Founded 33 years ago out of the CEO's garage, OMNI Systems is now a $100 million company.
"So, we know a bit about growth," said David Campbell, OMNI's CFO, at the Cleveland Smart Business Dealmakers Conference. "But we've never gone through a transaction."
This year's April deal for ITW Labels was the business's first venture into acquisitions.
"(It) started when we're going through the planning cycle for the 2023 budget," Campbell says. "We’re looking at five-year growth projections and where we wanted to be. And as we looked at the numbers, we kind of said, in order to get there, we're going to have to go down a path of building some acquisitions into this."
Coming out of the budget cycle, he says they interviewed investment bankers, and brought in financial and investment advisers before the end of last year. Though they took their time as they interviewed to find the right people for their deal team, the next steps happened faster than expected.
"Everybody told us it was going to be, rough math, a six-to-nine-month journey to find an appropriate acquisition target,” he says. “Little did I know that two weeks later, I got an email from the owner who said, ‘Through a contact of a contact of a contact I found out that ITW is looking to spin off their $40-million dollar label division and the bidding process is already started. But the first-round bids aren't final yet, so we can still get in.’”
Campbell says they jumped right in, grabbed a CIM and a couple of years of financial statements and within a week they were providing a bid on the first round. They were one of three companies selected to come back into a second round for due diligence, which he says went smooth. They soon entered into an APA and then, with a week left until the transaction was set to close, they got a call from ITW Labels saying that they had lost their largest customer, which represented 10 of ITW's sales, and roughly a 40 percent loss to its Durable's business.
"So, we went back to ITW, renegotiated a new purchase price, renegotiated some severance sharing in that equation, and then went through with the transaction," he says.
Looking back on the deal, he says among the aspects that were critical to the deal's success was building a strong team.
"Making sure that you've got all the right people in place. I mean, that started in all reality years ago with the building of the management team, and a lot of the business team that we have in place," he says. "Finding the right investment adviser, lawyers and financial advisers were all critical."
Another aspect that was critical to the transaction was staying close to the market. Without word from a connection who was close to the market, Campbell says OMNI would never have known about the ITW opportunity until it was done and gone.
That last point, he says, is really invaluable.
"I've been in family businesses for last 10 years now, at OMNI for four, and in both the prior business I was at, the deals have really come out of people — knowing people, people contacting people, people scouring the market to understand what's there," Campbell says. "So, that's been very critical, both in this particular scenario where our owner was literally talking to everybody he could talk to and, through the contacts, found something that was live and happening right now. And in the previous business it was similar: A family-owned business had contacts throughout the marketplace. An individual was looking to retire and hang up the shoes, and the owner there had built a strong enough relationship that we were able to get inside before it went to any true bidding processes. So, having your ear to the market has been critical."