Merger management Featured

7:00pm EDT December 26, 2008

It always takes longer than you think.

When performing a merger or acquisition, those are words to repeat, says Bruce Carson.

The president and CEO of The Dot Printer Inc. — a $28 million provider of digital services — has seen many aspects of the acquisition process over the years, most recently as his company acquired Page One Digital in September.

And the one constant during acquisitions is change. Some acquisitions seem like great ideas at the outset but lose their luster once you run the numbers and analyze the other company’s culture. And some might not seem like a great move at first, but once you delve into them, they make more sense.

Smart Business spoke with Carson about how research, patience and a willingness to walk away are a winning formula for a successful acquisition strategy.

Q. How do you approach acquisitions?

You have to look at a lot of potential acquisitions. In our history, we’ve looked at 20 or 30 but only have done three, and they all have been very small.

Also know that you cannot pay too little for a bad company. If it’s not a good company, no matter how good the price is, it’s not a good deal.

I think we’ve learned to be patient, to try to keep our egos in check. We’ve also learned that sometimes you are buying beyond what the accountants tell you. There is a financial aspect to every deal, there is a synergy and a culture to every deal, and those two things may be more important.

You don’t want terrible numbers, but culture is very critical.

Q. How do you keep your ego in check?

That’s tough to do. You have to just tell yourself that going in. We’ve tried to use some outside people to help us look at this as we go, folks who might not have a vested interest in the printing business or in Dot Printer as maybe those of us who are here every day.

At the time we did this most recent acquisition, we had a consultant working for us and we ran it by him, not so much to advise us as to just check our sanity on the deal. Independent, outside advisory boards, support groups, peer groups can be very helpful in preventing you from making a mistake, because it’s easy to drink the Kool-Aid. Outside parties will ask you the hard questions and take the emotion out of the deal.

Q. How do you integrate two individual cultures?

You need to go into this with an attitude of respecting the acquired company’s culture. It’s avoiding the attitude of, ‘We bought you; therefore, we have the power.’

Ultimately you do, because you made the investment and performed the acquisition. But we try not to present it with a belief that just because we had the financial ability to do this, we also have the intellect to solve all integration issues.

Integration issues can have to do with how quickly you relocate facilities, how do you handle the people, how do you approach customers, how quickly do you try to merge the pricing strategies. There are unique things about their business and their clients that we have to be respectful of, even if they don’t fit some business roles that we might apply to our clients and our business.

In our particular case, with the acquisition of Page One, they are much better at processing quick-turn jobs than we have been. They have the ability to get the job estimated, entered and billed within the same day. In our culture, which has been in the past to work on much larger and more complicated jobs, we have taken much longer to get the job started, billed and completed than they did.

The ability to quick turn and process digital jobs has been of real value to us.

Q. What would you tell other business leaders about performing acquisitions?

Remind yourself that it takes longer to do the deal than you probably expected. It takes longer to do the integration, and you have to expect some surprises. You also always have to be willing to walk from the deals.

What I’ve seen that makes most mergers fail is the idea becomes so strong, even the facts that occur during due diligence become ignored because someone is so anxious to do the deal, but it shouldn’t have been done. There are a lot more bad deals than good deals that have been done. We’ve only made three, two good ones and one that, for the most part, disappointed our expectations.

When you need to walk away from a deal, it can be pretty hard to justify. That’s why it’s so valuable to have someone from outside the organization take a look at it who can say, ‘Without specific knowledge, without having sat in on the negotiations, this doesn’t seem right to me.’

HOW TO REACH: The Dot Printer Inc., (949) 474-1100 or www.dotprinter.com