122: ‘Mergers and Acquisitions’, with Boris Rapoport and Alex Osenenko

122: ‘Mergers and Acquisitions’, with Boris Rapoport and Alex Osenenko

Evan Troxel: [00:00:00] Welcome to the TRXL podcast. I'm Evan Troxel. This is the podcast where I have a conversation with guests from the architectural community and beyond to talk about the co-evolution of architecture and technology. Today, I welcome the co-founders of ArchIT: Boris Rapoport and Alex Osenenko. Boris is the CEO and Alex is head of growth.
ArchIT is dedicated to supporting the unique it needs of architecture, design, and engineering businesses. In this special partner episode, we build upon the business of architecture thread here on the podcast. The topic today is mergers and acquisitions also known as M&A. Boris, Alex, and I discuss the importance of planning and communication in the process of acquiring or being acquired by another company, the need for continuity and quality and service delivery, the importance of involving people from various internal teams in the [00:01:00] transition, their three-step process for transitioning the acquired company's brand, and more. Please visit getarchit.com to learn more about their services. That's getarchit.com. Boris and Alex are both stand-up guys who care about quality, proactive IT service, and I'm happy to call them my friends.
Anyway, I hope you learn something new today. I know I did. And now, without further ado, I bring you Boris Rapoport and Alex Osenenko.
Boris, Alex, welcome to the podcast. Great to see you guys again.
Alex Osenenko: It's a pleasure. Always a pleasure here.
Boris Rapoport: Yeah, pleasure to be here. Evan. Thank
you.
Alex Osenenko: Thank you
Evan Troxel: So we're talking about M&A, mergers and acquisitions. We're talking about strategy. We're talking about kind of the real world application, the nuts and bolts side of that as well. What it's actually like to go through that in a firm and what leaders should be paying attention to
the strategy [00:02:00] all the way down. so that everybody's kind of included in that process. And there's, there's been a series of topics on this show about the business of architecture, and. I should say the business of aec because this is wider than just an architectural
Alex Osenenko: audience.
Evan Troxel: and ar it, you guys obviously serve service, uh, architects and engineers, small to mid-sized firms.
so this is a great topic because it's, first of all, I think it's surprising maybe to hear it on this podcast.
Um, but in this vein of,
uh, the business of architecture, this is an important topic that people should at least
in their brains as something to kind of be thinking about. also this is a, a very topic when it comes to building a business. and. The tech side of that is a piece of that. And so I, I'm excited to have this conversation with you guys today when we're talking about mergers and acquisitions and opportunities and strategies.
And so I guess [00:03:00] the first question that I'll start off with is why even consider and a why grow? Because that's, I think what people think about when they think about M&A is like they're gonna get bigger and they're going to acquire maybe a portfolio.
Maybe they're gonna acquire talent, they're gonna acquire clients. And obviously that sounds great, but, but maybe you can get deeper into the subject of why, why consider do using this as a strategy for growth.
Alex Osenenko: Mm-hmm lemme take this one, Evan. So, uh, firstly as ArchIT, we serve architecture firms, uh, engineer design firms. We, we are like strictly in AAC industry. And so we can speak to this because number one, um, we went through the M&A process ourselves.
In fact, we're going through it are, uh, towards the back end of the implementation right now. And we are not a big company. my, my kind of, idea was to help, companies understand, uh, even smaller companies can grow through [00:04:00] acquisition. And why even do that? Right. Well, there are multiple reasons for doing that. One of them, I think the most important one for me and boys, it's always been the case throughout my career, is to provide opportunity and growth to your best members, to your talent. talent, uh, growth is the key because if you are stuck in the same place doing the same thing and you growing organically, which is fine, um, the opportunities are tiny.
So your best people, best people will, uh, will look elsewhere.
Um, and that's, that's to me is always the key is, is to provide runway for best team members and also attract the best talent. So number one, number two, you can get the best talent acquisition. In fact, one of the criteria you should use or companies should use is what sort of talent level are you bringing on board, cuz that could be as much value as as the revenue or more. You know, [00:05:00] I, you know, Evan, you heard a term aqua
Evan Troxel: mm-hmm.
Alex Osenenko: Um, very, very popular in Silicon Valley. Um, but you know, we're not talking about that right now. But the idea is that you buy companies just so you can get the talent, okay? And that's not untrue for both, um, architecture companies, AC companies, IT companies, what have you. finally what we've done through our, our, uh, business here at r it, we actually, so not only are we going through process ourselves and gone through the process in the past, in my career multiple times, but we're also helping our customers go through these
m and a a tech technologist standpoint.
And this is where Boris shines. I mean, he's like operational genius and it genius at the same time. And so I will let him speak to the challenge. and as I called the pre-show, you know, how do you make implementation? How do you go from a dumpster fire into a controlled burn? It's not gonna be pleasant, but it can be absolutely, uh, controlled process where everyone wins.
Well, most people would win. Most of us who wanna win. Let's put it this way. So [00:06:00] Evan, I said my piece. free to poke at it.
Evan Troxel: Well, Boris, I would love to hear
what you think, what, what, where your brain was going when Alex was talking about that stuff, because like he said, your, the implementation side, it, so, so there's the, the str the strategy, there's kind of this rainbows and unicorns, uh, outlook, right? The vision of what the
the,
M&A is going to deliver for your company.
And that vision is what people buy into, but then there's like, how do we actually do it? What do we
actually do on the implementation side? And maybe we'll just start at the high level.
You've probably seen
lots of
Alex Osenenko: of scenarios,
Evan Troxel: really great implementation versus like just the wild West, like Alex said, the dumpster fire version, right?
So what, what have you seen
in, in the, the, the gradient
You know, different types of implementation or lack of implementation strategy
the years.
Alex Osenenko: the years?
Boris Rapoport: Well, um, I think.
Alex Osenenko: I think
Boris Rapoport: in order to make it a more of [00:07:00] a controlled burn, like the leadership really needs to be mentally uh, to provide direction and planning, uh, or help with planning and, uh, understanding of what kind of the end game is.
And
also making sure that the people that are,
talent that is coming on board from another company and also your, uh, own
Alex Osenenko: uh own
Boris Rapoport: feel like this is a win-win for everybody, right? Because look, it's a major change,
you know, for our small company it was a major change. It still is a major change.
people always get, you know,
scared,
Alex Osenenko: know
Evan Troxel: Mm-hmm.
Alex Osenenko: Mm-hmm
Boris Rapoport: when change
is coming. So I think initially the message, uh, from the leadership needs to be, um,
Alex Osenenko: um
Boris Rapoport: you know, that is going to be a win. I think Alex hit on some
of those points, right?
Like, you will have more opportunity because we are
a new clients
Alex Osenenko: newer clients
Boris Rapoport: and also bringing other people to where, uh, the organization will probably need to change reorganize [00:08:00]
bit so you will have more opportunities for
kind of
Alex Osenenko: kinda
managing,
Boris Rapoport: um, additional people.
Right.
example
Alex Osenenko: Uh
me just add one thing we did, we did have a plan. So this is, this is and I, we sat down, would spend days on our strategic planning once a year, and then we had obviously specific planning sessions to the, to this M and A. Cuz we grew by 50%.
That's not nothing.
Evan Troxel: Right.
Alex Osenenko: Um, and, and we mapped everything out as far as potential roles.
And we don't know who we buying and their talent, but we kind of know, we interviewed them. Obviously we have an idea. And so far, I think the people are fitting right where we kind of in initially thought they would as far as their skill level and their, uh, let's say, uh, a work ethic and abil, you know, ability and whatnot. But, um, to Boris's point, the plan is the key. And then share that plan. I think transparency, and I'm gonna talk about transparency all throughout
but transparency with your team members [00:09:00] transparency with team members the m and a site. Cuz I've seen some real bad situations where the owners, uh, of, of a company that's being acquired. Hold and, you know, make it a secret for way too long. I mean, there's, there's sense of, and we can talk about a lot of our communication there cuz communication is really key. But transparency is you have to bite the bullet and be able to explain to your team then, that usually where things start falling apart.
Evan Troxel: Mm. Yeah.
Alex Osenenko: just afraid to, um, admit that there's a, a m and a process happening. They don't have a real good plan. The company that's acquiring not communicating, um, what the vision is, uh, to both their employees and the company that's being acquiring employees. All those, all those pieces just instantly start falling apart.
So Boris's point on leadership needs to, like, have a plan and very clear plan and share it with the team is, is I think the first step and a key step that doesn't happen. Everything else we're gonna talk about is, [00:10:00] is sort of almost irrelevant.
Evan Troxel: Hmm. Well, Boris, you, you mentioned leadership being a key component here and
surprising people.
At the last minute
is not
a great way to
transparently about what's going on.
And that leads to fear. Obviously, if
it could be seen
by the workforce as a weakness we're being
if they're the acquire
acquirees,
uh, versus the acquirers, they could be seen as, oh,
we must be in trouble.
Uh, and so this firm is coming to save us.
Or,
or maybe they're going to
take over our company and get rid of us. And so there's a lot of different scenarios that people's minds automatically race to.
And so
early
Alex Osenenko: early clear
Evan Troxel: communication with a solid
strategy behind it is, uh, a huge part of this going
smoothly
and
strong leadership and having thought through all of these different puzzle pieces
before [00:11:00] that communication,
early
even begins is, is super important, right?
Boris Rapoport: And I mean,
Alex Osenenko: Yeah
Boris Rapoport: timeline of this is also important. because, for example, you know, our
process still on the tails, tail end of it. I mean, it's, it's been going on for about a year now,
right? So
when we just started having the talks,
Alex Osenenko: the talks,
Boris Rapoport: um
Alex Osenenko: um
Boris Rapoport: when it was just, you know, negotiating with the other side,
Alex Osenenko: the other
Boris Rapoport: um
Alex Osenenko: you know we
Boris Rapoport: our internal team, that, you know, we're looking at this company,
what we know, what we think is going to happen.
plan if Everything
successfully going to happen. So my guys were asking me like, every couple of months, it's like, when are, You know, when is this new
company Like, they were excited about that, Right. So,
Alex Osenenko: Right um
Boris Rapoport: that's what Alex is talking about in terms of transparency and
kind of for it, is wanna make sure that.
Alex Osenenko: make sure that
Boris Rapoport: leadership that idea.
you know, I'm,
run my business more
not
necessarily [00:12:00] as a democracy, but I like to listen to it, uh, you know,
Alex Osenenko: uh you know,
Boris Rapoport: is saying and take their input
lot of things and hopefully implement everything that they want, not always right. cuz sometimes,
Alex Osenenko: Cuz sometimes,
Boris Rapoport: conflicts of
things, but yeah.
So basically bring that message out and hearing what people have to say and
Alex Osenenko: to say and
Boris Rapoport: their,
Alex Osenenko: to their
Boris Rapoport: you know, fears and their thoughts about it.
Alex Osenenko: thoughts about it
Boris Rapoport: think that was
very, you know, very big win for us in terms of
the merger
um, everybody's on.
board.
Alex Osenenko: everybody's on
Evan Troxel: Alex, what are some other motivators for considering doing
Because you talked about
the talent
or the opportunities
talent
in the company,
but there's obviously a lot of other reasons why
m and a would be,
would
be thought about.
Alex Osenenko: be thought Yeah. growing the talent, I think that's like, you gotta anchor that as number one because your product delivery, your service quality, [00:13:00] um, your output, that's how your company is judged, is by what you produce, not, you know, how good of a culture you have.
That's all internal. That's great. Um, but at the end of the day, your customer is the, will make the ultimate vote with their checkbook.
And if you're able to deliver, um, and deliver better, and part of this, When people's focus. The other one is the strategy focus. Let's say you are an architecture company that does just strictly residential.
Maybe you do, um, I don't know, uh, high-end residential, but, but you're thinking to go into, uh, a different vertical, a slightly different vertical. Then you acquisition is the best way to get into it
you get, you acquire the knowledge and the industry sort of, um, history and, and, and all of the, uh, company knowledge, uh, from a firm who, who's in the vertical you wanna acquire. That's one, that's one big, another big win. Um, but maybe you don't want to. So you have to be really, really choosy. Now, if you buying a company, if you wanna buy a company that's [00:14:00] same as high-end residential, fine. I'll just grow your portfolio more horizontally rather than, I'm sorry, more vertically rather than horizontally.
You, you don't want to go to different things.
is the strategy, the company strategy is, is key here. Um, of course, the other thing is, uh, I'm gonna talk to like founders and partners right now, like, look, um, know, is, is it you want the business be all about you? Um, and that's fine. You know, that can be, um, I am, you know, and I hear a lot of other business owners looking to build something beyond themselves, right?
Looking to build, um maybe potentially, uh, a business that the next generation wants to take over. And it's not something, you know, usually you can't really attract your son, daughter, or, you know, whoever, you know, working 90 hours a week,
you know and goes through you and you are micromanager,
Evan Troxel: We've talked about that a lot on this podcast.
I mean, that's the kind of thing where, when you think about leadership in the
or at the firm level,
how are you modeling.
a future that somebody [00:15:00] wants to be a part of? Is a, is a big piece of that For sure.
Alex Osenenko: Exactly And so just think about your, I'm thinking about my daughters, you know, they're, they're nine and 12, you know, do they want to, a small little business that, that, that hasn't done anything for 50 years or 20 years, 50 years, where everything depends on, on me?
No, they're, they're, they're absolutely, looking to explore the universe of opportunities. and I want to provide them with an opportunity, they don't have to take over for me, but I'd like to give them the opportunity to take over. And that means interesting growing business with lots of moving parts and lots of opportunities for them to grow into the leadership position, not just assume it. Um, so that's another thing. Um, and I like this lead versus toil. So, you know, if you wanna lead, you gotta grow organic and acquisition, both good ways to grow, um, you know, combined. It's, it's, it's truly powerful. Um, you can do one or the other and, and focus on those and still do okay, but together,[00:16:00] they're good.
And, and finally I'd say generational wealth. Evan, that's, know, people don't think about that. I have a 50 year plan for where I'm going with this. I'm not in a any hurry. Um, I, I wanna build something cuz, for generations, I, I do, it doesn't need to be something like, you know, fantastic, uh, you know, billion dollar trust fund. But I do want to pass on some security to my, immediate family as well as through the
Evan Troxel: Mm-hmm.
Mm-hmm.
Alex Osenenko: those are, those are the motivations that typically people go after. So people, uh, opportunities, strategic opportunity. And then obviously building a business that can survive you, goes beyond you. and that's building generational wealth and opportunity for next gen.
Evan Troxel: Boris, do you have anything to add to that as the founder of ArchIT, and just thinking about like the vision that you present to your employees, or maybe even how that's potentially changed over the years
led up to this
M and a that you guys did,
The, [00:17:00] the ideas I'm sure have shifted
time
and the things that Alex was just speaking about regarding
of setting up a bigger vision.
I mean, one thing about business is it's always changing, and I think that the fear that we were talking about earlier
comes in because people get comfortable
with the way things are.
And we like to do, we like to do things the way that we've done them because we know how to do it, we know how to deliver it, we know what the timelines are like, and then there's this new injection, this new opportunity coming
that leads to, to some fear because things are changing.
But I think at the
strategic level, at the leadership level, you also
that business is always
changing and it's your job to guide that process and to bring people along and to build consensus on the team.
H how has that changed over the years
the
founder of R IIT for you?
Boris Rapoport: so
Alex Osenenko: well
Boris Rapoport: our first acquisition, and
Alex Osenenko: and
Boris Rapoport: I don't know if I would've thought about the idea
you know, Alex wasn't that instrumental in kind of ingrained in the
idea, [00:18:00] uh, in me.
So,
props to him for that.
Alex Osenenko: to him for that
Boris Rapoport: but I can definitely see that,
Alex Osenenko: see that
Boris Rapoport: a standpoint of where we
want to go with the company.
um, and,
the, you know, the 10, vi 10 year vision that
you know, I had initially and then Alex kind of joined in on,
Alex Osenenko: of joined in on
Boris Rapoport: would be much more difficult
to organically to that and probably even impossible.
So other avenues had to be explored.
Alex Osenenko: to be explored
Boris Rapoport: and, um, you know, growing through requisition is, is one of those, and I think it's, you know,
It's a very successful. avenue going through one,
ourselves right now.
Alex Osenenko: right now
Um
I
Boris Rapoport: where,
Alex Osenenko: can see where,
Boris Rapoport: you, you take, you know,
you can shortcut some of the things that
Alex Osenenko: things that
Boris Rapoport: take longer when you're just trying to grow
organically. Now with that comes its own
Like you take the shortcut, but then
Alex Osenenko: but then
Boris Rapoport: uh, more people, processes, breaks. So there's a lot of,
uh, of those other things that [00:19:00] have to be planned out and
consider
it,
Evan Troxel: of, everybody has to adjust at that point, right? It's like
squeezing more
Alex Osenenko: more
Evan Troxel: pegs into the, into the bucket. It's just like everybody has to adjust, everybody has to get used to the new adjacent pieces.
And so there's a lot of, uh,
I, there is an adjustment period, but it's also,
Alex Osenenko: it's also
Evan Troxel: I, one way that I've thought about this, just getting comfortable, being uncomfortable
and taking on the challenges of.
Growth or new, new things that are happening
is a constant.
And so I think that's, that to me is a constant message from leadership that should be going out is, is that you,
Alex Osenenko: you,
Evan Troxel: it
it's important to be nimble, it's important to be adaptable. And,
that
by putting those opportunities in, in play
your business, kind of helps people do that, even if they're not
Alex Osenenko: not
Evan Troxel: uh, open to doing that just on their own all the time.
Alex Osenenko: I have a question. Evan, do you work out?
Evan Troxel: Yeah. I do. I, I rock climb [00:20:00] and I mountain bike. That, that's my, my fitness
Alex Osenenko: fitness great. I do martial arts and all kinds of other things. Boris, uh, I know does a lot of walking. we work out to keep our bodies what
Evan Troxel: Mm-hmm.
Alex Osenenko: um
Evan Troxel: Mobile. Yeah.
Alex Osenenko: to keep our mental right, hopefully mental energy, uh, you know, recharged all that good stuff. Organizational fitness,
it's the same thing your company does not work out. If you don't put it through, I mean, yes, there are challenges you may get IRS audit. That's not a workout. That's, that's a colonoscopy. Gentlemen, um, this is workout is, growth. Um, this is where, uh, you exercise opportunities.
You exercise your team, your resiliency, your you, you build your policies and processes. You break 'em, you rebuild them. Cuz as organization
it's not, it's not like, um, you know, you have 10 people, then you have 30, it's a different organization. So, so [00:21:00] processes need to be adopted. But hopefully you have that fitness where, where this is interesting, exciting, and the right people typically join the organization that works
Evan Troxel: Mm mm-hmm.
Alex Osenenko: and so I, I just wanted to insert that piece and this is the ultimate. So, so an m and a is. Is the result of, of your organization's fitness,
I I Are you able to run that marathon? Like have you trained enough or are you just bit something that you're gonna choke on and, and, that's the piece that I think, um, is important.
And I think we need all need to look at the health of our organizations and the fitness before we go buy and other companies. But it's a terrific opportunity in on so many levels.
even I wanted to emphasize this, Evan, even smaller companies can do it. We're not a huge company.
We are, um, you know, 15 person, 12 person company, um, that, that made this, this acquisition.
So it's not, um, I wanna stress this. It's not just for large, large giant
Evan Troxel: mm-hmm.
Alex Osenenko: Um, because we can talk about this later. [00:22:00] There's a way to finance this through the revenue the company you are acquiring. And that's magical.
Evan Troxel: Mm-hmm. . Mm-hmm. . Well, that's a perfect segue. I think we should start to talk about
how and, and kind of the, the different things like you just mentioned about financing and, and, because I think
one thing to just. Talk about the idea of mergers and acquisitions and, and what that may do for a business, how it may be able to be used as
leverage for
Alex Osenenko: leverage for
Evan Troxel: or portfolios or talent
all of those things that I think one thing that we are definitely seeing in a e c is that big
companies are getting bigger
and small
are staying small,
the middle is kind of going away.
And so this
gives an opportunity
Alex Osenenko: for
Evan Troxel: strategic growth
important reasons, right? If, if you decide to go down this path, it's gonna be an investment
sure, but it also has
really great potential
If you have a good strategy and you've [00:23:00] got the right leadership in place and you're transparent and communicative,
but let's talk about what actually is needed to go down these paths, or maybe what some different options are to go down the path of m and a.
Alex Osenenko: I'd like to start with the financing with the money piece. I think we can talk about how to find acquisition afterwards. I think I need to p put people minds and ease here cuz I originally, you know, back in, when I was just starting, um, getting into this from my other businesses, I, I, I, you know, my idea was I have to save up, you know, $600,000,
um, to even know, be in the play.
Um, but reality is, um, there are wonderful organizations that support, uh, business growth. And one of them is small business administration. That's b
you know, yeah. You can say the bureaucracy. They're this, they're that. And, and trust me, Boris and I. Or athletes jumping through
they have hoops with fire around
and unbeliev, like, I'll tell you one or two stories [00:24:00] later on if we have time. But it is just, it's just unreal. But now that's fine. It's all fitness, right? Him and I are both better after this point is you put 10% down and that's all you're
if you approve for the SBA loan for the rest. Now there's two ways to do this. So let's say, uh, smaller, we're talking about smaller company, right? Smaller company, buying another smaller company. Um, let's say the price is, you know, let's say it's 600,000 or, or 750,000. So all you have to come up with is 75,000, which is 10%, um, from your own cash, and then the rest can be financed in two ways. Evan first way is getting the SBA loan, which a lot of times is good cuz it's a 10 year loan. So they have a, like a very specific loan product for, uh, the, the specific for the m and
and it's a 10 year loan product. And the interest rates is pegged against the L I O R. Uh, right now it's not very good. now it's not very good because s rates are
you listen, if you're listening in [00:25:00] 2025, hopefully, you know, our, um, rates have calmed down and it's a lot more attractive now. But yes, um, it's, it's a smaller payment. It's a 10 year loan, so it's, it's it kind of affordable. The, the second way to finance it, or a combination to seller or carry, let me explain what seller carry is. can actually have the owners of the business you are acquiring carry the note, meaning that you can negotiate the interest rate. The period of time they're gonna carry the note. So let me take, take back an example. You put 75,000 down. In fact, you have to, if you don't even get involved sba, which sometimes is better, you can a hundred percent finance it if the owner agrees, which most owners won't, but you can a hundred finance it through the owner carry it, meaning the owner of the business that is selling to you willing to carry the note.
So you say, okay, it's $750,000, I'm gonna carry it for five years 6% interest rate and you know, do the math and that's your monthly [00:26:00] payment. Um a lot of times what seller carry you want to, uh, the seller wants to see more cash from you. It's not, you know, they're not really willing to risk their company
Evan Troxel: Right,
Alex Osenenko: say
So typically, you know, it's half and half seller will carry half. It depends. Um, sometimes, you know, companies are, know each other very well and they'll agree. The big advantage for the company who's selling. Is a tax advantage. if they get all of this 750,000 at once, it's gonna be a massive tax bill.
It's just gonna boom, chop your legs off, um, from under you. And, you know, you think you're getting seven 50, you're getting like 3, 3 50
Evan Troxel: Yeah. Right.
Alex Osenenko: Um, but when you finance it, it's the, the, the to your cpa, uh, it, it, it's a much better,
uh, it's a bigger win. So you get, you know, seven to 20, $15,000 a month every month for five years, 10 years plus whatever negotiation is.
So, um, those are the two ways to finance it. Um, you put [00:27:00] small down payment, go with sba, you put small down or larger down payment, go with seller carry or do a combination. We've done a combination. We put money down. We had an SBA loan and we had a seller carry, so we had a trifecta. We went through all the hoops.
Evan Troxel: Achievement unlocked. You did all the things
Boris Rapoport: Yes,
got a little badge.
Alex Osenenko: get a little
Evan Troxel: right? Right Twitter
Alex Osenenko: right
Evan Troxel: you can now
tweet about this, about how, how you did this.
So, so
let's talk about, you know, some of
the,
the,
this adds leverage to small companies. So you, you got, you said Alex, that you are a small company, you
acquired another small company.
could have probably gone the other way too. But you're, you're the ones with the vision. So you're leading this, you're then finding some
businesses that potentially you could acquire, you hone in on one
and you start this negotiation. But before I, cuz I do want talk about how you actually do that.
Uh, how you find companies to buy, uh, who are open to this.
Uh,
maybe all companies are for sale. I don't know.
Maybe not. But [00:28:00] the, the idea
of, of
Alex Osenenko: of
Evan Troxel: using that as leverage,
uh, because this changes the business plan, right?
you all of a sudden grow by 50 to a hundred percent.
Alex Osenenko: a hundred percent
Evan Troxel: Through an acquisition
Alex Osenenko: that
Evan Troxel: the way
approach
business. I think it, at least in, in
increases your opportunities
in different ways.
Boris, maybe,
do you have some ideas in there that you can share
not ideas?
Do you have examples in there that you can share
of ways that
it
leveraged an m and a
and how it might have changed how you do business?
Alex Osenenko: do
Boris Rapoport: That's
Alex Osenenko: hmm.
Boris Rapoport: All right, uh, about that. Alex, can you, do you,
have any
Alex Osenenko: you can you yeah I was gonna save you with this one. Um,
Boris Rapoport: Yes,
Alex Osenenko: but, uh, so,
Evan Troxel: let me, let me, let me, let me change it from
Boris to Alex. So Alex, do you have
examples of ways that this has changed [00:29:00] ArchIT's
plan, your outlook
and how you go about your day-to-day operations?
Alex Osenenko: Uh, first I'd like to challenge you what, just for one second on the change of the business plan. Plan never changed. we planned for this eventuality
had, in fact, we had a fork, right? We had a fork. We say, okay, when we do an annual planning session, we spend two days in, you know, a remote location, undisclosed
Evan Troxel: Top
Alex Osenenko: just focus on Um, and, and then there, there's a fork, right? Here's what happens if we do
here's what happens if we
Um, so I wouldn't say the business business plan has shifted. Absolutely. The
Evan Troxel: Yeah. Right.
Alex Osenenko: Um but to give you specific examples, um, first of all, we are, um, in. L like engineering talent that we didn't have before.
Someone who can step in. And this was big goal for us. A big, big opportunity. Someone who can step in and do what Boris does. Strategic [00:30:00] consulting, um, you know, doing cio uh, services. We do, you know, virtual cio, we can do quarterly meetings with our clients so we're not just, you know, changing computers and, and, and, and, and re rebooting their, uh,
Evan Troxel: Mm-hmm.
actually changes your, what you offer out there. I mean, it, it
Alex Osenenko: I mean, it, it
Evan Troxel: increases your
Alex Osenenko: your
Evan Troxel: to your clients,
Alex Osenenko: clients Right? Well, so this is the thing. The value stays the, well, the value stays the same because that's how we approach every single client
tender to love and
But what it is, is who delivers that
Boris has more time to work on
Evan Troxel: mm-hmm.
Alex Osenenko: This is key. This is where people, this is where people fall apart. Cuz you take a lot of, like, Boris is a very, very talented guy from operational perspective, but he doesn't get to play in operations because he's
delivering those cio uh, meetings with strategy
cuz he's the only one in the work
Evan Troxel: Yeah. I, I frame this as going from working in the business to working on the [00:31:00] business, right? And that, that is a huge, that is a big shift.
there are a lot of people who don't wanna let go of the, the driving wheel. They don't want to stop doing
thing that they're so good at that they built their career on.
There's those types, and then there's the ones who
Alex Osenenko: who
Evan Troxel: can and want to do those bigger
strategic moves and, and affect more of the
Alex Osenenko: of the
Evan Troxel: And, and it's a different role, right? And, and there are people who are built for that, and there are others who aren't. But it, it does allow you by taking on this talent.
What you're saying, Alex, is by,
taking on these people who can then fulfill the working in the business part
so that you can.
Let go of the, the driver's wheel and work on the business is an important kind of strategy to,
to actualize in your business, to take it further.
Alex Osenenko: take For us, this was one of the most important things.
Okay. So we got a top level engineer we thought, and I think is, it's, it's coming out as the case. Uh, he, he can replace and deliver quality. Again, high level service to our clients, do be the escalation point. [00:32:00] So Boris can work on the
that is, that was a big piece for us. But also we got a portfolio of architecture clients. Like we, we didn't buy a company, um, that, that served sort
Evan Troxel: Mm-hmm. . Mm-hmm.
Alex Osenenko: grocery stores and, and car
We, and this is why, so we didn't talk about how to find those acquisitions. Our field was so narrow, like we only would wanna buy another IT company who served
Evan Troxel: Mm-hmm.
Alex Osenenko: Like that doesn't, first of all, they're hardly any exist. Uh, second of all, you know, how do you know they're for sale? You know? And then, Anyway, so you, but for us, it was strictly, strategic from a, from that perspective because now we have more architecture and we, we, like, let's be honest, other CLI clients we acquired knew about us. Um, some of 'em knew
we had good relationships with them, but they were happy with their IT
Evan Troxel: Mm-hmm.
Alex Osenenko: They weren't gonna[00:33:00]
So for us, and, and you know, for us it was, it was a lot more difficult. It's a lot more difficult to get clients because even if you're unhappy with your, IT cus um, you just gotta, you're just gonna suffer.
Evan Troxel: because you have kind of, that, you have debt there and, and it's like harder to take on something completely new than to just continue to suffer with the
Boris Rapoport: Or you think everybody is that way, right? Like
the other misconception is like, well this is just the way it is.
I'm it's like you guys, right.
Evan Troxel: Right.
Alex Osenenko: Right Yeah. It's, it guys, you know, suffering is, uh, you know, part of the program. Um, it's not, I just want to throw it out there, but let's get back to the, to the conversation. Um, the, the, those, so those two big advantages.
Uh, the third, I was, I'm gonna say, I'm gonna round this out, Evan. The third one is, um, most like, however you can say like, I'm a marketing guy. I've, I've done marketing, uh, you know, digital marketing. I had a digital marketing company. I'll just wanna
um, to the people, like I have depth. Um, but to be honest with you, [00:34:00] most of our growth is what
Evan Troxel: Mm-hmm.
Alex Osenenko: It's we are building an ecosystem, of awareness in our chosen industry, which is architects that we are out there, ladies and gentlemen, who help you out. You know, here's all the help we do. We do podcasts, we do aa, sponsorships, blah, blah, blah.
but at the end of the day, Most of our business.
And Boris, maybe you can just yay. And a came from referrals and we just re we just doubled our referral network.
Boris Rapoport: No
Alex Osenenko: I made a point Evan
Boris Rapoport: a point I
didn't continue, but No, Alex is absolutely right.
Evan Troxel: Yeah.
Boris Rapoport: Basically an
acquisition,
clients
bringing in more
Alex Osenenko: more
Boris Rapoport: expanded network of you clients
you the
services to them, you'll have more
referrals, right? So you basically exponentially just grew referral network.
Alex Osenenko: your program
Evan Troxel: Yeah. So, so Alex, let's get into how you find
to buy. You said you're in a, you're in a niche.
You are. It's, [00:35:00] there aren't that many
operating in this realm. And so maybe
easier for you, maybe not. I would love for you to kind of tell the story about how. You can find companies to buy who are, you know, aligned at some level with what your goals are.
Alex Osenenko: your Well, I think you need, you as a business leader or you know, uh, owner or whatever partner, need to have an idea of what, what is it that you're looking for? Um, in other words, like a perfect client profile, is something that's needed for marketing a perfect, you know, m and a profile is something that's needed for this.
Like, if you don't think about this and don't write about this and don't talk about this, it's not gonna happen to
Evan Troxel: Mm mm-hmm.
Alex Osenenko: It's very simple.
Boris Rapoport: Yeah. I mean, it goes back to having a plan, right? Like, we have written this down
Alex Osenenko: written this down
Boris Rapoport: three years ago, initially on our business plan
we're going to pursue growth through acquisition. We've actually talked to a few
Alex Osenenko: actually talked to a
Boris Rapoport: people,
[00:36:00] to see
Alex Osenenko: just to see
Boris Rapoport: there, right? But
Alex said, it was very difficult to find somebody that fits,
Alex Osenenko: that fits
Boris Rapoport: you know,
um has our clients, Right? Like that also serves the
architecture industry
Alex Osenenko: the industry
Boris Rapoport: So
Alex Osenenko: and
Boris Rapoport: with this particular acquisition, we kind of lucked into it because they found us,
Alex Osenenko: they found us
Boris Rapoport: as soon as we got that email, we were like, oh, look look, cuz we already talked about it, right?
we saw the opportunity right away. If, if we've never talked about this before, I'd probably send that email to Junk
and look at it again.
Alex Osenenko: look at it again
Evan Troxel: True.
Alex Osenenko: true.
Evan Troxel: I, how many people out there,
uh, respond to a recruiter's email
when they are looking versus when they are not looking
Right. It's like all of the ones when they're not looking
just get deleted. They, or they just get passed by. But when you're looking, all of a sudden it's like, oh, what's this, this is the best email I've got all day.
Right. And so to, to your point, I think it, that mindset,
it, you, you've gotta put it [00:37:00] into the plan
so that.
your subconscious is working on it. Because then the op, when the opportunities present themselves in your case, like they found you,
it's like let the light bulb goes off immediately
respond immediately to it rather than like, oh, maybe some that goes in the, maybe someday or the end of the junk mail.
Alex Osenenko: the let me put some framework around this. There's framework. So there is subconscious. Absolutely. You know how you think about like, you know, a yellow Corvette, you know,
Evan Troxel: Then you're gonna see
Alex Osenenko: yellow you're gonna see
'em
That's true Um, selective, right? It's just, it's just our mind does selective, um, uh, cause we can't focus on everything, so we're focused on something, and this is one of those things, there's framework like this isn't this wasn't just a
what happened. We blog about architecture. We have a podcast about architecture. Uh, it support for
And we, we, we go to conferences, we speak at webinars, um, we everywhere. So when you type in. it, architecture in Google, [00:38:00] it is there. so what, what happened? Well, what happened was the company, the, the, the two founders were retiring.
Well, they're looking to do something else or retire one, one's gonna stay, one one's gonna retire, whatever the case is. But they really cared about their clients, like to them. And this was one of the cases, like, you know, um, where where my clients go is more important to me than me, potentially more favorable terms.
I'm not kidding.
The owners had really, really deep relationships with
and we were one of the three farms they reached out and none the other two. Focused on architects. And so for us, as soon as we picked up the conversation, the fit was established cuz they realized that we are so deep in this industry, we are committed, we're not really serving anybody else, nor we have, um, any interest to acquire 'em.
Yeah. Um, it, it happens. We have other in our portfolio because of friendships and relationships and other things. We can serve other co, other companies, but we don't, we don't actively pursue that and we [00:39:00] prefer to stick, in fact, we focus to stick with
Evan Troxel: Mm-hmm.
Alex Osenenko: And so they knew that, this is what got a foot in the door and this is where conversations started. Um and, and they, uh, instantly saw that we were super receptive and then we, we, we, we actually disclosed them that, hey, this, this is part of our plan.
you guys come in on a great time, know, we are capable and interested, um, of doing this. And now let's talk.
Evan Troxel: Had you guys done other work?
prepare for this opportunity?
Alex Osenenko: for opportunities.
Evan Troxel: In other words, did you
look into all of the different, I mean, and Alex you have some,
experience with this, so maybe, maybe
by default the answer is yes here, but
in, in terms of the SBA loans and the understanding, the different ways in which you could finance
kinds of opportunities, should they, should they come up?
Or if you had found them yourself, it seems like you kind of have to have your ducks in a row
then actually make it happen.
And so you're right, it's not just like
it out there on a, [00:40:00] on a whiteboard somewhere and just saying, yeah, we're interested in doing this, but it's actually,
once you say that, you can then reverse
engineer that back and come up with the various steps that you need to
have in place to be
Alex Osenenko: to
Evan Troxel: for that thing to happen.
Otherwise,
uh, they're not gonna take you seriously.
If, if that were the, the case.
Alex Osenenko: Um the information is out there. I belong to the group and I'll, and I'll pull the book. we'll get Boris on the, on, on the next answer. I'll pull the book from my shelf and, and show it to everybody. But, know, you read a book, you know, you follow the author, you know the subject.
Evan Troxel: Hmm. So, Boris, let's talk about the negotiation process. So you, once you find a fit,
uh, where do you go from there? As Alex can go find, find that book. But the, the idea of negotiation is, I mean, it's not an idea.
this is a process. This is something you have to be ready for, right? It's not gonna be just
what, what do you want?
Perfect.
gonna fit like that. Right. So
tell me what it's [00:41:00] like to,
or what you look at when you're looking at the negotiation process of an m and a project.
Boris Rapoport: um,
Well
Alex Osenenko: Well
Boris Rapoport: our negotiation process,
preface it, by saying
it little longer what I would've expected initially.
Alex Osenenko: expected initially.
Um
Boris Rapoport: Um,
cuz
you it was a smaller acquisition, so, but there were, you know, we wanted to make sure, I guess when you're in negotiating and just like like leading a team of people,
it's
it's very important to make sure that
Alex Osenenko: sure
Boris Rapoport: are,
Alex Osenenko: you
Boris Rapoport: providing win-win
scenarios bodies,
for
Alex Osenenko: those parties.
Boris Rapoport: like I would with my team, you know, if
Alex Osenenko: team you know if,
Boris Rapoport: approach me and, you know, ask for
different job duties or something else,
um, I try to make sure that it's both a win-win for the business,
uh, win for the business, and a
win for them. So similarly, in this negotiation, I always look at the other side
try to understand what,
Alex Osenenko: to understand what
Boris Rapoport: what
a win for them
and [00:42:00] how we can make it work.
Alex Osenenko: we can make it work,
Boris Rapoport: also not right to also,
Alex Osenenko: to also
Boris Rapoport: have our business
successful as
Evan Troxel: Yeah, you find your book, Alex.
Alex Osenenko: your book, Alex? No, I'm working
So the thing is, I've, uh, um, uh, um, I've spent, so when I'm in the mindset of training or preparing for something, this could be, could be, uh, a, a health related, uh, kick or, or fitness related kick, or I'm preparing for like a belt exam, uh, martial arts, whatever the case is. get deep into a particular subject I do my research and I go like deep. And then what I do is I purge once I accomplish the goal. And that just happens to me. I don't
Evan Troxel: Yeah.
Alex Osenenko: I retain the concepts
I'm terrible at retaining the actual, um, I don't, I'm no longer part of those groups.
Like, I I, I, I,
Evan Troxel: You moved
Alex Osenenko: migrate over to my next [00:43:00] interest, uh,
Evan Troxel: Yeah. Well,
like you said earlier, there's only so much room in the brain for, for the things that there's room for and there's not,
room for everything. Right. So that, that totally speaks to that.
Alex Osenenko: We can continue the conversation.
I'm I'll, you know, we'll, we'll link the book to, in the show notes. and there's a wonderful Facebook group that's private group, um, people can join and this, you know, this one resource and then everything, the outcome from that resource. Cuz the book cites a lot of, um, different things, white papers people
Evan Troxel: Mm-hmm.
Alex Osenenko: Uh, but at the end of the day, it's, it, it, it just does a justice to specifically smaller to mid-sized companies acquiring other companies, you know, large giant m and a deals, you know, BlackRock, whatever, family, family offices, all those things are, are, you know, they have lawyers, have, um, their own, um, m and a people, they have analysts and all that stuff. We don't have any of
Evan Troxel: Mm. Mm-hmm.
Alex Osenenko: And a smaller company. So you need to arm yourself with knowledge, but it's not complicated. It's a lot [00:44:00] of fun, actually. Um, and, um, the one thing, the other thing I do is I spend time, had have an email from multiple companies that offer businesses for sale. This is advice actually. Um, like biz buy sell. can go in, you, I mean, it's possible that you'll find your next potential acquisition there, but not necessary. Best companies are
Evan Troxel: Mm-hmm. . Mm-hmm.
Alex Osenenko: you know, best companies come to an understanding that they need to sell for whatever reason, and a lot of times they'll reach out to you.
Now we go back to conversation how to find, they, they will reach out to other companies who are potentially, uh, acquirers who are talking
And I'll talk more about how to be that potential company. at the end of the day, if, if you are looking. you put yourself in the position to get that phone call, get that, notification, get that email and then go from there
Evan Troxel: Mm-hmm.
Alex Osenenko: Um, but you have to talk about it. And another thing I was, I was just wanna mention is you have to flex your, um, [00:45:00] memberships organizations you're in.
And maybe we can talk about more about this later, but if you, aaa, you have to talk about this to your friends and peers, like Hey, you know, we're looking to acquire, this is who we're looking to acquire. We're potentially, you know, we're not looking hard, but we're open. Do you know it by,
Evan Troxel: I think that's hard for a lot of architects who that these business things, they like to keep it.
In behind closed doors. They don't wanna let everybody know what their strategies are because competition is so fierce like it is,
is ingrained
into every architecture student
there who's competing against their entire class from their very first design studio.
And that doesn't change once they get into the profession, professional
Alex Osenenko: professional
practice,
Evan Troxel: going after work, it's a fierce competition. And so a lot of those
concepts are held close to their vest.
And so I think what you're presenting right now
goes
Alex Osenenko: goes
Evan Troxel: contrary to how our architects.
Have been trained to think, which is like, this is,
we [00:46:00] need to keep this to ourselves.
We can't tell people the word's gonna get out. They're pe our clients are gonna get worried about what we might be going through.
Our, our staff is definitely gonna be worried about, about it. The, the fear that we talked about early.
So, I mean, do you have any
practical kind of comebacks or pushback on, on that kind of thinking that is pervasive in our industry?
Alex Osenenko: archery? Mm. Has um, anything extraordinary extraordinary things, which is m and a is extraordinary. Um, does it happen to ordinary companies and or people who stay within with, with strictly within the guidelines? So lemme just remind people, first of all, you're not breaking any rules. I'm not saying, you know, break
Evan Troxel: Mm-hmm.
Mm-hmm.
Alex Osenenko: and Yammer about this potential acquisition to the market and then lose the deal and get sued. Don't do that.
Evan Troxel: your finger. Yeah. No.
Alex Osenenko: finger wagging for those who
[00:47:00] do not do that. Uh, I think it's, it's, it's like, why, why is it taboo? I, I don't understand this. And you can be still respectful of, of this, of the competition and all those things, and still, and, and still talk about it. Um still have conversations privately or at the round table at dinners.
Like, Hey, you know, have you ever bought a company or do you know this person's buying a company? What
that? There's, there's, there's definitely ways to do this. I wouldn't be afraid of, of this at all. I wasn't in the property management industry. In the past, um, you know, spent 12 years a company and then selling it in that industry.
And guess what? Same thing. It used to be like the, oh, it's, it used to be just, oh, it's not, some we talk about, it's not some, and, and, but, but guess what's happening right now? There's a huge
consolidation
Evan Troxel: Yeah. Right?
Alex Osenenko: That industry is going through uh, consolidation. A lot of, uh, VC and, uh, VC backed, uh, players [00:48:00] are coming in and gobbling in a
Evan Troxel: Mm-hmm.
Alex Osenenko: now the smaller companies, you know, bending together, um, to, to withstand the fee pressure
to with withstand the competition from all these v I don't know, is that happening in
Evan Troxel: Uh, yeah, absolutely. Yeah.
I mean, I
speaking earlier, big, big companies are getting bigger,
small companies are staying small, and the middle size are going away. Why? Because the big companies are sucking 'em up, like the vacuum that they are.
Alex Osenenko: And, and they have a plan and they're doing it. And guess what, you could
Um, it and, but, or you cannot
it be, you know, and just be, be, be quiet about it and, and have all the plans in the world. But unless you vocal and you are, put those plans out there and share it with your team and colleagues and organizations you belong
Evan Troxel: Yeah. Right,
Alex Osenenko: I, I think, you're not gonna get the opportunity. Maybe
Evan Troxel: right.
Boris Rapoport: And add something to that.
cuz yes,
mean
Alex Osenenko: yes, [00:49:00] Architecture,
Boris Rapoport: competitive,
but so services, right? Like
Alex Osenenko: services Yeah
Boris Rapoport: 1500
in the Bay Area,
know,
serving everybody.
Um, initially when I, you know, founded the business, I kind of had that same mindset.
I was like, oh, I can't.
somebody finds out like how would price things and you know, Alex was always Hey, we
try price We gotta put pricing on our website.
I'm Like Yeah. but you know, everybody's,
Alex Osenenko: But you know, everybody's,
honestly
Boris Rapoport: that happened to us in terms of like putting pricing on the website and all the other stuff that we're doing in terms of content and kinda sharing
processes and
we do things and secret sauce.
Sauce, so to speak. Right.
Alex Osenenko: so to speak Right
Boris Rapoport: not worrying about that others can copy. Because in reality,
Alex Osenenko: Because in reality
Boris Rapoport: if they copy, they would
already be doing it. B, they probably already doing it,
or C don't even, you know, they don't care
cuz have their own way of doing it and
they're not gonna
change.
Alex Osenenko: it and
Evan Troxel: right.
Alex Osenenko: Right.
Boris Rapoport: and of those kind of go like really there's no, [00:50:00] unless you have some secretive
Alex Osenenko: you have some secretive
Boris Rapoport: ip
where you're developing some secretive technology for NASA
or
Alex Osenenko: NASA
Boris Rapoport: really no,
kind of need of keeping.
Alex Osenenko: of need of keeping
Boris Rapoport: your business stuff secret. obviously certain things have to stay
confidential, but outside of
that, your generic plans,
Alex Osenenko: of generic plans
Boris Rapoport: shouldn't be a problem with sharing that.
Alex Osenenko: be a
Evan Troxel: during the m and a process,
I'm sure that there are different motivations,
from the acquiree,
uh, and probably for the acquirer as well.
talk about transparency.
Alex Osenenko: transparency
Evan Troxel: With what people want to get out of this deal, maybe how those things relate.
Uh,
Alex Osenenko: Uh,
Evan Troxel: do you find out what is important and then start to address?
Is that, is that all part of alignment
or is that not as important when it comes to alignment of, of what kinds of companies you're looking
to acquire? Because like I said, there's gonna be different motivations. Some people are gonna want cash out of the deal. Some people
are looking for,
know, [00:51:00] a retirement versus the next step
in their business.
And so maybe you can talk about some of those different,
um, importances when it comes to
people are looking to get out of a deal like this.
Alex Osenenko: Um, I'll tell you this, first of all, it's buy build. And, and I just feel absolutely ashamed cuz this book changed the way I
Evan Troxel: Mm.
Alex Osenenko: uh, growth and added a dimension, that, that I think will, get me to, to my 50 year plan. Let's say my, I have a personal 50 year plan. it's gonna be achieved through, through work, uh, and businesses, but at the end of the day, that's, that's the ticket.
So buy them build. But Walker Diebel, he's got a Facebook group. Uh, just read the book first. It's like, it's whatever, 20 bucks. Um, best $20 you'll spend. I, I, I'm, I'm just, he's, he's such a great author and he's got a lot of experience in this and he explains everything to normal people like you and I. it's not like, it's not, you [00:52:00] don't need to decode
Evan Troxel: All right, we'll,
Alex Osenenko: is spelled
Evan Troxel: we'll put a link to that in the show notes. Yeah, for sure.
Alex Osenenko: Yep, for yep. And so go back to motivations. that's what you need to find first as an acquirer. You need to understand what the owners, owner, partners of the other company are going through, through multiple conversations, interviews, um, research. Uh, you need to become the analyst. need to become the interviewer. You need to look at their podcasts. If they're out there on the web somewhere, listen to them, understand them. So what they say, uh, is of what you,
what your
because I'm not gonna talk about unscrupulous people, but it does happen. So, so, so, you know, first of all, you need to, like, you need to be sure if there, um, there's a big lawsuit or something else going on, you need to know about it, but that, that's rare. Um, a lot of times it's. They're moving on. Like, I'm just tired of this. Like, [00:53:00] I'm, I'm onto my next business. I'm on next idea. Um, and, and you know, they could be older, younger people, it doesn't matter.
They're onto the next thing they want, they want make sure their employees are taken care of, their customers are taken care of, but they're, they're really just want to get out. So speed sometimes is more
Evan Troxel: Mm.
Alex Osenenko: Um, a lot of times it's money. Um, they're in a financial bind, right? They're a financial situation.
They need to cash out quickly. Um, could be health, could be who
Evan Troxel: Mm-hmm.
Alex Osenenko: Um, a lot of times it's retirement. Most of the times they'll be retirement. People retire. Retirement people have different motivations. Uh, they're not in a hurry to sell this thing. They're not, not like they want to find the right buyer. willing to carry the note because it's, it, tax wise, it's a lot more advantageous to them. Um those are great businesses to buy. Um, anything that's moving fast. I would question took us a year from
email to, uh, you know, to, to semi-finished [00:54:00] implementation. So I'd say about eight months to close the deal,
eight to nine that's the timeline we all should expect. I think it's normal.
Evan Troxel: Well, tell me about this idea of a clawback clause. What does that mean?
Alex Osenenko: this is something I've learned. Um, Walker, does he have it in his book? Uh, this is from my previous experience. So the clawback clause, I don't know if it's as relevant for architecture companies.
Here's why. Um, does architecture companies have recurring revenue or do they
Evan Troxel: In a way, you have recurring clients. There are some architecture companies who offer architecture as a product.
In that case, they may or may not, but I think pretty much it's it's
dollars for services and so I wouldn't really
count that as recurring revenue.
Alex Osenenko: Yeah. So then the claw by clause does not really apply.
This is for, uh, this is for services, um, like, it like property management where there's recurrent revenue
play [00:55:00] if you lose clients, so you're buying that recurrent revenue stream. But if like, you know, 50% of the clients leave
you, you know, what, what did you
Evan Troxel: Right, right.
Alex Osenenko: And, and so I, I I, I think it's less relevant for the
um, uh, in the engineering design space where it's, it's one-off contracts repeat clients.
Yes. But you can't commit them to, know, servicing with you.
Evan Troxel: Okay. Let's, let's, uh, let's start to wrap up here and talk about maybe like the final,
this can go on for as long as it, it needs to take, there's no, no time expectation here, because I think this is probably where I
may have the most to add to the conversation
regarding integration. So like, there's like closing the deal
of the m and a and then there's the actual
Alex Osenenko: the actual
Evan Troxel: And this goes back to where we started the conversation, like have, there's the big
the big vision, but then there's also
Alex Osenenko: then
Evan Troxel: the, the nuts and bolts integration part. And that can go
Alex Osenenko: that can
Evan Troxel: really well.
can go horribly wrong. Right. when it comes to,
it, [00:56:00] if you're take, especially in architecture, I think a lot of firms operate in a wild west, kind of, it's like you're always putting out fires, you're always working on
Alex Osenenko: working on
Evan Troxel: and it's, it's like, just
go, go
go,
And so,
um, infusing new people, new processes and
Alex Osenenko: and
Evan Troxel: into that. Maybe even servicing
new clients on an ongoing basis that aren't used to the way that you do things.
If you're the acquirer,
I could see how, you know, there's, there's a lot of integration
challenges here. So,
um, there's a branding
Alex Osenenko: branding.
Evan Troxel: that needs to happen.
There's messaging out to all of the clients about what's going on and how things will continue. And there's a lot of different kind of moving parts here. And really people are gonna see this as
the beginning of
the,
next steps
than the end of
m and a process. Right. That's, it's kind of,
it all begins for a lot of people.
So talk through
closing [00:57:00] and integration and,
rebranding and transitioning and leadership and, I mean, there's a lot we could talk about here. So again, like no constraints on time, but I, this is kind of where the rubber meets the road.
Alex Osenenko: rubber meets Well, I'm gonna start this, but Boris, I want you to take this, uh, to take this to more, um, granular level, um, entrepreneurs solve problems, right? Uh, problems means something failed, and it needs. Fixing needs to rethinking needs, reimagining needs reworking. if it's not for you, don't do it. because you're running already, uh, fast and hitting deadlines, but I'll be honest with you, like if the, if that's a normal state of business, um, would you wanna double
Evan Troxel: Right, right. Good point. Good point.
Alex Osenenko: you go to a doctor, um, with a heart attack. Um, God forbid, um, I'm just saying like, [00:58:00] like, okay, the house needs
Mm-hmm.
step one. know, know, you know one dumpster fire that, you know, you add another one and it's not gonna be all of a sudden, know, uh, a pleasant cafe. Um, you know, it's, it's just gonna be the same.
So, so I wanna say this, you know, you know, be okay to solve problems. We always fail businesses. It's okay to have, okay to have a failure. A constant failure rate in the business. Cause that's what I call fitness, right? When you're constantly fixing problems, not okay to run around absolutely go from a fire to the big fire burning through people getting things out and thinking acquisition's gonna solve it.
I don't think so.
Even I don't care how strategic it is. I don't care how much talent you buying, they're gonna take one. Look at what you got and quit. So unless you make it attractive for them to work
in your
Evan Troxel: Mm-hmm.
Alex Osenenko: I think that's, we go back to the square one, um, it's not gonna happen.
Evan Troxel: Yeah, I've seen, [00:59:00] I've seen an example just, just to build on what you just said about quitting, like
I think firm, I've heard stories about firms who have purchased firms and it didn't go well.
And then in the, the next one,
they put in a clause in people's
where they'll get a bonus if they stay with the company for a couple of years, for example.
And then as soon as they get that bonus and that couple of years is up, they're gone. Right. And so it was like a bandaid, it was just a temporary patch. It didn't actually work to solve
the integration issues that we're talking about. And I think from an IT standpoint,
and this is kind of where I dovetail into this conversation here, working on digital
and, and mergers and acquisitions and people using softwares and workflows and
standards that are differing.
It, it's, it's all pieces of the puzzle that are very important. And something you said early on,
was that leadership needs to acknowledge.
All of these various puzzle pieces, all of the moving parts,
and help[01:00:00]
leaders of those pieces of the company
come together to solve this problem for the bigger business case and, and actually, Ensure that that can happen in a, in a smooth way, that they
first acknowledge it, but then actually help accomplish those goals.
And don't, and don't just say, you know, that's not something we care about. All we care about is the big strategy. They have to care about those little pieces too. Can you talk about some of those as far as the integration of,
I mean, let's just talk about it from a technology standpoint. This, there's
differences in the way people use technology, their
Alex Osenenko: for adoption of
Evan Troxel: they've got great habits, maybe they've got bad habits, maybe they've got standards, maybe they don't, right? Maybe everybody has their own
that's coming over, and so that becomes kind of a digital nightmare of sorts, trying to kind of figure all of that out. But I think a lot of people have lived through that
well, and so it's not as
uncommon as we would, we may hope, right?
I think less common is actually a smooth transition [01:01:00] process.
Boris Rapoport: And, um, I think,
Alex Osenenko: And um I
Boris Rapoport: so one, one of the things I mentioned before is,
leadership involved. Another thing is planning.
Like it still goes back to like those
Alex Osenenko: those
Boris Rapoport: weave through this whole process. Uh, always have to have a plan. So we've, even we when we haven't finished,
you haven't signed the final docs yet, like three,
Alex Osenenko: yet like three,
Boris Rapoport: estimated closing date and like three months before we started planning for this event,
what if it's gonna happen?
What are we gonna do, how our processes are gonna change? At least for myself.
Alex Osenenko: At least for myself
Boris Rapoport: started doing that,
Alex Osenenko: I started doing that
Boris Rapoport: because basically
as mentioned, we grew by about 50%. So everything
Alex Osenenko: So everything
Boris Rapoport: done
Alex Osenenko: we have done
Boris Rapoport: pre-acquisition, like
re-engineering and incorporating
Alex Osenenko: and incorporating
Boris Rapoport: new
Alex Osenenko: new things
Boris Rapoport: because
just
Alex Osenenko: just
Boris Rapoport: it works
properly uh,
Alex Osenenko: properly
Boris Rapoport: we,
know,
have to we have to.
innovate of and
maintain [01:02:00] information
Alex Osenenko: and
Boris Rapoport: small of people
maintains a certain way.
Larger of people needs a lot more process to be put around that.
Alex Osenenko: to people
Boris Rapoport: so
Alex Osenenko: Um so
Boris Rapoport: the tactical the tactical side, right? Some of the challenges is you're absolutely right. Uh, people,
Alex Osenenko: Uh people
Boris Rapoport: people from another organization are coming in with their own standards and their own
ideas to,
Alex Osenenko: about how to
Boris Rapoport: how do certain things
and how to service clients, right?
Or how to deliver
projects. think initially our plan has always been, look, we want to have
the least possible
Alex Osenenko: the least possible interruption,
Boris Rapoport: the client service
delivery like.
Alex Osenenko: delivery looks like.
Boris Rapoport: think that's very important too,
is
Alex Osenenko: too
Boris Rapoport: necessarily matter
what process on their side is. We need to maintain that process at least
Alex Osenenko: that process at least
Boris Rapoport: temporarily of time.
We can say whatever, three months, six months,
Alex Osenenko: whatever three months
Boris Rapoport: months,
nine
Alex Osenenko: months
Boris Rapoport: how long that those projects take to deliver. [01:03:00] Obviously in our case, the life
Alex Osenenko: in our case the life
Boris Rapoport: cycle is
Alex Osenenko: cycle
Boris Rapoport: shorter,
there's a two year project,
Alex Osenenko: know there's a two year project
Boris Rapoport: clients are already used to the way that project gets delivered. So you wanna make sure you maintain, um,
Alex Osenenko: you maintain um
Boris Rapoport: out of it. right.
So the,
company
that's being acquired
Alex Osenenko: that's being acquired
Boris Rapoport: maintain their processes
on, side. And then you can slowly
Alex Osenenko: then you can slowly
Boris Rapoport: down to using your processes or
combining processes. Like you know, before, I kind of lead,
Alex Osenenko: before I kind of lead
Boris Rapoport: from a standpoint of
Alex Osenenko: a standpoint of
Boris Rapoport: people for input. So we've actually implemented quite a few things that, you know, the other company,
Alex Osenenko: you know the other company
Boris Rapoport: and we were not either aware of or
were not using before Uh, but they, you know, they brought that in and I was like, look, yeah. This is gonna make our lives to us easier. Let's, let's put this in and let's,
let's get going
with it.
Alex Osenenko: let's
Evan Troxel: Take the best of both worlds. Right?
Boris Rapoport: Absolutely. I, I think that's the, only, I mean,
Alex Osenenko: think that's the
Boris Rapoport: in, perspective,
that's to [01:04:00] do it.
the only way
Evan Troxel: Well, and that gives everybody ownership at some level, right? It's like, well, you take the best from here, you take the best from here. You combine that. We're even better
together
now.
we made something that we couldn't have made before
out of the best parts of both of these things. I think that's, that's really strong and that that's a great, great thing to shoot for,
and, and understanding
opportunities
from both sides of this equation.
Alex Osenenko: I want to add a couple things of it,
Um, one is having a plan in place is keep, and we keep harping on this, but like, all right, you gotta like bring in your partners into this, right? Um, in other words, if you it partner, right? You're an architect, you are buy another architecture company, they use Revit, you
Evan Troxel: Mm-hmm.
Alex Osenenko: there's technical
to this. So your plan can say, well, we're gonna migrate to Revit. We wanted to do it anyway. So we're just gonna go ahead and grab Revit. And use, you, you, you use their license and just expand on that, right? And then, [01:05:00] let's just say like, we'll just put, put finger out there and say, oh, it's gonna take three months. you need to bring in your IT partners. need to explain the scope. And you need to actually have a plan in place where your IT partners will tell you, we'll give you information on how long it's gonna take and the effort it's gonna be required, and a retraining and, and, you know, all that is involved.
And that's the same thing for accounting. you know, don't, don't think accounting is not, you know, that changes too. They're using QuickBooks online. Using QuickBooks. You think, oh, it's just QuickBooks. No, it's not. It's QuickBooks Online. It's a different freaking animal than QuickBooks. We've learned that, um, I've learned that. Um, there's also brand peace. Okay, so brand peace. Bringing in your marketing people as smaller companies, you don't have marketing people might be a good, good to buy dinner for your friend who's in
Uh, it's a great idea to run things by him. Again, put that
Evan Troxel: mm-hmm.
Alex Osenenko: And the plan is, I'm gonna just give some meat on the bone.
Okay. You want meat? I'll give you meat. So sunsetting the brand is key. Okay? So you [01:06:00] buying another company, the obsessive thing we all need to think about wellbeing and continuity
Evan Troxel: Yeah, and, and perception, right? Because that communication, that perception is, is a huge piece of the,
positive outcomes coming to fruition because they're, they are your livelihood, right?
Alex Osenenko: your life. Absolutely. And that's how you're gonna finance that. That's what you did in the first place. and so, so be obsessed about continuity and quality, product delivery, service delivery to those clients you're buying. And, you know, take 'em to dinner. Have conversations. You know, don't be afraid to spend your own time.
This is important. Invest, invest, invest, invest in that. finally say, we all gonna wanna put our little shingle on that building and say, oh, it's now, it's now us. You know, we're, we're so good. We we're buying companies. Let's say hold off on that. Um, have a plan to sunset their brand you are acquiring. And my plan is [01:07:00] very very simple. Like it's a three step process. First, you don't do nothing. That company remains. This company, the name remains the name and the new client's gonna knock on that door. Now you, it's still, you already integrated and still have a service delivery that's through your company, but there's a shingle in name cuz you don't wanna mess with all of the, uh, gains they've made over the years.
Right? All of the marketing, all of the relationships they've built, don't do that just yet. So I'd say six to 12 months even. Just keep that o operate storefront as if it's them, though you are fully integrated Right. Uh, on the backend. Make sense
Evan Troxel: Yeah, totally.
Alex Osenenko: Next step is a little byline it still keep it them, you may wanna do some website redesign, you may wanna do some building redesign, whatever, but it's. It's X company by your company name. So, um you, you start to introduce you are part of this or [01:08:00] part of this group, or you know, how companies say do this, right? So, you know, John's architecture you know, a rapid
Evan Troxel: Mm-hmm.
Alex Osenenko: Let's say you are the Rappaport company. So, so that's how it works.
And then finally, finally, the third phase of transition is you bring it into your fold completely. Um, and that may not even be necessary to be honest with you, but typically after two years or so, year and a half, everybody already knows this. You know, you got the momentum. You can just, there's technical side to this, right?
You can, can forward all the url, like a website URL to your website and just ingest it completely at, you know, two years from now. It should be, should be okay. But that's the brand transition.
Evan Troxel: Yeah,
Alex Osenenko: in sort of like
Evan Troxel: I think what we're used to seeing, at least on the tech side of things is these giant companies swallowing up smaller
and, and an email goes out and the website shuts down. Those people have been
Alex Osenenko: people have
Evan Troxel: into the mothership and it's like, it just looks like it happened like that
[01:09:00] on the outside.
Right.
And obviously that's not what's been going on on the inside for a while, but the perception is,
Alex Osenenko: is
Evan Troxel: This thing, this service that I relied on is gone. It's shut down. Or Google had this service that I've been using for 10 years and they just shut it down because it wasn't working for them anymore because it, it wasn't
providing the ad revenue that they needed to keep, keep it going.
Right. And so
I think what you're, you're painting a very different picture there
of a service industry that we operate within
architects and engineers and IT professionals. You're providing a service.
timelines should be longer.
look at the, at what happens,
at least our perception of what happens in tech as the model here.
this is a, a different timeline to be looking at. I think it's great that you actually pointed that out because. This is based on relationships, right? The, the whole service
industry that we're a part of is based on those relationships. And it does take handholding and it does take kind of [01:10:00] crafting and, and doling out these, these bits of the breadcrumb trail over a period of time
that it's really digestible by everybody.
Doesn't take people by
surprise, then it doesn't cause fear.
And that's a, that's an important
Alex Osenenko: important
Evan Troxel: the
of
of, the overall m and a process.
Alex Osenenko: ending. For sure. It is for sure an important part because if you jerk things around, you will end up with less than you, than, than you
wanted
Evan Troxel: well, what are we missing here? What, what piece of the story, what piece of the puzzle have we not touched on? Is there anything that you wanna throw in here at the,
we wrap up this episode? I,
it's incredibly.
Alex Osenenko: it's incredibly
Evan Troxel: Amazing that you guys are sharing this information with everybody because like Alex, you talked about that book being kind of a masterclass.
I mean, this is just,
Alex Osenenko: this is just,
Evan Troxel: could be transformative
people's businesses.
could be the kind of information that you're sharing
Alex Osenenko: information that
Evan Troxel: is,
Alex Osenenko: is,
is
Evan Troxel: I, I love that you're doing it. It's a resource [01:11:00] that people can use for a very long time.
And so I really appreciate you
both taking the time to put this together
and tell this story to the audience.
And obviously this, my hope is this goes way beyond
the audience that this episode gets shared with
firm leadership who don't listen to this podcast
and people who, because even if it's not something that they're considering, it's really educational and it's the kind of thing that
could be an option in the future if it's not right now.
And so this is, uh, my, my goal with this whole
Alex Osenenko: my goal with this
Evan Troxel: is to create,
put these conversations that people have.
Around a table,
in a room,
to everybody
and make it a resource for all. So I, I appreciate you doing that, and I just wanna make sure that we didn't miss
anything in our conversation that needs to get out there in this episode.
Alex Osenenko: I, I want to add, I wanna say two things. One, one is if you are, a future leader the organization and you find out [01:12:00] that your organization is buying another company or your organization's being sold to another company, I'd say if you want to move your career forward and if you like the company you're working with or for, I'd say like volunteer to help volunteer to help stand up and raise your hand and say, Hey, I know Revit, I know this, I know that I know, you know, most of our clients. I can help with X, Y, Z. don't just ask once expect your leadership just
you and say yes constantly. Because they have other things they worry about. They, they, they, they, they'll plan. Maybe not calling for anybody internally to help out whatever the case is. say if you wanna build your career and become indispensable in your organization and future leader in your organization, step up. And once you find out the acquisition, don't resist. Offer your help and offer it often. Okay. Um, that's, that's one, one thing from a leadership perspective for fork out before you do [01:13:00] anything, you know, we consider buying companies fork out part of your business plan and say, what if we acquire, how is that gonna look like?
So you don't have to like create an elaborate, uh,
Evan Troxel: Mm-hmm.
Alex Osenenko: but do map it out in your brain and write it down and, and so, and start talking about it, then it will happen. So those are the two pieces I wanted to add.
Evan Troxel: any last thoughts from you, Boris, before we wrap it up here?
Alex Osenenko: we wrap it up here?
Boris Rapoport: I'm just gonna say, yeah, be open to the idea, right?
And plan on,
Alex Osenenko: And plan
Boris Rapoport: you make that a part of a strategic discussion, um, have, you
Alex Osenenko: you have
Boris Rapoport: know, your strategic
Alex Osenenko: strategic
Boris Rapoport: you're doing
strategic planning
at the um,
have strategic discussions look at as
an,
Alex Osenenko: look
Boris Rapoport: realistic
avenue for growth.
Alex Osenenko: realistic avenue for growth
Evan Troxel: Great. Well, again, thank you both for taking the time to share
information.
Alex Osenenko: information.
Evan Troxel: again, my hope is that this is a resource for people out there.
know that's your goal with it as well.
[01:14:00] It's not just to show how cool you are at r i t having gone through this process, but there's a learning opportunity
for, for everyone out there in the service industry that this is an option.
there's some people who want to potentially be acquired. There are other companies who want to do the acquiring, and I think, uh, that audience I, I'm hoping, hears this message.
thanks guys for taking the time today and we'll put links to the book to ArchIT both of your LinkedIn profiles in the show notes. uh, I look forward to our next conversation.
Alex Osenenko: Fantastic show, Evan.Boris Rapoport: Thank you for having us. Have great day.