Strength in Numbers – Growth by Acquisition


You can grow a consulting business such as LLP Group in two ways: through organic growth, or through acquisition. The first is a slow, but usually sure, process that can ordinarily be financed from profit, as long as the pace is not too fast. It’s a sure process because expansion need proceed no faster than the market will allow, and because each of the many steps you must take will be a small step that you can take when you’re ready, and not before. But organic growth is not without risk, the risk that others might move faster than you, seize a larger market share and leave you struggling along behind. Growth by acquisition is a far riskier process, and it’s much more difficult to finance, but it’s nearly always a quicker way of gaining market share. So, each process has its merits and its risks.

LLP Group has grown steadily over 24 years, usually through self-financed organic growth, but also through three acquisitions. The first, in Romania, involved the acquisition of a small competitor providing consulting around Microsoft Dynamics NAV. We thereby gained market share and brought into the company some of the best experts in the field. I would judge it a success, though it would be difficult to measure the financial benefit over a long period. When the financial crisis came we lost some customers and employees and we eventually sold our Microsoft Dynamics ERP division.

In Hungary we made a disastrous acquisition that I regret to this day, encouraged by a managing director of great charm and persuasiveness, but little sense of risk. Again, it was a company that was expert in Microsoft Dynamics NAV. We carried out limited due diligence and failed to spot a disastrous project that led to an expensive lawsuit against the company, which we eventually lost, and which finally led to the bankruptcy of the company.

In Slovakia we made a third, small, but successful acquisition to bolster the group’s capability around Microsoft Dynamics AX. This company was sold with LLP Group’s entire Dynamics division, but the acquisition made the division more attractive to potential buyers.

The risks of acquisition are many, particularly for a services company, where value lies mainly in employees and customers, partially in intellectual property, but almost never in saleable fixed assets:

  • Are the financial statements correct?
  • Are revenue projections plausible?
  • Is the sale pipeline plausible?
  • Are contracts with current customers secure?
  • Are relationships with employees good?
  • Are the company’s strategic aims consistent with the buyer’s?
  • Are the company’s culture and ethical standards compatible with the buyer’s?

Due diligence of various kinds and close observation can help you to decide some of these questions, but risk remains.

Sometimes there’s an opportunity that you can’t put aside, so this week we’re announcing the largest acquisition in our history, the acquisition by our Microsoft Dynamics CRM consultancy, LLP CRM, of Logic point, our main competitor in the Czech Republic. Together we will be the largest specialist provider of CRM (Customer Relationship Management) consulting and software in the region, with combined revenues of towards 3 Million EUR and around 45 staff.

‘Marry in haste, repent at leisure,’ the saying goes. This has been a fast-moving relationship, with talks only beginning a month ago. But we’re a good match, each of us bringing different technical skills and different sector knowledge to the table. Together we will be able to offer our customers a wider range of skills, with greater efficiency.

We’re starting close cooperation this week, and have agreed terms for our merger (LLP CRM will acquire 80% of Logic point) subject to due diligence. We expect to tie the legal knot in about three months’ time. Preliminary careful analysis, carried out with caution and scepticism, has thrown up no obstacles, or unexpected risks that cannot be mitigated, but it is the ‘unknown unknowns’ that we must be wary of.

In the meantime, we’re in for an exciting and hectic time, as LLP Group’s numbers in the Czech Republic grow to more than 80 for the first time in the group’s history. Fingers crossed for a long and happy marriage.


“It is not enough to succeed, others must fail”


This splendidly waspish remark is attributed to the writer, Gore Vidal. He was, himself, immensely successful, though acclaimed more for his ‘unserious’ writing than for his political novels, which I find, frankly, quite indigestible. It was these thoughtful and interminable novels about politics that he wished to be remembered for (rather in the way Leonard Bernstein longed to be remembered for his vast symphonies instead of West Side Story, when most of us would have been glad merely to have written one good tune from the show).

Gore Vidal wrote screenplays too, mystery novels under the pseudonym Edgar Box, made a lot of money, and mixed in the Princess Margaret set. But, struggling, despite his success, with some crippling insecurities (I suppose) he suffered fools very gladly indeed, in that it gave him immense pleasure to be both socially and intellectually superior to almost everyone he met. In most cases he was certainly the latter, but I can’t help thinking that those who are conscious of the former have already failed miserably in some way.

Envy is also a sentiment of the young. When we are striving for success or recognition, other people’s talents and successes are an affront. We must grin or grimace determinedly when we hear news of some friend’s astonishing triumph, triumph of a kind that has, as yet, eluded us. But as we age, we begin to take genuine pleasure in others’ success. Success and failure are not the necessary and balancing outcomes of a zero-sum game.

On the way to Bucharest airport yesterday, my colleague, Ioana, and I popped in to see our former colleagues, those working for the company that LLP Group sold 19 months ago. It was LLP Dynamics then, and is Xapt Romania now. Not so successful then, but conspicuously, confidently successful now. Microsoft’s Dynamics suite of software was never my cup of tea, and certainly, under my direction (and others) the company hadn’t thrived. I knew I couldn’t solve the underlying problems, and by the middle of 2013 it was wearing me down, so selling it brought me some guilty relief (and some cash, too, of course, though nowhere near the amount we’d lost). Guilty, perhaps because I felt I might be putting my own interest before my colleagues’. I was the captain, and I was abandoning the ship.


But it wasn’t like that. The sum of human happiness has been greatly increased by the sale – my happiness I was sure of, but theirs too, as I could see yesterday. Now Xapt Romania is doing very well indeed. It’s the largest and best Dynamics AX reseller and consultancy in Romania. It’s profitable, it’s growing (now it employs nearly 50 staff), and it feels happy to me. Hats off to Mihai Madussi and his team.

It’s actually ok to fail, even if others succeed!

And, let’s face it, we haven’t failed everywhere. What’s left of LLP Group, (LLP Group, LLP CRM and systems@work) is still very much more my cup of tea, and it’s doing very well indeed.