Hyland is a very acquisitive company, but it wasn’t always that way, says Bill Priemer, the software company’s president and CEO.
“We were founded in 1991 and it was 14 years before we made our first acquisition,” Priemer says. “It was 2007 before we said acquisitions were going to be a formal, intentional, ongoing part of our growth strategy. Initially, it was more about strengthening our presence in existing markets and geographies.”
It’s no coincidence that 2007 is also when Hyland was acquired by private equity investment firm Thoma Bravo.
“Acquisition is one of the major reasons we sought a private equity investor in the first place,” Priemer says. “We chose the exact right one. Working with them has been a master class in M&A work.”
One key to the partnership with Thoma Bravo is that both sides knew exactly what they wanted.
“Do you want to acquire or don’t you?” Priemer says. “There has to be alignment there. We’re aligned that we want to be acquiring all the time. It’s a consistent part of our growth strategy.”
In this Dealmakers feature, we revisit our conversation with Priemer from earlier this year to gather more dealmaking insight from him and Hyland’s director of M&A, Justin Torkelson.
Hyland has made more than a dozen acquisitions, and in each case, Priemer says the company has largely let the opportunity to be acquired speak for itself in negotiations with potential targets.
“We have not taken a very aggressive stance in trying to convince sellers to sell if they weren’t of that mindset already,” Priemer says. “That means some of these discussions will take place over the course of years. We first came into contact with a number of the companies we ended up acquiring and started that dialogue years before the deals happened.”
He says that Hyland is always considering multiple acquisition opportunities.
“It’s not like at any one time there are only three or four companies that look attractive to us,” Priemer says. “We’re global, we’re in multiple industry segments and the product set is very broad and broadening all the time. We don’t feel like we’ve got to lock in to one ideal opportunity and not let it go. We’re happy to turn our attention to the next and the next because there seems to be ample opportunity for that.”
Track the metrics
Financial and other internal metrics also play a role in Hyland’s decision-making process.
“Have we gotten to the point that we’ve accumulated enough cash to do something meaningful?” Priemer says. “What’s meaningful to us will change over time. We’ll look at our current debt burden relative to the size of our company.”
He says Hyland hasn’t borrowed for many acquisitions, but it has for some.
“So we have to look at those different debt ratios and the extent to which previous acquisitions have been fully integrated,” he says. “Have we gotten through the integration effort effectively? Then we’ll look at aspects of our business. If they’re going through a lot of expansion and change already, we may choose to wait.”
Another aspect of making acquisitions is what it means for the future of the company being acquired, Torkelson says.
“There are a lot of folks that we’re providing a handsome exit for,” Torkelson says. “These are small companies, and we can come along and provide them the exit and the reward for all the sweat equity that they have put into their company. We can provide their customers and employees a good home and, in return, we’re adding value and adding these tools to Hyland. It’s a lot of fun, a lot of stress and a lot of work. At the end of the day, when you can provide that win-win, it’s exciting to see. That's the way it’s supposed to work.”