Talent-Based Acquisitions, Apple, Developer discussed on M&A Science
We are not generally a developer or owner of real estate. We advise clients on there real estate matters. And so when we talk about Acquisitions in the context of jail on what I do, I'm specifically referring to the opposition of other Real Estate Services firms. What is a talent focused acquisition? So a telephone was that position is largely a services-based acquisition and off the Hallmarks of a talent-based acquisition our situation. We are requiring people requiring people for their skills their domain expertise particularly in the areas of Consulting and advisory and their client relationships particularly in the areas of brokerage as you can imagine jll being principally a Services based organization. Most of the Acquisitions. We do are talent-based but like other firms me to our on our digital Journey here and interested in you know, looking at some technology-based place as well. But for today, we'll be talking about talent-based Dominic. What are the key criteria in assessing? An investment and a talent focused acquisition and if you can describe how you would do the diligence, when we looking at Allen focused acquisition, we're looking at initially a lot of the same things would for any other acquisition in understanding the business model the historical and projected financials Revenue profit and so forth. So all of that is table Stakes, but I think what makes the talent-based acquisition more unique is we're really digging in understanding the employees and the culture one of the things that we are particularly attracted to our situations where the employees of the firm are also the owners of the firm and there is really strong alignment there which enables us to do some things with purchase price and earn-outs to create incentives going forward. We also want to look at how calm the employees are not just to a sale but to continuing on as employees to jail well as closing and that's pretty critical and so we would not be interested in a situation where a group of folks are looking to age. Cash on retired that would be pretty hard for us to get value out of that going forward. It's very important that we have commitment so that we can realize the return-on-investment overall. Make sure there's an ongoing career path to leadership involved absolutely and no leadership is as well all the employees and and that there is also a good training and development model in place as well because not everybody is going to be there forever. Not everybody's going to last forever and we need to make sure that there is appropriate processes in place for knowledge sharing and and training how do you approach planning the structure and valuation of a deal recognizing that the values in the employees and the biggest risk is that you do the acquisition and then as soon you close everybody leaves in your left with nothing, so that's the risk that we're always trying to minimize and how we structure the deal from evaluation perspective. We still employed a very revenue and cash-flow based evaluation methodology, but how we structure that valuation is going to be different for talent-based deal. We tend to pay purchase price over time rather than all at once and use an ounce quite extensively now everybody's got their horror stories about her. Now. It's I'm proud to say by and large they most often worked for us. They've mostly been when when we of course have some scars as well, but they have been a very effective tool in talent-based Acquisitions to new creating that incentive for the owners slash employees to walk to really Drive growth going forward. And then of course, you also use retention mechanisms as well both time days and performance-based retention compensation models. Hips are keys on how do you make an orange successful try to imagine every possible scenario and plan for it in the purchase agreement and then you'll still miss something really gotta get that crystal ball out there. I think for us the key has been in our the way we structure our house has evolved quite a bit over time and I think the biggest area of involvement has been making sure that we are holding the acquired business page. Accountable for things they're in their control. So that's really important to folks coming on board. They don't want to be measure of things that are well outside their control like corporate allocations and expenses that they have no visibility into you have to find a way to integrate but also ring-fence the business at the same time that can be a tricky balance and to making sure that the earn-out is aligned with what you actually want those employees focused on day-to-day. Well, I am not round the variables that team can actually control exactly go tip are there ways in which building a talent Focus structure could be leveraged and other Industries. Absolutely. So I think Tom m&a is really applicable to any Professional Services or business services firm consulting firms advisory firms interior design architecture and you name it. So anything that falls in category is going to largely be focused on talent and they're going to likely employ similar structures and models to the things that yeah. Well does I think in the world of technology dead There's Channel based on Monday and it's more frequently referred to as Apple hires frequently C software companies and Technology firms acquiring talents, but I think the distinction there is in Business Services, you're requiring that challenge for exactly what they're doing today in the technology world, you might acquire that talent and redeploy them to other projects or morphed IP into something a little bit different. It's really using a way to get access to it too. Great development skills typically, but what those people might be doing post closing is more often than not looking looks a little bit different than what they were doing pretty closing. And what does that mean in terms of repurposing the home team that you're requiring or a different projects in the technology world with an echo higher soften an acquisition of a team and maybe plus some intellectual property intellectual property maybe is interesting, but they were not able to monetize it or really turn it into a business. And so the acquirer often will either sometimes scrap that intellectual property completely or take that intellectual property and build it into a wage. Thing else that they are building internally is a way to accelerate development. And so the team the acquired team may or not continue to work on that IP more likely they're going to work on something bigger so and Google and apple other of these types of Acquisitions. They usually got big projects already underway that they need talent for and they'll use that wires to go get that if you're not going to utilize the IP are you actually putting weight on that in your generation? I would think in those situations not so much know you're going to be really looking more hiring costs as your opportunity cost and then the deal structure itself is going to be more heavily weighted towards retention wage, maybe or now if there's if there's a way to measure Revenue going forward and some screwed way, but these deals are often very focused on in a position of just of the talent and then retention around that going forward them to keep that strategic ones on and discard the nice to haves and what ways does the talent focused organization have to change their processes and adapt. I think the most important thing is to keep it open a game. I'm willing to learn from the organizations that we acquire. There's obviously a reason why we're attracted to the firms that we acquire. They're doing something very well. It's important that we learn from them culturally and operationally so we have to be open to adapting our methods our business model in.