When Clark-Reliance Corp. launched efforts to reach double-digit revenue growth year after year, Rick Solon knew it wouldn’t be all organic.
So the president and CEO of the manufacturing company created a process for acquisitions that starts before the first phone call.
You must understand your core competencies and processes and procedures in order to find the best strategic fit, Solon says.
Second, you can’t leave employees in the dark. Not only will the communication make the transition easier when it’s time, but employees can play an integral role in your acquisition search.
Clark-Reliance, which had 2008 revenue between $60 million and $70 million, formed a list of 900 potential acquisitions based on employee feedback.
“Talk to your sales and marketing folks, all of your employees, about what they think or what they hear,” Solon says. “What companies they come across that they think would be a good fit based on their knowledge and experience both working with us and perhaps working outside the company.”
Smart Business spoke with Solon about how to prepare for acquisitions.
Understand your company. The most significant issue for every company is if you’re looking just at your internal products and processes, you’ve developed some understanding of what you believe your core competencies to be. Whether those competencies are in fabrication and welding, whether they’re in human resources, how do you hire people, you’ve understood and developed a sense of what those core competencies are.
Then, typically you want to go out and find someone or some other company that will actually be a very good strategic fit with those products, processes and … how does this complement or augment your core competencies?
You have to be honest with yourself that you have a very strong foundation from which to work. By that specifically I mean, if you are a typical manufacturing company that has some combination of fabricating, welding, machining, light assembling, in those particular regards … in order to establish that base you have to be able to say to yourself, ‘These are things that we believe we do well.’
For very small companies, it’s hard. You read all this stuff from Harvard Business School and the rest about well how do you build a core competency that maintains a sustainable competitive advantage. That’s a great statement for a small company, but most likely for very small companies — $10 million, $1 million — you’re not going to achieve that.
But what I would tend to counsel anybody else on is make sure that you’re comfortable with the processes you have in place internally, whether it’s quality systems, manufacturing processes, internal ordering process.
The process and procedure, the process by which you get the work done, is incredibly important. If you have robust processes, then generally those processes will allow you to understand just how quickly you can bolt down an acquisition or you can grow based on your knowledge on what it’s taken to get your resources trained and educated and in the right place to be able to go after acquisitions and internal growth for that matter.
