Alastair Mills is the chief executive of Six Degrees Group, an acquisition-led company launched in 2011 which provides internet systems and cloud computing services for businesses. It counts half of the top 10 investment banks in the world as its customers.
From 2004, Mills was the CEO of SpiriTel Plc until he sold the business to a competitor for £37m in 2010.
Six Degrees has made 13 acquisitions since launching two years ago; so what’s the secret of a good acquisition? Read on…
Q: Why should companies consider making an acquisition?
There are a few reasons. The first is if you want to want to offer a new service – for example, if you sell phones but want to move into cloud computing. Sometimes it’s easier to bring in a company already successful in that market, rather than starting from scratch organically.
The other is if you want scale – to become the biggest provider in your field, it’s easier to buy more of what you are already doing. Six Degrees is already recognised as one of the leaders in cloud computing for businesses, and that’s only taken two years. So making acquisitions really accelerates your growth strategy. We had six employees when Six Degrees first launched - today we have 256 people working for us. We’ve acquired 13 companies over the last two years and turnover is around £75m now, making £14m profit.
Q: How difficult is it?
It’s easier than you think to make an acquisition. I’ve done 25 deals over the last seven years through SpiriTel and Six Degrees. For some of those we’ve paid more than £10m and others less than £2m. There are three things to think about:
1) It’s crucial to know everything about the company you want to take over. We obsess about absolute detail. We know what the company’s dress code is, and when they go out for drinks. We know what information they have on all their customers, and how often they contact their customers, rather than just looking at the big stuff such as which IT platforms they are using.
2) We rarely keep the owners on after we’ve bought their business; and we explain that the first time we meet them. Most entrepreneurs don’t want to work for someone else anyway. Several of our competitors have made the mistake of keeping people on who continue running the company as they always have done. So you end up owning lots of individual companies with competing priorities.
3) You need to integrate all your systems. If there’s one mistake I made in the early days, it’s underestimating the pain of putting systems together. That includes your CRM, your finance, your billing system, and your order management systems. Plugging those together is a really painful task, and if you make sure you get it right, you’re less likely to mess up the acquisition.
Q: How do you spot potential companies to take over?
About half of our deals are originated through corporate finance houses. There are lots of corporate finance boutiques who are out there trying to sell small companies. The others are scouted by me or my team. I spend a lot of time meeting CEOs, MDs, analysts and speaking to the competition.
I like to think there’s no stone I’ve left unturned. I get to know our smaller competitors and build up a relationship with them. When they consider selling up, they know we’re here. I like to think Six Degrees has got a great reputation. Some companies say they going to buy a company – but when it comes round to doing the deal they realise they haven’t got the money, or they change the price at the last minute.
Q: Ever missed out on a deal?
I missed out on a couple where the price was too much. I also did some deals I shouldn’t have done at SpiriTel, but you learn the hard way. The mistakes tend to arise from keeping the vendors on - some have been complete fruitcakes. A few years ago we brought someone in on to our senior management team because that was the only way we would get the deal done, and from the day he joined we regretted it.
Q: Describe a typical day
I’ve got two boys aged two and nine, and a few years ago I made the decision that I was going to take my eldest boy to school every day. So I don’t get to the office until 9.45am, but I tend to still be here late on 3 nights a week. My typical day involves lots of meetings with my senior management team, analysts, and the heads of other firms.
I spend one night a week by myself to catch up on stuff. I have a restaurant booked every Monday near my home in Wimbledon where I’ll go and sit by myself with a pile of reading until a car picks me up at 10pm to bring me home. It’s an opportunity for me to read what’s going on in the market, to see what our competitors are doing and to just sit there and think. It’s when I have some of my best ideas.