Fusion Facilitates Growth via Acquisition
The term fusion can be defined as the process or result of joining two or more things together to form a single entity. A company taking this to heart is Fusion, having completed five successful acquisitions in the past three years resulting in exponential revenue growth. The 20 year-old firm is a market leader in cloud services, operating in 18 U.S. data centers and will continue to act on its stated goal of growth through acquisition.
Fusion President and Chief Operating Officer Don Hutchins provided the session, “Successful Growth through Acquisitions in the Technology Space,” for ITEXPO attendees. In the session, the 40-year industry vet illustrated best practice for navigating the seas of merger and acquisitions.
From 2012-2015 Fusion acquired NBS, cloud assets from Broadvox, Pingtone and RootAxcess. Each addition serving as a strategic piece of the firm’s plan, and adding up to a suite of solutions including cloud communications, connectivity, computing, storage and security.
Fusion is among many expanding via acquisition; companies like Vonage, RingCentral and ShoreTel are active as well. Sometimes buying to grow is simply the best option, and Hutchins laid out a guide to the phases of acquisitions.
The first phase is planning and engagement. You’ve made the decision to buy, but how? It is vital to define the objective of the acquisition. Is it to increase revenue, broaden the company’s scope or increase products and services? Collaborate with advisors and management to decide. Once the objective is clear, it is time to begin the search for the right fit. Establish disciplined selection criteria. Fusion, for instance focuses on buying companies that have recurring revenue, higher than average RPU and a low churn rate.
You can then begin to identify and screen candidates. Finalize the selection and engage the target. Hutchins explained research plays a key role in this phase; you want to learn as much as possible. Leave no stone unturned.
At the point you feel a sufficient amount of questions are answered, time to get to the letter of intent (LOI). Approach targets via social media or common friend, investment banker or lawyer. Hutchins recommends to, “Get involved as early as possible. You are selling yourself, and have to build trust and a relationship.
Exchange information and financials. Explain the story of the company, illustrate your intentions. And, learn as much as possible about the target. Gauge interest, and begin to negotiate a letter of intent—Hutchins notes to get an exclusive letter of intent to firm up a “one-on-one commitment.” Give yourself 90 days to work through and get a structure in place. Execute the LOI. This is like “getting engaged” with the target, but the deal is not 100 percent in place.
At this point, you want to learn EVERYTHING, about the target. Hutchins explained that Fusion asks around 200 questions. Complete your due diligence, it is beneficial to learn of any big risks or issues up front. Work through solutions.
Finally, negotiate and finalize the purchase agreement. Hutchins instructs to build a strong financial model. Identify synergies and tracking mechanisms. “Look beyond people...at networks and financials.”
But most importantly, this is the time to initiate planning the integration process. Once the transaction takes place, what’s the plan? Integration is crucial to the process, a plan delineates a clear path, “more companies have lost more value by screwing up the integration process,” cautioned Hutchins.
Fusion calls day one activities “celebrating day one.” That’s a big day, and it should be a bigger day for those just acquired. It is important to understand what those people are thinking, and be honest and open with them.
Communicate clearly with employees on workflow and organizations. Educate those acquired on policy, procedures and benefits. Integrate the technology, branding, products, pricing, etc. Fusion tracks a list of items for the integration, it takes time but it is vital to be diligent to optimize return on investment.
Hutchins left attendees with a few tips. He explained planning ahead is a key element, and maintain discipline and control during the evaluation and acquisition process is important. It is key to consider corporate culture – work hours, dress, language, etc. And at the end of the day, success can hinge on communication. Make sure you are reassuring new team members, guide them through process and build excitement with the new opportunity presented.
Mergers and acquisitions are reality, and knowing how to maneuver each step of the way can determine the difference between a deal going boom or bust.
Are you a buyer or seller?
Edited by Maurice Nagle