When Volaris acquires a business, we feel strongly that its leaders and employees are best positioned to continue operating autonomously, as they are used to doing. However, in some cases, businesses joining us make an informed decision to merge into an existing business within our group.
Several businesses that have sold to Volaris have come to the conclusion that a tuck-in acquisition is the best path for them—where a company is strategically merged into a complementary business within the same vertical market. Companies may consider being part of a tuck-in if they already have a great product that they can see aligning well with a larger company. They are also typically ready to give their team new experiences and take their skills to the next level.
The advantages of tuck-ins are that they can boost income-generating and growth opportunities for both parties, who may have previously acted as competitors in the same market. By joining forces, competitors can benefit from sharing information and business processes with each other, ultimately adding value for customers. This type of deal can be low-risk for both parties, since the two companies are often already aware of each other’s capabilities. Both can expand their reach and increase their credibility in the markets they serve.
By now, Volaris has completed dozens of tuck-in acquisitions. Our deep expertise in structuring acquisitions and integrating employees has led to several tuck-in acquisitions for companies who decided this type of arrangement would work for them. Below, we profile three success stories.
A renewed focus on product: Occam and Kinetic
When David Wilkes founded student accommodation software provider Occam Systems in 1998, he named the company after English philosopher William of Ockham, who is known for originating the Occam’s razor principle—a phrase that states the simplest solution is often the best one. While Wilkes originally intended this principle to reflect in the company’s software design, it turns out the theme continued in his path to joining Volaris.
By 2018, Wilkes had considerable time to reflect on the benefits of selling his company to Kinetic Solutions, Occam's main competitor. Both companies were founded in 1998 and had successfully operated for close to 20 years. Kinetic was the bigger of the two, and as both companies matured, they started to encroach more on each others’ customers. Kinetic initially began with event management software but eventually moved into the student accommodation space, while Occam had also started moving into Kinetic’s turf by building software to manage conferences.
If you don't have enough market share, then at some point you do stop taking risks, and you almost go back into your shell and just do what you're good at.
–David Wilkes, founder and former Managing Director of Occam Systems, now the Chief Products Officer of Kinetic Solutions, on why the company agreed to a tuck-in acquisition
After years of competition, Kinetic had won the bigger share of the market. Wilkes estimates that by the time of acquisition, Kinetic had signed up twice the number of customers that Occam had in the student accommodation space, and also owned most of the market for conference software. Wilkes noted the market was saturated and that Occam would be met with challenges taking the market forward in the UK. Thinking back to the Occam’s razor principle which he had printed on their business cards, he concluded that if he couldn’t beat the competition, the simplest solution might be to join them.
In the three years since joining Volaris as a tuck-in acquisition of Kinetic, Wilkes has been able to devote his focus to product development. The merged company has a marketing team, which Occam didn't have before. Joining Kinetic has also meant greater access to sales and HR capacity. Wilkes has also been able to provide a career trajectory for longstanding, high-performing employees who wouldn't have had the same opportunities at Occam alone. As a result, he was able to hang on to employees who might have moved on to bigger companies otherwise. Retaining customers was also easier because the merged company was able to bring their customer communities together and gain market insight, instead of “winning” against a competitor. Occam had developed a strong reputation for customer service and was able to share best practices.
I used to spend Fridays doing accounts and chasing bank statements, and once a month looking at my balance sheet and cash flow forecasts. Now, all the central administration of finance has been handled.
–David Wilkes, founder and former Managing Director of Occam Systems, now the Chief Products Officer of Kinetic Solutions, on how the tuck-in enabled a focus on product
In their new corporate home, the newly combined team at Kinetic was able to launch a new product called Student Life, which universities use to manage student well-being and maximize student retention. Meanwhile, Wilkes has realized he is well-suited to strategy and has relished the chance to allocate more time to product initiatives.
Putting customers first: FIVE x 5 and Whiskey Systems
Caroline Calhoun’s introduction to Colorado-based FIVE x 5 Solutions came in 2016 when she decided to join the craft beverage industry software provider as a support representative. Gradually, she learned the company inside and out, taking on several leadership roles, including as operations manager, product manager, and now general manager of FIVE x 5. In her five years at the company, she has seen the most significant improvements come after the company began to view its competitor as a potential partner.
Since its inception, Whiskey Systems has been FIVE x 5’s primary competitor. Whiskey Systems was a fellow provider of distillery management software which positioned itself as a lower-cost alternative. Both companies’ founders were proud of their distinct company cultures and promoted a strong sense of competition with each other, fueled further by customers who switched between their products. While each company was determined to beat its competition, neither of them were losing customers significantly to the other.
It was the primary competitor in a market that FIVE x 5 already understood, with a team that was available and excited to integrate another business in the same market.
–Caroline Calhoun, General Manager of FIVE x 5 Solutions, on why Whiskey Systems saw the benefits of a tuck-in
When Whiskey Systems assessed the opportunity to become part of FIVE x 5, the company sensed their partnership would be a good fit. Both were already similar customers with the same fundamental software feature set. Both companies had a deep understanding of the craft distillery market. The companies saw the potential to put customers’ best interests in mind by joining together, which led to Whiskey Systems joining FIVE x 5 as a tuck-in acquisition in 2020.
Since the deal, Whiskey Systems has retained 100% of its staff and found efficiencies in process implementation. Calhoun says evaluating the newly expanded team’s values helped them clarify how they would interact with customers. The company has not only retained all its customers post-acquisition, but gained close to 50% in new customer growth. To give customers even better service, the larger company has built a new consulting practice which wasn't in place before the acquisition.
The biggest win to everyone was from a Whiskey Systems customer who had also used FIVE x 5, telling us: ‘I almost forgot you guys are one team now. This is so rad, you’re still the people that I like, but I’m just using a different product to bridge the gap between.’ Being able to maintain the reputation of both companies was pretty cool.
–Caroline Calhoun, General Manager of FIVE x 5 Solutions
From survival mode to thriving: Rental Result and Wynne Systems
When UK-based Rental Result was presented with the opportunity to be acquired in 2015, the company was in a tough financial position. The rental software provider had invested heavily into oil services, but suffered when the price of oil dipped below US$50 a barrel because their customer base was not adequately diversified.
One option for Rental Result was to pursue a buyer. Fortune turned out to be in their favor when Volaris was able to give the company a home. The company was tucked-in to U.S.-based Wynne Systems, a construction equipment rental software provider with synergies in the same vertical market. Since the U.S. market was much larger than the UK market, this presented room for growth.
The team at Wynne recognized that Rental Result’s staff were especially strong in customer care and professional services, which are important for a healthy revenue stream. With six years behind them since the tuck-in acquisition, several employees from Rental Result have taken new career opportunities and leadership roles. The combined company also found synergies in the product development side. In addition, Rental Result’s product helped broaden the customer base for Wynne, and Wynne was able to help minimize Rental Result’s exposure to the oil market and add more customers in the medical sector.
Today, Rental Result’s product is still sold by Volaris Group, and their team has been able to thrive after a successful tuck-in experience. Adding their complementary strengths to Wynne Systems has helped build one of the strongest, largest units within Volaris Group.
Rental Result’s strengths and leadership in customer care and professional services have helped our combined company become very profitable.
–John Bureau, Group Leader, Volaris Group