This past month, I have learned that buying a business is a lot like buying an old house. You walk in and instantly fall in love. You see a few things that could use a touch up here and there, but can’t believe you found it and that it is going to be yours. Then you move in. You start to realize there are issues and imperfections. You realize this is going to require a lot of time, sweat, money and energy to get it up to your standard and make it into your dream home. You know the bones are there and it has a solid foundation, but you are not going to be able to kick your feet up and enjoy it for a while. You have a vision and once you do fix it up, it will be yours and you will be proud of it. You will have created it exactly how you believe it should be.
So that is what it is like to buy a business, but now let’s talk about buying a business in the middle of times like these…..
A month ago, my business CertifiKID acquired Macaroni Kid. This month, I think I have learned more about leadership and business than in my entire decade running CertifiKID. This has been so incredibly complex and challenging due to the fact we are in the middle of a health and economic crisis, plus a much-needed reckoning in terms of racial justice and equality in our communities. Despite it all, I am thrilled for this incredible opportunity. There are many amazing reasons why NOW is the time for us to make an acquisition, which I will get into, but I hope this post will give you some thoughts as to what you are up against when you take that leap of faith.
Let me start by explaining the business of Macaroni Kid and why I chose to acquire it in the middle of the pandemic. Macaroni Kid is a digital media powerhouse that delivers hyperlocal content on kids activities and family-friendly events, destinations, products and services to parents nationwide. The business has 500 publishers throughout the country who produce content for their local areas. There is also a national headquarters team that works with big brands like Target, Disney and Kraft on national advertising campaigns, utilizing the local publishers to run influencer-based, experiential marketing campaigns for these brands. Macaroni Kid is the perfect complement to CertifiKID, which is an ecommerce site offering kids activities and family experiences at a discount. Acquiring Macaroni Kid will allow us to expand our offering to millions of more families in a unique way through these 500 publishers. During this time when the local experience market is severely impacted by COVID-19, we saw an opportunity to connect parents with products and services that will help them get through this challenging time at home with their kids. Macaroni Kid will help us provide an unparalleled platform for brands to reach this highly sought-after parent demographic, and will be instrumental in allowing us to more rapidly scale our family-focused experience deals to communities nationwide once demand returns. I have always considered my business as a puzzle, and believe Macaroni Kid can be a key missing piece.
Many people may be nervous or think it is insane to make a bold move like this in the middle of a pandemic. It certainly is challenging and scary to acquire a company right now, essentially doubling our core team overnight and adding over 500 mom publishers that we need to serve and whose livelihoods depend on our leadership. Combine this undertaking with the demands of my own struggling business and the needs of our loyal employees whose livelihoods are also dependent on me and the success of CertifiKID.
Let me lay out to you WHY we did this:
- BIG & Unique Opportunities Are Out There Now – So many business owners are burnt out and fatigued right now, and they are looking for a fresh start. This opportunity probably would not have been available for us in a pre-COVID world, and if it was, it would have been much more risky financially.
- My Core Business Is Slow – CertifiKID has been slow during the pandemic, which also happened to coincide with our peak season. Most of our biggest clients such as trampoline places, amusement parks, and camps shut down or are not selling the volume they typically would. This slowness is going to last for a lot longer than we had hoped or anticipated. Acquiring Macaroni Kid has given my CertifiKID team much more work to jump on so I can keep them busy, and creates more opportunity in the near term than the current environment likely would present.
- Infusion of Excitement – My CertifiKID team and I were feeling down for so many reasons, but this acquisition has created a renewal of excitement and energy as we feel this combination provides us with key components that our business needs. We see so much potential and it gives us a bit more direction as we felt so lost with the pandemic’s impact on our business. I have been so busy these past several weeks that I haven’t even had time to watch the endless stream of depressing news or dwell on the challenges facing CertifiKID’s business.
- Perfect Time to Get Our Footing – This actually is a great time for us to really dive in and use the next couple of months to carefully evaluate the needs and strategy for the combination of the two businesses. If this was in normal times, we would be feeling the pressure to integrate operations as fast as possible to take advantage of the opportunity, but this is allowing us to be more methodical in our approach and pace ourselves.
- Allow Us to Get Deeper Into Areas of the Country Less Affected by COVID – CertifiKID has a bigger presence in a lot of the areas hit hardest by COVID (i.e., major population centers). Macaroni Kid has deep roots in small communities nationwide which will allow us to sell discounted family experiences in areas that are more open.
So now you see WHY we decided to take the leap, but let me also lay out the challenges we are facing (and really did not appreciate prior to the acquisition) and some thoughts on how we are tackling them:
- Typical Acquisition Issues – Anytime there is an acquisition, everyone is on egg shells and worried about where they stand personally. I learned it is best to not try to answer all of these questions on day one and allow some time to figure everything out. However, the sooner you can define roles, the more settled the business and team will be.
- Company Vibe Due to Pandemic – Unsurprisingly, like CertifiKID, this particular company has been feeling a bit down due to the fact that revenue from experiences, events and advertising is down. All the perks these publishers typically have are virtually non-existent. We learned quickly that our ability to offer them new opportunities through selling our deals could be the hope and excitement they needed to bring them out of their funk. We learned that the message of “nothing will change,” which I had read most experts recommend in the initial stages of acquisitions, isn’t appropriate in all cases. Both the publishers and employees actually needed a “change is coming” message to give them hope.
- Racial & Diversity Issues – Like so many others right now, these issues have been challenges for the business, and especially so during this past summer, given the variety of publishers with diverse backgrounds throughout the country (and Canada). Without hesitation, we faced this head on and started tackling it right away. We promptly put out a statement concerning our stance personally and as a company. We held a live talk with the entire community on diversity and inclusion efforts and issues. We engaged with the company’s consultant concerning their training program and scheduled calls with Macaroni Kid’s Black Caucus and Diversity Committee to understand their struggles and needs. There is so much work to be done now in developing and implementing new practices and policies to ensure positive change is made to make the company more diverse, inclusive and equitable.
- Timing of Investments – Under normal circumstances, we would have immediately started investing resources to fill the gaps and make improvements in the business, which would also help the employees see our vision. However, given the economic impacts and uncertainty of the pandemic, we have to be conservative and smart in this initial phase. I was upfront with the team about this because I know from the advice I received and literature that in the wake of an acquisition many employees think you are walking in with deep pockets to spend so managing expectations is key.
- Impact on Original Business and Employees – In my decade as CEO, I was involved non-stop every week in all facets of the business. This is the first time I have become consumed with something so significant outside of CertifiKID. I have learned it is important your team understands the direction of travel for the combined business, how it will impact them, what is the vision, and what is the timetable for execution of this vision. It is difficult because you won’t have all the answers right away. Also, it can be challenging for employees when they do not feel involved in the planning or have transparency into the acquisition and business decisions. Our approach has been to be honest about the reality that I have had to neglect them a bit during the transition, explain our thinking, hold more regular team meetings to address questions, and focus with them on the opportunities and vision. It’s a work in progress.
As you see, there are some amazing reasons why it may make sense to do a pandemic pivot and make an acquisition right now, but you have to be clear-eyed and ready for the challenges that will most certainly follow. I hope on the other side of the transition that the combination of CertifiKID and Macaroni Kid will make for a bigger and better offering on both sides than ever before and help make a positive and deeper impact on our communities in these trying times. That’s our goal and we will give it our all.
Time will tell if we were crazy like a fox or just crazy. What do you think?