We recently had the opportunity to host a panel of CREG company leaders and hear first-hand about their acquisition experiences and what life is like with Constellation, post-acquisition.
The panel was moderated by SVP of Corum Group David Levine and included Denise Lynch, President of Enspire for Enterprise; Stephen Ryczek, President of Mortgage Builder; and Robert Reardon, General Manager of Offrs and SmartZip.
From the integration process to resources available during and post-acquisition to opportunities presented for organic and strategic growth, the Constellation acquisition experience is tangibly different than those of typical private equity firms.
Below are major differentiators for Constellation discussed on the webinar, along with a couple follow-up questions we didn’t get to answer on the call.
Opportunities for growth.
Constellation Real Estate Group companies have considerable access to opportunities for growth. Whether internal, organic or through M&A, our post-acquisition pillars are priming and identifying opportunities for increased growth and profit margins.
Enspire for Enterprise, acquired in early 2020, has already begun white-labeling their front office software and selling into a different vertical.
“Constellation wants its businesses to collaborate to grow and introduce general managers of complementary businesses to start the collaborative process,” Denise shared. “We have found opportunities cross-selling products to each other’s customers, white labeling each other’s products or collaborating on product adaptation or innovation – we are early on with CSI and have well over a dozen cross business projects going on today.”
We encourage collaboration among brands within the larger organization, identifying opportunities to cross-sell to sister business units.
Stephen adds, “The ability to share technology and private label products improves market perceptions by allowing us to look and feel like an enterprise provider, versus having just a few products. It makes a huge difference with the markets perception of what you can deliver on with Constellation behind you.”
Resources available through Constellation
Constellation Real Estate Group is characteristically positioned to provide scale, integration and lower costs to both our portfolio of brands and their customers through our expansive network of resources across the larger CSI organization. While our business managers all have access to Constellation’s pool of resources, their needs and experiences vary.
Access to capital
“The biggest change post-acquisition were the resources available. We were able to leverage the experience of other companies within Constellation,” Robert shared. “Coming from a bootstrap company where we were used to resting on our laurels to having resources, guidance when needed and human capital to help solve business challenges. We also have access to financial capital when opportunities to acquire a product for less than you could otherwise build it.”
Centralized support services
As an operating group, we offer an ongoing network of support services include HR, Legal, Financial oversight and support, IT, product development and M&A support.
“Immediately following our acquisition, there were a ton of support services available,” said Denise. “From managing our onboarding and integration project to transitions in billing and accounting to IT support, Constellation made the integration process well understood and supported.”
We encourage our brands to leverage the Constellation network which often helps them solve for business problems – sometimes they don’t even know they’re facing.
Stephen notes, “We talk quite frequently about market trends and best practices to support running our businesses in the most efficient way. Through these talks, we were able to better understand our costs and profitability. We established a new rate card that considered all of the dynamics tied to P&L, allowing us to become competitive and get increase profits on the services we were providing.”
Measuring success across 750+ companies.
While success is measured though P&Ls and standardized KPIs, we also measure success through client satisfaction. As long-term investors, a company’s valuation depends both on P&L and client base. Client satisfaction often influences P&L and is a strong measure of success, regardless of vertical or product.
“CSI has hundreds of P&L’s for standalone businesses and uses a standard set of financial and operating metrics to help managers compare performance and to focus in on potential areas of improvement,” Robert noted on the call.
The balance of autonomy, accountability, and collaboration with Constellation.
Constellation company leaders own the vision and drive the strategy and execution of their businesses, while measuring against established KPIs, controls and oversight.While we provide strategic guidance and financial security, leverage operations and best practices, we leave the day-to-day to each general manager, trusting that they know the ins and outs of their business best—empowering them to remain in control.
Denise described accountability within Constellation as more of a collaborative partnership than a hierarchy. With the ability to leverage resources and best practices across the company, business challenges are often met with solutions from other companies who have faced similar problems.
1. Does Constellation have a standard purchase formula?
We prepare a discounted cash flow analysis, forecasting post-tax cash flows of the business. This allows us to calculate a purchase price that will achieve our Internal Rate of Return (IRR) hurdle rates. If you want to discuss further, please let us know and we’d be happy to set up time to discuss.
2. What are the differences between being acquired by Constellation vs. other conglomerates/PE?
Constellation has a buy-and-hold investment strategy. Where most investment and private equity firms acquire companies and consolidate a portfolio sell, we acquire companies outright with the intent of owning them forever.
Another major difference is in how our companies are managed post-acquisition. As mentioned earlier, our companies own P&L and drive the strategy and execution, allowing them to stand up and run the day-to-day of their businesses.
With private equity firms, because value lies in shorter-term returns, they’re typically more involved in setting direction and the day-to-day operations of their businesses.
If you’d like to learn more about Constellation or any of the above, please don’t hesitate to reach out. We are always interested in connecting.
Hope you are all staying well and we look forward to connecting soon.
President and Managing Partner
Constellation Real Estate Group