The Deal Is the Easy Part: Building One Company After an Acquisition | Christophe Piron | EP14

Welcome everyone. It's Bill Canady with the 1,000 Day CEO. Today we are honored to have Christophe Baron, European CEO, CFO, and M&A leader. As the CEO of Beer, Christophe helped turn the company from a French market leader into a European powerhouse, doubling revenue, €220 million, and quadrupling operating profits. He led acquisitions across the United Kingdom, Belgium, Germany, unified the business under one management technology platform, ultimately negotiating Beersell to Airheld Engineered Products. That's where I came in, that's where we got to know each other. He went to Ecosol Group, raising $100 million there and completing 3 cross-border acquisitions as part of his expansion from Belgium into a pan-European renewable energies platform. Uh, today he is founder and CEO of Cannibalus and serves as interim CFO of EVS Broadcast Equipment. How you doing?

I'm very well. Yourself, Bill?

Well, listen, it's fantastic for you to be here. You have sat in so many different roles. Uh, you've been the CEO, CFO, you've led integrations, you've done it around the world. You know, talk to us a little bit about what that looks and feels like and the challenges that you've had to deal with.

It's true. Actually, I've worked from origination to execution integration on 23 deals for a total of $2.3 billion. And I can tell you there is no deal which are equivalent to the other. And strangely enough, I think that the smallest one were the more, the most difficult in integration.

Find that same thing. The smaller is harder. You gotta do your piece. And their piece.

And their piece. And when you, the acquisition is done, you don't have the size, the management size to integrate on the acquisition part. So actually now when I see businesses willing to acquire small companies, I tend to be reluctant and tell them, you know what, you're probably underestimating the fact that there is no middle management enough in small companies in order to to lead the integration, and that makes it bloody complex. And that actually was true. The biggest one, okay, fine. The ticket was much more, much bigger, but in the end, much easier to put in the company.

That is so true. You know, it's funny, I'll go do a small deal. We like buying products and things. You know about that. And so the person you're going to buy it from, we'll just say the guy, So you meet his attorney, it's his divorce attorney. You meet his accountant, it's the guy that does his taxes. So no one has any deal experience and you wind up finding that you have to close their books for them. In many cases, you have to show them the deal piece. And then some of their advisors want to prove their worth and they actually can kill deals, right?

Absolutely.

Instead of getting through it and being kind of good partners, It's hard. How do you handle it all?

Well, actually, you made a very good point. I mean, many times the advisors are a pain, an additional hurdle to the success, and getting personal relationship with the buyer or the seller is absolutely essential. First, to really understand what drives them, what drives the sale, what drives the acquisition, what drives the reason. And once you understand them, I mean, the negotiation becomes much easier because sometimes, you know, the advisors are focusing on stuff which are absolutely not important to the principals and they're making, it's just additional hurdles. And a number of times where I said, if you want this deal to continue, you know what, you and I, We will go outside together. We will have a good dinner. We will have an afternoon together and we will try to understand what blocks. And it takes no more than 2 hours most of the time to unlock the deal. And then you have a handshake and then we go back to our advisors to tell them, okay, this is what we want. And that's it. And it works perfectly.

It's so well said. You know, the issue, it's just factual, is a lack of trust. You don't know them, they don't know you. They feel Like you may be taking advantage of them, but the honest piece is this may be the one deal they do in their whole career. And we can't afford to have our reputation sullied by doing anything than right down the middle of the road. But they don't know that about us. And so taking that time to get to know them, taking that time, they can see inviting them in, helping them talk to other people we've done deals with. Can really make a big difference in that.

So that, that's, to me, it's essential. And, and also, you know, sometimes you see people blocking on, on certain aspects of the deal, which you simply don't get. And then by just discussing, by just understanding their, their needs, sometimes you propose something a bit different, which is absolutely neutral to you. I mean, it's no better, no worse than the other proposition. and it's done. And that's really, and that also creates the trust to continue to work together afterwards. And to me, that's absolutely essential.

I really agree with that. You need the owners and the key leadership. You like for 'em to stay forever. It's not always the case. When do you find that as an acquirer, it's important to start imposing one system? You know, you get 'em integrated into your platform, one culture, One operating cadence, right? When should you do it and when should you leave the business alone?

When the companies I worked for were really willing to acquire a business which is totally equivalent, same thing somewhere else or same thing, same place, then it makes sense because suddenly, You will see your working capital more clearly. So your inventories, all your stuff, and it's become much easier to manage and to drive synergies. That's number one. When did I leave it alone? When it's a diversification type of business, let them run, let them go, let them develop, give them the means to grow, but don't force, assist them, which is not probably applicable to the way they work and try to understand them, try to get the best out of it, but let them grow. I'd like to talk about a failure I have. It's a company we acquired in Germany, sizable. I mean, sizable, everything's relative, but still a $40 million business. Okay. Outstanding contact with the CEO. Outstanding and a very, very, very nice guy. And we worked together for a year and he was actually blocking the integration while it had to be so. And at some point after a year, we go for dinner together and he said, you know, Christophe, I'm tired. I'd like to leave. It doesn't work. I said, I agree. It doesn't work. Our teams do not talk together, it doesn't work well, but very nice conversation. Nothing, I mean, we got along well as human beings. So we agreed he would leave. And then I asked him, but what happened? You were so motivated during the deal. And he told me, you know, Christophe, when I was CEO of that company, I didn't have cash and I didn't realize that At the moment I would sell, I had this type of amount of money on my bank account, and now my life has changed. And frankly speaking, waking up in the morning to do what I used to do in the past doesn't make any sense, and I cannot motivate myself. And I thought that was very honest from him. And that's something I'm checking all the time now when we were acquiring a company. is, does it change the life of the person? And is this person ready to continue under those new circumstances? And that person in particular, he said, you know, I simply want to sail now. I want to go on an island, sail, and I will be happy. And that's respectable. I mean, the guy has worked a lot. He does the stuff and he apologized himself. He said, I truly apologize. I didn't expect To feel that way. And I think he was really sincere, but that's, to me, uh, that was an eye-opener to, okay, pay attention to what's next for that person. What does he plan to do with the cash he got? How, how will he react? How do we prepare succession? Because that may come in any case. So, but that's, to us, was a failure because we, we struggled afterwards. To find the number 2 and to ensure the succession of that business.

That is so insightful. And every founder-led, or every private company, I should say, that I have bought, the culture before was they were frugal. And so they led a certain life even though they had this massive asset. Everything was tied up in it. And so their life was pretty normal. Now all of a sudden they're made wealthy, wealthy beyond their wildest dreams. And it was a small company, it was very profitable, and we paid $112 million for the business. So how do you plan for that? What do you do? What do you look for?

First, now I try to avoid that situation and make sure that there is a very strong number 2.

That's the key.

So that's because you cannot control it. You know, some people are just workaholics and they will continue anyway, but not everyone is like that.

Not everyone's there. And, and sometimes the workaholics, you don't mind if they kind of retire anyway. You, you need to get the company into your culture.

That's true because you, you, you tend to have a problem to take the control on those companies. The point is make sure you have, uh, a strong number 2 or make sure within the company already, or make sure that it wouldn't be too difficult to find someone who can lead that business quickly and pass the baton in a very friendly way with the existing owner. To me, that's essential. But if I have a little doubt about this, the possibility to have a number 2 inside or outside the company, Then I don't do the deal.

In most private equity businesses, we like buying founder-led companies. There's a lot we can do with them in professionalizing them and putting them into our system. But I count today on 100% of the people leaving. And I look very carefully at that number too. What is the capability? So we'll spend time with the founder for all the obvious reasons, But we'll spend an unusually amount of time with whoever we think their successor is, getting them a good contract where they feel comfortable, getting 'em into our culture. Uh, what do you do about the other pieces of it though? What do you do about like the systems and, and the back office stuff? See, because most of the deals we do, we depend on the synergies. In other words, the cost out or the go faster pieces.

Mm-hmm.

How, how do you push that in?

First, the first thing I try to do is making sure the companies we acquire, the, the actually the sellers are reinvesting in our business. So one level above. Why do I prefer that over earnout? It's simply because they will be the first actors for synergies.

Mm-hmm.

You know, uh, I really tend to bring them up front. Otherwise, It will always be a discussion. Ah, yes, but if you implement this, it will be a burden for us. We will have additional costs. So I don't want that because my earnout won't be good because this and that. So the first thing is bring them a level higher in the org so that we have them fully aligned with the value creation for the group and not for themselves. So that's number one. And we tend to do that with the key people. So not only the CEO and the seller, but the key people. So everyone within the acquired organization so that they're not thinking about their own piece, but they're thinking about the group. If you have that, it becomes much more easy to have the people thinking about okay, what really makes sense? And if they find that putting an ERP, putting the stock, the inventory together, sharing the clients list, doing normal integration type of things, everything becomes easier because you're just aligning the incentives of everyone who is in the organization to the organization's interests. And to me, That's really something I push. And if we do that, we think together. I'm not the type of person who thinks, okay, we need to take the holding or the group's ERP system at all costs because we've already done that. I prefer having people thinking all over the place about what truly makes sense for the group. And if there is a better tool at the acquired company, Let's use that. If it's better somewhere else, let's use it. But so that they're all thinking not about protecting their own kingdom, but really thinking about the interest of the new group.

Earnout is another language for saying you're going to get sued, right? Because you put it in and then if you want to integrate the businesses, which we typically have to if we're going to be successful, they're going to, it's not going to go as well. They're going to injure their earnout because the resources are diverted. Is there one place you tend to focus more than other? Are there certain levers you pull that you feel you can count on to produce results?

Depends on the type of business, but in general, I will start with finance to make sure that I have the good dashboard and the facts and figures to be able to manage the company, not on feelings, but on hard facts. So certainly start by that. And depending on the type of businesses, but I would say, uh, I've done 80% of my career in wholesale. So there, operations, inventories, you know, all those stuff where it's thin margins. So being extremely efficient there. truly make the difference. And often in working capital, there's a hell of a lot of money to bring back quick to the shareholders. That's most often where if you are really fast in slimming the working capital, I know you're a big fan of the 80/20, but that's really it. It's making sure that you spend your time on the most important clients, that you stop with slow turning assets, this type of things. And there is a hell of a lot of money to be brought back to the shareholders and super quickly. In the end, it's a matter of a few months. So that's where I agree.

The 2 things that flow through the quickest is pricing. If you can look at your pricing and get it correct, you can drive growth in property. And the second one is you've got stacks of cash sitting on those shelves. And all those warehouses no one's looking at. How do you get those out? How do you monetize those? Because not only do you get the money for it, you also don't have to continue to carry the cost of, maybe you don't need that warehouse anymore. Some of this inventory ages out, either becomes unusable or the market just moves on to it. Is there something else that you really pay a lot of attention to that, that you find is, is pretty important?

Um, Obviously culture. I tend to, you know, test it before the deal because there, I mean, changing culture is something extremely complex.

Yeah.

Um, when we work together, by the way, that's a good, uh, that, that was one of the tricks and that was one also one of the reasons why I left, by the way.

Um, working for me was miserable. That's why I moved.

We used to work for a family business where, yeah, the time horizon is extremely long. So I was leading that company, leading beer. For 4 or 5 years, I think, with time horizons, which are obviously much longer than what Arrowhead had because owned by a private equity owner. And the choices to be made were naturally totally different. And the reason why I left, not because I disagreed with those choices, but I found it extremely difficult to explain to a team where you told them, This is where the north is. And obviously the north is not at the same place when you have a shorter time horizon, right? I simply thought, well, you know what? I might not be the right guy to lead with such a quick change of time horizon. It was nothing more, nothing less than that. But I think that's very important. And that's part of, you know, the time horizon is also part of the culture because that's the culture of the company, the speed at which it works. And what you tend to focus on, the KPIs you're focusing on. And that's by nature not the same. And that was, to me, something I clearly pay attention to, but I would say it's even before the deal.

It's a really insightful point is when you go through a transition from a privately held business, the culture changes dramatically. Speed changes, what we look at changes, how we treat those things. Changes. And, uh, you know, besides a very few people at the top, no one else in that business made that decision to go with it. And, uh, and they don't all want to make that journey. So keeping that team together, keeping those people together and showing them what's in it for them and why this is good, speed changes dramatically.

Speed changes. Yeah, exactly. That's the time horizon.

So hence the name of the 1,000 days. And it takes a while, you know, to get systems in, get the people stabilized, allow integrations to happen. That doesn't happen overnight. About 70% of the CEOs who come in for this, they don't make it. And, uh, and so it's this ability to build a team, understand what your partners and the board and your LPs want, and keep that team together.

Yes.

How have you, how have you made that work through your career? I mean, you've had an extraordinary amount of success.

Well, as I said, when you are in a situation where the entire team is already structured around that time horizon, for the moment I have the shortest possible time horizon, it's simply adapting to that. And I think the style, the level of decisions, the the dynamics, you simply need to adapt. You're working for a privately owned, but really private, private, a family or so owned company, about the next crisis. It won't change. What's important to them is most of the time, will my son, my grandson, and so on be able to live on the dividends, as you said? So there is a crisis, they don't care. They will still do the investment, right? Because that's what they're looking for.

Well, as long as they're not gonna injure their family materially.

That's the key. That's the key.

They'll go with it. It is, uh, critical. On the opposite side of that, it also allows complacency to come in. It allows it to be a little more comfortable.

Absolutely.

You don't run it as lean. And that's why private equity loves buying those companies because there's a lot of fat in there that you can trim out, that the business will be leaner, it'll grow faster. It'll push into areas that normally it wouldn't do.

It's actually easier to be a CEO coming from outside the company when the PE has just bought. Why? Because he will be the person giving the tempo, you know, the new tempo, and you can adapt. I mean, if your employer is a PE, okay, we'll go. You have this 7 years or 5 years horizon, you go full speed. There's no discussion. I mean, you know that anyway, you're fully supported by by the PE investor, and that's his expectations. And you simply, I think as a CEO, you're a professional manager, you simply have to adapt to your employer. Your employer is the shareholder, right?

Absolutely. That's it. It's simple. Your boss is one company, one person, whoever you're reporting to there.

You just focus on that and you know the levers and you execute the levers. It's as simple as that.

Absolutely.

And it's even more true on the stock market.

So when you're going through this and you're building these companies up and you've bought a lot and put them together, what's the earliest signs of your buy and build strategy and your platform? It's really becoming a collection of companies versus a truly integrated system. How do you notice that? What do you do about it, if anything?

I can talk about a couple of them. The first one, I became CEO and there was already 2, 3 companies within it with clearly, I mean, they were clearly working separately to a point that they were competing each other.

Mm-hmm.

Right? I mean, one company was Discounting to clients of the other while they were in the same group. Literally. Yeah.

I see that. That's so true.

It was, it was just unbelievable. You just looked at the list of clients and then you see, why did, why did you come here? I guess because, uh, our sister company is making good money with them. Do you realize that you're actually, uh, jeopardizing their own business and cannibalizing that business? And at what cost? It's lower margins. You, we are just killing the killing on food. So you stop, you stop by that, you stop. Okay, fine. Suddenly the margins come up. You haven't done anything but just prevent them to work together. Then it's organization. It's one clear leadership, cross-border, cross-entities. Once this is done, you can make the decision about the system. To me, organization, good governance, within the group management governance so that you have full alignment and then you can deliver, I would say, roll out the system, the processes and so on. And it's just faster to, uh, to put in, to set up, to put in place.

Interesting. You're talking about companies competing against others. They don't always have to be, it can be just different divisions. And, uh, as the parent organization, it's all the same ledger. All right. And so we wanna win and we wanna win successfully. When you buy competitors in the same field, they're used to trying to kill each other and now they're, they're brothers or families in arms about doing it.

You gave the example of competitors that, that's, can you imagine they've been trained for years to beat the others? Why would they stop?

Why would they stop?

It, it's in the DNA. So it's a hell of a lot of work. you have to start by the organization, by one boss, one stuff, so that they're all looking at the same sun.

When you were at Ecostal, you pursued a kind of a 7 to 8-fold growth ambition, and you did pretty quickly 3 acquisitions. Did you experience any of these issues there?

It was quite interesting because we had to raise a lot of money In parallel, a lot, again, relative to the size of the company. Everything is relative. It was fast. It was reasonably fast because it was really a buy and build, but on non-competing entities.

Mm-hmm.

And since all entities of the group saw the interest of becoming bigger For purchase, I mean, we entered into an overcapacity business, right? I mean, the solar panels is, it's overcapacity worldwide. So you see the price is going down very quickly. So the purchasing capacity, the purchasing power of the group was super attractive for everyone. So that was extremely easy to put all those guys together. I mean, they were sizable businesses, but they all said, you know, We are not sizable enough to survive to this worldwide overcapacity. So we need to grow, grow fast. In 18 months, the prices were divided by 3. So you better sell fast.

Yeah, you better sell fast. If you only had 1,000 days today to go build a company for a premium X, what would you standardize that first 100 days? What are you gonna focus on to make this the best outcome possible?

I think I had that discussion no later than today with, with, with someone who has become CEO and, and asked my, my opinion. I said, first, take your 100 days to, to get, you know, a grip on the, on the figures. And then when you're building your strategy, You know, when there is a tsunami, you have 2 things to do. Either you take your surfboard and you surf the tsunami, or you're playing the big boy and you try to hit it in front. And you know what? Hitting it in front, it never works, right? You die.

That's a great analogy.

And I said, you know what? Look at the megatrends. Look at the megatrends within your business and adapt your business. And That's an example for beer. We grew it. You told it, we doubled the size. We had plenty of failures. Obviously, when you run a business, there are things that works well and others that do not. But one stuff that worked well was rider gear. Rider gear was a $2-3 million business when I entered and $40 million 3 years and a half afterwards.

Why?

Because the megatrends were in Europe. Electric driving, electric mobility. That was safety. The EU who doesn't stop putting regulations in all sense in order to protect everyone from whatever they do. So that was obvious. It's looking at a few megatrends and then you select what you do and you focus on really being excellent on this and stop what you are not good at or not brilliant at so that you free up capital in order to be able to invest in businesses where you will take your surfboard because you know that whatever you do, you will always have a regulation that will come up and that will help you. Can be an additional protection system that they want to put in. I don't know. In some countries, they're obliged to to ride with gloves, with stuff, but it's not the case everywhere. It was not the case everywhere in Europe. And the only thing that happened is adding those regulations everywhere. And for us, it was additional markets and we were ready because we had the goods, right? So I take that example, but it's true for any business. Really think about, okay, where will we be helped from really the long-term perspective? Focus and be excellent on that. Stop what you're not excellent at or where you see it's gonna be tough because the market is going down, declining like hell. You sell it, you free up capital, and you invest where you're supposed to be good at, and you invest to be better at what goes in the right direction.

I agree. So how do you decide what to stop doing? What customers, products, markets, initiatives, how do you prevent these things from Just adding complexity instead of profitability.

First, the trends. I mean, if the past history, historical figures, if you see that it goes down like this and in the end you see the more difficult it is, the more time people will focus on that. So basically the more expensive it becomes as well. The management, if you have a division that doesn't go well, everyone is trying to save to save that division. So the full attention is put on that. Mm-hmm. In the end, the people are not working on something where we could easily grab money, where we can easily create value.

Mm-hmm.

And you see it, you see the trends, you see people are working, spending way too much time for something which is not value creative. And Increasingly more time. When I became CEO of one of the companies, the first thing I did was putting one of the subsidiary bankrupt. And the previous CEO told, we're really, really struggling with that market. We are not succeeding. And my predecessor was already succeeding. And then, you know, if it's been 2 generations of CEO not able to fix the business, I don't see why I would be able. So the first thing I did was liquidate that company. And again, it didn't bring a cent, but the management attention was refocused on what created value suddenly, and that helped to grow the rest of the business. And that was just fantastic. So for me, looking backwards, see whether, you know, we put the right level of attention and then same stuff, looking at the potential, you know, of some businesses. By looking at a market, how to deliver a market the way we used to deliver it and just comparing it to competition and to see, okay, how are they working? Does it work better? Does it work less well? What are our key differentiators? How can we make sure our differentiators are valuable for the client? Because the number of companies where I worked who said, well, that's our key differentiator. And I said, okay, what's the value for the client? Don't know. I said, so it's not a differentiator.

It's not a differentiator. They just like it. They find it interesting. You're different.

That's true, but it has no value in that differentiation. So why do we do, do you do it? You know, and that's the type of things where I try to have a view because that's not easy. I mean, you also make mistakes and, and that's normal.

Looking back, what is, is there one integration decision that you've made that if you had to do it over again, you probably wouldn't do it?

Stuff, when I, when I look back, I thought, my God, why did I do that?

What was I thinking?

We were actually competing with, with, with another, another player, a great company as well. And we were both in buy and build mode. So it was really, most of the time it was the first one on a target, right? It was really a race, a rat race. And they got one of the companies I really wanted to have. And we were on it at the same time because we were, it was, it was an auction. And at some point I said, stop. That's in my eyes, that was too much. But still my ego was touched. And then I was too fast on the second, on the next one. Because I absolutely wanted to have it because the other, and I would say that's my key learning. You'd better not make a bad deal than miss a good one.

Boy, there's words of wisdom there. I, the most money I've ever made is from the deals I didn't do because I would've lost so much. And it's hard. I mean, so I try, to keep myself somehow separated enough so I can not get emotionally involved. Because when I get emotionally involved, particularly if you're the person in charge, uh, you, you, it's hard, uh, and you can lose sight of what the goal is because we're competitive and we want to win. Uh, okay. So you've accomplished all these great things. What's coming next for you, Christophe? Where, where are you taking all this?

It's a good question. I like what I'm doing for the moment. It's the first time honestly that I'm working at executive level on a listed company. So I mean, there is learning everywhere. So what I would like to really do is, you know, Lead another group, another group, wherever it is, by the way, I'm quite mobile. Uh, and it's make sure that we can grow it again, but I would say on a more, on a less shaky way. I had mistakes as well, quite a lot, by the way. And by the way, I think that only the people who do nothing do not make mistakes. Just growing a business, turning one around. I'm looking for companies for myself as well, smaller size, and then I'm hesitating, shall I do it or not? Might be too small because I also think that I run company from $100 million to half a billion of a billion. That's the size where I used to work. I'm wondering, you know, to work for smaller and smaller groups, it's not the same business because you hardly have management. You really have to do this stuff by yourself. And I'm attracted by that, but I'm not sure it's the same skills. So I'm still careful. So for the moment, I'm discovering the listed company executive mode. That's very interesting. And then we will see what I can bring to the market.

Well, you sound like you got a lot of exciting times ahead of you, but I have no doubt someone with your background and experience and acumen is going to do great at anything you touch. So this is wonderful having you today on the show. I can't thank you enough for taking some time out and sharing your wisdom and your wins and losses.

Thank you, Bill.

You bet.

Bye.

Bye-bye now.