There are many perils to buying a
lease book or customer portfolio but there are rewards too, says
Jeremy Hall
Selling Wyse Leasing (North) in 2006, I was bound by a
(fair and reasonable)restrictive covenant clause relating to the IT
sector.
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Organic growth in a market I know well is one
thing, organic growth in a totally new sector is much more
challenging. The solution was simple – buy a leasing broker that
focuses on other markets, which I did, with the acquisition of
Power Leasing Limited, which had 500-plus end-user customers,
numerous suppliers relationships in the waste and scientific
fields. We had a base to work from while not upsetting Wyse
Leasing.
This acquisition provided us with immediate
business opportunities, a flow of income from agreements at the end
of term and a history to entice new contacts. OK, let’s not forget,
the company did not come cheap, it had to be financed and we then
had the ongoing amortisation of goodwill.
Now compare this to having no customers but a
pot of cash to play with. The cash would be used to finance the
acquisition of a sales team who, over time, would develop those
supplier contacts and build a 500-plus customer base anyway. But
what is the quickest and most cost effective strategy to follow? In
this case and with most other personal acquisitions, the buy and
build strategy works. The annuity stream from end-of-term income
pays for the company while the customer base generates new
income.
But what happens when you buy a customer base
and have to start repaying commission clawbacks? What about when
the finance company decided not to transfer the customers to you or
the time when a number of key suppliers had binding letters
transferring title at the end of term. For me, worst of all was
buying a portfolio and no end-user customers bought from us
again!
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By GlobalDataMost business leaders who buy companies or
customer portfolios will get caught some time, despite due
diligence. Often, the seller is not even at fault or has mentally
discounted the sale price to take into account something they have
“forgotten” to tell you about.
But, buying a lease book or customer portfolio
can be a rewarding exercise. And as for the seller, well they
always smile with a cheque in their hand.
