i4 Business Magazine – November 2018 – “Navigating the M&A Game”

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Article originally published November 1st, 2018, in i4 Business Magazine:  http://www.i4biz.com/featured/navigating-the-ma-game/

Navigating the M&A Game


Dena Jalbert was working with the Tribune Media Company, where she and the publisher of the Sun-Sentinel newspaper in Fort Lauderdale would go out into the marketplace in the mid-2000s and acquire small local publications.

The Chicago native had spent her career until then working in corporate finance with other large enterprises, including Arthur Andersen and Ernst & Young. But she found herself drawn to the companies that were on the other end of the acquisitions she was negotiating for Tribune.

“I would watch these business owners sitting across the table from us who didn’t have representation,” she says. “I was so surprised and disheartened because they didn’t understand all the terms. It’s a complex process. They were inadvertently leaving money on the table.”

Today Jalbert is the owner and CEO of Winter Park-based Align Business Advisory Services, which represents firms in what she calls the lower middle market, or those with $1 million to $100 million in annual revenue.

Business owners at this level are “very much underserved,” she says. They’re too small to be able to afford a full staff of C-suite executives who can help them navigate through complicated business issues, especially a chief financial officer. The larger consulting firms and investment banks would consider them too small to become clients. But they’re too big to qualify for some of the services available for mom-and-pop start-ups.

“I want to help those business owners,” Jalbert says. “I want to make sure they’re getting the best terms and they’re maximizing their decades of hard work in that transaction.

“I compare it to a game of poker. You sit down at the table, and you know some tricks. You’ve read a book or two, and you know the rules generally. But you’re a novice, and you’re sitting across from someone who could win the World Series of Poker. You’re at an inherent disadvantage.”

Better Off

Jalbert purchased Align in 2017 after being hired previously by private equity firms and several midsize companies to help with their exit strategies.

One of those companies was Channel Intelligence, a Celebration-based firm that developed technology to power online shopping sites, including Walmart, Target and Best Buy. Google purchased the company for $125 million in 2013 in what still remains one of the largest acquisitions in the Orlando area.

After a series of these kinds of experiences, the lightbulb clicked on, she said. “I thought to myself, ‘Hmm, there’s a pattern emerging here. This isn’t coincidence. There’s a need for this level of expertise.’ So rather than doing this one business at a time and displacing myself every three to five years, I acquired this firm and now we get to do it one-to-many.”

Align was founded in 2010 and specialized in information technology (IT) consulting, and Jalbert has expanded it to include finance and accounting, human resources, mergers and acquisitions, and other services that help strengthen midsize businesses. The company employs nine and is looking to grow to as many as 35 in the next 18 months as it expands nationwide.

She is committed to making the team diverse. This includes personal background, such as gender, age and ethnicity. It also includes experience, such as industry, geography, business size and business type.

“In my number of years in finance, I’ve realized it’s an industry that is not very diverse,” she says. “You go to the Meet the Team page of most of our competitors, or any investment bank or PE firm, and they all look the same and they all come from the same place. … We actually take a completely opposite view of that. I focus very heavily in our recruiting on who we have on our team.”

That diversity brings a breadth of experience and knowledge that can better help businesses that otherwise might not get exposure to the world of M&A, she says.

“The firm provides a subset of consulting services because our clients in this demographic have these needs,” Jalbert says. “If we’re going to help them through a transaction, we’re going to help them better their business as well. So even if they don’t end up selling their business, their business is better off.”

In turn, she says, the firm’s work also creates value for the investment community. “Our venture capital and private equity partners, along with the corporate investors we work with regularly, find it refreshing to have our level of M&A expertise in this demographic of business. They’re used to having either no one present or owners whose experience is less sophisticated.

“In just about a year, we’ve had a tremendous amount of growth and success. I have to pinch myself sometimes. It goes to show our model is resonating in the marketplace.”

Start Anytime

It’s never too soon for a small or midsize business to start seeking help if the plan is to eventually sell instead of handing the company over to someone in the family, Jalbert says. Even if the vision is 15 years down the road, having an exit strategy on the radar helps strengthen the business today.

“One of the first questions we ask every client is, ‘When you lie in bed at night and you visualize what this transaction looks like for you, what is that?’” she says. “Are you going to retire in Costa Rica? Are you going to start a new business? Are you going to invest in real estate? What is your end objective? What is your motivation and your driver? Then you work backward from that.”

When it comes time to negotiate the sale, an average transaction takes about 1,000 hours to execute, she says. It’s a lengthy process that can be painful at times, and it’s hard for a business owner to run the daily business and continue to grow it while managing an extra 1,000 hours of work.

One step to start with is a talent planning analysis. “I compare it to an NFL football team,” Jalbert says. “You know what positions you need to play the game. Who do you have in those positions? Are they the right people for the positions? Which positions are empty? What do you need to fill and when? We’ll help them plan their ‘draft’ and make sure they have the best team members to get them to where they want to be so they can exit the business.”

After the merger, companies like Align also provide support for integrating the entities into each other. “Once two businesses combine, that’s when the hard work begins,” she says. “It’s easier to buy a business. The hard part is putting it together.”

Local Outlook

The Orlando area is not exactly viewed as a hotbed of activity for venture capital or private equity investment and M&A activity among small and midsize businesses — yet. But it shows promise, Jalbert says.

“As more wins become better-known, our market will hopefully start to attract more venture capital, private equity and corporate investment,” she says. “Here in Central Florida, it’s a bit of a desert. It’s difficult, and you have to go to other markets to seek funding. We have some local funds, but that expansion funding is where there’s a lot of opportunity for growth in Central Florida.”

Everyone wins if local small and midsize businesses can grow where they’ve been planted, Jalbert says.

“Silicon Valley is competitive and expensive,” she says. “Founders and business owners are looking for other markets for growing their businesses. We’re creating a competitive ecosystem here that will help that, but there’s still a ways to go.”

Watching the Trends
The mergers and acquisitions (M&A) landscape shows no signs of slowing down in the coming decade, says Dena Jalbert, CEO of Align Business Advisory Services. In fact, it seems to be picking up. She has noticed several trends that are affecting the marketplace:
Private equity firms seem to be investing in multiple firms in the same line of business and merging them as a way of growing them to scale faster. For instance, they will buy six IT managed services companies, pool them to create one large entity, and then sell that to either a publicly traded company or a larger private equity firm. “Private equity is very much focused on a ‘buy-and-build’ strategy,” she says. “The statistic I’ve read is that 63 percent of all private equity portfolios employ this type of strategy.”
M&A activity has been heating up in contracting trade services such as lawn care, pest control, electrical and plumbing. It is also affecting business process outsourcing organizations, or those that handle back-office functions such as HR, finance and accounting, and call centers. Jalbert is also seeing consolidation in healthcare. “A lot of that is driven by the cost of healthcare, which is continuing to increase. Consolidation is a way to bring economies of scale and shake down costs and be able to preserve profit margin. We’re seeing consolidation in clinics and practices, devices, pharmacies, veterinarians and all sorts of niche healthcare.”
In the U.S., businesses are starting to see deals involving foreign investors from Europe, Canada and Asia. “That’s new,” Jalbert says. “Traditionally, it was primarily domestic. Those investors are starting to see that consolidation in the lower middle market allows them to have geographic expansion quickly.”
Industry-specific funds are popping up, as well as those aimed at traditionally under-served types of businesses, such as those owned by women and minorities.
Certain funds are placing money in companies that rate high in corporate social responsibility, or missions and causes that help people and the planet.