Mergers

Mergers are combining (merging) two different companies. A merger is permanent with shared control of the company; it affects the entire populace of the companies and usually occurs between similar sized companies.

Selection of a CFO is Sometimes Your Most Important Decision

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Ambler CFOHaving a complementary CEO and CFO has become a competitive advantage in the dynamic world of major hospitals.

Read health industry or business publications, and you’ll soon notice the name Amy Mansue. She’s the CEO of Children’s Specialized Hospital. NJSPOTLIGHT.com recently recognized Mansue as a “Top Healthcare Policy Analyst.” Plus NJBIZ includes CHILDREN’s SPECIALIZED Hospital on its list of “best places to work.” With an ever expanding geographic reach and 12 locations, CHILDREN’s SPECIALIZED Hospital’s services now include inpatient, outpatient, rehabilitation, long term care, medical day-care, early intervention, etc.

Mansue clearly leads the process of identifying opportunities for CHILDREN’s SPECIALIZED Hospital but is the first to point out that CFO Joseph Dobosh plays “an important role in the expansion.” Mansue particularly values that Dobosh is a “visionary.” 17% of the 1,200 fte report to CFO Dobosh.

TRINITAS CEO Gary Horan also speaks highly of their CFO, Karen Lumpp. “In this ever changing healthcare environment, a CEO needs a CFO with the background and expertise Karen brings to the table,” says Horan. TRINITAS is the result of combining Elizabeth, NJ’s three previously struggling hospitals. 10% of TRINITAS’s 2,000 FTE report to CFO Lumpp.

John Sheridan is the CEO, and Doug Shirley is the CFO of COOPER University Health Care in southern New Jersey. 400 of COOPER employees in this $900 Mil/yr entity report to CFO Shirley. Well known for its trauma center, COOPER has expanded dramatically over the past several years. “We recognized the need to increase our access to clinical trials,” said CFO Shirley. COOPER had already looked at 4-5 leading cancer hospitals when MD Anderson contacted COOPER. CFO Shirley played a key role in deal structure and making sure managed care rates were in place during the creation of the recently opened $100 Mil MD Anderson COOPER Cancer Center. “The two-way due diligence process spanned about a year,” said CFO Shirley.

These CEOs and CFOs agree that today’s hospital-based CFO must have extensive experience handling major projects. The CFO doesn’t just “crunch numbers” any more. Dobosh, Lumpp and Shirley all view their CFO role as predominantly focused on major strategic initiatives. It is very telling that these hospital CFOs view ICD 10 compliance as a “short term project.” CFO Lumpp shared that hospitals complying with ICD 10 coding by October 1, 2014 involves “quadruple the information, a big learning curve and dual coding.” CFO Dobosh shared that the project to transform hospital records to a MediTech paperless system involved “a few years and less than $6 Mil.” Clearly, changes in coding and going paperless would have been viewed as major projects for a CFO not very long ago. When CFO Shirley isn’t structuring a joint venture with the #1 hospital in the country, he is leading COOPER’s Lean Six Sigma initiative or teaching niche surgeons about supply costs. When CFO Dobosh isn’t structuring the financing for a new service and/or location, he is “retiring debt, refinancing to direct placement or thinking about Triple-B bonds.”

Clearly, today’s hospital-based CFO must have strong communication skills. No longer do CEOs and board executive committees consider strategic options and then consult the CFO. The CFO is “at the table.” Hospital CFOs are expected to make frequent presentations at executive team and board meetings. It can take as long as five years for a CFO to earn trust in a hospital setting, so the CFO must demonstrate that he/she is motivated to help find ways to help other professionals use state of the art technology, treatment techniques, etc. Today’s CFO cannot sound like a negative bean counter.

Perhaps more than in any other industry, health care-based CFOs must be level headed and accept that the rules will constantly change. CFO Lumpp says that hospital CFOs must “replace the word hospital with health care systems.” The reality is “by the time a brick-and-mortar project is built, it will already be out of date. Even insurance could collapse into a new system,” predicted CFO Lumpp. Apparently, she is correct given the recent headlines about Saint Barnabas’ plan to introduce its own health insurance plan.

It is a challenge given the limited time available, but health care-based CFOs must commit to continuous learning. CFO Shirley reads industry publications like Healthcare Financial Management (HFM) Magazine, Healthcare Executive, Modern Healthcare and HealthLeaders Magazine. CFO Lumpp warns that a health care CFO’s time can “too easily be chewed up by simplistic popular ideas that don’t consider the 40+ variables involved.” CFO Dobosh is convinced that his auditing background, experience as a referee for high school basketball and leadership level participation in the Healthcare Financial Management Association (HFMA) have helped him. He suggests that someone who is interested in becoming a health care-based CFO should “look for mentors and get experience handling major projects within the industry.”

Clearly one of the most important decisions made by a hospital CEO is the selection of the CFO.

Alternate Between Divergent and Convergent Thinking When Negotiating Deals

Divergent ThinkingYou have been considering your options, running scenarios, and have come up with what you think is a great idea. But your idea can’t possibly be in another person’s budget or plan. You just came up with it. Both parties usually don’t think of a possible deal or new working relationship at the same time. It’s human nature (and more so these days) for a person to be inclined to say “no” if a deal wasn’t his/her idea. So, the first step in deal negotiation is to help other people open up, get caught up, and not feel rushed. If you push to sell your conclusion, you are very likely to prompt a negative response.

It can help to alternate between divergent and convergent thinking when discussing new working relationships or deals. Once you think you have discovered a good option take a step back and start your discussion with the other party with the premise that there could well be ways that the two of you could work together that would be mutually beneficial. That way, the first discussion is exploratory and expansive (divergent). Together, you generate multiple ideas and approaches.

The operative word here is “together.”

The second time you meet, you can shrink the options down to 3-4 that have merit, which is convergent thinking. Together, you can divide up the “homework” to be done. One of you may research the joint venture option. The other may spell out how money would flow if it should be a strategic alliance instead. Or, one of you might clarify how a partnership might work while the other thinks through how a loan could be executed without a partnership involved.

The operative word here again is “together.”

Deals often fall apart in the early stages because one person was too focused on a single conclusion or only one side is doing due diligence. Deals also fall apart when one participant reveals worries or focuses on possible problems way too early in the process.

If there is consensus on a possible mutually beneficial approach, the third meeting can be dedicated to how to prevent problems, minimize barriers to success, address worries, etc. Aired before concept consensus, those concerns just sound like fretting. Divergent thinking is involved when listing what could go wrong and what might be needed to address issues.

The fourth meeting is the most important in most deals. What will each entity actually commit to doing? Who else will be needed in order for the concept to pay off? What is the best timeframe? What ROI is reasonable for both? Is there a fallback or contingency plan?

In my opinion, lawyers should not be involved in deal discussions until the fifth meeting. Their role is adversarial by definition and certainly feels divergent. Business leaders need to know what they want and be centered, so they can provide clear directions to the attorneys. Life is good when attorneys are asked to explore a concept’s viability versus identifying all the ways it may not work.

The sixth meeting is sometimes referred to as the “champagne meeting”. Together, agreements are signed. The launch is rehearsed. Key people who will make the concept pay off are present.

Again, the operative word is “together.”

Pick Up Speed

Does this sound familiar?

The tedious process of major prospects makes your sales people sound like they are waiting for several decisions.

The production department(s) express agitation about waiting so long for the accounting department to distribute financial reports. They want to know how much gross profit they generate and if the numbers suggest they have to hire, make do, or lay off anyone.

And the marketing department can’t tell if they can start working on their new campaigns.

It’s not a good sign when your department heads are waiting and looking for data.

Yes, you need timely financial reports about how last month, last quarter, and last year turned out.  But creating better results for next month, next quarter and this year is more important.

Putting department heads together once/month to compare projections for the next month, the next three months, the next twelve months pays off. What revenue can they count on for each period? What is the best educated guess about additional revenue that can reasonably be expected? What direct costs (COS) can already be projected? Which capacity utilization and billing multipliers apply to improve the short term future?

Accountable department heads do not just coordinate, react, and allocate resources on a day to day basis. They learn the metrics and create next month’s success, next quarter’s improved results, and next year’s growth.

Are your department leaders putting their heads together to compare projections and make decisions to get ahead of day to day implementation and create success?

This is especially important if/when your company is going after larger more complex clients. A client going through a merger or IPO will bring even more bureaucracy and delay. To prepare for larger accounts, it’s essential to pick up speed and get ahead of your own day to day process. 

Is your sales manager looking for ways to leverage and replicate the lessons learned from major proposals?  Is the marketing department finding ways to multi-purpose the contents of published articles, speeches, webinars, etc? Is the production department creating standards and delegating tasks down as far as possible?  Does your accounting department need to move beyond just reporting the past results to become a resource to the other departments?

 

[video post] Watch Your Words When You are Updating a Strong Strategic Plan

Watch Your Words When You are Updating a Strong Strategic Plan

It’s so exciting to work with high performing organizations.

I was recently invited to speak at an all staff event for a regional organization that is part of a national entity.  National headquarters had required four locations to merge a few years ago.  Everyone had to reapply for their jobs and/or express an interest in another role…even the people who had been with the organization for over 20 years!

The leader of the new combined regional organization had welcomed input and guidance from the national headquarters.  They did pilot projects.  They established new procedures.  They embraced national’s updated vision and mission.  This region is now the role model for others. WOW have they been busy!

The pre-merger regional strategic plan was exceptionally well done.  And now it was time to “refresh” the strategic plan.  So they created a few task forces. They brought in board members, employees, customers, and volunteers for a few full day Saturday sessions.  And they utilized conference calls in between. Very impressive, huh?  Clearly, this organization has proven that the people are capable, dedicated, team players who want things to turn out well.

When the board convened to report out on the conclusions reached by the task forces, there were tweaks to the mission statement and updated numbers for goals.  And there were major initiatives proposed. It’s helpful that the “refreshed” strategic plan had been a participative process because the proposed new initiatives are very ambitious.

Before being a guest at that board meeting, I had just spent a day conducting back to back interviews with key employees and board members from various locations. They are bright, hard working…and tired.

I found myself speaking up at the board meeting asking the leadership to revise some of the wording on the refreshed strategic plan so they wouldn’t sound like the next wave of effort would be as difficult and stressful as the last. Instead of a big new initiative or asking MORE MORE MORE, it pays to use words that convey that they are building on success, can become more specific now, can realize better results if some details now develop.  They built a great huge cake coming through that merger intact.  A request now must sound like the addition of icing and not like a demand to bake tons of pies.

A few years living and experiencing a bold strategic plan surfaces insights, deeper details, and raises the bar. It’s important not to skip past the celebration of success before demanding bigger and better things from people who are already tired.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieving accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

Keep an Open Mind during M&A Negotiations

A prominent competitor approached our consulting firm saying that they were potentially interested in acquiring us.  At the time, we viewed ourselves as the acquirers rather than the acquired.  But we saw the situation as a learning opportunity so we met with the leaders of the larger firm. The process shined a light on holes in our strategic and staffing plans.  That didn’t feel very good at the time, but it was a huge favor.  The process also helped us understand the value of our innovation and I.P.  Very important partner level discussions were sparked for us by our interaction with the larger competitor. Although we turned down their acquisition offer we remained convinced that we hadn’t wasted one minute going through the process.  It was very illuminating.

A few current clients are led by Baby Boomer aged owners. We are encouraging them to engage in exploratory conversations with their counterparts in related companies.  Over the years we have discovered that a maximum of six conversations are needed to finalize a new relationship (merger, acquisition, joint venture, subcontracting, etc).  And we encourage our clients to have a minimum of two discussions so they remain open minded. The conversations serve multiple purposes…learning, surfacing opportunities, imaging the future taking a different form, etc. The conversations often start with a meeting over breakfast at a diner in a neutral location.  There is no reason to prematurely alert employees or customers to the fact that they are talking with one another.

For one of our clients, the initial diner conversations between complementary firms sounded like a merger might be possible, but the proposed terms that resulted looked more like an acquisition or asset purchase. The younger owners of one firm had jumped to the conclusion that the older owners of the other firm were ready to retire.  Talk about illuminating!  The acquisition won’t be happening this year, but the door has been left open to reconsider later.  In the meantime the “older owners” came away from the negotiations with renewed commitment to their business and determination to raise their prices, upgrade their technology platform, and fill a job vacancy. The fact that a competitor viewed them as “ready to retire” and “no longer viable” was the wakeup call they needed.

Are you initiating conversations with the leaders of complementary businesses to explore strategic alliances, joint ventures, acquisitions, mergers, or roll ups? And when you do meet with peers, are you staying open minded enough (not focusing on the punch line) so you can learn? Surprisingly, the process can surface ways to improve profitability, candidates for key positions, client or project opportunities, or growth financing.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST®. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB clients get on…and then stay on…the published lists of the fastest growing privately held companies. She owns and operates a suite of companies that help privately held midsized companies achieve accelerated growth with sustained profitability® through opportunity & resource analysis, 4 approaches to strategic planning, executive advisory services, growth financing, and targeted search.  2012 is Ambler’s 8th year hosting a weekly peer-to-peer-to-peer syndicated on line talk show that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. An archive of over 300 interviews is available at www.GrowthStrategistShow.com. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

Mergers Become More Possible During Tough Economies

Maybe you have also heard a business attorney declare from a speaking platform that “There is no such thing as a merger! One company always ends up in the dominant position!” I can understand that viewpoint.  After 40 years as a business growth strategist, I have concluded that the overwhelming majority of acquisitions can be traced back to a company being in search for a more effective CEO.  Acquisitions and mergers are not just about the exchange of money. When there is clear leadership in one of the entities, that’s who ends up in control.

But mergers are more possible during difficult economic times, because comparable competitors may want to work with one another. Neither may want to dominate the other or step back and be told what to do. They may just need to share the risks, reduce their operating costs, benefit from shared marketing, be able to take vacation again, be ready to handle larger accounts, retain top performers or lay off “dead wood.”  By working together, they may feel less isolated and worried. Today’s mergers can be as simple as a “stock swap and keep going.”

Lately, I’ve noticed more trucks with dual name businesses like “SMITH & JONES Electrical Contractors.”  In my opinion, the enemy of entrepreneurship is isolation.  If you are still interested in being in business, but scaling your company to an efficient size has become more and more difficult, it may be time to consider a merger with a competent competitor.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST™. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB service, technology, and distribution clients get on…and then stay on…the published lists of the fastest growing privately held companies. All of her own service businesses (strategic planning, executive advisory, growth financing, talk show, speaking, search) help privately held midsized companies achieve accelerated growth with sustained profitability™.   Ambler is in her 7th year hosting a weekly peer-to-peer-to-peer on line talk show at www.Business.VoiceAmerica.com and www.growthstrategistshow.com that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. Family owned businesses are being emphasized in 2011. Ambler is in the process of launching her 8th enterprise. She can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

Everyone Is “In Play”

During a recent discussion with a prospective corporate sponsor, a very influential CEO shared that “these days, you can assume that EVERYONE is in play.”  This guy would know.

Wow, what a profound observation!

Look around. Industry leaders who seemed firmly entrenched in their roles are becoming association Presidents. Previously very independent companies are quietly seeking affiliation with larger organizations.  Regional CPA firms are launching new divisions by acquiring boutique consulting firms.  Leaders of some family owned businesses who lost their retirement nest egg in 2008 and can no longer count on the next generation to want to take over are now contacting business brokers, considering mergers, and even weighing dissolution.  Former football players are becoming Congressmen.

Everything being dynamic…in motion…is a symptom of this most recent recession’s extended period of uncertainty.  But as confusing as these changes may seem, it is a very good sign.  It means many people are tired of waiting.  They are no longer hoping the government will magically bail them out.  They are no longer defaulting to “just work harder” as the only possible strategy. They are no longer holding onto a pipe dream.  These folks are getting on with it!  YEAH!

Not all of the business model changes, consolidations, acquisitions, new divisions, and career shifts will work.  But it is SO much better than staying stuck, waiting for someone else to do something, losing too much money, or becoming depressed.

There are several important implications to this shift in behavior…including how it impacts your sales force. Prospects may not be accepting your sales person’s calls and your buying cycle may be stretching.  When the reasons for delays sound the same but your sales people can tell that they aren’t being told everything, they might be right. The prospective customers can’t tell your sales people that their companies may be sold.  They can’t admit that their CEO is leaving the industry.  They can’t reveal that they are in negotiations to become a division of a larger entity.

If you wonder if your prospects can’t be candid with your salespeople, it may be time for more executive-to-executive conversations. Or at least change your sales approach.  Some firms (like outbound call centers that set real sales appointments for their customers) provide important services that can keep customers afloat during periods of uncertainty or flux.  This may be the time to become more direct with stalling prospects rather than just wait for them to later tell you why they couldn’t talk more candidly.

 

Aldonna R. Ambler, CMC, CSP has earned the right to be called THE GROWTH STRATEGIST™. She has won over 2 dozen national and statewide “entrepreneur of the year” awards for the resilient growth of her international businesses across 4 recessions.  Her midsized BtoB service, technology, and distribution clients get on…and then stay on…the published lists of the fastest growing privately held companies. All of her own service businesses (strategic planning, executive advisory, growth financing, radio show, speaking, search) help privately held midsized companies achieve accelerated growth with sustained profitability™. Ambler is in her 7th year hosting a weekly peer-to-peer-to-peer on line radio program at www.Business.VoiceAmerica.com and www.growthstrategistradioshow.com that features interviews with CEOs/Presidents of midsized companies (typically between $20 and 200 Mil/yr) sharing success tips about the growth strategy-of-the-week. Family owned businesses will be emphasized in 2011. Ambler can be reached toll free at 1-888-Aldonna or at Aldonna@AMBLER.com.

 

Is Your Product/Service Development Process Slower than the Economy?

There is so much emphasis these days on specialization, serving a niche, and improving what you do that some companies get in a horrible rut.

Imagine you ran a M&A (mergers and acquisitions) firm like Peter Colella does.  He is the President of the Colmen Group.  That’s complicated business, right?  It’s a big dating game.  They are always looking for buyers and sellers, evaluating compatibility, and facilitating deals.  But one of the many reasons Colmen has been successful is that Colella continues to introduce new services to the mix in response to customer needs. They got into developing, staffing, financing, promoting, and integrating new offerings several years ago and more recently they added management advisory services as well.

“It may not sound sexy,” says Collela, “but our clients were really happy when they learned we could provide ‘spreadsheet jockeys’ for them while they were going through the various steps involved with deals.”   (Click here to listen “When & How To Introduce New Services” with guest Peter Colella.)

Or imagine you are in the “personal image” business. Would you be one of the first firms to provide make overs? Did you pitch a television show to the cable networks?  Would you have seen the cue to author a book? Would you use UTube and Facebook as ways to reach the public? Entrepreneurs like Mary Lou Andre and Karen Kauffman have found ways to update and expand their services in that highly competitive market.  (Click here to listen to “DIFFERENTIATION” with guest Karen Kauffman.)

Or imagine that your company provides project management or marketing services?  Those services can quickly become commodities, right?  Greg LaLonde of TripleFin has stayed ahead of competitors in that space by focusing on the pharmaceutical and consumer products industries and investing in new services to become a one stop shop for their customers.  (Click here to listen to “The Power of Committing to Vertical Integration…Especially during a Tight Economy” with guest Greg LaLonde.)

Thrity-eight years ago I did not know that my businesses would provide a range of services to help midsized companies keep growing.  Expanding from strategic planning into services like growth financing and executive search has certainly helped my businesses achieve 93% repeat business and attract talented employees over the years.

When/if your business hits a plateau, consider the possibility that the plateau may not have been caused by the economy. Maybe your company’s product/service development process is FLAT!

Avoid Wishful Thinking and Presumed Conclusions During Deal Making

A deal is a sale with a non-customer.

Some deals help your company acquire new technologies or capabilities more quickly than trying to develop it yourselves.  Some mergers and acquisitions are done between complementary companies to expand the product or service offering to better serve the best customers. Acquisitions can also be done to eliminate a competitor in an important market.

I noticed that the lingering recession has led some tired entrepreneurs to consider acquisitions and mergers as a way to get relief from their intense schedules.  Unfortunately, this increases the vulnerability of the already tired entrepreneur.  Wishful thinking takes over, and the entrepreneur convinces him/herself that an acquisition can solve their problems.  Why not hire a strong “#2” and get centered again before considering any acquisition or merger?

I have become convinced that acquisitions are like marriage.  When a tired single parent marries to “solve his/her problem,” new problems often develop.  Acquisition, merger, and marriage negotiations all seem to go more smoothly when each participant is centered.

But what do you do when/if the two entities don’t seem “centered”?  What if you thought you were negotiating a merger, and the other entity (key person) waffles, seems a bit too nervous, and withholds information? It pays to slow down and expand your view. Maybe the other person just wants to cash out and retire.  Maybe he/she had become bored. Maybe the transaction will only involve the purchase of assets so you don’t take on their debt or “people” issues.  Maybe you should only offer to pay a licensing fee and not purchase anything.  I’ve seen acquisition negotiations end in simple subcontracting arrangements.  We all know couples who concluded that they should just continue dating one another.

The best deals are when the leaders of two companies look for synergy (fit) and leave their options open…instead of starting the process assuming the answer will be an acquisition or merger. If there is not win/win fit, the title of the deal you don’t make won’t matter. It pays to leave the structure of the deal to attorneys.  Whether it’s a strategic alliance, a joint venture, an acquisition, a merger, an asset purchase, or something else isn’t the most important question.

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