Brendan Cullen

Don’t dismiss your competitors when it comes to potential acquisitions, since companies that offer similar products or services to your own may be ideal targets as business owner Brendan Cullen discovered.

10 Years of Organic Growth Doubled With One Acquisition

Having experienced how tough it is to grow a business from scratch, automotive parts business owner, Brendan Cullen, began to look for easier ways to expand.

“It’s very easy to get caught up in the day-to-day. One day turns to two, and before you know it, you’re 10 years into it.”

His company had grown organically over 10 years, bolstered to an extent by the use of online marketing techniques.

“We’d done a lot of pay-per-click advertising. Over two years, we went from having two staff to 15 and from turning over 100,000 to £200,000 in the beginning to £1 million.”

After 10 years, he wanted an easier way to grow the business. I thought there’s got to be an easier way of doing this. This was just a joke. So, we looked into acquisitions.”

Buying an established business would mean that it would have a customer base and a management structure. “We wouldn’t have the risk of the business going bust.” He followed the Dealmaker’s Academy’s recommended method of sending enquiry letters to potential sellers. The response was overwhelming.

His first target, however, was the business of an existing customer. “We remanufacture gearboxes for cars, vans, commercial vehicles, and the like. One of our customers was also our competitor. He’d built his business over four years and then started coming to me for products. I thought, ‘Why are you not doing this yourself? You have the skill set to do this, so why are you buying from me, putting a mark-up on the products, and moving on.’”

Brendan often spoke with the business owner and knew that the man was far from satisfied
with his lot. “There were the normal grumbles from him, like, ‘If someone gave me a cheque right now, I’d quite happily walk away.’ So, I decided to call him out on it.”

Brendan offered to buy his customer’s business. “It was as frank as that.” Brendan doesn’t believe in wasting time convincing sellers to do a deal. If they don’t seem interested in his initial offer, he moves on.

“The way I think of it is, ‘You have something that I potentially want. Do you want to give it to me?”

Yes, or no? If you don’t, not a problem. Thankyou for your time. If you want to sell, how much do you want for it? How do you want me to pay you for that? I would like it like this.’ It’s as simple as that: people either want to do it or they don’t. If they don’t, there are plenty of people out there
that do. So let’s get on with it.”

Once Brandon made his intentions clear, the seller left to consider the offer. “Things went quiet for two weeks over Christmas. Then he rang me
up. I think Christmas was the best thing that could have  happened because he’d had time to stew on it. He just said, ‘What do we do now?’”

“I said, ‘Leave it to me.’” Brendan believed that having known each other for several years made it more likely that his offer would be accepted. “I didn’t have to introduce or explain myself. He knew I was already a specialist in the industry and had credibility. He knew I was serious.” Brendan offered an initial payment on completion of the deal and a consideration paid over the first 18 months.

The two men avoided a drawn-out discussion over the value of the business. “I asked the owner what he wanted for the business. He told me an amount. It sounded reasonable to me, so I accepted it.

“If I was looking at a stand-alone business, would I have paid what I did for it? No way. I probably would have tried to play hardball. But I accepted his price because of the company’s structure. I knew I could add to it once it was under our control.

“The structure is key. If you can structure the deal so that it doesn’t put stress or strain on you, then you’ve got a much better chance of success. You’re not under pressure to immediately affect the business.”

Unlike many sellers, this one didn’t try to renegotiate the price during the sale process. “He’d been my customer, so we’d had dealings in the past. He knew how I operated. He knew if I stated a price, it would be a fair price. I don’t lowball anyone.”

That was important since part of the deal was to retain the services of the former owner. “Moving forward, if we were going to have a group structure, I wanted him involved in that structure as well. If I screwed him over on that deal, he wouldn’t want to be part of the
picture.”

“I wanted him for referrals too. If I approached other businesses and the owners were a bit
sceptical, they could speak to him. He was more than happy with the arrangement.” 

That wouldn’t have happened if the owner felt as though he had been offered far less than his
company was worth.

Things moved fast after the owner accepted Brendan’s offer.

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“It kind of snowballed from there. We got to Heads of Terms rather quickly. We reached all the commercial agreements.” Once the solicitors were involved, however, the momentum slowed, “They made things 10 times harder.”

The seller’s solicitor, for example, was a stickler for details. He picked up on the fact that the employment contract for a long-term member of staff featured the wrong location.

“If a comma was out of place on the contract, it would come back with a big red circle around the comma. The business owner and I were getting frustrated; all we wanted was to get the deal done. In the end, however, we bypassed the solicitors and sorted it out between ourselves.

Even so, his legal bill was double mine.” Eventually, the deal was finalised. Five months
after approaching his customer, Brendan had the keys to that man’s business premises in his
hands.

Interestingly, Brendan had not visited the site yet. “There were three reasons as to why I didn’t go there before then. Firstly, if I couldn’t buy it remotely, how could I manage it remotely? I didn’t want a job. Secondly, if I got there and didn’t like something, it would stick in my mind. I might start to think that I didn’t want to buy it, as that something would put me off.

Thirdly, I wanted to improve the business. I didn’t care what it was like till then because it’s going to be better.”

All that aside, Brendan admits that arriving at his new business premises the first day was a bit daunting, “I knew there was no way I could change my mind.”

As it happened, his last-minute nerves were groundless. The acquisition would eventually become part of a group structure.

“I didn’t want to incorporate it into the group structure immediately in case I had a hiccup or there were problems. I didn’t want ‘A’ to affect ‘B’. The holding company owned shares in the company that we bought. The plan was that once the deferred payments were settled, I migrate it.

“The company I bought has a great name that I didn’t want to lose. But over time, it will be integrated.”

Currently, Brendan is focused on the two companies. “About a year or so ago, I would have probably been quite hands-on in the business. Now, I show other people how to do what I would have done, and get a bit of a buzz out of seeing them go from not having a clue to telling me that the task is done.”

Giving up control has not been as easy as Brendon imagined it would be. “I used to think that I would love to have other people do what I do for me. It’s a lot more difficult than I thought it would be. In your head, you think you’re the best at doing whatever task
it is. You believe that if other people did what you did, they wouldn’t do it your way.

“The hardest element was realising that once you remove yourself from the day-to-day functioning of the business, you make yourself redundant.”

On the positive side, delegating means that Brendon now has the time and space to grow the new company and look for new acquisitions, even in different industries.

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