When a small business is looking for a way to grow beyond organic means of using its own core competencies, an external strategy of merger or acquisition can be a profitable option.
Three local companies, all highly successful on their own, found a path to growth within the last year through their purchase by and realignment with a new parent owner.
Through the acquisitions, all three companies expanded into new markets, broadened their product and service offerings and negotiated the terms they wanted on who would retain leadership.
A perfect fit
Brighton-based Brand Cool Marketing Inc. was acquired by the Henrietta firm Butler/Till in June 2015. At the time, Brand Cool CEO Sue Kochan faced the hardship of downsizing—a first in the history of the company’s 20-plus years.
“It was difficult. I knew it was time to make a change,” Kochan says, noting she received many inquiries from agencies inside and outside of Rochester that were interested in purchasing the company.
It was a chance lunch date that took her to Butler/Till. She happened to be meeting with a professional friend from the company; during the lunch, the two alighted upon the idea to bring their companies together.
“It was a perfect fit,” Kochan says. “We brought in energy and sustainability—the third leg they were looking for.”
The two companies worked in similar industries. Butler/Till is a media and advertising agency and Brand Cool—a certified B Corp for meeting rigorous standards of social and environmental performance, accountability and transparency—focused on branding and engagement in the energy and sustainability sector.
The acquisition proved to be a boon for both companies.
“With the acquisition came more service offerings,” says Kimberly Jones, president of Butler/Till. “Brand Cool had creative capabilities and Butler/Till had the media expertise, so we could offer more services to both companies’ clients.”
Under terms of the acquisition, Brand Cool retained its name and became a wholly owned subsidiary of Butler/Till, which purchased 100 percent of its shares. Brand Cool continued to serve its multiyear contracts with state entities and utilities and retained its status as a U.S. General Services Administration contractor, a women-owned business and a New York State Benefit Corporation (B Corp).
Initially, Kochan retained her role as CEO. But like her former partner, Kathleen Muscato, who retired in 2014 after 10 years with Brand Cool, Kochan eventually decided she wanted to step away from full-time company management.
In April she transitioned to her new position as chairman of the board.
“Kim and I have meetings, but I’m not involved in the day-to-day running of the business,” Kochan says. “It gives me time to do other things before this life is over.”
Kochan plans to dedicate more time to her teachings around mindfulness—a philosophy she maintained in her company practices.
“You may not need to be here to oversee the day-to-day operations, but you are our guiding light,” Jones says, pointing out the excellent rapport the two leaders have.
Both attribute the success of the acquisition to the synergy of the companies’ cultures and values. The Brand Cool staff moved to the Butler/Till offices in Henrietta. The team that had once numbered as high as 23 people, standing at No. 25 on the Rochester Top 100 List of fastest-growing companies in 2014, had dwindled to five full-time and one part-time employees.
Today, the Brand Cool team has grown to a staff of 19, and Jones reports that business has more than doubled. There are 104 employees at Butler/Till.
“Obviously it was a great strategy,” Jones says. “2015 was really a banner year for us. Our total revenues increased by over 35 percent, and we’ve had 36 percent employee growth since 2012.”
A whole new energy
For Scott Bass, the managing director of Rochester-based Advanced Language Translation LLC, seeing acquisition as a growth strategy required a change in his thought process once it was his company that was being acquired.
“I never looked at it as a way to grow. I always thought it was posed as an exit strategy. You look at it as an end,” Bass says. “But our company is in definite growth mode since our parent company acquired us.”
Advanced Language Translation, founded in 1994, was acquired in December 2015 by Morningside Translations, a company in the same industry of professional translation services, but on a much larger scale. Morningside is headquartered in New York City with offices in San Francisco, Hamburg, London and Jerusalem and services Fortune 500 corporations and leading law firms worldwide.
Under the agreement, Advanced Language Translation became a wholly owned but separate LLC of Morningside. Bass traded his title of president for managing director and still maintains much responsibility for the leadership of ALT.
The growth began almost immediately.
“My company had eight employees, and now we’re up to 12,” Bass says, noting he needed to add roles the parent company required that he had never had. “I’m learning how to be part of a larger enterprise. In some areas my responsibility has grown. In others, I’m actually more of a consultant internally.”
Bass sees this as much of a growing opportunity for himself as it is for his company since he has exposure to broader experiences, including new technology.
“My time is invested into bigger payoffs. I’m only 50, and I think there’s potential for me to grow my role, applying what I have learned,” Bass says. “It’s nice to know they value my expertise.”
The parent company has 110 employees, all based in New York City. The difference between Rochester and the Big Apple equals a difference in company culture, but Bass feels the two complement each other well so far.
“We’re a small boutique company focused on service and selling, and they’re a large company focused on operations,” Bass says.
There has also been a concerted effort on behalf of Morningside to welcome ALT and encourage a smooth integration, he adds, noting that a manager comes to Rochester from the parent company every month and the Rochester ALT employees were invited to the holiday party in New York City.
“It’s helped us to feel more connected, even with the distance,” Bass says.
Since it has been just six months, Bass says it is too early to gauge revenue growth. But he has seen several tangible growth benefits of the acquisition already.
“We’re at the front end of some deals and, as part of a larger organization, these leads are even more interested in us now,” Bass says.
He also sees a wealth of knowledge for his sales team to gain from the global parent company. The entire ALT team has stayed on, even six months after the acquisition.
“As a sole proprietor, so much of my ego is tied up in the business. It can be a shame not to be open to new opportunities,” Bass says. “For me, the acquisition gave me a whole new energy.”
Strategy and succession plan
The tables turned for a Pittsford insurance company owner who, after years of using acquisitions as a way to grow his business, sold that business to secure its future for himself and his employees.
Barry York Inc., located on Marsh Road in Pittsford, was acquired in January by Walsh Duffield Companies Inc., an independent insurance agency based in Buffalo. Walsh Duffield, founded in 1860, has more than 80 employees and offers personal and commercial insurance products to clients across the Upstate New York region.
It approached Barry York, the owner, about purchasing the company, making it the second Rochester insurance company acquisition for Walsh Duffield. It previously acquired Stuart G. Smith Agency— now doing business as Walsh Quinn Agency LLC— in Brighton, in 2014.
“It’s a bit of a turnaround from doing the acquiring to being acquired,” says Barry York, who has retained leadership of the Rochester agency as president, which has changed its name to Barry York Agency.
York has been with his agency since 1972 when it was Pitcher, Matthews and Consler. In April 2000, York acquired the assets and it became Barry York Inc.
From there he grew his company through acquisitions, two in 2002 and another in 2007.
Now with the sale to Walsh Duffield, which has said it intends to expand its footprint in Rochester, York’s agency is a division of the larger company.
The acquisition came as a bit of relief to York’s employees, who recognized their leader might be looking to retire now that he is in his 70s. The acquisition turned into a growth strategy and succession plan.
“The plan is for me to stay on a number of years to effectively manage the transition and take care of my clients,” York says, adding that all 12 of his employees received offers to remain with the company. “I still enjoy our clients and intend to do this as long as I can.”
The additional service offerings from the larger parent company will enable York to grow his business, which specializes in personal and business, casualty and property insurance.
“Walsh brings employee benefits (as a client offering) to the table that we had very little of, so my focus is to bring people in that department to introduce my clients to them,” York says.
Like York, the leaders of the local companies acquired in the last year believe the move was a good decision. All three see strong potential for growth continuing in 2016 and beyond.
7/8/2016 (c) 2016 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email email@example.com.