Buy or merge with caution

Bob Livonius
CEO, Nursefinders Inc.

Business changes rapidly and constantly
challenges us as leaders, but mergers and
acquisitions can be particularly challenging. One of the keys to these deals is to
approach them grounded in reality.

“Just don’t try to be overly optimistic,”
says Mark C. Layton, senior partner,
chairman and CEO of PFSweb Inc., who
was featured in the January issue. “Be
conservative in terms of the time and cost
to get it done. Too many companies do a
deal and say, ‘We know we’ll have to close
these three plants,’ but they’ve underestimated the time, the difficulty and the cost
to get that completed, and they come
back eight months later and have to deliver disappointing news to stakeholders
because of the cost and time involved.
Take a good look and be honest about the
risk assessment.”

When you’re looking at the real picture,
one of the key factors you need to evaluate in that assessment process is the numbers — growth rates, revenue, gross margins and expenses.

“The trends for these are key indicators when you compare them to the
industry,” says Bob Livonius, CEO of
Nursefinders Inc., who appeared on the
September cover. “If the industry’s
growing at 10 percent and this company’s growing at 15, that’s a very good
sign. Obviously, the reverse would not
[be a good sign.] If margins are lower
than the average in the industry or if
expenses are higher, those are all key factors to look at.”

Also look at the company’s customer
base.

“(Business) needs to be spread across a
large customer base where there are multiple years of sales to those clients,”
Livonius says. “This indicates that their
client retention is high.”

It’s also important to look out for critical
warning signs when doing your evaluation.

“One of the warning signs would be
more than 20 percent of your business
concentrated into one client or more than
50 percent in the top five to 10,” Livonius
says.