Mullen also says the Driscoll name will remain on the door to benefit from the brand’s “tremendous value.” He says the recent decision to rebrand the Texas subsidiary owes to the length of time that has passed since Structure Tone acquired it, as well as its desire to have the parent brand more visible in the interiors market nationally.
Despite filling its plate with a big purchase, Structure Tone may not be done looking at other markets, other cities. “Strategic acquisition is the model for us,” he says. “There is nothing imminent, but you have to be opportunistic.”
Smart Mergers Can Build Powerhouses …
One of the simplest ways to put a merger or acquisition on the right track is to start from strength. It may seem obvious, but firms with solid balance sheets and stuffed project backlogs often aren’t thinking about deals.
“When things are going gangbusters, they might be so busy they’re not really thinking about acquisitions,” says Will Hill, managing director of the investment banking practice at FMI, a management consultant based in Raleigh, N.C.
There’s a big difference between entering a deal from solid footing and approaching it from a point of desperation – where a company might settle for terms that could eventually doom it (see accompanying sidebar).
Another basic rule to making a mergers work is having a strategic vision for how it advances a company. Often, it’s to achieve rapid growth that takes them from a sleepy regional outfit focused on one specialty to the big leagues where they handle many types of construction and diversify their revenue streams to weather different market conditions, says David Pfeffer, a partner for Tarter Krinsky & Drogin, a New York-based law firm.
“It’s very rare for smaller or mid-sized regional players to be able to play in multiple fields without merging with another company,” he adds. “You can’t do it through strategic hires of individual people. It doesn’t matter who you bring in, no one is going to hire [a residential building contractor] to build a dam.”
Another trait of smart mergers is to make sure the firms have a cultural fit and similar approach to business – but also to recognize that they both will evolve, says Ronald Eagar, partner at Grassi & Co., an accounting firm specializing in work for contractors and developers.
“You’ll see a new culture emerge over time,” Eagar says. “As similar as people may think they are, there are very specific differences that will come out after the fact. And you have to recognize that there’s the office culture and the culture out in the field at the project sites.”
Eagar says a wise approach is to appoint a “transition team” for both headquarters and the field that outlines clearly what changes need to occur and delineates how personnel fit together and within the merged organization. “On the accounting side, what if there’s a CFO on both sides?” he asks. “You need a clear reporting structure in place.”
Some merged firms are tempted to leave old systems intact to minimize disruptions, but that approach ignores the economies of scale that justify deals economically. “You have to develop a unified and streamlined structure for some [functions],” Eagar says. Accounting, technology and systems, safety divisions, and many administrative functions are prime candidates for such consolidation.
And Eagar recommends that the even the friendliest of merging companies enact a dispute resolution process, because invariably there are unexpected disagreements that stump even the transition teams. “You need a formal system that dictates how management will resolve it,” he adds.
… But Merger Missteps Can Wreck a Company
The construction industry’s past is littered with firms that tried to grow too fast, or others that merged out of weakness in vain hopes of rescuing themselves. Deals can easily go wrong.
