Welcome to We Buy Web Companies, a division of WordwrightWeb. We are a full-service web design, web hosting, and digital marketing company based in beautiful Wilmington, North Carolina. To kick off our blog, we decided to write about our mergers and acquisitions journey by interviewing the president of WordwrightWeb, Michael Byrd.
- How did you discover that Mergers and Acquisitions could be an opportunity for your company and why do you keep pursuing it?
“We (Johannes and I) discovered it somewhat by accident when Kent Milholland, a former competitor, worked with us briefly several years ago. He had sold his company a few years prior to Wide Open Technologies (WOT), an in-town competitor to both of our companies. WOT got 40-ish relatively small clients from this sale, and 8-10 big clients. WOT realized that they didn’t want the small clients. WOT raised hosting pricing on these accounts to make it worth their while, but that caused many to leave or threaten to leave. Kent saw an opportunity to broker a sale of those clients to us. WOT was motivated and almost didn’t care about the price and the terms, which was good for us.
Johannes was still new with us and was working hard to get us out of the hole. We had a folder full of payables, many of which were on payment plans. We had a lot of debt. But I was excited about doing this deal and gaining about 35 customers, even though we had no money. The seller agreed to a low price and generous terms. I remember lowering my own pay to almost nothing, because I saw that the pain would be temporary, but the recurring revenue would be for as long as we kept these customers. The experience opened my eyes to the possibility of gaining customers by buying them directly, instead of fighting for them one at a time, in what I think of as “hand-to-hand combat.” I also noticed my own personal excitement about this deal, and how good Johannes and I were at crunching the numbers and sizing up the value of the deal.”
- Thinking back to the first deal with WOT, how were you approached and was it a no-brainer?
“It did seem like a no-brainer. The customers were Kent’s originally, and he was now working for us. So they would be comfortable. Kent knew the seller and had a friendly relationship. We could tell the seller was motivated because of their flexibility on the terms. We received almost everything we asked for which, in hindsight, was very skewed in our favor. And still, it served the seller’s interests also. He wanted to be rid of these clients. Instead of just running them off, he could get a little bit of money for them.”
- Looking back at the biggest acquisition yet, Eagle Web Designs. Was it any different than the smaller deals?
“Yes. It was almost the same size as our company, in terms of customers. It was substantial money. And because it was the first deal that we scraped up on our own, we opted for using an attorney. They did as well. It bogged the process down tremendously. Maybe it was a good precaution, but we’ve used an attorney twice and neither experience has been great, at least as far as that aspect is concerned.
The EWD deal was also different in that it was out of town, involved an office lease, and included an employee. These were new elements to incorporate, but have worked out well.”
- Is it difficult to talk to other business owners about buying their business or part of it?
“I don’t think it is difficult for me or for Johannes. I think we have a knack for mergers and acquisitions, and we work well together. There are often delicate moments in the beginning, when the seller finds out that their “baby” isn’t going to fetch the million dollars that they think it’s worth, at least not from us. But Johannes and I are both pretty straightforward in letting the seller know what we think it’s worth, while still trying to be polite and respectful.”
- Which deal was the hardest in terms of complexity and negotiating with the prior owner?
“The deal that fell through at the end of 2021 and the start of 2022 was the hardest and most complex. We had talked with that owner 2 years earlier, and he was offended by our offer. He was entertaining an offer from a local IT company. When that fell through, he came back in the late summer of 2021. His company was slightly larger than ours in its number of customers. It was a lot to go through, which Johannes and I did from August to December of 2021. We ended up offering him 30% less than our prior offer, but he was ready to take it. He had even announced it to his customers, and his employee was involved in our discussions. Two things killed the deal. No. 1, in hindsight, was our lawyer. That was my mistake. No. 2, after our lawyer “negotiated” with bluster instead of finesse, was that our terms were too much in our favor. His lawyer didn’t like that, and insisted on a personal note that included my wife. In hindsight, we could have done that, or gotten a bank loan and paid him most of the purchase price upfront. But it was too late at that point. He got spooked.”
- Without looking at the actual numbers, do you think that each deal was a success?
“Yes. I think it’s clearly the case, without looking at the numbers, but doing them in our heads. When we pay roughly 1 year’s worth of that company’s recurring revenue, and we keep that revenue for more than 1 year, we have made money. If we keep that revenue for 3 years or 5 years, we have clearly made money. And although we lose some customers, we typically offset that revenue by raising prices.”
- Do you think that your company grew on a level that is appropriate for its size due to M&A activity?
“We have most likely grown faster than we would have organically. We’ve been careful not to take on so much that we sink ourselves, but mergers and acquisitions activity has accelerated our growth.”
- What would you do differently going forward, if anything?
“I would have handled the most recent deal differently, the one that fell through. I might have wished for a different law firm on the EWD deal also, but we didn’t know. I still think it will be valuable to use a law firm going forward, for the bigger deals, but I’m still looking for the right one. We need a law firm that is nimble enough not to bog down the deal, but experienced enough not to kill it just by being clumsy.”
Alright folks, that’s all for now! We’ll be back soon with more on mergers and acquisitions!