Over a span of a little more than two years, starting in September 2017, Pineapple Payments made nine strategic acquisitions. Today, Co-founder and President Jon Halpern says the payments technology company is being cautious in the near term as a result of COVID-19 — just like everyone else — even as it continues to evaluate opportunistic acquisition prospects.
“There will be opportunity that comes out of this, as we get to the end of this, hopefully at some point soon,” he says. “But we just don’t know the timing of how this is going to shake out, so we’re taking it one day at a time and trying to be optimistic.”
The Pittsburgh company provides payment processing, proprietary technology and omni-channel payment acceptance solutions for 25,000 merchants of all types. Its customers with in-person businesses, like restaurants or retail, are seeing slower volumes, while those who deal with medical, ecommerce or B2B are experiencing an uptick.
However, many merchants are asking about implementing contactless payment methods, which haven’t been widely adopted yet in the U.S.
Halpern hopes to use this time to focus on organic growth, form partnerships and bring the team at Pineapple Payments together. That’s because when you do a lot of acquisitions in a short period, he says you have to not only integrate the different systems and processes that you inherit, you also must meld the various cultures that come with that.
Every deal is different
Halpern had only completed one acquisition before helping launch Pineapple Payments in 2016 with CEO Brian Shanahan.
He’d founded two businesses in college — a company that provided on-campus safes to students and AthleteTrax, a software platform for sports leagues and facilities. AthleteTrax, which is part of Pineapple Payments today, acquired a small company in 2016. At the same time, Halpern was getting to know Shanahan, who owned Cool Springs Sports Complex in the South Hills.
However, Halpern’s prior experience was nothing like having acquisitions as a large part of your growth strategy, and he’s learned a lot over the past three years.
“One of the things that’s surprised me is that there are so many different hot buttons for people,” he says.
Every transaction has the standard 10 to 15 terms that need to be negotiated, but each person has something that’s vitally important to him or her, Halpern says. Some people don’t have an issue with valuation, but they have an issue with how their employees are treated going forward. Or, they might have an issue with what they’re willing to hold in escrow.
“Some people don’t care about one thing that somebody else won’t close the deal on,” he says. “They can be little points, or they can be big points. It’s been very interesting to think through the psychology.”
In addition, founders see their company as their baby, so emotions can run high. Halpern says that potential acquirers need to detach themselves from that, even as they build a relationship with the entrepreneur or business owner.
“In some cases, we’ve gotten to a place where we were going to do a transaction, but we didn’t do it because we really liked X, Y and Z the person, but we couldn’t get our heads around the numbers or the technology or the valuation or something,” he says.
Peel back the layers
One key to a successful acquisition and integration is a strong cultural fit, but you have to accept that you cannot figure that out completely in the due diligence period. The management teams need to be well aligned in how they think about things — how they operate and the way they work with their partners and employees.
“Just because a deal looks good or bad on paper doesn’t mean that’s going to be an actuality,” Halpern says. “A deal could look really good on paper financially, but the people that are running the business you’re going to clash with, or you’re going to have a terrible time with — they have different values and culture.”
The flip side is that the business could look bad on paper today, but you believe in the individual who’s running the company, he says. The right deal with the right incentives and support could be worth it.
It’s all about finding a balance between the people running the business and the culture tied to it, with how something looks on paper and what you find out in due diligence.
Synergies or economies of scale are significant, but they are not everything.
“It’s also very important to understand who you’re getting yourself in business with and how that fit is going to be from a long-term perspective,” Halpern says.
Pineapple Payments continues to work through cultural nuances, but Halpern says the business already homes in on culture more during the due diligence period.
Sometimes the smallest things can pay off because they are, again, hot button issues. For instance, every time Halpern called an operator that Pineapple Payments was considering buying, he answered the phone with, “Hey, what’s up dude?”
“I’m thinking to myself, ‘Why?’” Halpern says. “Not that I cared, I’m just thinking, ‘Why is he saying, ‘What’s up, dude’ every time?”
After the deal closed, he learned that the operator wanted to make sure all their conversations were normal and real. It was a test for him.
“At the end of the day, that was something important, that he could act himself, be himself and that we would think about that in the same way and be OK with that, because not everybody would,” he says.
That’s been one of Pineapple Payments most successful acquisitions thus far, and it’s an example of a nonbusiness cultural component that was important to him as the owner, Halpern says.
In a few other cases, the sales engine wasn’t able to ramp up as quickly as Pineapple Payments would have liked, but Halpern is still confident that, in the long term, they will be wins.
“I feel very good about the nine transactions that we’ve done,” he says. “Every one has its own little nuance to it, but when they come together as a whole, we have a very good team.”
- Cultural fit can make or break a deal.
- When negotiating, look for the hot-button issue.
- Look beyond what’s on paper to the people running things.
Name: Jon Halpern
Title: Co-founder and president
Company: Pineapple Payments
Education: Business degree from The George Washington University
What was your first job, and what did you learn from it? My first job was a car wash and detail business I started at 15. I played golf growing up and was lucky enough that my parents were members at a club here in Pittsburgh. I convinced the GM to allow us to wash and detail cars for members. I would show up at 6 or 7 in the morning, prior to people teeing off. Sitting there in a golf cart, I would flag people down and ask, ‘Do you want your car washed or detailed?’
I took some nos, got some yeses, and a couple of us would work 10-, 12-hour days and do 10 to 20 cars, depending on the day. I learned about the importance of hard work and building relationships.
What’s the best business advice you’ve ever received? Focus on where you’re spending your time. Is it creating and adding value for the business?
Where might people find you on the weekend? During non-COVID times, probably on the golf course. Some weekends, I’m involved with a nonprofit, Social Venture Partners Pittsburgh, where I help out other nonprofits in the community. I also might be going for a run or working out.
What’s your handicap in golf? I haven’t looked in the past few months, but it’s around five.