Prior to founding W Squared, Tammy Wolcott had been involved with companies that had done a lot of acquisitions, so when she brought on a PE partner, she knew it was only a matter of time before she would be on the block.
After two years of PE involvement in the outsourcing and procurement services company she co-founded, Wolcott and her team began shopping W Squared in 2017.
“I know as much about being acquired or acquiring a company as anybody,” she says. “I think at some point we figured this management team, all together, we probably collectively have been through 75 acquisitions. So I was not under any Illusions about what was or wasn't going to happen.”
W Squared approached the process with an internal team that also included a marketing component to communicate out to the greater public and to the internal team members. She and her team spent a lot of time before approaching any parties getting the company’s financials into presentation format and making sure that there was adequate history to present — trended revenue by client for three or five years, historical financials, current contracts.
“We wanted to be able to publish a data room very quickly because time is what kills deals,” Wolcott says. “So we wanted to have all of our ducks in a row before we went out to the market and said, ‘Hey, are you interested in looking at us.’”
Smart Business Dealmakers spoke with Wolcott, now CEO of LBMC W Squared, about how she and her team prepared W Squared for a sale.
Tammy Wolcott will join a panel discussion on "Why Deals Fail: The fine line between success and failure in acquisitions" at the upcoming Smart Business Dealmakers Conference on Feb. 27 at the Westin Nashville. Use code DEAL100 to save $100 off tickets.
Finding the right fit
As she sought a partner, she was looking for people who approach business in a like-minded way.
“We definitely wanted a group that had a good business reputation in town,” she says. “I wanted the opportunity for my senior leadership to have an equity stake in the company. And, honestly, the culture was a big piece of it.”
Wolcott says the team identified a number of firms in town to talk to, but always knew there was probably a good fit at LBMC. LBMC and W Squared, friendly competitors since W Squared began, had talked before about potentially doing a merger of some kind, but the timing just wasn't right. So Wolcott went through a process, engaged with five suitors and narrowed it down to two that were more serious than others.
Ultimately, W Squared merged with LBMC because it was a good cultural fit, a good structure for all of the company’s teammates and W Squared’s services were a nice complement to those of LBMC’s.
As the process toward a deal with LBMC progressed, the marketing team was preparing for an announcement so that the company had the right script and that things were announced in the right order, “because the worst thing that can happen is that your employees find out about it at the same time or after the market does,” Wolcott says.
She and her team wanted to make sure that there was adequate time to communicate with the company’s clients and staff about what was happening and why.
“I've found that people are just afraid of change and so we asked everybody to keep it to themselves,” Wolcott says. “And our marketing team and our M&A team were certainly very sensitive to the fact that some team members they were working with currently were going to be impacted. So I think there was probably some empathy going on there. But we definitely communicated to our team and to our clients before the public announcement was made just because I'm a big believer in transparency and don’t want anybody to think that they haven't been given an opportunity to have a heads up with something that is probably pretty important to them.”
For those who are selling their business for the first time, Wolcott suggests working with someone who's been through a deal before, “or they need to get a really good checklist of everything that they need to have together before they start on the path because I think a lot of companies don't really know what they're worth,” she says. “They don't even really understand the process.”
There is a lot of information needed to publish a data room, and suitors, whether they’re strategic or financial, have certain expectations for what that room will include. Having someone with experience explain what will be needed is valuable to outsiders looking to understand the business.
“I think it's invaluable because it just it just proves that you're a well-run and well-documented organization,” Wolcott says. “And that checks a lot of boxes.”