USWired’s Robin Hau on Finding Your Magic Number, Surviving an Acquisition

For Robin Hau, president and CEO of USWired, business owners should look at cultural fit more closely when considering an acquisition.

Hau in early 2022 announced that Quatrro Business Support Services (QBSS) was buying the MSP firm and making it one of its subsidiaries. He said multiple factors influenced his decision to pick Quattro over other suitors. That included a high-end valuation and equity opportunity, as well as QBSS’ track record buying and selling other MSPs. But partners mulling a deal should never overlook cultural alignment, Hau said. He added that USWired experienced growing pains around culture when it made an acquisition in years prior.

USWired’s Robin Hau

“Cultural fit encompasses a wide range of factors, such as leadership styles, communication styles, employee attitudes and organizational values,” Hau said in an interview with Channel Futures. “A misalignment in any of these areas can lead to conflicts, misunderstandings, and ultimately, a failed integration.”

Hau will share the story of the USWired acquisition and his M&A advice to partners in a session titled, “Finding Your Magic Number and Surviving the M&A Process,” at the Channel Partners Conference and Expo, May 1-4, at the Venetian in Las Vegas.. Rick Murphy, CEO and managing partner at Cogent Growth Partners, will join him on stage.

Hau answered several questions from Channel Futures about the content of their talk.

Channel Futures: You note in your session preview that “getting too preoccupied with top-line revenue growth could spell disaster vs. focusing on gross margin and net cash results.” Why?

Robin Hau: Focusing solely on top-line revenue growth can lead to disaster for a business because it may not necessarily translate into profitability. In fact, businesses can grow their revenue rapidly but still struggle to generate profits due to high costs and low gross margins. On the other hand, paying attention to gross margin and net cash results provides a more comprehensive picture of a company’s financial health. Gross margin is the percentage of revenue that remains after accounting for the cost of goods sold. A higher gross margin indicates that a company is able to generate more profit per dollar of revenue.

Similarly, net cash results take into account the company’s ability to generate cash from its operations after accounting for expenses. This is a critical metric, as cash flow is what ultimately keeps a business running and allows it to invest in future growth.

A buyer may be attracted to the target company’s high revenue growth, which may appear impressive on the surface. However, if the target company’s gross margin and net cash results are weak, it could be a red flag that the company is not generating sustainable profits or cash flow. This could put pressure on the acquiring company’s overall profitability and strain its liquidity position.

CF: Could you share an example of a business that has successfully undergone M&A?

RH: Last year, I successfully sold the company I founded, USWired, after receiving unsolicited interest from various firms. I responded to a few, resulting in several letters of intent, and ultimately chose Quatrro Business Support Services (QBSS) for several compelling reasons. QBSS met all my non-negotiables, including offering a multiple for my business that was on the highest end of the range of valuations, without requiring any earnout or other performance-based payouts. Additionally, they structured the deal as a stock sale, which has a more favorable tax treatment than …