From Acquisitions to Exit: How to do it Successfully

Michael Garbe has been an active member of the tech community in Toronto for over 30 years. Most recently, Michael founded a managed services company called Accelerated Connections (ACI) in 2000. Over 18 years, Michael grew the company, as its CEO, from inception to just under $50 million in top-line sales offering internet, voice, and data centre services to Canada’s enterprise and SMB businesses. In March of 2018, Michael sold Accelerated Connections to GTT Communications, a US-based public company.

Michael is also involved with the startup and venture communities in Canada as an investor and mentor to younger CEOs. In addition, Michael is a founding member of Peerscale (formerly AceTech Ontario).

Michael has also acquired several companies while he was CEO of ACI. We sat down with Michael to chat about the acquisition process, lessons learnt and what is next for him.

Tell us about your professional journey thus far.

I have been in the tech business all my life. I worked for Computer Land when they were computer stores. I founded Northgrove Technology, a rep firm representing US based manufacturers in Canada.

And finally, I started Accelerated Connections in July of 2000. I was a 100% shareholder and ran the company as the President from when we founded it to when we sold it in March 2018.

You have acquired several companies through ACI, tell us more about those.

The first acquisition we did was in 2012. It was a $2 million ISP and we did it to get our feet wet and get comfortable with doing this kind of stuff. In 2015, we bought the assets of one of our wholesale customers at $2.5 million.

Our biggest acquisition happened in 2016 and that was the acquisition of OneConnect. At that time, ACI had $21 million in top-line revenue and OneConnect was at $22 million. That was a major acquisition which was transformative for the company – it doubled the size of our revenue and more than doubled the size of our people.

What did the acquisition process look like?

In the case of our first acquisition, I was buying it from a mom and pop organization, essentially it was just me negotiating with them. However, the next one involved a bit of a bidding process and the OneConnect acquisition involved several rounds of bidding. Finally when I sold our company, I hired an M&A advisor and it was a properly run process from beginning to end.

What are some of the things you look for in a company before you acquire them?

The first thing that I look for is that the services they are selling are complementary to the services that we already offer. In other words, when we were providing internet services to businesses and there was a company out there that did installation services or network design, I probably wouldn’t be interested in that because they were not complimentary. They would be a bolt on, instead of an add on.

Another thing I look out for, especially in a bigger deal, is that I want them to be a little bit broken. With OneConnect for example, they did a lot of what we already did. They were a perfect layer on acquisition except they were broken – their profits were less than half of what ours were. I knew I could fix it and extract additional value out of it without decimating it.

What made you want to sell ACI to GTT?

It all started out with ACI acquiring OneConnect. The plan was to acquire and spend 6 months fixing it. Have it run well as a combined new company and then take it out to market to sell it. That is exactly what we did.

What are some of the lessons that you have learnt about acquisitions and have there been any big surprises along the way?

The first lesson is to look for companies that are complementary. Second, try to borrow money rather than take on other investors and dilute your ownership

In terms of surprises, with OneConnect, I underestimated the difficulty in joining up the two cultures. It took a long time for it to happen and it didn’t happen as smoothly as I thought. It happened on its own timetable and I couldn’t make it happen any faster.

How has Peerscale or your CEO peer group helped with the acquisition process?

Through Peerscale, I have had the opportunity to talk to people for whom acquisitions didn’t work out, so I avoided some of the pitfalls that those folks had and that was immensely helpful.

As I was going through this last stage, which involved the sale of my company, talking to my CEO peer group was extremely valuable and it shortened the timeline on a lot of things I did – I grew faster and I didn’t stumble as often.

The M&A advisor we ended up hiring came indirectly through a recommendation made by the people at Peerscale as well!

What’s next for you?

As I ease out of Accelerated Connections, I am easing in to a new role, investing money that I have acquired from the sale of the company into the ecosystem again. Myself and a couple of other Peerscale members who have had exits and other investors have formed a new Venture Capital Fund called Ripple Ventures – that will hopefully help create and inspire and invest in the next generation of Peerscale members.

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