Watch now: What you need to know about growth by acquisition

Bianca Granara comes from an investment background: she spent six years at VC firm Hamilton Ventures in London before joining a restructuring team at a FinTech in Israel.

In early 2018, she joined Salary Finance as Finance Director, looking to get some experience in a more operational role, working in-house. Back then, the team was still small. ‘We were about 35 people just in the UK at that time,’ she says.

Salary Finance offers companies financial products and services (such as loans and pay advances) that link with employee salaries to give them more control of their finances.

In March 2020, Salary Finance acquired Neyber and together, they became the UK’s largest employee financial wellbeing platform. In the same year, Bianca became CFO.

The Neyber acquisition brought on huge growth. They are now able to reach 500 client partners and 3 million employees, enabling them to expand their product set and their team. Their UK team grew to 180, plus 70 in India, and they’ve just launched a US business.

In this interview with Bianca, we discussed the ins and outs of acquiring Neyber, how it fitted their strategy for growth, and Bianca’s key advice for finance teams at companies that want to acquire other businesses.

Asking the big questions before acquiring

Salary Finance hadn’t strategically set out to acquire Neyber. The opportunity came around because Neyber wouldn’t be able to close its next funding round before running out of cash.

But before Salary Finance could assess if an acquisition was a good idea, they needed to understand what Neyber’s client base was, and how similar their product set was to Salary Finance’s.

And since they were often up against each other in competitive pitches, Salary Finance was already quite familiar with Neyber. As Bianca explains, ‘It was really about just understanding how they were set up internally and how to structure the transaction.’

Connecting the two sides made a lot of sense from a strategic point of view. But Salary Finance had to ask themselves three questions:

1. How do we structure the acquisition?
2. How do we fund the transaction?
3. How do we integrate the two businesses?

There are always considerations around trying to grow a business on your own versus acquiring.

In this case, it was easy for Salary Finance to figure out how each company’s different products and services fit together.

This, coupled with the benefits and number of customers this acquisition would bring, would empower Salary Finance to scale and thrive as a stand-alone company.

Considering costs in the long run

When thinking about whether you can afford an acquisition, you need to be aware that there’s more to it than the transaction cost. Modelling an integration plan and seeing how much it will cost in the long run is a crucial step. And on top of that, what the incremental revenue will be once the integration is done.

When Salary Finance contemplated acquiring Neyber, it was never about whether they could afford the actual one-off cost of the acquisition.

They designed and built their plan and looked to the future, asking two pertinent questions, which Bianca shared with us:

‘How much is it going to cost in the long run? And does it make sense in the long run?’

For them, finding the answers to these questions stood above any other consideration on cost. And it wasn’t easy work. ‘That’s where we spent all our time,’ Bianca adds.

They needed to see what they were in for before moving on to the next stage.

Learning from integration challenges

Connecting two businesses has its hiccups, no matter how small. A successful integration will depend on how much you know about the business beforehand.

Salary Finance prioritised three integration points in this particular case:

1. Securing supplier relationships
2. Restructuring the team
3. Budgeting for unforeseen expenses

First, they looked into the relationship between Neyber and their suppliers. They found that some critical suppliers had stopped providing their services to Neyber in the run-up to the acquisition.

Acquiring another company doesn’t mean you’ll have to take on their liabilities. But as Bianca explains, ‘you probably want to factor in the cost of settling those bills.’ Especially if you need those suppliers to get the business back up and running.

After this, it was important to analyse Neyber’s team and how they would fit with theirs – already a difficult task without the added misfortune of a global pandemic.

Observing whether there are duplicate roles, and running the entire restructuring process is costly in itself, Bianca explains. ‘You just spend a lot of time and effort on it.’

She says that, at least in the beginning, you might end up with a larger company than you need, while you decide what’s best.

‘You have to make sure you are giving people a fair chance to represent themselves.’ Especially employees from the acquired company.

Finally, Salary Finance had to budget for a list of unforeseen costs, such as legal expenses and, notably, tech integration costs. While Salary Finance built all their tech in-house, Neyber used external suppliers.

This left Salary Finance to bring everything in-house, which involved a lot of planning.

‘We tried to model some of [the tech integration costs] out upfront, which you’re never going to get right. But you need to try and size it up somehow.’

Reaching more people, faster

Bianca sums up the role of the acquisition in Salary Finance’s growth as ‘just reaching that point of scale faster.’

When one of your KPIs is reach, acquiring a company with a similar customer base and product set will move you forward much faster.

For Salary Finance, this meant their core business would be profitable at the end of the year, which would’ve been further down the road without the Neyber acquisition.

‘It would have taken us probably another two years to get to that same level of reach.’

Since they were so similar, Salary Finance could apply the knowledge they had on what worked well with their clients, such as specific marketing techniques, to their newly expanded audience.

This was a massive milestone for Salary Finance and their investors. Bianca believes that ‘having that additional scale definitely put us on the radar for a series of investors that might not have considered us before.’

The speed to scale that came with the acquisition was a major driver for them, and a great enough reason to consider any acquisition.

Rethinking business positioning

Salary Finance learned that cross-selling their products into the new client base takes longer than you’d think – keep this in mind before assuming anything.

The similarity in products and clients between Salary Finance and Neyber brought on a lot of incorrect assumptions about how they would work together.

If you’re only looking at the numbers, Bianca explained, it’s easy to model out an acquisition. But the numbers won’t give you the full picture.

Salary Finance strategised based on what they observed across their client base, and it only made sense that their new clients would have the same appetite for similar products.

But the reality was more complex, because they needed to ask two key questions:

• How was Neyber positioned to clients?
• What kind of relationship did they have with clients?

And you can’t get the answers to either one just by looking at the numbers.

You get them from talking to clients directly, and understanding what they need. By looking closely and finding what’s not always in clear view.

Only then will you truly get a sense of how quickly you’ll get that boost in sales which, in this case, was what inspired the acquisition in the first place.

When we asked Bianca what was the most important advice she could give finance teams and businesses at this stage, she said:

‘Do as much due diligence as you can and really think about that integration afterwards.’

Prepare for lift-off

Don’t just skim the surface: you’ll end up making assumptions and overlooking details that will cost you more in the long run. And speaking of this, ask yourself what an acquisition will mean to you in the future, and how you can make the most of it to grow.

Investors will appreciate deeper insights, and you’ll be more confident in the decision to acquire – and that it will be absolutely worth it.

‘I think we did the best we could with the knowledge we had. It’s always about that.’