Adrian Knight – Why Acquisitions Fail With No Integration Strategy

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Julie Wilkinson  00:03

Hi, I’m Judy Wilkinson, and I’m a chartered management accountant. And I’m excited to be launching the build and exit podcast. This podcast is for business owners and entrepreneurs who are looking to expand their business portfolio by acquisition, or at some point in the future, when to exit their business. We’re going to bring real life stories and experiences of people who have grown by acquisition, who have exited their businesses, and other areas of business such as funding and cash flows. So there’ll be lots of opportunity to learn different areas of business and how you can in the end, transition your business from a lifestyle to an asset to look forward to seeing you soon. Hi, and welcome to the build and exit Podcast. I’m Judy Wilkinson, and I’m the owner and founder of Wilkinson accounting solutions. I started the build and exit podcast in 23 off the back of the work we do with our clients that will concerns because I noticed there was quite a gap of skill in the market in acquisitions, especially in terms of understanding financial reporting, valuations, and also like how to streamline the finance team post acquisition. So the podcast has had lots of guests from different areas of business in different parts of acquisitions, looking at acquiring or selling or funding. And I’m really excited today to introduce Adrian Knight. Hi, Adrian. Adrian has come on the podcast. So a bit of background about him. Adrian has successfully done three acquisitions in 24 months, he is building is built a 3 million pound group. And he’s also done two franchises that has got just under 70 franchisees. So I know I know how you doing does also have some another business venture as well. But that’s sort of an acquisition journey he’s been on in one of his groups. And I thought it’d be a great content for others to learn about his journey. And also we’re going to look at Adrian’s taking a bit of a step back in his acquisition journey to look at how to integrate a back office. And that’s something we’re going to look at today. So thanks for coming, Adrienne.


Adrian Knight  02:06

Thank you for having me, Juliette. So it’s a real pleasure and honour to be on your podcast.


Julie Wilkinson  02:10

And I just want to hand over to you. So you can say a bit about yourself really your journey and why you’ve come on the podcast?


Adrian Knight  02:19

Yeah, absolutely. So I’ve been acquiring businesses since early 2020. I’ve acquired several companies, I’ve had some successes, but also some real train wrecks in there as well. And it was sort of towards the end of 2000, in the summer of 2020, when I was looking like very sort of objectively and seriously at kind of the different businesses that are had. And I just felt like I wanted to assess and wanted to keep on acquiring, but I wanted to do something with a bit more meaning to me personally, and something that had a bit more of a like a social impact. And through a series of sort of serendipitous events over that summer, I sort of arrived at the children’s education sector, which haven’t been a fairly new dad was like a whole new world to me. And I was fascinated with this with this new world. And so in August 2020, I made a very conscious decision that I was going to play a part in this in this sector. And I started by acquiring a very small franchise network called Talking tops, which only had eight franchisees to it. So in franchises, well, that’s very small. But I just wanted to get under the skin of a business in this sector and to understand a bit more and also to have a bit of credibility. And fast forward two years later, that has that sort of first acquisition has led on to two more acquisitions. So we’re currently as a group sitting at just under 3 million in revenue. We’ve got 17 employees, and for the last one was coming up to 12 months now we’ve focused on nothing but the back end sort of post acquisition work, which has been probably the most challenging part of the journey so far. And we’ve still got a lot of work to do there. But yeah, it’s been a it’s been a great ride.


Julie Wilkinson  04:24

Yeah. And I think it’s really interesting that you’ve taken a step back, because you don’t hear a lot of people talk about post acquisition in the challenges. There’s a lot of people that get to the point of closing that you never hear from them again. You know, you’re working with someone so brokers and things and they maybe disappear after the deal. Deal happens. So then it’s interesting. Nobody then sees that personal journey for somebody after they, after they bought it. What made you decide to focus on the back office?


Adrian Knight  04:54

Well, it was I was kind of forced, forced into it and like forcing to do and so because As my last acquisition, which was in early October of last year, that was a real, that was a turnaround. So that was a business that had 10 employees in a decent level of revenue. But it had so many problems, I had zero process, it was very old school in the way it was being run. And so going into that, I mean, the I mean, literally, the day after signing, was straight into the first major fire, and it was just fire after fire after fire. And so it was a question of, as we were putting out these fires, it was like, well, we need a process in place to be able to prevent this from happening again. And it was kind of like opening Pandora’s box, like you opened one bid, and then you’d have 10 more problems that would appear. And so you fast forward to today. And we’ve we’ve just done so much work on our systems and our processes. And this is how we’re going to approach this. But it became clear to me probably around sort of spring of this year, that we didn’t just need to do it for that particular business in the state of like, sort of being highly reactive, that actually we needed to take this a step further and start to consolidate this group and put in like this in sort of broader system. So for example, if we was looking at, and we was looking at IT systems for this for this last acquisition, well, that also made us look at the IT systems were the other companies and be like, well, how are we going to manage this? Like, do we want to have a more sort of fragmented like a federated, like group structure? Or did we want to go down the consolidated route? And then once we made those decisions, we then had to start rolling out? And so yeah, I mean, given, given the opportunity, I probably would have done another acquisition, because it is fun, and super sexy. And it’s a real thrill. But I just knew realistically, that that wasn’t that wasn’t this phase, this phase was a period of putting the right foundations in place so that we could then keep on acquiring, sort of trying to look five to 10 years ahead, rather than at five to 10 months.


Julie Wilkinson  07:12

And when you did the acquisitions, originally, out of interest, did you have an integration strategy? No,


Adrian Knight  07:19

it was completely, I want to be in a sector, I’m just going to go and take some action and acquire a small business, and then basically just see what happens in go of it from there, like very, I was so early into my acquisition journey, like I don’t, I’ve made my first acquisition, it was about seven or eight months earlier. So I’ve still very, very new and actually exited that last year, to sort of to focus on the children’s education group more. But yeah, I just, it was all front end, like what’s right in front of you. Whereas now, when I’m looking at acquisitions, look at them in a completely different way. And I think the level of due diligence we go into now is just it just levels, levels deeper, and not just financial due diligence. It’s like the full works.


Julie Wilkinson  08:14

Yeah. Yeah. And so when you talk about back office, then integrating the back office just just for people that maybe because it could be a lot of things in the back office, what things are you included in that? What type of things are you looking at?


Adrian Knight  08:30

So I mean, we’ve looked at everything that sort of underpins the business. So first of all, our office and our office location. So with my low with the second acquisition, we took out a very small Service Office, which was just outside of Watford, which served our purpose at the time, but after doing the third one, the like, with that acquisition, we had to move office because it like the business was in just a horrendous lease situation, like we had no choice, but we had to move. So again, it was like looking at office space and thinking, well, we’ve got 10 people in this business right now. But what about the other companies? And how can we start to create a space where we can, for example, consolidate our finance function across the group? And what would that look like? So that was a very, that was a very sort of tangible, like, back office sort of integration piece that that that was sort of the first and look at, then it was like it then it was marketing, then it was even sales and recruitment as well, because we have to franchise networks. We’ve got we’re all like, there’s a lot of costs that can be consolidated here, and potentially we can offer a better service to, but people inquiring about a franchise because if they’re interested in one, but that territory isn’t available, then we’ve got another one that we could, we could present to them and we want to present more to them down the line. Fine, but then you have to think about stuff like GDPR. And, and all of this stuff. So it was just like this never ending. There’s never ending cycle and we’re still on that journey. But it was all the stuff that’s in the background that certainly from a, an acquisition perspective, we don’t always think about that we’re just so focused on the deal and the deal structure, but it’s the engine behind the business, that you know that that that was really it.


Julie Wilkinson  10:27

And you said, you’ve been focusing on back office for 12 months? Is that what you


Adrian Knight  10:32

is? Yeah, and we still got so much work to do so much work to do. Yeah.


Julie Wilkinson  10:36

So it just goes to show just how much work there is, how much work there is on the back office, isn’t it? I don’t think people really think about, cuz, because we see a lot, one of the things we help people with on the acquisitions, and we’ll concerns would be the consolidated budgets for all these things. Because one of the things we look at helping people think about would be okay, so you’re doing an acquisition? What are your synergy segments? What are your opportunities, which is kind of what you’re doing? We’re just looking at it from a numbers perspective, because most people are trying to quantify things. So, you know, if you’ve got three leases on back offices, the idea would be okay, we consolidate those leases. And in the end, the overriding point for that would be streamlining, you know, Systemising, but probably also some cost savings, because why would you not want to try and get a cost savings off the back of it. And that’s, and when we, when we speak to people that are buying businesses, especially if it’s a business buying, not necessarily like an if it’s a business buying and acquisition, what’s interesting is they often don’t have their own forecasts and plans in place for their own business in the first place. Does that but if you’re going to buy a whole nother business, then bolt it on, and you don’t have a business plan or a process? Or, or even you know, you know, I suppose your own internal improvements that you need in your own business? How would you then integrate that into an acquisition, because you might have your own problems that you haven’t resolved, let alone an acquisition problem. So


Adrian Knight  12:06

it’s so true, it’s so true. And the first thing I’ve done when, in my last acquisition was I took on a part time finance director, which I was itching to have previously, but we wasn’t at the scale where we could support that. And I mean, even then it took six months to get to a place where we had, like proper visibility on that, that particular business, not even at a group level, and we’re still not there at a group level, because we’ve been firefighting, and a very sort of hands on with the like, with the last acquisition. But yeah, it’s just like, No one thinks of this stuff. But this is the most important aspect of it, it’s, it’s mad really, to think that I’m going to look back on myself and just going in sort of all, you know, smile, and, you know, fly by the seat of your pants, it’s a little bit all about getting involved.


Julie Wilkinson  13:02

Although it’s difficult, it’s there, but it’s good that you look, if it’s good that you’ve recognised it, and you’ve taken the time to step back and review it, because it will only get worse, if you just keep holding on more and more and don’t fix anything, you know, then that will, in the end, it could get out of control couldn’t. Yeah. And and when you say you’re sort of like forced, I mean, had you seen impacted the customer on the basis that you didn’t have a process?


Adrian Knight  13:33

Yes, yes, we did. So with this acquisition, I knew that I knew that there were problems in the business pre acquisition, I knew there were problems in the business that weren’t being said. Some of it sort of, like they didn’t want to say, but also some of it, I think, through pure, like lack of awareness that have their own problems like the previous owners. And so I structured the business in a sorry, I structured the deal in such a way so that a lot of the consideration was on the back end. And it gave us a bit of sort of breathing space so that we could get in and actually figure out where the problems were and what they, you know, how severe they were. And some of them turned out to be very severe, but then also had the protection so that the cost of those problems would be deducted from the consideration. So and it was the only way the business was really gonna. There’s no way the owner was really going to sell it because basically, like we were coming in, because he was just done. But yeah, you know, sort of getting into it, the I mean, the first, within the first 24 hours, I have a message from two of the salespeople, saying that the third salesperson was syphoned off leads. And then two days later, we had a major incident at one of the US schools because this is a person that builds playgrounds at one of the schools. And it just so happened to be one of the top 10 private schools in the country, like right on the embankment in London. And the incident escalated and escalated and escalated to the point where the police were on site, trying to stop some contractors with who managed to break into the school, with their diggers fully prepared to start digging up all of the work. And this is like 72 hours into into the ownership. And I sort of looked at that. And it was very only a very heated, and it was a complete standoff in the end. But I look, I looked at that at the time, and I was like this could have been prevented in so many ways by simply for start having terms conditions in place with this contractor, a really simple, really simple fix, by having a process internally that could have vetted them, rather than the salespeople of all people choosing the subcontractor because they were the cheapest, and they came first on Google light. And so the impact to the customer was, like significant. And unfortunately, we have more of those cases, where they like all of the rubber, like the tail end from the previous like six to 12 months where it was just one problem after the other from a customer perspective, which is exactly why the previous owner wanted out. Like it was just, it was just, you’ve just bizarre really so surreal.


Julie Wilkinson  16:35

And I think there’s so many small things in an acquisition that can actually cause such big financial problems. Like I one thing, one of the things we always look at is, you know, all say to people is think about the business they’re buying, is it trademark, like the amount of businesses that have logos all over their bands, as an example, that signage is their marketing. And actually the name is not trademarked. And it’s never been checked. It’s not actually in breach of another, I suppose larger brand. You know, and I suppose you could argue, well, the risk is minimal. It’s never been found out before. But actually, if someone did notice that, and the whole brand was at breach, like what would that do? I mean, how would that impact the acquisition? I mean, that could literally be a game stopper, couldn’t it? For for a period of time anyway. It’s funny


Adrian Knight  17:25

say that, because this business was exactly that. It didn’t own its trademarks. It had a competitor who owns its trademarks. And it had another competitor who it was like the two names, but back to front, and up. But I knew this before going in like that as part of the due diligence, I knew that was the case. And it was only acceptable because I knew we’d have to rebrand like a new a rebrand was coming. And so as I as I went in with my eyes open, but I was sitting there, like how could you not trademark, like the company name like surely this is? I didn’t know it just felt so elemental. But you know, clearly it’s, it’s, you know, it’s not for some people. And yeah, it was it was just sort of crazy really had I had no intentions to rebrand the business, then almost certainly wouldn’t have gone forward with the acquisition for the very reasons you said you really like it could be swept from under your feet within a matter of, you know, a day.


Julie Wilkinson  18:22

Really sounds like you’ve done some good due diligence, though, because I think you’d be surprised Adrian, how many people wouldn’t even know that the trade it wasn’t trademarked. I think there’s there is a lot, I speak to a lot of buyers. And the feedback I get, because a lot of people go into different they’re being taught in groups. So there’s lots of them out there. You know, people that bind people to buy businesses and the feedback, I get a lot from people that attend these types of courses is, you know, it’s great for deal flow. May may be a bit of ego, trying to find the deals, but most people do say to me, but actually, I don’t know what I do when I find them, like so they say they there’s a lot of people teach you to find deals of despair, and people want to do the acquisitions. But a lot of these people then say I don’t really understand financials. And actually, I don’t quite know what I’m looking for. And even worse, when the deals gone live, a lot of them are I don’t actually know what I’m going to do to run the business. Like that’s not saying they have no clue in business at all. Everybody has their own skill set. But you know, once once you take legal ownership of these businesses, you know, you are legally responsible, you know, you then you have a responsibility to your stakeholders, to be able to have to be able to run this business effectively. And I just think there’s a lot of gaps in some of this teaching that’s out there in terms of showing telling people the reality behind that how hard it is, once you buy the business.


Adrian Knight  19:51

That’s just it and that was me, like I I done a training course, and came out of it again all Crazy cheeked in big smiles in this car of generating deals. And I’ve done my first acquisition within three months of doing that, because I was I’d set myself up to do it, like in terms of my bandwidth, because I had a business that I had started and been running for coming up to seven years. And so I went out and acquired a my first that was, it was actually very lucky, it was a good acquisition, and I exited it, as well. So it was great experience. But then my next, my next three acquisitions were just a train wreck. Because I had this false confidence behind me that oh, this is, this is, you know, this, anyone can do this, this is how you do it. And then went into these and was just burned big time, because there was largely a lack of proper due diligence, and I didn’t really know what I was getting myself into. And it was done all wrong. And they were very painful experiences, but they moulded and shaped the, like my approach to acquire and which is exactly what’s happening. Now, with this back end integration. It’s May it’s changing the way and continually changing the way I look at deals and look at acquisitions now. And so it was like, fortunately, to those train wrecks that happened at the start of my journey, that gave me the insight on how to structure this last acquisition and how to do the due diligence in a way so that I could at least arrive at a position where I knew that there were problems, but we didn’t have the answer to them decided to deal. You know, that in itself was was like quite big, because like you knew the problems were there. You just didn’t know exactly what they were. But that sort of that mindset of going into that deal. That wouldn’t happen if it wasn’t for the earlier train wrecks. So it was yeah, it’s been a pure baptism by fire in every which way.


Julie Wilkinson  21:59

Oh, wow. So now you’re looking at the back office. So what’s your intentions going forward? Are you still searching for acquisitions is what type What are you looking for?


Adrian Knight  22:11

Yes, we are. So as part of the back end integration. So people was very high on my list. And there’s been a lot a lot of people changes and stuff that that’s happened particularly over the last 12 months. But as part of that people strategy, I have engaged a non Executive Director, very experienced person within the sector, who is helping to help them to sort of guide certain aspects and components of the, like the subsidiary businesses, but also of the group as well. And as part of that relationships, relationship I have with them, they are helping me to prioritise which sectors to be sort of looking at within the broader scope of like our like group mission and what we’re trying to do. So that in itself has been a real eye opener, I guess, in terms of doing that, like more due diligence on the different sectors and markets because there’s so many to go out, rather than just doing it on a deal by deal basis. So we’ve been looking at that in quite some detail. And we’ve we’ve sort of zoned in on a couple of sectors, which we feel would be a great area for next acquisition in the context of where we are right now. Or there’s other sectors we like the look of, but we’re not quite ready or it like it would be just too much for for where we are right now. And we don’t want to, you know, it’s all about managing risk here as well. And so we started to look at those. But interestingly, we have started to have started to look at those acquisitions, from a people perspective. So rather than going straight to looking at the business, we’ve we first identified the sectors based on where we are right now. And then second to that we’ve looked and identified a couple of key people who we feel would be excellent and are qualified, running and operating those businesses, whichever, you know, whichever ones we ended up acquiring. So it’s been a complete back to front approach than I’ve ever done with my other acquisitions. Because they’ve always been about, like the business, it’s almost like more opportunity, opportunistic, like, oh, this business has come up, let’s see if we can acquire it. But now it’s like the complete reverse. So we’re looking at those I don’t feel as like rushed. Like I have to do an acquisition right now. I did with the other ones. It was like gotta grow you gotta grow at scale scale scale. But then the last acquisition just like is brick wall after brick wall where we’ve been steadily climbing over or breaking down or going around each of those which has created space, but it’s also a creative space and myself because I feel like even I’m still very early My acquisition journey, like I know that was the next acquisition, it’s still going to be a journey within the journey. And there’s just like a component of timing has gone right up my priority list in terms of the right people at the right time to maximise our chances of succeeding with this. And not, you know, being called because the police were on site at a major private school in London. So


Julie Wilkinson  25:27

oh, it’s not funny, but you have to if you don’t laugh, and you know what, we’ll just won’t go over it. Well, ya


Adrian Knight  25:34

know, exactly. I mean, this, this last year has been so incredibly tough. Because of that acquisition. And I, I sort of knew, I knew I was going into a bit of a battleground here, but I didn’t appreciate the extent of it. And it’s been incredibly testing. But looking back, I mean, all you can do is laugh, and I feel quite grateful that there’s some, yeah, some pretty surreal stories and experiences there to sort of tell my daughter when she’s a little bit older.


Julie Wilkinson  26:06

Well, thanks so much for coming on. We’re coming towards the end of the podcast that has been really good take the journey. And I think, I definitely think this is an eye opener, I think you’ve got the right idea there. And you’re really taking a step back and thinking about the group, which I think long term will be the better thing for I think, if you’re just gonna keep adding on and adding on, it could have got into more of a mess, to be honest. So I definitely think you’ve got the right idea. And I just want to say thanks to all our listeners. If you like our channel, please hit the subscribe button. We are nearly at 2000 downloads now. Which is really good because the drummer only had it a few months, like I only launched it a few months ago. So I’m really pleased about that. And I look forward to seeing you soon. So once again, thank you so much for taking the time to listen to our podcast. I hope you found it useful. If you think there’s anyone else in your network that might benefit from our podcast, then please share it with them even just click the link and send it to them or send it in a Facebook group or other social media channel. Don’t forget to subscribe. So other podcasts come to you directly as of when we launch them. So I’m really looking forward to seeing you next time. We’ve got some really exciting things coming up. And we’ll see you again soon.