Companies Bought and Sold

I've bought and sold hundreds of companies, advised on hundreds more, and I have investments in 12 countries. I did it through mastering Agglomeration™.

Is a “Unity Agglomeration™” right for your business?

Ok, so, that is a bit of a trick question, as you probably have no idea what a Unity Agglomeration™ is in the first place, so...

Unity means "togetherness" and agglomeration™ is "to form a cluster."

It is a methodology or model created to solve a number of problems entrepreneurs face in growing their business and adding value – shareholder value or what the business is worth at the end of the day – and how and when to exit.

​First, it is worth exploring the problems facing small- to medium-sized businesses. Start-up is exhilarating fun and exciting, but if the business is not going to die, it has to evolve into a more “grown up” form of business. And at this point, a lot of the joy gets sucked out for a lot of entrepreneurs. They often fail at this point, move on to the next shiny new thing, or get stuck in a desert of mediocrity for years. These business owners are often award-winning, highly-talented leaders in their field, so why do they get stuck? How do they break out of the desert? What are the challenges that hold these businesses back?

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These are the issues small- and medium-sized businesses face:




The Scale Paradox



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Succession



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Demographics



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Liquidity



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Wealth & Value
Creation


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Global Expansion



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Portfolio Approach



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Access To Capital



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Mergers & Acquisitions, Public Listings, and IPOs

People who have followed my blogs or been to The Harbour Club know my one-size-fits-all solution to pretty much any of the world’s problems is Mergers & Acquisitions (M&A), and, in fact, most of the problems listed above can be fixed by merging companies together and then publicly listing the new group. But, let’s just look at some of the issues with mass mergers or “roll ups” (as they are sometimes called).





Ego/Pride



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Talent Retention



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Brand Retention



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Management



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Synergies & Centralization



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How are the acquisitions paid for?


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Publicly listing your company gives you the liquidity in shares and reason for the mergers. After all, why would people join a merger unless there was some visible future way out? However, there are a few things to consider when deciding if an IPO (Initial Public Offering) is the way to go. 

First, they can be very expensive and time consuming. You pretty much need a board to run the business and a board to run the IPO. Some are also an “exit in disguise,” with all the talent is leaving or certainly planning to.

Some IPOs are just desperate for cash, and, in my experience, most businesses raising money are just trying to fill a leaking bucket with more water. I don’t think IPOs are a good way to raise growth capital. And, most IPOs forget we are a global economy and just list in their country of origin. Why not take a global view of where best to IPO?

The Unity Agglomeration™ solves the issues discussed so far, simply, and elegantly.

So this was quite a list of challenges I found myself working through. The solution I arrived at was the Unity Agglomeration™. I have done mergers, reverse takeovers (RTOs), and roll ups, and this takes the best from each scenario and makes it work for investors and entrepreneurs alike. The best way to look at this is rather like a cooperative IPO, where a group of companies from the same (ideally fragmented) industry join forces and publicly list; then, they grow further by acquiring more companies in the same space.
SCALE
All of the member companies share a common holding company. They continue to run their own business in their own way, but with a consolidated P&L and balance sheet in the parent company. This gives them the scale needed when pitching for contracts, as well as the geographical coverage and the product diversification of their fellow companies. They can be big and corporate when they need to and small and dynamic as well. This scale is instant.
SUCCESSION
Each business is a silo within the group, so there is limited liability for each business unit. But with publicly-listed stock, it is easy to go and acquire a similar business to one of the silo businesses and bring in their management team, thereby creating easy natural succession without having to sell out. The company joining gets to merge to make themselves instantly bigger, gets public stock, and a better than normal valuation (due to the scale and liquidity advantages). I have always believed that the best way to do succession is through merger, as the best people to run a business like yours are already running a business like yours right now! The missing piece, however, has always been the bigger picture for both sides, and the public company is that missing piece.
DEMOGRAPHICS
By collecting smaller businesses together, you can create bigger players in each of the markets. Take marketing services, for example. There are five or six dominant global players and hundreds of thousands of small talented competitors. By clustering, you create a middle tier-sized company and have a more stable future proof of business.
LIQUIDITY
The public listing allows people to completely sell when they want, or sell a bit and keep a bit. It creates financial freedom for the business founders, and the fact they are all in the same boat creates cooperation on driving share value and the timing of share exits. It is in no one’s interest to dump stock, so it happens in a more orderly fashion. Founders have share restrictions for the first year, and also have share bonuses linked to performance in subsequent years. To re-balance high-performing versus low-performing members, this share bonus also has further lock-in periods. These combine to create a stable share price and a natural willingness to cooperate when it comes to exiting blocks of shares.
WEALTH & CREATION
In this respect, I really believe we have found the holy grail of entrepreneurship. We take away the binary sale choice, and create smooth and steady exit instead. We also have a dividend policy so all companies in the group issue dividends. This means that the founders get income from their shares so they don’t have to sell them to get money in. This is also a powerful mechanism for attracting outside investors. Profitable, debt-free, dividend paying, small-cap companies are rare beasts indeed!
GLOBAL EXPANSION
It is very simple to add new companies in new territories quickly and simply, giving you a truly global business. Instead of the cost of set up, you now add profit for every new territory. There are huge opportunities for service overlap, tax planning and cost of production reduction when you start to utilize different markets in this way.
PORTFOLIO APPROACH
Sometimes, business owners are fearful about getting into bed with strangers. Well, we focus on making sure they are not too strange, but we also remind people that instead of having $1 million worth of shares in their own business (if they sold it all today), they now have $1.5 million of liquid shares (for illustration purposes only) shared across a number of debt-free, profitable businesses, so they get a portfolio approach to running their own business. They also get share incentives for over performance and the share price is a derivative of profit, so they still have real impact over their own wealth improvement, but considerably de-risked.
ACCESS TO CAPITAL
The Unity Agglomeration™ is a great way to bring the huge amount of capital in the world together with the SME sector. We create vehicles big enough and interesting enough to attract the capital and liquid shares so that they can come and go from their investments. The groups also have access to soft loans from the parent company to assist in working capital and growth projects. With this model, we have our publicly-listed stock and Unity’s M&A expertise to help consolidate the members’ particular niche sectors, or even add products or talent through acquisition. We just have to follow the rules of debt-free, profitable acquisitions.
EGO / PRIDE
Under a Unity Agglomeration™, the business owner remains 100% in charge of their business; the brand stays the same and there is no external interference in what they do. They are publicly listing their business, which is on most entrepreneurs’ “bucket list” of things they want to do in their career, so they are at the center of a collaboration for a common purpose, and that is a really exciting place to be.
TALENT RETENTION
As nothing really changes operationally, there is no boat rocking to scare off the key people. What’s more, the founders are in for the ride to keep working and growing, so the most important people are all still around. The ability to reward key people with shares really means something now as they are tradable, real shares.
BRAND RETENTION
My pet hate, the ego-maniac roll up where they try and centralize everything, including the brand, is like filling a bath with a sieve! So much gets lost in the process! Under a Unity Agglomeration™, all the brands are intact and carry on business as usual, so none of that value is destroyed, and you also have a potential portfolio approach to any brand damage issues in future.
MANAGEMENT
Under this methodology, each CEO now sits on an executive board of directors, as well as running their own company. They are not directed by anyone. They have statutory duties, which are slightly enhanced under the umbrella of a public company, but otherwise, they have total autonomy and control of their own business. There are basic safeguards and certain matters that are reserved for group decisions; these are all set out in a group constitution designed by the founders. So nothing is forced; it’s an open agenda to save a buck or make a buck by working together.
SYNERGIES & CENTRALIZATION
As already stated, there is no drive toward synergy; that’s just left to nature. The view is that everyone’s outcomes are perfectly aligned and that less interference equals more productivity. So most of the value comes from the scale and the liquidity; any synergies are the icing on the cake (or pure upside). I think centralization is the most common mistake in roll ups. I have seen great examples of centralized sales teams that take years to get up to speed, cost huge amounts to deploy, and don’t leverage the talent and brands of the group companies. In a Unity Agglomeration™, the only touch point people have with the holding company is as a public investor in the stock market.
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Let's quickly compare an IPO to a Unity Agglomeration™, and you'll see how the Unity Agglomeration™ is different.

IPO: Very expensive and time consuming, you pretty much need a board to run the business and a board to run the IPO.
IPO: You ideally need specialist non-executives and anexperienced board to attract investors. Public company investors are a different breed to business angels and PE/VC guys.

IPO: Some IPOs are exits in disguise so all the talent is leaving or certainly plans to, so this can give them a bad rap.

IPO: Some IPOs are just desperate for cash, and in my experience most businesses raising money are just trying to fill a leaking bucket with more water so if you want money for ‘google ad words’ or the such like, its going to be hard/a disaster. I don’t think IPOs are a good way to raise growth capital.
IPO: Most IPOs are pushing hard for the highest valuation because (as I said above) it is either an exit in disguise or they want to raise money (to minimize dilution).
IPO: Most IPOs forget we are a global economy, and just list in their origin country. Why not take a global view of where best to IPO?

UAG: The holding company can be separately capitalized and managed for this process. Unity Group provides all of these services in a one stop shop.

UAG: These positionsare appointed in the parent company and incentivized with shares.

UAG: With a Unity Agglomeration™, there is a clear path for growth through acquisition and a fully-vested management team.

UAG: A Unity Agglomeration™ is a group of profitable, debt-free companies that, basically don’t need the money. They are listing for all of the other benefits mentioned, not the least of which are scale and liquidity. This really puts us in,br> the top 1% of IPOs (or more rare in small capital IPOs).
UAG: As we are not exiting or raising money we can list with a very fair valuation and let the market find the right price, this leads to a stable long term growth stock, not the roller coaster penny stock.
UAG: Due to the global nature of our members, we can pick the best markets and countries to arbitrage almost the whole IPO process, so we don’t end up on small, illiquid, secondary markets where the share price slowly dies.
So as you can see, a Unity Agglomeration™ is not a traditional merger roll up, and it is not a traditional IPO. But, if you are doing more than $1 million in revenue, are profitable, debt-free, a leader in your field, and you operate in an industry where you feel there are lots of similar or synergistic businesses that could benefit from collaboratively coming together to create a major player, then quite possibly yes, a Unity Agglomeration™ might be for you.

Apart from solving all the issues mentioned above, why would a competitor come and join you? Well, they are likely to get a much better valuation via this model than a straight sale, and they don’t have to sell out, so it really is a “have your cake and eat it too strategy.”

  • UAG: These positionsare appointed in the parent company and incentivized with shares.
    It works in any country or jurisdiction (just think of all the public companies you know that have operations pretty much everywhere)
  • Nothing fundamentally changes day to day.
  • It really is business-as-usual, and they get the tools and backing to consolidate their own competitors (if that is something they have ever wanted to do).
  • Business is more fun when you are playing with friends; never underestimate the power of the group of founders.
  • They are “the board you couldn’t afford,” there when you need them, but without any control over your business.

This model drives the bankers and finance guys crazy, because is democratizes the IPO and gives the power to the founders. When the power is with the founders, the advisors are out of job.

This was created by entrepreneurs for entrepreneurs, to fulfill their potential, take back their lives, and drive their own destiny

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