Acquisitions are an exciting time for the buyer.
But when you’re the company being bought, it can be a very uneasy feeling, says Bill Priemer.
“Those people didn't choose to come to work for Hyland,” says Priemer, Hyland’s president and CEO. “They chose to come to work for an entirely different company and now, they're working for us. They need to be sold, convinced and recruited all over again.
“The same thing is true for customers,” he continues. “They chose to buy from an entirely different company. Now, we're there. We're very intentional and very mindful of that. If you lose too many people and you lose too many customers, you lose most of the value that prompted you to make the deal in the first place.”
After 15 acquisitions, and more deals likely on the way, Hyland has crafted a formula to avoid that fate.
We spoke with Priemer and Hyland’s director of M&A, Justin Torkelson, about the software company’s acquisition integration strategy and the role dealmaking has played in putting Hyland on the cusp of being a $1 billion business.
Have a heart
When you’re buying a company, you should never lose sight of the emotional side of the transaction, Torkelson says.
“It’s a traumatic experience,” he says. “You’re concerned about your paycheck, your benefits, calling your spouse or whatever it might be. For us to stand up in front of the room and talk about our company or their company or the customers, a lot of times is lost on them if you don't do it in the right order. We make it a point to reiterate some of the same messages and have some of the same working sessions over and over.”
It’s all about embracing new colleagues and working to get them comfortable with their new circumstances, Priemer says.
“That's something we're very intentional about,” he says. “Usually, the majority of people will either know us by reputation or soon discover that, ‘Hey, this is a pretty cool place I'm now a part of,’ and start to enjoy being part of how we do things.”
Keep an open mind
As a known acquirer of companies and a business that operates in the ever-evolving world of content management software, Hyland rarely lacks for acquisition opportunities. Often, they come out of the company’s relationships with bankers or with Thoma Bravo, the private equity firm that acquired Hyland in 2007.
“We get approached by companies we hadn't targeted and companies operating in spaces that we hadn't considered,” Priemer says. “We don’t dismiss out of hand something new coming in from the side. We have to be careful about how far we get into it and whether we really change our mind and become serious and intentional about it. But we will explore it.”
The 2015 acquisition of LawLogix, a Phoenix company that provides cloud-based solutions for HR professionals and immigration practitioners, fits this description.
“It was a great acquisition for us, but not one we were seeking or even considering,” Priemer says. “It turned out to be a right fit. So acquisitions can broaden your strategic thinking and your strategic horizons in a pretty cool way.”
Hyland has learned to keep an open mind when researching potential deals, Torkelson says.
“We have a pretty wide bell curve of acceptances that we'll look at and consider,” he says. “It has brought a lot of opportunities and a lot of conversations. Having that wide breadth of, ‘Yes, let's take a look at it,’ gives us access to a lot more opportunities than if we were more easily dismissive. We'll have more than 100 meaningful conversations a year. So we are constantly talking. That's not just introduction calls. A meaningful conversation is evaluating a company.”
Stick to your principles
One point on which Priemer and his team won’t bend is what they’re willing to pay to acquire a business.
“We're not going to overpay,” Priemer says. “We have the discipline to do that. So as excited as we will get about the strategic fit and the growth opportunity, that will affect maybe the end of the range that we would be willing to pay. But we've got a realistic disciplined approach. We're not going to get so excited and operate with such a sense of urgency that we end up regretting what we paid.”
Companies that don’t consider their cash position, their current level of debt and their team’s readiness to take on an acquisition are taking a huge risk.
“Take our health care business, for example,” Priemer says. “If they're very busy with their international growth efforts and there's a lot of change and dynamics underway in that business already, then maybe it’s not the right time for a health-related acquisition.
“We might look at another aspect of our business where things are going smoothly and it's healthy and we can inject some new opportunity. They can embrace that new company and make the most of it as opposed to it causing them chaos and additional stress. Those are things we’ll look at internally that will affect whether we acquire and get more serious about targeting.”
Identify the right deal
If Hyland is the right buyer strategically, provides the right home for the seller’s employees and customers and can best leverage the seller’s products and technologies that it has built, the negotiation becomes considerably easier.
“It's about proving you’re a good home for all of those things that they have built and dedicated their lives to building over the course of time,” Priemer says.
“We're involved in a process right now,” he adds. “There is a larger group, probably eight bidders. We're still in the process and it may or may not happen. But the potential acquisition has told us that given our statements about business and about fit, we’re the preferred buyer. That's aside from price. And that's among eight bidders that have made it to this stage. That's exactly the position you want to be in.”
As Hyland pursues more deals and approaches $1 billion in revenue, Priemer says his team is aware of the opportunity at hand.
“It’s not necessarily a goal in and of itself, but we expect to get there and now relatively soon,” Priemer says. “When we do, it's a cool number and really meaningful for any company, certainly for a technology and software company that isn’t that old.”
Related story: Hyland’s Game-Changing Deal