By: Jim Wooster, Jr., Alarm Financial Services, Inc.
In the previous GMS Newsletter, we announced a series of articles that will appear in the next several issues outlining the many aspects of making an acquisition and financing that acquisition using the recurring monthly revenue (“RMR”) accounts as collateral.
This article focuses on a step that seems obvious, finding a company to acquire. But many dealers we speak with don’t know where to start. They often expect the seller will find them. The answer to how you find a company to acquire is, any way you can! Ask GMS to let you know if any of their dealers are getting ready to retire. Offer the people working the counters at ADI or Anixter 50-yard line seats for their local NFL team if they introduce you to a dealer and you end up making the acquisition. Seriously, why wouldn’t you make this offer? Get creative and get the word out.
Reach out to a broker. Many of our industry’s best brokers advertise in trade publications like Security Systems News and SDM, or in-state alarm association publications like The Mirror. Tell your insurance provider. Speak to industry lenders like Alarm Financial Services. We hear about dealers who are thinking of selling through our many contacts in the industry and we will keep an eye out for opportunities.
Give thought to what kind of accounts you are interested in acquiring. Residential? Commercial? A mix? What about geography? Are you trying to fill in your current service area or expand into a new city? A very important consideration is the number of accounts. A good rule of thumb is not to try to acquire more accounts than you currently have, otherwise, you may face challenges both operationally and financially managing such a big merger. Are you looking for just accounts or also employees?
And perhaps most important, be patient. It does not make sense to do an acquisition just for the sake of it. You will be investing valuable time and money. But when the right opportunity comes along, be ready to jump on it. One of the keys is to start getting financing lined up ahead of time.