How To Succeed With Mergers And Acquisitions With Jeremy Harbour

How do you succeed in mergers and acquisitions? The fundamental strategy is to reach out directly to the type of company you would like to acquire. Lance Tyson’s guest in this episode is Jeremy Harbour, the founder of The Unity Group. Jeremy is an expert in mergers and acquisitions. And while his approach to sales may differ a bit from what you are accustomed to, you’ll find he’s governed by many of the same principles, such as the need for business and sales processes. And that people do business with people, not businesses. To be successful, you have to know your clients and prospects. So if you want to broaden your perspective of the B2B sales process, listen to the wisdom coming from Jeremy, and you’ll gain insights into your own sales process.

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How To Succeed With Mergers And Acquisitions With Jeremy Harbour

I have Jeremy Harbour with me. He is a world-renowned expert on mergers and acquisitions. He’s the Founder of The Harbour Club out of Singapore. Jeremy, how are you doing?

It’s an honor to be here. How are you doing?

I’m great. Jeremy, as with all these things, our audience is small to mid-sized sales leaders, executives and a lot of folks in sports entertainment. Why don’t you tell a little bit about your story? That’s how we start this thing.

I was born a salesperson. Growing up at school, I was the annoying kid that was always trying to sell you stuff and bringing things into school to sell. At a young age, I had a business selling stuff on a market stall. The key to that business was buying as much as selling. There was an expression that used to ring in my ears which is, “Bought right is half sold.” If you get the entry point of price, it makes the selling so much easier. That was my superpower.

When I was only about fourteen years old, I used to buy both watches and jewelry. I would then wholesale those to other market traders because I could get a better price. That would leave me with my stock heavily subsidized from these other disposals. I left school and I had a business supplying amusement machines to pubs and clubs and things like that. I then started a telecoms company. The telecoms company, lots of people were trying to buy that from me. My first education in M&A was being on the receiving end of people trying to pitch me to buy my business.

They were all great salespeople. The one thing they all have in common is they weren’t going to give me any money upfront. It was all cleverly structured deals to give you some jam tomorrow. I sat on the other side of the table and I thought, “I don’t have any money either. Why don’t I become the buyer instead of the seller?” I went outside of pitching telecom companies. I bought a competitor down the road, and that was an epiphany for me.

In my life, up until that point, I believed that you had to work hard, do sales and marketing, grow the business organically, and that was it. It was a relentless hamster wheel. I bought this business and we grew by a year’s worth of sales in an afternoon. I didn’t take any risk. I didn’t put any capital upfront. It was all deferred payments. It was a straightforward little transaction that had a massive impact on the business. It was like somebody showed me how to run the last ten yards of a marathon but you still get a medal. It was such an amazing feeling to realize that you don’t have to go through the blood, sweat and tears. You can do the last bit at the end and get all the glory.

Buy a company, add as much value as you can to it, and then sell it as quickly as possible.

I sold that telco in 2006. I was evaluating what I like and what I don’t like about the business. What I realized was that I liked the deal. We use #DealJunkie a lot in my Harbour Club community because my favorite deal is always my next one. We very much look at this whole M&A process as a sales process from start to finish. Sourcing companies are marketing. Doing deals are sales. I enjoyed that part of it.

The bit I didn’t enjoy so much was the staff and the customers part, the day-to-day, nitty-gritty operational stuff. I figured that if I could find a business where I didn’t have to do the stuff from the customers but I could do the deals, that would be perfect. From 2006 onwards, I bought and sold companies. I’d buy a company and keep it for as short a period as possible. My target was always four months but some of them, you end up holding for a lot longer than that. You buy a company and then you sell it as quickly as possible. In between, you add as much value as you can. You increase the value on the balance sheet, the P&L, cashflow and then sell it on.

I got quite a reputation for doing that. People started asking me to come and do consulting or something like that. I couldn’t think of any reason why I would want to go to work for someone and particularly work for someone to help them find the business. When I found the business, I would do the deal myself. Why would I want to do it for a salary? One of the companies that I bought was a training company. I realized the answer might be to turn that consulting into a training business. I created a company called The Harbour Club back in 2009, which is now a global leader in M&A training on how to buy and manage businesses.

We have a lot of things in common. I want to go back to something you said when you had your store business. You said, “It’s in the deal.” You buy low and sell high. One of the things that got me started in business is I own several apartment units and tax parcels. The first guy that ever sold me, sold me a piece of his investment portfolio. He said, “If you’re not embarrassed by your offer, you’ve offered too much. You’re never going to make any backend.” I never forgot that in everything I did.

Everything you talked about is interesting. You said that you were a born salesperson but you’re all about the process. In our interview, you said sales is a process. I agree with that. It’s half process and half art. It doesn’t make you an engineer, it makes you an architect. Nothing is built the scale at some level. There is some movement in there.

The other thing you were saying also is the art of the deal or the last ten yards. There’s something I was reading on you that said that not everybody is built to be an entrepreneur. To play off of the statement, would you agree that a lot of organizations and deals that you’re involved with are maybe product-heavy or service-heavy but sales poor? They don’t have a sales structure.

It tends to be extremes. There’s a whole bunch of things that have come up from everything that you’ve said that I could leap off. To go down that specific one, every business suffers from being overweight in one area. It’s either too much accounting because it is run by an accountant. It’s too many sales because it is run by a sales guy. It’s too much product because it is run by an engineer.

ASO 15 | Mergers And Acquisitions
Mergers And Acquisitions: The company grew by a year’s worth of sales in an afternoon with no risks and upfront capital. It was all deferred payments.

What happens is somebody from an industry tends to leave the business that they are in and go start a business of their own thinking they can do this better, cheaper, faster or whatever it is. When they are working for that company, they have a narrow experience of what the business did. That didn’t necessarily prepare them for the broad spectrum of things that they are now suddenly responsible for.

I remember buying a business process outsourcing company many years ago and they had spent a fortune on developing this incredible software that would outsource a company’s entire back-office administration function to them. You would run your business and these guys would do everything from your purchase ledger to sales ledger. All of that back-office admin function was almost totally automated. It’s way ahead of its time. This was years ago. They built this incredible piece of enterprise software but it was built by an accountant. They had $1 million of software and three clients. I ended up buying two of the clients as well. One was a health club and one was a music school.

One led to the other.

It’s a domino effect. Effectively, we bought them, we integrated this into our own back office, and that made it self financing. We then offered the service to our clients to be able to look after their back-office administration. We had a telecoms company at the time. We had lots of business clients. We have the thing they didn’t have. We had clients.

Why did somebody invest all this money in creating the perfect software solution? Why did they effectively give me the company? It’s because we solved the problem for them. Their problem was, “We’ve got this amazing software. We spend all this money but we don’t have any clients.” By solving that problem, there’s an upside in it.

That makes total sense. Complex problems don’t require complex solutions. That’s number one. You probably go into a lot of your deals and look for as many things that are the same as opposed to different. I was thinking about this and I jotted a note to myself. I said, “Jeremy has to go in. He’s talking either to buy a business or sell a business.”

As an entrepreneur, I’ve been approached several times during COVID, probably 3 or 4 times, from equity firms that say, “You’re willing to sell Tyson Group.” My board always asks me, “How much are you willing to sell for?” Every time I’m asked, I tighten up and go, “I’m not ready to sell it. I’m not going to get what it’s worth.” How do you approach that when you got so much passion involved in these businesses and these projects? What’s your approach to things?

The key in mergers and acquisitions is to reach out directly to the type of company you would like to acquire.

It’s about identifying motivations the same way as you would with any sales process. You have to identify where is the itch that you’re going to scratch. Somebody like yourself who’s on a journey with your business, you still feel like there’s gas in the tank. You’re enjoying the journey still. It’s going to be a different approach to somebody like you, then perhaps a Baby Boomer that’s had his business on the market for two years and has kissed a few frogs, but never found that princess. They are going to be in a different presentation.

For example, I might talk to you about, “Have you ever thought about rolling up other sales training organizations or rolling up other businesses where you can inject your sales training into that business, and have a huge impact on that business? How about we help you go public, we help you acquire all your competitors, we help you go and raise capital in the capital markets?” We’d be presenting that solution to you because you’re still hungry and want to be in the driving seat.

For another business, it might be run by somebody who is saying, “I’ve been doing this for 30 years. I want a safe pair of hands. I don’t want to see my legacy destroyed.” The Baby Boomer generation is an interesting one because they own most of the businesses. There are 10,000 of them retiring a day. They own a huge percentage of the small to medium-sized businesses in the US. They don’t have a bunch of options. One of the options they have is they can sell to a competitor. Selling to a competitor is great because they spend their entire career 30 or 40 years. They are hating these people with a passion and teaching everybody in their organization to hate them. The only reason they hate them is that they are good.

I’m guilty of that. We’re both techy. I’ve trained all my salespeople to go after the big fish.

Go and hate the big boys. The last thing you would want to do is sell Tyson to one of those big guys for them to assess strip you, take your name off the wall and put your customers into their programs. That’s what happens. This little local air conditioning company gets bought by the big air conditioning company and they rip the guy’s name off the building and sap all of his stuff, and take over the maintenance contracts. That is his life’s work done. That’s it. It’s finished.

He’s got the offer from some BizBuySell.com where he’s trying to sell his business, where they are going to give him $100,000 for his life’s work. Watch your life work be set on fire in front of you or take $100,000 for your life’s work. It’s like, “Do you want a punch in the face or a kick in the balls?” It’s not a nice set of options. When you provide a third way that’s compelling and solves those problems, solves the issue of legacy, provides a safe pair of hands for their business, and lets them see that business go on and achieve more and be more, it gets a little bit easier to jump over those emotional hurdles.

There are a couple of themes arriving here. As you talked in the beginning about your journey, you said, “This is a process. Even how I entered into these things, I wanted to be on the other side but I had to do business right on the frontend to get business right on the backend.” The second time I ever bought a business was a Dale Carnegie franchise. I broke out of the partnership. I was in Philly. They are franchised all over the world. Singapore has a franchise where you’re at. It’s a great training brand and world-renowned.

ASO 15 | Mergers And Acquisitions
Mergers And Acquisitions: With any sales process, you need to identify motivations.

I approached a guy in Cleveland. I didn’t know him. I was prospecting businesses to buy because I wanted to get out of the partnership and want to own one of my own. I introduced myself and said, “Have you ever thought of selling?” The guy said, “No, I’m not.” I got into a little conversation. I knew he was older. I said, “If you were going to sell, how much would you sell it for?”

I knew if I got to that question, he’d give me some range. He tried to put me off and I drove through the night and got there that night. The second big thing is understanding people’s motivations. When you were starting your M&A businesses, what was your approach that’s not a cold approach? If you’re not getting a referral, how are you getting to that point? People know who you are because you’re world-renowned.

If you’re a real estate mogul, you don’t spend your day looking in the windows of real estate agents. In the same way, if you want to do deals, you don’t go to the business brokers or the business broking websites. You reach out directly to the type of company you would like to acquire. If you want an air conditioning company in Kentucky that’s doing $10 million in revenue, there is probably a dozen or so of those. You write to those dozen companies and you have a call with them on a “nothing ventured, nothing gained” basis, “Let’s have a chat about your options going forward and what you’re thinking about doing with the business.”

As in a good sales discovery call, you try and understand what the motivations, challenges and apprehensions are of that client. You try and figure out if there’s a solution that would be a win-win for everybody concerned. We would go directly to businesses. The more businesses you can talk to, the more opportunities you get. Also, 9 times out of 10, the deals that we’re doing are companies that I don’t even consider the idea of selling my business before.

You have a predictable sales process. We’re going to connect. We have an identified target, and whether it’s need-based like you’ve talked about with a solution or opportunity-based, it’s either-or. Your folks and the folks that represent you are going out and reaching those targets and at least getting somebody interested in the conversation.

It’s from there that you can then drill down and find out where the opportunity might lie within it. In The Harbour Club, we teach people fourteen different strategies around how to do deals with owner-managed businesses. It ranges from a complete distressed basket case about the column and a bankruptcy lawyer right away through to solve them profitably, debt-free, well-run business that could go and do its own IPO tomorrow if it wanted to, and everything in between. The key with our strategy is we try and focus on stuff that doesn’t use a lot of lawyers or advisors, that don’t use the leverage from the bank. We don’t borrow money from banks. Also, it doesn’t use your cash upfront to close the deal. It’s without lawyers or leverage is the main criteria that we try and focus on.

I look at those first three deals I did. It was a continuing interest formula. I got the owners to hold the note and I paid them a portion of receivables in the future.

It might take you longer to sell textbooks to schools than buying and selling a company.

That’s one way to do it. You can only do this kind of structure.

If you think about this in your business, you’re connecting, you’re doing an evaluation, you’re diagnosing on either side, you’re suggesting something or prescribing something, and then you start negotiating to close a deal. I don’t mean to simplify your business that way. Too many times, whether you’re selling software, or you’re trying to buy or sell a business, or you’re flat out selling textbooks to a university or school, there is some predictability and some science to things if you stay in your lane and you stay focused.

It might take you longer to sell those textbooks to that school than it does to buy and sell a company. Sometimes the juice is worth the squeeze when it comes to the ticket size that you can get involved in. I often say when I was selling watches and jewelry at a market stall, it’s the same activity that I do now but with a far larger upside or outcome.

I and my people are in the business of identifying competencies and skillsets that get it done. When you look at entrepreneurs or even look at how you do business, what would you say are the 3 of the 5 top competencies or skillsets that you need from your people or you see in great entrepreneurs? You’re running into a ton of them.

The key ones are rapport, empathy and general communication skills. If you can’t empathize with other people, if you’re completely emotionally void of any empathy, it’s hard for you to do a deal. You then need a rapport. If people don’t like you, they’re not going to do a deal with you. What’s interesting is some of the best people are doing what I do.

I’m quite an extrovert. Some of my best members in The Harbour Club community are quite introverted. You see this in sales as well. When you look at the sales team, you’ve got the gregarious, outgoing loudmouth, and then you’ve got a little quiet guy in the corner. The quiet guy in the corner does 30% more sales than the guy who sounds like he’s going to be the next CEO.

A lot of people say it’s about the relationship. I’m constantly arguing with sales leaders or salespeople. Relationships are outcomes. It’s because of what you do. Rapport is you can walk into a Starbucks or a coffee shop, and have somebody a good rapport with you in 10 or 30 seconds that are built to connect with people. You chose the right word there.

ASO 15 | Mergers And Acquisitions
Mergers And Acquisitions: You can create great rapport and empathy with a depth of experience.

I was talking to somebody who runs almost an analysis on entrepreneurs. His name is Michael Hall. He did an analysis on me and he goes, “You’re an ambivert.” I’m like, “What the hell is an ambivert?” I thought I heard every word. He goes, “You have extrovert traits but introvert qualities. You can turn it on and off.” I’m like, “That’s probably true. That’s one of those things.” Talk about communication. You know when to shut up too.

One of my weaknesses is talking too much and maybe not listening as much as I should. One of the other great rapport builders or great empathy builders comes from some depth of experience. You can create a great rapport and great empathy if you have experience in their sector, their business or you understand. There are commonalities that you can draw upon that make them instantly think, “This guy knows what he’s talking about.” That’s another way you can shortcut.

What you said is true. In my book, I talk about three factors, rapport, understanding and then credibility. Credibility, trust and rapport allow you to persuade or influence. Understanding is that EQ, that empathy or sympathy. Sometimes it’s even sympathy for other people’s ideas. You can’t go on and tax somebody’s baby after they build it for 40 years. As I was doing my research on you, you’re hard-hitting. What are you like when it comes to objections in negotiation? Are you tenacious? Are you calculated? What are your moves there?

I don’t think there’s a magic secret sauce to negotiating. You have to have a range of options, and be pragmatic and flexible around the solution that you’re providing. All too often, you’ll see this a lot in sales where they’ve got one thing they can sell you. It’s like going to a barber. They’ve got one thing to sell you.

I always see this challenge, particularly with M&A deals. Somebody who has read a book about M&A is focused on a leveraged buyout. You put some cash in, you borrow some money from the bank, and you make them an offer. If that doesn’t work, you offer them more. You go back to the bank and see if you can borrow more to see if they can finance it more. They have this one solution and they keep pushing and pushing against the one solution.

What we have are fourteen different ways we can slice the cake. If that one is not resonating, we can do or solve it in a completely different way. Having that flexibility and also the ability to deliver a different solution quickly and on your feet effectively, and to see how the physiology of that suggestion is landing with the other party is the key. It’s not necessarily a hard negotiation around a number. It’s around finding the right solution to that person’s problem, and recognizing when you haven’t quite hit the nail on the head. The physiology doesn’t match or there’s some challenge.

About 70% of our business is in sports and entertainment. I couldn’t think of a worse industry to be in than sports entertainment. Getting a bunch of groups of people together to watch things is not great. We’ve been looking at a lot of different studies and looking for research partners. One study that came up at Florida State was when they started to look at high-performing salespeople. They started to notice that the highest performing salespeople were agile.

Develop the ability to deliver a different solution quickly to see how the physiology of that suggestion is landing with the other party.

They use the strategy at the moment that would best succeed. I call it the new business reality. If I hear the new normal again, I’m going to headbutt somebody because that invokes that we’re going back to what it was. It’s going to be what it is, and what got us here might not get us there. What we’re suggesting now is you better go in with multiple strategies.

We had an NFL team go and pitch a big convenience store that’s going to be a partnership. It’s going to have a lot of digital components to it. It’s a multimillion-dollar deal. The prep we did for that was about 4 or 5 strategies. Lo and behold, they went into the pitch. Thank God, that big food store chain had 2 or 3 strategies because the main one was not the one they went after. It was the third strategy. If you’re not flexible and adaptable, it’s key. What’s your advice as we start bringing this down to landing? You’re from Singapore. If you’re in business now, what’s some advice around COVID that you’re seeing?

In my business, we make our money in recessions. About half my wealth is from the last recession. I don’t want to be gleeful because it’s a pretty horrible situation for everybody. There is a lot of opportunities that also come from recessions. Many multimillion-dollar fortunes have been created in recessions. Some of the biggest companies in the world are formed in recessions. I would encourage your readers not to let a good recession go to waste without being too trivial about the whole thing.

The thing I’ve seen in every recession is the difference between those who react quickly and make changes, and those who wait for it to go back to how it was. If you sit there and wait for it to go back to how it was, you’ll get wiped out. You’ll get dumped by the wave. You want to be riding the wave. You have to adapt quickly. You have to do something new and different.

I saw a cocktail bar in Singapore that closed down because of the crisis. I saw another one that sent people all the mixes and taught the mixology over Zoom and did cocktail evenings. I saw a beauty salon that closed down, and I saw a beauty salon that did a seven-day facial detox program with video instructions each day. They send you a basket full of stuff and then every day you get a video on what you stuck on your face on that particular day to do an at-home spa. Those businesses were thinking about how they can pivot and do things a little bit differently instead of sitting there with their salon closed, complaining and waiting for when the rules are going to change so they can open it again.

The first thing is you have to adapt. The second thing is this is a great time to consolidate an industry. If you’re in an industry that’s fragmented, your competitors are squeaking too. It’s now the time that you all get together. United we stand, divided we fall. It could be a great time for mergers to save costs and get best practices. It could be a great time to consolidate or perhaps retire owners who don’t want to go through another recession.

If you’re a Baby Boomer and you went through the European debt crisis, 9/11 and the dot-com crash, you know this movie. You know this movie is three years long and we’re right at the beginning of it. Do you want to swing your arms and not land any punches for the next three years, or do you want to do something now, get out and spend those three years doing something?

ASO 15 | Mergers And Acquisitions
Mergers And Acquisitions: Some of the biggest companies in the world are formed in recessions.

That’s such good advice. I’m going to ask you a couple of interesting questions and bring this bird down for a landing. I can tell watching you that when you start talking about deals, the covering comes over like a shark. That’s a compliment. I appreciate that. I get pretty excited about doing any sales deal, especially one that means something. I have a sale song. It’s Onyx’s Slam. It’s an old rap song that I play in my head right before a deal. What song are you playing during a deal?

I would never have thought about that. It’s funny that you chose a rap one because the first thing that popped into my head was NWA’s Express Yourself. It’s being funky but there’s a proper message in there as well. When you leave, it’s that Call Me Maybe. It’s the irritating one a few years ago.

Last question and we’ll pull this together. My favorite interviewer is Howard Stern and my favorite podcaster is Tim Ferriss. He always goes, “If you’re going to gift a book, what book are you gifting?”

I read a lot and I read loads of good books. Sometimes the ones that get me thinking the most are the ones that had nothing to do with business at all. It’s something left field. I remember reading Andre Agassi’s book, Open. I’m not a tennis fan at all. After that, I was like, “I’m going to go watch Wimbledon.” That was an inspiring and good book. I enjoyed Richard Pryor’s autobiography as well. I found that was quite inspiring. Life is too short. He talks a lot about feeling the sun on your face one more time and things like that. He was dying when he wrote it.

I read this book called The Spy and the Traitor. It’s a true story about a KGB agent that the British managed to turn. He became the head of the KGB and he was a British spy. It’s the most insane story you’ve ever read because it’s true. You’ll get sucked into it. It’s a complete page-turner. It’s amazing how the business lessons you take from reading that story. You read all these things and it takes your brain somewhere else. You come up with some fantastic ideas and ways to solve things.

For everybody here, there are a couple of things. One is to have a strategy like you talk about, buy low, sell high, and know what your target is.

On the buy low and sell high, Warren Buffett said, “Price is my due diligence.” If you get the price right at the beginning, that covers a whole bunch of pain on the DD side. In The Harbour Club, we always talk about asymmetric risk investing. Asymmetric risk investing is simply don’t invest your money upfront so your risk is zero and you only leave upside. You take away all the downside and you only leave room for upside. You can then be a lot more bullish when you go into a deal. You can take a few more risks because the tight ropes are only 6 inches off the ground. It’s important to get that balance right.

“Price is my due diligence.” – Warren Buffett

Have that pre-qualifying strategy on how you’re going to go in. In any good business and any good salesperson, it’s a lost art. It’s understanding the motivation. Convincing a person with their motivation is important. It takes time to understand that. People are creatures of emotion. The rapport that you said is critical. You choose a relationship and you said rapport. That word is important. The last thing is to be agile and to move forward. It’s that ability to have several strategies or at least be nimble enough to move. Jeremy, I appreciate your time. This was fantastic. Stay well. Heads up and hands washed.

Thank you.

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About Jeremy Harbour

ASO 15 | Mergers And AcquisitionsJeremy Harbour, Founder of The Unity Group. Jeremy is an expert in Mergers and Acquisitions. And while his approach to sales may differ a bit from what you are accustomed to, you’ll find he’s governed by many of the same principles such as the need for business and sales processes. And that people do business with people, not businesses. So, to be successful, you have to know your clients and prospects. If you want to broaden your perspective of the B2B sales process, listen to the wisdom coming from Jeremy and you’ll gain insights into your own sales process.