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Do Roll-up Strategies Really Succeed?

Posted by on Mar 28, 2018 in Osborne Insights Blogs | 0 comments

Back in March, I was asked: “so what do you think of roll-up strategies?” The asker was contemplating such a strategy and shared that he now has access to a sizeable pot of private equity cash. It got me thinking about my own experience of having been part of the very same business strategy about 15 years ago. I considered the key question “what does it take to successfully pull off a roll-up merger strategy and presumably exit with substantially more capital than you started with (while having a healthy return on that capital)?” Here are my thoughts: Perhaps obvious, but start with the end in mind; with a set of exit parameters against which you can continuously evaluate new acquisition opportunities or exit opportunities. Just because classical private equity money tries to exit in 3-5 years doesn’t always make that an optimal timeframe. I recently saw a private equity play wait over 15 years for their exit and achieve a very impressive return. That’s the exception, but you get the point; be flexible on certain business parameters. The availability of significant cash is not an excuse to overpay for an enterprise, nor to buy a business for which little or no improvement in operating results can be obtained. For a striking example, read the Saturday, March 24th story in the business section of the Globe and Mail titled, “how a Bay Street all-star team flopped”. They had significant capital to invest but under time duress, made little progress and several rookie mistakes. Depending on how many smaller businesses are being merged (or rolled-up), significant effort and resource must be put into the operational aspects of the merger(s). Strengths have to be shared and enhanced and weaknesses ruthlessly found and eliminated. The merged business, now professionally run (after a usually short period of post-acquisition operation by the previous owner) may have trouble replicating the successful market strategy employed by a leaner, fast-moving founding owner. Leveraging and sharing the various business strengths of merged enterprises requires a strong, experienced, and sure-footed executive team. It seems to me that the time required to effect the merger(s) and build on the strengths is often underestimated. Market conditions are always changing, key acquired management talent may not stay on, and finding more to fix and change than expected (due diligence can’t possibly find everything) often makes for slower progress than hoped for. This new business, now rebranded and eager to grow, has to get traction with customers who may have been wondering what to expect. Purchase by a new owner has left customers talking to alternate suppliers as a backup should they be disappointed by the new ownership. Smart competition always tries to...

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Hiring During Business Transformation

Posted by on Dec 7, 2017 in Osborne Insights Blogs | 0 comments

For more than the last eight years, I have been helping businesses transform from mediocrity (or worse) to strongly performing enterprises. While there may be marketing strategy changes or situational upheaval, all the transformations have involved subtracting, adding or changing roles on the management team. Of the businesses I have been most involved in, in the last 24 months, this has and continues to be the toughest task for the senior manager. Despite significant size differences ranging from quite small, to medium with strong growth and then to the top end of the SME range, all these businesses are struggling with finding and on-boarding the talented leaders they need. Invariably, they have faced hiring mistakes and “start-overs” as they push to get management structure in a place capable of carrying the weight of performance improvement. So, what can you do? Firstly, as a senior or THE senior manager, know why you are making the change. Also, what you have to get with a new hire and why (so that you can articulate that need to candidates). Know the answer to the oft-used interview candidate question, “if I was to be judged successful after 12 months in this position, what would I have done?” One hiring guru has suggested that it takes 130 decent resumes to get one hire. In my experience, it takes at least four (4) filtering interviews to make a successful selection. The same guru postulates that there are 4 “super elements”: Attitude Accountability Past job-related successes Cultural Fit Really on that list, there are only two “super elements” in my opinion. From experience, tangible past job-related success is the most critical predictor of future success and secondly, attitude (a subjective attribute) which nearly always determines accountability and culture fit. The first is the more easily gauged as you can probe for both success factors and failures in a candidate’s resume experience. Always ask them to define what they personally did versus a team effort (however important). And be dogged in your follow-up questions for fact-based answers. We all embellish a bit on our resumes so, caveat emptor. Attitude mostly determines accountability hence the ability to accurately judge a candidate’s overall attitude is really important and, highly subjective. Different interviewers judge attitude by different standards and weigh comments, body language, and facial expressions differently. Usually, I develop a sense of overarching attitude as the interview moves along. Initial impressions can be supplanted by newer evidence from completely different career segments. I have found panel interviews especially good at developing a comprehensive “attitude” profile. While others are doing the questioning one can observe, undistracted by having to listen to each word and gauge a candidate’s response process more...

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Start with the Tough Stuff

Posted by on Sep 28, 2017 in Osborne Insights Blogs | 0 comments

Many of us like to ease into our work day. Read e-mails, check schedules, wander down the hall and chat a bit; anything to delay getting into a higher mental gear for more important work. Some of the more successful people I’ve been associated with have a different start. Deliberately they begin with their toughest task for the day. One quite successful senior V.P. of Sales did all of his most difficult customer call-backs at the top of his day. Or started with an hour’s worth of senior client management cold calling and business development. He claimed it was the most productive part of his day. He was fresh, the client was fresh, and often conversations became creative in ways that wouldn’t be likely four hours later. I had a salesman who knew that I liked to be at my desk early. Invariably Al would call well before the normal start of work, usually to plead for a special deal or a favour to placate a key account. It must have worked because he kept doing it for years. At the top of the day, we have our highest level of optimism and mental energy. Our minds aren’t yet cluttered with minutia or the remnants of other people’s rants and problems. We look at issues with a sense that they are resolvable with a bit of thought and goodwill. Our belief in our own capabilities is at its highest. Our intent to “carpe diem” – seize the day – is still intact. We can constructively engage those who later in their day will be turned off and tuned out. An early win generates more mental energy and optimism to drive creative risk-taking and stronger expressions of vision or direction. We have clarity of thought and confidence of expression. Our “game” has been upped exponentially. So, how can we make this a re-occurring experience? What habit should we start? What amount of daily time planning is necessary? One strategy is to start early before others arrive and intrude on your planned task. Another, is to leave your computer turned off for an hour – no nagging unread e-mails glaring out at you, or new ones pinging away. Clear your desk at night so there’s no visual distraction as soon as you sit down the next morning. For most of us, it’s impossible not to pick up a pile of reports or schedules and thumb through them. After all, they must be important if they’re on top of your desk. But really, having a clear desktop electronically and physically allows you to start by saying: what’s the most important issue in front of me that cannot be delegated and which only...

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Medical Technology Amazes

Posted by on Jul 10, 2017 in Osborne Insights Blogs | 0 comments

If you haven’t been in a hospital lately, keep up the good work. If you have, as I recently was, you’ll find there’s some amazing technology making our lives much more productive and safe. My recent medical adventure was cataract removal. The only part I could easily appreciate was the nurse verifying which eye was the victim by putting a big, black ink dot over that eye so no one could miss it. The procedure is scary fast – about 15 minutes. You are conscious and can hear the play-by-play of the surgeon and intern making critical decisions (“no, oh sh…” thankfully was not heard). An hour later, an eye which could only read the two big letters at the top of the eye chart before could read down the entire chart and even two lines into the second page. They had cut out the natural lens covered with a cataract sight and inserted a new, artificial lens correcting for both the cataracts and astigmatism which goes back to my childhood. This was all done with a lens engineered for my eye alone. And, yes, there was a charge above OHIP but really, that’s a lot of technology for less than $1000.00. The wait time for the procedure was about 2.5 months and it was done at a public hospital, not a private clinic. Co-incidentally I began reading my U of T alumni engineering magazine (Skulematters, 2016 edition) which had considerable space devoted to bioengineering research and new products/processes which in the field. It boggles the mind; everything from equipment that can suture an infant’s blood vessels too small for a surgeon to work on, to systems that grow human cells outside the body, to software systems that optimize the use of scarce operating rooms and surgical staff across a network of hospitals (patient sharing). My personal experience was relatively minor, but its precise and successful outcome says our lives can improve hugely when medical science and engineering collaborate to solve complex problems. The availability of the procedure also suggested that resources are being reasonably well managed despite some of the media reports to the contrary. This all bodes well for my grandchildren who will benefit in the future from knowledge and devices yet unknown. The fun part? I soon get to do it again for the other eye. Fortunately, the black ink dot is gone now, so we can start fresh and hear a new play-by-play. We are indeed ever so fortunate to live in Canada at this time in our history. By John Bielby Manufacturing & Executive Management Visit osborne-group.com for other ideas and opinions from our Principals on a range of topics. Their views are their own and...

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Does Diverse Experience Really Matter?

Posted by on Apr 17, 2017 in Osborne Insights Blogs | 0 comments

Looking back over my career, I saw many different business models and strategic outcomes. The question of career experience and how a senior executive “fits” a particular business can vary from very well, to OK to not at all. Clearly one size in executive talent, does not fit all. And not all experience is transferrable. Two weeks ago a colleague ”moved on” as we say. During our goodbyes, she mentioned remembering my saying that I had moved around and been involved in many businesses (7 plus interdivisional moves), adding significant value to my knowledge base. And it is true. It prepared me for the strong consulting/interim management career which I now enjoy, where working with several diverse businesses per year is the norm. So what have I learned about this element called experience? For me, it has been that each situation truly is different (no surprise there); using a template to build complex enterprise solutions is not the answer. Every business problem has more than one solution so you have to consider several before running forward into battle. A few examples: I’ve seen a very successful private business that did only one P&L per year. While a bit extreme (and that business has since moved to more conventional accounting) the lesson may be to remember that the financials are only an outcome of business execution and that many astute managers already know where the numbers will land long before the accountants give the answer with exquisite precision. Certainly singular monthly financials, by themselves, are not of great use. I’ve seen management too long at the helm lose all vigor, unable to make impactful strategic moves. They remain wedded to one vision of how the world looks and stifle any challenging new initiative. It’s very rare for a leader to remain innovative beyond 8-10 years and probably less in today’s world. I’ve seen companies (dare I say overstaffed with head office MBA’s?) recut budgets three times per year and others which make an estimate of the month-end every Friday and then, in a four day close, estimate the month-end in a daily conference call, dissecting the minutia of the changes until day four arrives to end the silliness. To what end I say? Micromanaging through the numbers is not strategic execution and no doubt destroys management initiative and energy. I’ve often seen companies fail to take risk or to spend capital on R & D, missing key growth and market expansion opportunities. The best managed businesses truly differentiate themselves with a strong culture of well-considered risk taking. Frequently the top manager is the enabler by taking occasional failure in stride. Being an engineer, early on in my career I chased...

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