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The Art of the Acquisition

(February 2009) posted on Thu Feb 26, 2009

The right way to buy a rival.

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By Jake Widman

Last July, BigInk acquired Ivey Photo’s business-to-business division, getting a Durst Lambda photo imager, among other equipment, in the deal. "The process started in September of 2007," recalls BigInk president John Scholl. "Ivey’s senior management came to me and said they were interested in exploring a merger or an acquisition of BigInk. So I said, ‘I’ll sign your nondisclosure if you’ll turn around and sign one for me.’ After I saw what they were proposing, I declined to pursue the merger. But then in December they came back and said they were interested in looking at it the other way."

Once the deal was done, BigInk moved Ivey’s equipment along with four Ivey employees (giving the firm a total of 26) into its existing plant. "The deal wasn’t done so much to pick up the assets," explains Scholl, "but it was structured as an asset deal because I didn’t want to pick up their liabilities. So we did pick up some of the equipment, but the big hope in a deal like this is that you pick up some of the employees and accounts along the way. The employees weren’t part of the deal, but I interviewed everyone at Ivey who wanted to be interviewed-about nine or ten total. I didn’t need to fill that many positions, but interviewing them was the right thing to do. We ended up taking four because of the additional work we expected to get; and should business pick up dramatically, I’ve already got people I can talk to about a job."

In this case, the acquiring company was happy to eliminate the competition. "Ivey was a direct competitor," says Scholl. "This was an opportunity to take a competitor off the street. I also recognized the value of the announcement to people who buy services. Ivey had been around forever, and the name recognition would help drive business to us."

BigInk didn’t try to pick up all of Ivey’s business-some came from photographers whose small quantities didn’t fit with BigInk’s core business-to-business focus. But Scholl made sure not to leave those customers high and dry. "I didn’t want them calling and saying, ‘You SOBs, this isn’t fair.’ Maintaining goodwill goes a long way throughout the customer community. So if they called, we were ready with a list of other places they could get what they need."