The Roadmap to a Successful Acquisition Strategy, with Rick Murphy, Cogent Growth Partners
Rick Murphy: [00:00:00] My two partners and myself – Bruce and George, my two partners, one here in Atlanta, my other partner’s in New Jersey – they and I take what we call discovery calls with the candidate company, so we can greet them, and talk to them, and listen, and see if there’s an opportunity. Again, why. We’re using the whole why phrase. Should we introduce you to one of our clients and vice versa? And we do the same thing with our clients. So, that’s the discovery process, meeting a company.
Rick Murphy: [00:00:31] Once we get them introduced and they start talking, it’s really important to be able to do the initial due diligence to make intelligent decisions instead of just knee jerking around money or even the issues or what have you, which a lot of people do. First thing they think about and talk about is money, and price point, and multiples. And we go, you know, “Our mantra, if you will, is opportunity first, money last.” Talk about why should you do this at all. So, we coach them through that process. And along the way, once they’re comfortable, we have a proprietary financial modeling system – we call it our transaction analysis model – that we’ve been developing since day one in the company. And it’s constantly morphing and improving.
Rick Murphy: [00:01:14] So, we do a lot of intensive – intensive is the wrong word – granular due diligence and protecting the information of our candidate company. So, we redact all the customer names, we redact all the employee names and information. But we know their title, and what they get paid, and so forth. And we know what kind of client it is and, generally, where they are in terms of being able to share that information early with our buyer, but we’re protecting the candidates’ information from day one. And it’s all about building trust between the buyer and the seller or potential seller.
Rick Murphy: [00:01:47] And so, our modeling helps us be very granular with the potential seller, our candidate company, understanding their business soup to nuts. You’ll see what they look like. They get to see what they look like in the mirror. We share the model with them, and walk through the whole bits and pieces of their company that they’ve probably never seen this way before. And I guarantee you, they’ve never seen their company this way before. They see that what their company looks like and, also, helps us underpin rationale for how we might structure a transaction. So, it helps us deal with structure and so forth.
Rick Murphy: [00:02:19] So, by the time we get to doing a letter of intent, which is really so that engagement, we’re getting engaged to be married, and then that’s where the purchase price and the structure has to be outlined, and people need to agree to it. We’ve done a significant amount of due diligence before that, and we have a plus 90 percent LOI to close ratio as a result of that preliminary work.
Rick Murphy, CEO, Cogent Growth Partners
Rick Murphy is an innovative entrepreneur with deep merger & acquisition experience in the technology space and is the founding CEO and Managing Partner of Cogent Growth Partners, LLC. Since the company’s inception in 2010, Cogent has closed 130+ acquisition transactions for the firm’s buy-side clients in the Information Technology sector across the USA.
Expert at conceiving, planning, and leading comprehensive acquisition strategies to transform and enrich IT Service businesses, Murphy leads the Cogent team throughout the transaction life-cycle, from initial candidate recruiting, through due diligence, financial modeling, valuation, deal negotiation, and transaction structuring, to the creation and negotiation of all transaction documentation and the thoughtful consultation with all parties that is always needed to see a deal through to a successful closing.
Listen to Rick’s full Alpharetta Tech Talk interview here.
The “One Minute Interview” series is produced by John Ray and in the North Fulton studio of Business RadioX® in Alpharetta. You can find the full archive of shows by following this link.
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