Revolutions Per Minute: Inside Revolution Capital’s Aggressive M&A Strategy

In an exclusive Q&A with Commercial Factor, Loren Shifrin, CEO of Revolution Capital, gives us an inside look at the company’s 2021 acquisitions of Growth Capital, Atlantic Gateway and Grand Financial New York and how it expects to keep growing in 2022 and beyond.

In 2021, Revolution Capital, a provider of factoring and cash flow financing in Canada and the United States, kept itself very busy, especially on the acquisition front. Over the course of the year, it bought factoring firms Growth Capital, Atlantic Gateway and Grand Financial New York. The acquisitions were supplemented by further growth by way of the opening of a new Midwest office, which is being led by Davinder Singh, formerly of Compass Funding Solutions. After so much activity, Loren Shifrin, CEO of Revolution Capital, spoke with Commercial Factor about the company’s approach to acquisitions, the process of closing deals in 2021 and Revolution Capital’s goals for the future.

Revolution Capital made multiple acquisitions in 2021. What was behind your M&A strategy for the year?

Loren Shifrin: In 2021, we acquired Atlantic Gateway, Grand Financial NY and Growth Capital, marking our fourth, fifth and sixth acquisitions since 2018. Our overall growth strategy concentrates on increasing market share in existing industries (e.g., transportation and staffing) and expanding our physical presence in untapped local markets (e.g., Texas, Kansas, New York).

The acquisition of Grand Financial NY gave us a solid base to build upon in the eastern U.S. market. Their existing management team had significant experience in servicing clients in both the transportation and staffing industries on the East Coast. Revolution’s access to capital and leading platform strengthened the Grand team’s ability to attract clients in our target markets.

As for the acquisition of Growth Capital, market consolidation was the key motivating factor. Revolution Capital has established itself as the leading factoring choice for transportation companies in Canada and Growth’s portfolio was a perfect fit for us. The fact that the company’s principal, Nelko Mohlyanov, is a well-respected and highly skilled salesman was a bonus that continues to yield returns.

What is your M&A strategy going forward? Are you looking to expand more?

Shifrin: We have only just begun our expansion.

We are about to announce our expansion into the southern states with the opening of our new office in Fort Worth, TX. We have partnered with Amelia Dipprey and Luke Hodges — both of whom are exceptionally talented and experienced operators — to lead the growth in that market.

Acquisitions will continue to play an integral part of our overall growth strategy. We are looking to invest in teams with proven track records and untapped potential. With every strategic acquisition, we unlock access to local markets, established sales channels and the intangible value of human capital.

We are actively engaged in negotiations with multiple factors across the U.S. and Canada. I anticipate making a few more announcements around the end of Q1/22.

Beginning with the acquisition of Atlantic Gateway last January, how did that opportunity come about?

Shifrin: The Canadian factoring market is quite small, especially when compared in size to the U.S. market. Everyone just seems to know everyone else. We have known Serge [Chestak], Atlantic’s principal, for over a decade and have had multiple high-level discussions about acquiring his portfolio over the years. Once Serge saw how smoothly we were able to merge the Grand and Royal books/operations with our own in 2020, and after receiving glowing feedback about our handling of the whole process from the companies’ previous owners, he approached us with serious intentions to sell.

What was the process of negotiating and closing the deal like?

Shifrin: Most of the heavy lifting was done by Michael Rakhnayev, our director of sales and the former CFO at Grand Financial. He and Serge have had a close working relationship for many years, so Serge was able to witness how we approached our acquisition of Grand.

We made the transition as painless as possible for the staff and clients, so there wasn’t actually much to negotiate with Serge. We agreed on a price, conducted our due diligence on the portfolio and closed the transaction in less than two months.

In November, you acquired Growth Capital and Grand Financial New York in the span of a few days. What was it like trying to close two acquisitions back-to-back?

Shifrin: Our operations team put a lot of time and energy into working out the logistics of doing two transactions so close together. Our compliance team and credit team weren’t given much time to relax between closing Grand NY and beginning due diligence on Growth. Our collection and data teams also went into overdrive for a few weeks inputting and reconciling. We have a very strong team. It took dozens of people working together to pull this off and we are very proud of them all. Both the Grand NY team and the Atlantic teams, who are now on team Rev, also pulled their weight and helped ensure things went smoothly.

How did each of those opportunities come about and what was the negotiating/closing process like?

Shifrin: The Grand NY portfolio was actually a carve-out of the Grand Financial acquisition we did in 2020. One of the principals in Grand NY wasn’t ready to sell at the time and wanted to keep the U.S. portfolio separate. We allowed the carve-out with the understanding that if we kept our word on everything, we had promised the original Grand team that Grand NY would sell when ready at a prearranged premium multiple. One year later, they were ready to come on board.

Growth Capital wasn’t as easy. The owner approached us through one of our VPs of business development to help finance his growth. We respectfully declined, as financing other factors doesn’t align with our business model.

Eventually, one of the principals reinitiated the conversation, but this time he wanted us to buy out his partner. The company had huge growth potential but couldn’t scale due to lack of access to capital. Once we were able to understand Nelko’s primary motivation and what he wanted for himself and his company, we were able to structure a deal that was mutually beneficial.

Whenever we negotiate a deal of this kind, it’s important to us that it makes sense and feels fair to all parties. This is especially true if we want to rely on the other party for various contributions after we close. As soon as we were able to align our interests with Growth’s, the deal came together quickly and easily.

How do you expect these two acquisitions to enhance Revolution Capital’s approach to the marketplace?

Shifrin: Both acquisitions have already begun to bear fruit.

The Grand NY acquisition established our presence in the American east and acted as a catalyst for future U.S. acquisitions. Our New York office is growing at a steady pace and we will continue to invest in that market and our New York employees.

The same is true of the Growth acquisition. With it our transportation market share increased, helping us to solidify our position as a market leader, and the subsequent deal-flow and referrals have been steady.

With every successful acquisition we become more experienced and skilled at bringing other companies under our umbrella. We want to be seen as a prominent player in the factoring M&A space. These two acquisitions bring us one step closer to becoming the first name that comes to mind when a factor thinks about selling.

How did you incorporate the teams from each acquisition?

Shifrin: We rely very heavily on our department heads. All of the credit goes to them. They welcome all the new team members with open arms, introduce them to their new colleagues and actively work on acclimating them to our culture.

Communication and transparency are key. We ensure that the incoming team members feel secure in their new positions and within the company. We promote open communication with their managers and encourage asking questions. We commit to the new team members so that they feel secure in committing to us.

Of course, there are a few bumps during these transitions, but we always come through them stronger.

How have the acquisitions enhanced Revolution Capital’s approach to the marketplace?

Shifrin: Our approach hasn’t changed — we have built a factoring platform that we are proud of. Our focus is and will always be on ensuring that we are providing our clients with industry-leading personalized service, competitive rates and as much value-add as we possibly can.

We pursue acquisitions because they enhance our reach and allow us to provide additional working capital to a greater number of businesses in more industries and regions.

In addition to acquisitions, you also opened a new Midwest office in November. Why was this a market you wanted to enter?

Shifrin: We built our business on servicing the transportation industry. The Midwest, given its many transportation hubs, was a logical next step for us. If we are going to expand our reach in the transportation industry, we want our clients to have local representation. We want to attract talent that is familiar with the area and regional sectors of the industry. It also helps that we found a superstar business developer that was eager to open his own office.

Why was Davinder Singh the right person to run the new office?

Shifrin: Davinder is one of those people that inspires confidence and makes you feel comfortable the moment you meet him. The first time we spoke, I told him we should do business together. We started negotiating terms right then and there. Of course, we did our research, which confirmed exactly what we suspected. Davinder is highly respected, hardworking and universally liked by everyone he deals with. He has an excellent network and well-rounded knowledge of the industry, and we have no doubt that he is the right person to lead the new office.

What are your goals and expectations for the office in its first year?

Shifrin: The first year is all about building a solid base to expand upon as we grow. We are forecasting that we will be able to build a portfolio and operations base large enough to contend with some of the more established players in the Midwest market.

What are your goals and expectations for the company as a whole in 2022?

Shifrin: 2022 is going to be a busy year for our company. We don’t want to give away any spoilers, but we have hit the ground running. We will open a few more offices, close a few more acquisitions, expand into new markets, diversify revenue streams, reinvest in our communities and help thousands of businesses with their cash flow.