Part 1 detailed what a unity agglomeration really is and broke it down so small business owners could understand what it is, and why it’s important. We focused on several issues that small and medium-sized businesses face, and today we’re looking at a few others you yourself might be struggling with.

 

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Access To Capital
Raising money for smaller businesses is really hard: there is a huge sea of capital waiting to be deployed into businesses, but small businesses are just not big enough or de-risked enough to attract it. 90% of all businesses globally are small or medium-sized businesses, so it is literally trillions of dollars of investment potential that is effectively taken off market due to scale and transaction costs. When you do get investment, it is not so much with strings attached but more with ropes and padlocks: you have to sell your soul, your dream and your control to the investor.

Mergers And Acquisitions

For people who have been to the Harbour Club, they will know my one-size-fits-all solution to pretty much any of the world’s problems is mergers and acquisitions (M&A), and, in fact, most of the problems listed in my previous article can be fixed by merging companies together and then publicly listing the new group. Let’s just look at some of the issues with mass mergers, or ‘roll-ups’ as they are sometimes called, and then the issues with public listing:

• Ego/pride- people don’t want to feel like they sold out, got bought or gave up.They want to see their efforts rewarded with growth and success in their own name.
• Talent retention– when companies sell or merge, often the first thing that happens is the key people leave, sometimes with the key customers. In SMEs, talent is everything and it is often their only USP.
• Brand retention– so many companies are obsessed with acquiring businesses and changing the name above the door.They want to show off their new acquisition, but with all the years of work and trouble that have been invested, the brand is actually a valuable asset that should be retained. Also, as I have already pointed out, people hate change, so customers and staff alike can rebel at this point.
• Management– the problem with management is that it doesn’t work! In fact, most management books I have read in the last 15 years are all about how the modern hierarchical management structures just don’t fit with the current generation of talent.People now want mastery over what they do, empowerment to do it their way, and, let’s face it, if they have built a successful business in that space why would you want to tell them to do something different. People are too obsessed with control over results. Often results come from giving control, not taking it.
  
  
  
• Synergies and centralisation- a bit of an MBA hangover, people think the reason to roll up is to get synergies and to centralise. Yes, that is one future benefit that may manifest itself, but I have gone full circle on this, born out of my own hard-won experience, and I now believe, post-merger, less is more. You can spend a fortune and upset everyone, staff and customers included, by trying to rinse every last dollar out in your first 100 days, or whatever plan you are using. Do not forget you actually create a huge amount of value straight away by creating the scale, so be happy with that, and focus on allowing the business to just keep doing what it has always done. Stagnation post-merger should be viewed as a raging success! The challenge I’ve always had is how do you motivate synergies later, and the Unity Agglomeration solves that.

How Are The Acquisitions Paid For?

Most roll-ups are either debt funded or investor funded; either route creates a huge stress on the eventual vehicle, either pushed by investors for results or so laden with debt they fall over (the leveraged buy-out or LBO). You can do a straight equity merger, but you have to have a compelling plan: a possible trade sale at some point in the future won’t generally cut it.

That is quite a raft of challenges I found myself working through, and the solution I arrived at is the Unity Agglomeration. I have done mergers, RTOs, roll-ups, and this takes the best from each scenario and makes it work for investors and entrepreneurs alike. The best way to look at it is a sort of cooperative IPO: a group of companies from the same (ideally fragmented) industry join forces and publicly list, and then grow further by acquiring more companies in the same space.

The Unity Agglomeration solves the issues discussed so far, simply and elegantly.Next time, I will go on to discuss my solution to the specific challenges.

_{Edited by Nedda Chaplin}

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