Enrolment
Can several company owners work together? What about egos/disputes?
Ultimately, we are selecting for good companies and good people. We need good companies to make this profitable for all. We need good people to deliver their part.
This is the number one question we've been asked. This probably is our number one risk, and why we're being intentional about partner selection.
Since operations remain independent the main potential disputes will likely be around whether to accept / not accept an offer - and timing. We'll solve via the group governance answered elsewhere.
What will my relationship with other partners be like?
Hopefully very collaborative and for mutual benefit. Both in terms of learning from each other, and support to each other. And financially in terms of cross-sell, joint bids etc.
In other projects like this, many owners have said this was an unexpected and significant benefit of being part of a group. And one of the reasons why each owner joins the HoldCo Board of Advisors to create some structure to relationship building.
One thing to note: Each company's P&L will remain separate to keep it simple in terms of HoldCo share distribution etc. We trust partners to be mature about rev-shares, referral fees (etc) where mutual commercial benefit.
How will this change the day-to-day?
Not much. And by design. We trust that you and your team are the best people to continue to build your company. So there is no sudden 'group' layer, forced integration, new systems etc. We simply put in place an incentive structure - ie: the option agreement that grants shares in HoldCo based on the contribution. Plus governance and support with the HoldCo Board of Advisors.
We think it's a good idea to discuss (and one reason for the Strategic Review at the outset) how each company operates, what each can learn from the other, and where there might be opportunities. This would inform any shared services offered, growth opportunities, where we can get group efficiencies etc.
One thing to note: Each company's P&L will remain separate to keep it simple in terms of Hold Co share distribution etc. We trust partners to be mature about rev-shares, referral fees (etc) where mutual commercial benefit.
We have existing option / investor agreements in place. How to handle this?
Let's talk it through. The vision is a 150M+ EV group. There are many ways to create this. And a large part of it is the group of people and if all feel can work together.
Our planning assumption is companies of a similar size/scale who make up the value-chain. That end-to-end is most important for the buy-side story. And there is some natural variation between companies (for example, strategy consultancies tend to be smaller than development partners).
How much more will my company be worth?
Good question. Check the financial model calculator at the bottom of the info pack page
Without meaning to sound like ChatGPT, we encourage partners to do their own internal modelling, seek out independent advice (should they wish) and all the other good caveats.
We have been conservative in our modelling to not get too carried away. We are assuming each company moves from something like a 3x EBITDA multiple to the group selling for 12-15x.
How long will it take? 12-24 months is too long/short
From a buy-side perspective, you want to acquire a quality asset, with stable management and governance, and opportunities to grow. That’s why we want to take the time to harmonise the group. The timescale really depends how quickly we can achieve this - and, of course the wider market conditions.
I would like to join, but not sure if too big/small. What to do?
Let’s talk it through. The vision is a 150M+ EV group. There are many ways to create this. And a large part of it is the group of people and if all feel can work together.
Our planning assumption is companies of a similar size/scale who make up the value-chain. That end-to-end is most important for the buy-side story. And there is some natural variation between companies (for example, strategy consultancies tend to be smaller than development partners).
What is an options agreement? How does it work?
An options agreement grants one party, in this case the HoldCo, the exclusive right - but not the obligation - to acquire another company.
Essentially, it gives both parties assurance that both are committed. And at the point of exit, it makes it simple to sell the HoldCo to the buy-side and execute the transaction.
Growth
What if one company wants to drop out? How will we handle this?
We have a break clause in the agreement. This is a standard clause in, for example, M&A deals. This fee covers the cost and impact of other partners if one chooses to drop out. We hope not to have to use this. If we do, the fee will be used to source a new partner and sit at the Hold Co level to drawn down for the benefit of the group.
What will my relationship with other partners be like?
Yes. We (Roglo) can simply cancel the options agreements we have in place. This isn't something we want to do or plan to do - but we have this clause in place to de-risk for all.
We can't foresee every scenario or reason why this might happen. But, in most cases we can think of - and you may have a more optimistic/pessimistic mindset - each company would be left better off having worked with others, learnt from others, probably built partnerships across the group (etc). Obviously we would manage the comms and end with a good story.
How does the HoldCo Governance work?
As a principle, we want to balance the desire to govern well and achieve a great outcome - without creating a very stale corporate governance layer. Practically, this means a balance of a governance structure. But also intentional space to build a common culture in how we govern the group together.
Functionally, the HoldCo will be managed by Rolgo with the Advisory Board. This enables free conversation about progress against outcomes, acquisition discussions etc.
We plan to do Quarterly Business Reviews - ideally in person (perhaps at each company's offices), and monthly calls, with a TBC comms channel (eg: Slack) for ad-hoc. However we understand each company will have it's governance rhythms, so will define these specifics and what works best at kick-off.
How do voting rights work? Do I have to give up or lose control?
Formally, the HoldCo will get ‘drag and tag rights’ as part of the option agreement. This is a standard clause in an options agreement to give exclusivity to a sale (and only to avoid a situation where a company, separately, tries to sell and impacting the group).
However, there is no benefit in initiating a transaction without preparation and conscious discussion and agreement etc. That’s why we setup the HoldCo Board of Advisors. To create a forum to discuss options and vote on such matters.
Naturally, one partner might be bigger or smaller financially than another. Or, for another reason, may want to justify more or less votes. We believe the simplest way is if each partner company gets an equal vote, with us - in effect acting on behalf of all - breaking any deadlocks.
What does the Operating Fee cover?
The Operating Fee covers an investment in building a valuable, sellable group. Specifically, the HoldCo governance, Growth / M&A Advisory, and support to each company - and the group.
Benchmarked against investing in Co-Founders plus Board/Growth/M&A Advisory (etc). we feel this is reasonable - and far less than the $50k+ / month we have charged in the past.
The exact specifics we can discuss. For example, we can join your current Board meetings or governance rituals as observers, or arrange a monthly 121. No doubt there will be hundreds of ad-hoc calls and WhatsApps.
Exit
How will we build buyer demand? And what happens if we don't get the right offer?
Like marketing or business development, building buyer demand is part art, part science. One thing we've learnt over the years is: the best businesses are bought, not sold.
That's why 80% of the work is building a great business, sweating the cross-group opportunities, strong external messages about the big vision and ambitions of the group. With the other 20% about continuing to build relationships, have informal conversations with target buyers etc. And we'll initiate a more structured roadshow with select buy-side if it makes sense.
On the second question. Formally, the option expires after 36 months. Let's see, but we don't expect to struggle to field offers for the vision outlined with the right partners.
What if I change my mind and don't want to sell? Could we change strategy and keep growing?
We want to set a clear vision, direction and timescale to sign-up (or not sign-up) to. To be successful, this has to be done very intentionally.
We are aiming for a buyout - far simpler for us to commit to, secure, and structure payouts - versus a minority exit.
With that said, there may be opportunity to do a minority exit, allowing certain shareholders to leave and cash-out whilst others remain. But take the above as the game-plan - which we aim to stick to.
What if my company performs better/worse than expected?
Every company will perform in some way, whether you join or don't join. The question is: will your company perform better as part of this group with all the support in place?
Yes, it could be that your company performs worse than expected and you might otherwise choose not to exit.
Ultimately, it's a risk/reward decision about the benefits of joining v not. We think the fairest way to benefit in the upside of group scale is for all to have the same incentive structure. A % of the exit based on their EBITDA contribution at the point of a transaction. And we trust the premium of being part of the group creates somewhat of a buffer.
