Mastering the Art of Acquisition

Lessons Learned from Acquiring 586 Companies

In a recent interview with Patrick O’Shaugnessy on ‘Invest Like the Best’, Justin Ishbia laid out a few core ideas from the world of private equity that apply equally, if not more, to the budding entrepreneur through acquisition (ETA). Justin is the founder partner of Shore Capital and graciously shared the lessons he learned from acquiring over 586 companies. You read that right, 586. He has created a repeatable system as the primary force behind his operations.

It all starts with a system-centric approach to business acquisition. Justin believes his system-driven strategy for managing and growing business is the key to his success.

Shore Capital focuses on sub-$10 million EBITDA businesses because Justin sees the inefficiency in the lower end of the market. This segment is rife with opportunities others might overlook. And this is the sweet spot, though maybe a tad towards the lower end for the ETA. So the lessons and strategies fit well for most ETA gameplans.

Part of Justin’s system relies on operational excellence and continuous improvement. Standard Operating Procedures (SOPs) are implemented across acquired companies. These SOPs are continually refined based on lessons learned from each acquisition.

The system places emphasis on leadership and talent development, particularly nurturing talent from within the organization. Justin also recognizes the value of “early career energy” and giving his team significant responsibility early in their careers.

Shore Capital looks to an industry-specific strategy. While this might not apply to many ETA’s, a few of you out there may be industry-specific. Justin’s thematic approach requires his team to develop deep industry expertise and create roadmaps for each sector when evaluating potential acquisitions. Part of the approach looks at identifying growth prospects, creating expert boards, and maintaining a philosophy that prioritizes Main Street over Wall Street.

Of particular interest in the episode, Justin talked about negotiations. In his view, you should approach negotiations by building trust and creating mutually beneficial relationships. He recommends focusing on the psychology and sales aspects and not just the financial transaction. Negotiations require an understanding of human behavior and motivations. You’ll want to get sellers to believe in your shared vision of growth along with a shared commitment to your future success. This requires trust, and a relationship with the seller that goes beyond the legal documents and contracts. For Justin, negation is a process, not a one-time event. The process includes understanding the sellers’ needs and working collaboratively to address any and all concerns.