Jeremy Harbour - There are more ways to grow your business than just sales and marketing
The Harbour Club
Merger and Acquisition Strategies for SMEs
Jeremy Harbour
Jeremy Harbour ................................................................................................ 03 You don't make money running businesses ...................................................... 04 Tips for a Successful Mergers and Acquisition Strategy .................................... 09 Position yourself as an investor or shareholder ............................................ 10 Don't look for businesses which are for sale ................................................ 12 Focus on motivations, not money ................................................................ 14 Adding shareholder value ........................................................................... 15 Bad paying customers, and letter writing lead gen ..................................... 16 Roll ups and building huge value ................................................................ 17 Personal letter of thanks to Jeremy by CEO Jonathan O'Byrne ......................... 19 Some of the tactics and strategies taught on the course .................................. 20 Links for more information ................................................................................. 24
Table of Contents
JEREMY HARBOUR
Jeremy lives in Singapore and has a wonderful home in Mallorca, Spain. He is actively involved in buying and selling SMEs around the world and teaching mergers and acquisitions (M&A) tactics through his Harbour Club program, specialising in deals that do not require cash up front.
During a career spanning
over 20 years, Jeremy has started many businesses and has grown an organisation to 130 plus employees with
10 million plus pounds
in revenue. In recent years he has completed over 50 transactions, in both distressed and solvent businesses and advised on hundreds more.
More recently Jeremy has focused on bigger deals involving capital markets, reverse mergers, public listings and he even bought a bank!
He also has a great knowledge of insolvency and company law. He has a gift for creative
deal structures that require little or no funding and no bank leverage. Renowned for being truly agnostic in his business interests, his track record includes a health club and spa, music school, IT support, telecoms, training, business process outsourcing, cleaning, air conditioning and a cooking school, just to name a few.
YOU DON'T MAKE MONEY RUNNING BUSINESSES
Entrepreneurs often fall into the trap of thinking hard work will pay off. It's common practice to believe you have to work hard at to get wealthy. running your business I'm going to show you that this is not necessarily the case. It's still hard work, but your hard work should be invested elsewhere, so you can see truly spectacular results in short periods of time. You might think you have read all the books on buying and selling businesses. What these books tend to leave out are the practical tips and entrepreneurial way to acquire businesses and sell them. They focus instead on the need for expert accountants and lawyers to broker the deals. At the Harbour Club, I will share with you practical tips and advice from my personal experience using relevant examples, which have been implemented and proven over the last ten-plus years.
Both these well-known examples only became wealthy either when they sold their business or acquired and sold another business. But perhaps they are too far removed for you. Let me give you a more achievable example, my own experience.
Think about it… Those businessmen and women who have secured real wealth are usually less operationally involved in their businesses, leaving them more time to think strategically about the bigger picture.
Take Richard Branson as an obvious rst example. He executed a huge deal at the outset of his career. Richard made his money when he sold Virgin music to Thorn EMI for 510 million. Before that day, he admits he was borderline insolvent. Another example to help get your head in this space is Deborah Meaden. Deborah made her money selling her stake in Weststar Holidays. In 2005 she made a partial exit when Weststar was sold in a deal worth 33 million pounds to Phoenix Equity Partners.
SIMPLY CHANGING YOUR CONVERSATIONS TO BE MORE STRATEGIC PLACES YOU IN A VERY DIFFERENT SPACE.
In 1997, I started a telecommunications company. I ran this business for 2 years, before the penny dropped so to speak! Every week I was being approached by buyers who wanted to buy my business but had no money. You see the great thing about telecoms companies is they are very acquisitive, as everything is duplicated. For example, there are two ofces, two nance directors, two computer systems, and two IT systems. So a 2 plus 2 deal can equal 10. For this reason, most telecoms companies have a mergers and acquisition strategy in place. So why wasn't I thinking like this? Why was I still asking people the more operational questions like, how many mobile phones do you have and what is your average bill per month? I wasn't thinking strategically at all. I wasn't acting like an entrepreneur.
In the end, I met with too many potential buyers and couldn't decide on any deal. I like to compare this to eating out at a restaurant with a huge selection of meals on the menu. It becomes an impossible choice and you end up not wanting anything. So, my thinking went full circle and I thought, “Maybe I could be a buyer?” And so began my journey to acquire another business.
This changed everything. In particular, my conversations started to change signicantly. I no longer asked the operational questions, my conversations became more strategic. In fact, it lead me to have a conversation with Costco who was opening shops across the UK. All of a sudden I was pitching against the likes of Vodafone and other huge telecoms. It was then that I had my epiphany.
With this telecoms example I also learnt you don't have to run a marathon to grow your business, you can just run the last ten yards and you still get the medal. By acquiring a business it is possible to use it as a growth strategy and grow your business by a year's worth of sales pretty much in an afternoon. This forced me to think more strategically, more like an investor or a shareholder, and lead me to my rst deal which was to acquire a 13-year-old telecom company.
I immediately identied their motivation to sell; their lease was up in six weeks and they couldn't afford to pay it or their staff. Plus, the owner had what I like to call “shiny new thing syndrome” a distraction experienced by many entrepreneurs who get more excited by their next deal or start-up and lose interest in their present business. This particular company was in distress. It had a six-week deadline that it couldn't meet. The seller was asking £15,000 upfront for the business. I couldn't afford this. However, as time slipped away and his shiny new thing syndrome heightened, I stuck with the deal and eventually bought the company for £1. I negotiated to take over all the suppliers' frustrations and moved their staff into my ofce.
Why is it that SMEs do not traditionally have a mergers and acquisitions strategy? Why do SMEs have a marketing strategy and invest in this, without a guaranteed return on investment, but do not even think about an M&A strategy? M&A is simply not something you immediately think about, and yet I believe done correctly, it can have a bigger impact with a lower cost and lower risk than any marketing campaign.
In this tactical course with the Harbour Club, I will share with you how you can successfully implement an M&A strategy at the onset of your business, with little capital or no need for borrowing money. I will share practical tips based on my own and other's experiences over the last 10-plus years. It's a very hands-on course using examples to meet the specic results you are after, without the use of expensive accountants and lawyers.
Of course, I have to save the best ideas for the Harbour Club itself to be fair to the people who choose to invest in their own development, but here are a few tips to whet your appetite…
TIPS FOR A SUCCESSFUL MERGERS AND ACQUISITION STRATEGY
If you position yourself as a shareholder in your business early on, you can start moving up the ladder and progressing as an entrepreneur. This is something, that, had I known it early on in my career, would have saved me a lot of time, effort, heartache and headache. As I explained in the telecoms example, it's only when you start thinking strategically about your business and more importantly talking more strategically are you exposed to new and very different opportunities. In fact, everything starts to change once you position yourself as an investor. Your conversations start to change with partners, clients and contractors. You start seeing gaps you didn't see before as you were too bogged down in the nitty-gritty.
Position yourself as an investor or shareholder
OPPORTUNITY
In 2009 I bought an air conditioning business for £1. On an angel investment website, I discovered a company seeking funds for their business which specialized in supplying parts for air conditioning businesses. I arranged to meet with this company, to potentially advise on raising capital for them. During our meeting, it was revealed that this entrepreneur had another completely separate air conditioning company. This other company was in trouble. I found out it had a lot of cash ow problems. Bills were being paid in the wrong order and as a result, it meant the staff had not been paid in over 2 months. The staff were loyal and had been with the company over 20 years. The owner was in a tricky position; he was faced with closing the doors and not being able to pay his staff. The owner's motivations were not to lose face with his employees, whilst swanning around in his new car recently bought off the back of his other business. I realized I could buy the business for £1, sort out the cash ow issues and on-sell it several months later.
A key point in this example is in the fact I was on an angel investment site when I indirectly came across the company. This is because I was researching businesses, which were NOT for sale but rather businesses that were seeking capital and why they might be seeking capital. This is another very useful tip in an M&A strategy.
Throughout the Harbour Club course I will go into more detail on how to position yourself as an investor and make this a priority, leaving the day to day running of the business to someone else or, in some cases, as a second priority.
When someone is looking for money, nd out what for, do they want you to pay off debts or are they trying to x a leaking bucket with more water? If they want you to invest in the past it is buying a losing lottery ticket, so focus on the future and in many cases they don't need money in the future if the past is xed.
Don't look for businesses which are for sale
Property experts don't buy from estate agents windows and you should not be looking for insolvency practitioners, business for sale websites or business brokers. If you are looking to acquire a business, don't look for businesses which are for sale. Every meeting, dinner date or coffee break, could be a new opportunity (in fact your next deal is probably a number saved in your phone!). Learning to discover these deals requires a lter. You need to listen and think in a different way. Let me share with you an example in which a job interview I conducted turned into a business acquisition.
I had just bought the telecommunications company and I was pretty excited about my new acquisition. I went to my operations director and said, “I can buy businesses and they can be anything.” I was a little too excited so he calmed me down and instead I chose to look for afliated businesses.
It just so happened, I was interviewing a new telecoms account manager and I noticed his name was the same as his email address. He was the business owner. The interview took a very different turn. Rather than asking him about his skills and presenting the job on offer with our company, I found myself asking a lot of questions about his IT company. During this conversation his motivations for getting out of the business were revealed; a new baby on the way, secure and regular income, standard working hours and there were cash ow problems. After the interview, I had a private meeting with my directors and suggested we buy this man's business. So we did, for £1! We ironed out his lumpy cash ow problems and gave him a job in our company with regular wages, working hours and security.
At this time Blackberry had just come onto the market. At our telecommunications company, we were outsourcing our IT, which was a big cost to our business. I wanted to bring it in house so we would either need to up-skill in IT, or buy an IT company.
Being tuned in is very important. There are deals everywhere if you listen differently. At the Harbour Club, you will learn this very important skill of applying a lter to how you listen. Your next deal is likely to be in your mobile phone.
Focus on motivations, not money
Always look for the motivations of the potential business you are looking to buy. For example, if you are looking to buy a business which is seeking investment, it might be a good thing to look at why they are after capital. Perhaps you can meet the motivations without cash. Let me illustrate this with an example I recently worked on. I found a huge sport sponsorships company, 12 million in revenue, which had multiple motivations to sell. Please note, this company was not in distress. First of all, the company wanted to acquire their biggest competitor. Secondly, they wanted to create value for their shareholders, thirdly the owners wanted to take some money and nally the owners were not quite ready to let go. They still wanted to have some share in the business. As an independent body, I was able to meet all their motivations and acquire a share of their business without coming up with huge capital outlay. Firstly, I structured a deal using a public company vehicle to buy their biggest competitor (using shares instead of cash). This allowed the owners to take some money off the table, giving them liquidity in their stock. It also gave me a controlling stake. At the Harbour Club we will teach you how to take a controlling stake without taking the technical majority of 51% or the majority rule stake of 76%. We have a methodology where we can take any stake or percentage and take control of everything. An in-depth understanding of motivations is far more important to focus your energies on than asking price. As in the above example, I managed to secure controlling stake of a 12 million dollar company with no capital.
So you're keen to sell a business and there are a few things you need to do rst to make it look more attractive. At the Harbour Club we share some amazing tactics to nancially engineer your business. In short we help you nd prot and cash within your business with no extra sales. Sounds too good to be true? Take a recent Harbour Club graduate, a marketing consultant, Conrad. Conrad provided marketing solutions to about a dozen different companies within Asia and Europe. During his weekend course with us, Conrad started lining up meetings before the course had nished and bought his rst company within days of nishing his course. As a consultant, he had an in depth understanding of the different companies he worked with. He understood their motivations. One company was looking to sell. After completing the Harbour Club course, Conrad took controlling stake of one of his client's companies. He used the nancial engineering techniques he had learnt and applied them to the business. He was then able to on-sell the business for a much bigger prot. In fact, many people who complete the Harbour Club course use the nancial engineering tool to add 10-15% turnover back into their business without any sales.
Adding shareholder value
The following is a great tactic for nding and communicating with distressed companies. A word of warning; you need to know what you are doing, this is a powerful tool for nding distressed companies, but remember you need to know how to safely acquire and turn them around or you can really be messing with people's lives. So the legal denition of insolvency is 'unable to meet your debts when they fall due' so anyone not paying on time is, in the eyes of the law, insolvent and you are not allowed to trade when you are knowingly insolvent. So the key is to nd people while they are in trouble, but before they call the insolvency practitioner, who will, by the way, ruin everything for the staff, for the creditors, the customers and the owner, so it is a race to get there rst and save the day.
We have played around with this a lot and the right letter to the right companies can get you very high % results. The home address part is key, you can also use it for geographical or sector targeting. The letter can't come from a business, no logo, mustn't look like a marketing activity or any kind of 'mass production' a personal letter from you to them. I cannot count how many deals have been found this way, Lee Smith, who did the Harbour Club for a second time recently told me he had done 8 deals, when I got to the letter part of the course he said 100% of his deals came from using the letter strategy.
A. Start with companies who supply businesses and nd out who is on their 'naughty list' so who is a bad payer. B. Search those people on a credit checking tool like Creditsafe or Experian business builder. C. Make sure they are not Tesco (also a bad payer apparently), but t our acquisition prole. D. Write a letter as an investor to each of the directors at their directors service address (usually their home).
Bad paying customers, and letter writing lead gen
When you have a company, why not look for more in the same sector? One of the biggest drivers of value is scale, big companies are much more valuable than small ones, and a big one can just as easily be several small ones put together, so when you have a company can you roll up? You can read my book Agglomerate (from idea to IPO in 12 months) for my take on doing huge roll ups without cash or debt. It also tackles a lot of the issues on integration, culture and value retention. This is about how to put deals together in the hundreds of millions of value, but with normal small protable debt free companies, good businesses, not distressed but sub-scale from a capital markets perspective.
Roll ups and building huge value
Specically we will cover off how to:
And you will learn how to:
Find a motivated business seller. Negotiate a deal for little or no upfront capital. Fix the business. Sell the business for 6 or 7 gures.
1. Source an endless stream of motivated sellers. 2. Structure a deal so you pay little or no upfront capital. 3. Fix a broken business and get it back into prot. 4. Find all the business buyers you will ever need. 5. Sell your business for a good price. 6. Sell your business fast. 7. Use insolvency law to your advantage. 8. Make your due diligence and legal work headache free. 9. To get your business shipshape and ready for sale.
At the Harbour Club, we go into a lot more detail around these tips, plus many more. I also share with you some important legal documents. Most importantly, the Harbour Club opens up a network of like-minded business owners – all of whom are potential buyers or sellers. Like Conrad, your next deal is probably in your mobile phone.
Personal letter of thanks to Jeremy by CEO Jonathan O'Byrne
Dear Jeremy, I hope you are well.
I wanted to thank you again for organising the session last weekend, I took an awful lot from it and found it enormously valuable.
Web: www.collective.works
Kind regards,
Jonathan O'Byrne CEO – Collective Works
I just wanted to let you know I was actioning and that it is working really well.
Thanks again.
P.S. – Not quite the fastest but 4 days isn't too shabby!
I didn't know how to structure it until this weekend. He didn't have a single point of contention to the SPV/holding company structure, in fact to any of it – He just left feeling fantastic.
I have just come out of my rst merger meeting with a competing co-working space. I listened, I understood their needs I showed them how a merger would x all their problems and sold them on all the other potential synergies we could work on afterwards. I got them to imagine the press release announcing the merger and the effect it would have on the industry. I got them to see how it would overcome a huge challenge for our industry which is the barrier to exit (eyes lit up at that point). I also introduced a surprise element they didn't know about which is the potential for the next merger after this one and how I'm the only person who could make it happen. I left them really excited and energised about the prospect. We are meeting to draft a deal next Tuesday.
The other party's comments were 1. “gosh you really are wise beyond your years” and 2. after I told them I would send them a list of questions to complete before the next meeting so we had some terms of reference “You really have put a lot of thought into this” and 3. when we were shaking hands and parting ways “What a fantastic meeting. I'm really looking forward to Tuesday”
Here are some of the tactics and strategies taught on the course:
Personal Guarantee Magic: How to make “Personal Guarantees” disappear almost like magic using this nancial engineering strategy (that works on almost all SME businesses). – Case Study: How Jeremy bought a PR company for £1 on the basis he gets rid of their personal guarantees in excess of £85,000 on their overdraft (and xes their payroll of 17k due a week later). He then made those PG's disappear like magic without using any of his own money or borrowing, selling the business only months later for $2,000,000 USD to a company in the USA. Discover why 500k to 5 million revenue companies are in the Q ualifying Leads: sweet spot for doing deals. 3 research tools for nding an endless supply of leads and how to pick the right industry (this last tip can boost your exit value by up-to 300%). – PLUS learn why London is almost always the worse place for deal hunting.
Understanding these triggers is the key 1 1 Psychological Triggers of a Motivated Seller: to unlocking the creative deal structures that give sellers what they want, while structuring a deal for no money upfront without borrowing or debt. Once you understand these triggers, then creating a WIN-WIN deal will be effortless. – PLUS “The Perfect Storm” when 3 of these triggers are combined together, you are likely to close the deal on the spot.
How to close a deal in the rst meeting by using the “last D eal Closing Machine: man standing” method of negotiation. This will save you many days wasted in travel and meetings. Use the “reverse table side” method to get contract clauses agreed upon quickly with little or no resistance. – PLUS use the Harbour Club “cut and paste” contract clauses to make ironclad contracts effortlessly like a pro.
I Hate Due-Diligence: It's expensive, boring & time consuming…but necessary right? What if you could get your due-diligence done for free without any extra work… and even better…have it more complete than if you did it yourself or paid £100,000 to hire professionals to do the job for you? Find out how on day 2. Phone Persuasion: Discover one powerful unwritten rule of telephone etiquette (that even you unknowingly follow) that can turn the tables on your conversation (and get your questions answered). What is the one thing you must say immediately when answering the phone in order to keep control of the conversation? – Find out on day 1. Deal Structures: Forget everything you learnt about deal structures from your MBA. These rely heavily on debt. Discover 9 new ways to get more leverage in a deal that does not require any cash or borrowing. Insolvency Secrets: Discover how to buy companies through the Insolvency process using these 5 proven deal templates (100% legal). You will learn how insolvency works; (liquidation, CVA, administration). – PLUS one simple tip to cut your debt in half and inject 6 gures of extra prot into your P&L without any changes to the company operations, sales or marketing. Easy Cash Injection: Discover how to take a company with 10 or more employees and inject up-to 15% of their yearly revenue back into the business as cash. It only takes one phone call to do and requires no upfront cash. (It also DOES NOT involve ring anyone, reducing hours, outsourcing or even cutting wages – operationally nothing in the business even has to change). Bullet-Proof Purchase Agreement: How to turn the simple age old purchase agreement into a contract more powerful than anything a lawyer could ever draft, (no legal experience required). This is very out-of-the-box thinking, but it's so powerful that a friend of Jeremy's (an insolvency practitioner) working for Baker Tilly, one of the largest accountancy rms in the UK now recommends this strategy to all his clients).
The 51% Myth: Whoever has 51% or more of a company's shares has complete control over the company…right? WRONG! – Discover one simple tweak you can make to the shareholders agreement that will give you the same power as a majority shareholder even if you only have 1% of the company. Compete Clause: How to stop the previous business owners from stealing your best staff & customers and going into direct competition with you? Use a “Non-Compete Clause” right? – Nope…let me explain… “Non-Compete Clauses” don't work anymore, they are a violation of human rights under EU law…and to enforce one requires going to the high court (which will cost £60,000+ and you will probably lose). So what is the solution? Discover one simple strategy & get your hands on a proven contract template you can use that will leave you secretly wishing they do steal your customers. Financial Engineering: Amazing tactics to uncover prot hidden in your business (without increasing sales). If your business turnover is £500,000 or more, then this alone could make back your course fee within a couple of weeks of returning home. Cash Is King: Discover the 3 step formula for xing the long-term cash-ow problems in almost any business type. You don't go bust from a lack of sales, prot or turnover; it's a lack of cash that will bury you alive. PLUS – Discover how to save a business only weeks away from closing its doors (using Jeremy's 8 week cash-ow forecast strategy).
A lot of new case studies have been added to the Harbour Club, here is a sneak peak at six new 7 gure deal strategies recently eld tested and added to the course: How to Buy a Bank Without Using any Money: Discover how Jeremy bought a bank in America with a hundred million in assets… For no money upfront (without debt) – PLUS nd out how to structure a 100% risk free deal like this yourself. There are more than 7,000 banks in the US… Globally many thousands more… They all have the same fundamental challenges that Jeremy will show you how to solve. IPO Exit Strategy: The two big drivers for a company valuation are scale and liquidity (ability to buy and sell shares easily). Discover how to correctly structure an IPO to achieve compound growth in these two areas as quickly as possible. Back Door Listing: An IPO is expensive… Unless you use this little known method. Discover how to do an IPO for 80% less than going through an investment bank or corporate nance company. By using this sneaky (but perfectly legal) back door route to a main market listing.
Going Global: How to do more cross-border, multi-jurisdiction deals so you are not left at the mercy of your local economy. Time to diversify and protect yourself against geopolitical risk.
Virtual Roll-Up 2.0: The same concept as 1.0 (how to buy and sell multiple companies in one deal for 7 gures without even having to own them)… – However a lot has been added to the virtual roll-up strategy recently (from ideas Jeremy has tested out in the eld) – For example, a new approach to corporate management and management for generation Y – PLUS a great way to create big companies fast… All this with well established market leading protable companies (rather than distressed).
Jurisdiction Arbitrage: Jurisdiction arbitrage and the IPO inversion strategy… This is all about using global solutions to maximise value… – An example of one of the many deal types in this category is: 1) Finding an established UK company and 2) Acquiring businesses from emerging markets under its name. Why? – Because a company in the UK gets a better valuation than a company in Asia, but a company in Asia has much easier prots than the UK… So put them together and you get a UK company doing well in Asia that you can sell for over 500% more than you could if they were separate. (Case studies included).
You can watch the video for the virtual roll up strategy 1.0 (old version) at this link: http://www.harbourclubevents.com/virtual-mergers/
You can nd more about the course contents here: http://www.harbourclubevents.com/the-course/
You can hear about the experiences from people who have been on the Harbour Club here: http://www.harbourclubevents.com/interviews/
“These strategies work globally, and have been tested in UK, USA, Singapore, Australia, South Africa, France, Lithuania, New Zealand and many more...”
For dates, prices and locations of upcoming courses please email:
If, for any reason, after attending the rst two days of the course you feel this business model is not suitable for you, simply tell Jeremy after dinner that you don't want to participate in the nal day on nancial engineering and get a full, no-hassle refund without having to prove anything. Stay one more night in the accommodations provided for free, with no hard feelings. 100% of your money will be refunded.
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