On paper, Oleg Firer literally embodies the American dream. Moving to Brooklyn, N.Y., from the Soviet Union at the age of 12, he entered into business without a college degree and rose quickly to become the VP of a publicly traded company by his late 20s.
In 2002, Firer taught himself the payment-processing business — which would become his career — from the ground up and eventually partnered with private equity group Star Capital to start his own payments business in 2007.
With the help of his partners, Firer executed a roll-up strategy that included eight acquisitions between 2008 and 2010, combining the entities into a one payment-processing company — Unified Payments LLC. Today, Unified Payments has grown to approximately 50 employees and $59.5 million in revenue. And with a three-year growth rate of 23,646.3 percent, it soon shot to No. 1 on the 2012 Inc. 500 list of the fastest-growing companies.
“M&A is my background,” says Firer, co-founder and executive chairman, Unified Payments, which now processes about $10 billion worth of transactions for 100,000 merchants a year. “I like to find the diamonds in the rough and make them into diamonds. And that’s what we’ve done.”
Firer’s leadership has been critical in helping the company overcome challenges of integrating eight companies while managing fast growth and staying innovative in a competitive industry.
Smart Business spoke with the Firer to find out the keys to his M&A success and keeping Unified Payments on top.
SB: How did you choose which companies to target as part of the acquisition and roll-up strategy?
OF: The companies that we acquired had something unique about them. Being established is one thing — but they all had some sort of issues. We did a lot of distressed equity buys where they were either overleveraged or they were growing too fast and they couldn’t keep up with it or they had shareholder feuds or so on. Obviously, we looked at dozens of companies and we identified the eight companies that we liked the most, and we executed.
We also invested in human capital. Each one of these eight companies — besides having potential to grow and having a sales engine — had human capital behind them that we believed in. We don’t have eight different divisional presidents. We consolidated, and there were three people that I believed were the strong sales leaders to take this business to the next level. We bet on them. So it was not just acquiring for the core assets and growth opportunity; it was also acquiring them for human capital that knows this industry.
SB: What was your timeline for the acquisition strategy?
OF: The first acquisition that we did was the most expensive and the biggest. We executed the first acquisition in 2008 as a platform buy to do the add-ons that we did at later points. When we did the platform buy, it had a lot of human capital already behind it. Most of it needed to be restructured.
We bet on the sales leadership, but operationally, we had to break down a lot of departments in order to make this a success. That took awhile. And obviously, from the add-ons that we did, we moved some people around, and we hired some new people.
SB: When did you start integrating the businesses?
OF: We didn’t wait for the eight to complete. From the first platform buy, we started right away working on operations, restructuring the operations and making the operations stable. No matter what size of payment-processing provider that you are, you still need a core engine. For us, it was building an engine that’s scalable and having the outsourced pieces that we need in place to have 24/7 support and so on. It took a year to really build proper structure, and then when we started executing on acquisitions, it was about integrating them in the structure.
SB: When you are completing multiple acquisitions, how do you integrate them into your company in a way that doesn’t overwhelm your business infrastructure?
OF: It was easier with the add-ons because when you have an add-on, you strip away (general and administrative expenses) G&A and you integrate the asset into the engine if you see any new human capital that is an asset to the company. Then the rest we would strip down.
So the core support functions like customer support and technical support we would keep in the core engine. If tomorrow I’m presented with an opportunity to buy a payment-processing provider, I would let all the customer support and technical support resources go because I already have them in my core.
It’s like a puzzle. You see the missing pieces and you want to fill those pieces. Identifying the missing pieces and bringing those pieces in became easier after the first acquisition because we see that we’re lacking in a niche vertical. So now we know that the next acquisition that we do is going to be a new vertical. It has to have something special.
SB: How has the recession impacted the growth of your business?
OF: After we acquired the eight different companies, we consolidated, created this engine and decided to keep them in an organic growth strategy. We have been growing for the past two years organically from redoing these engines that we acquired.
This industry is very competitive. And with the recession the biggest thing that keeps me awake at night is that there are more businesses that go out of business. So it’s losing merchants and keeping up with attrition and the churn and providing outstanding service to the merchants that process with you — and providing them with innovative products so that they don’t go to the competition.
SB: How can you manage risk when you have customers who are struggling?
OF: It’s pretty much keeping your ear to the ground and working with partnerships. ... When MasterCard launched a PayPass program, which is a ‘contactless’ card, we were the first organization to launch it for them in New York because we understand what it takes to roll out technologies. By working with the industry’s innovative associations, such as Visa, MasterCard and Discover, and working with technological partners that we have, it makes us stand up to the competition.
SB: How do you make sure that you’re not growing too quickly?
OF: You want to have gradual growth. Pulling in the reins on a monthly basis and slowing down the growth is really the most challenging. Once you let marketing loose, it’s hard to pull in some marketing areas. Growing too fast can permanently damage the company. So it’s about growing methodically, managing within the budget.
With us, there is an acquisition cost to every merchant that we bring in. So if I want to pull in the reins, I just shrink the budget for that month. It’s growing at the pace where the business can afford to fund marketing and then fund G&A.
SB: Any lessons learned the hard way?
OF: If you’re a business leader and you’re an operator, choose the right capital partner that believes in you and that will give you an ability to take this to the next level. I had to go to a few capital partners, and it was challenging to find a capital partner midtransaction. Adding another capital partner during a transaction was even more challenging. So the challenge I had was going through several capital partners; when you’re already committed, you can’t go back.
Get a firm commitment and make sure that the partner that you choose believes in the overall picture and not just a piece of it. Believing in just a piece of it could cause you to run into to problems later in the game.
SB: What are the main lessons have you learned from your M&A experience?
OF: Everything takes longer and it costs more. So you need to be very conservative in your estimates and be very conservative in your projections. Be very cognizant of time. Underpromise and overdeliver — that’s my model.
SB: What advice would you have for another business executing an acquisition?
OF: I had to go through a lot of companies to really believe in the eight that we did. And I mostly believed in them because of the people. It all starts at the top. If you have the right people at the top, if you have the right business leaders, it becomes very easy to do a transaction. If you don’t have the right leadership and business leaders that you rely on, everything else can crumble.
And then, obviously, it’s always challenging to find good people for any business. But if you find somebody that you believe in and that has the track record, don’t let the person go. ?
How to reach: Unified Payments LLC, (877) 621-9110 or www.unifiedpayments.com
The Firer File
Co-founder and executive chairman
Unified Payments LLC
Born: Soviet Union
Education: New York Technical College
Management style: There are two styles to me. First of all, I have an open door policy. I speak to every employee in the company and everybody has direct access to me. I meet with my employees all the time. And I don’t consider them employees; I consider them partners because we have a common goal, and we need to work toward it. And I think outside the box. There’s no strategy that I would not look at. There’s no opportunity that I would not look at.
What you do for fun?
Jet skiing, boating
Who have you never met but would you like to have dinner with?
Warren Buffet, to get an insight on what it takes to be the most successful investor of the 20th century and understand what it takes to spot the hidden jewel in the companies he invests in.
What would you be doing if not your current job?
I would be a politician.
How do you regroup on a tough day?
I spend time with my kids.
What destination would you still like to visit?
What’s next for Unified Payments?
Every month and every day we raise the bar because of the fact we have to grow, and I’m not satisfied with the growth that we have. So we still want to grow a bit more. We still have some internal restructuring that I’m working on, and as I execute a little bit more organic growth and do a little bit more acquisition, one day who knows? I might exit. So it’s making the business big enough to be palatable to somebody smarter than I am.