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Summary
In this episode of the Inorganic Podcast, Christian and Erik delve into the complexities of take private transactions, using Smartsheet's recent acquisition as a case study. They discuss the economic challenges facing public companies, the lifecycle of a business transitioning from public to private, and the strategic considerations for boards contemplating such moves. The conversation highlights the importance of fairness opinions and the intricate dynamics of investor strategies in these transactions. In this conversation, Erik and Christian delve into the complexities of take-private transactions, focusing on the negotiation dynamics, the role of advisors, regulatory considerations, the impact on employees, and the financial structuring that influences investor returns. They use the Smartsheet deal as a case study to illustrate these concepts, providing insights into the motivations behind such transactions and the implications for all parties involved.
Takeaways
Public companies face unique challenges that may lead them to consider going private.The lifecycle of a business includes transitioning from public to private ownership.Smartsheet's acquisition is a significant case study in the current market.Initiating acquisition conversations requires careful preparation and strategy. The Smartsheet deal features a go-shop provision allowing for additional bids.Advisors play a crucial role in take-private transactions, including bankers and consultants.Regulatory dynamics can complicate interactions between buyers and sellers.Employees in public companies face different equity compensation structures when taken private.Investor returns are influenced by the capital structure and debt servicing costs.The liquidity of equity compensation differs significantly between public and private companies.Chapters
00:00 Introduction
04:04 Understanding Take Private Transactions
08:28 Analyzing the Smartsheet Case Study
15:53 Transaction Dynamics and Investor Strategies
20:44 How Fairness Opinion Works
23:28 Initiating Acquisition Conversations
29:18 Advisors in Take-Private Transactions
31:48 Do's and Dont's for Potential Acquirers
37:33 Impact of Take-Private Transactions on Employees
45:41 Erik Morton's Hypothetical Simple Exit Waterfall
51:38 Conclusion
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
Connect with E20 guest, Erik Morton on LinkedIn
https://www.linkedin.com/in/erikimorton/
Episode References
https://investors.smartsheet.com/news/news-details/2024/Smartsheet-to-be-Acquired-by-Blackstone-and-Vista-Equity-Partners-for-8.4-Billion/default.aspx
https://www.wsj.com/articles/smartsheet-to-be-taken-private-by-pe-firms-in-8-4-billion-deal-7296758c
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Summary
In this episode of the In/organic Podcast, host Christian Hassold and guest Keith Anderson delve into the evolving landscape of data measurement, focusing on WPP's potential divestment of Kantar. They discuss the implications of this move, the importance of independent measurement in advertising, and the future of Kantar in the market. The conversation also touches on the challenges agencies face in adapting to a rapidly changing media environment and the need for collaboration and innovation within the industry.
Takeaways
WPP is exploring the sale of its stake in Kantar to streamlines its business and bring more cash onto their balance sheetKantar is known for its consumer panel businesses and global footprint, WPP currently owns 40%, Bain Capital owns 60%.Independent measurement is crucial for advertisers but the capabilities on a standalone basis are becoming commodifiedThe agency business is facing significant challenges, global agencies must elevate their offerings to remain competitive in a world where clients are seeking to consolidate spend with a single global partnerChapters
00:00 Introduction
05:23 Understanding WPP and Kantar's Relationship
09:22 WPP's Strategic Reasons for Acquiring Kantar
12:46 Independent Measurement in Performance Marketing
16:47 Bain's Potential Divestment of Kantar
20:45 Analyzing WPP's Tech Strategy & CTO vs CPO
23:54 Kantar's Potential Acquirers
28:12 Agency Evolution and Collaboration in a Changing Market
35:04 Conclusion
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
Connect with E19 guest, Keith Anderson on LinkedIn
https://www.linkedin.com/in/keithanderson101/
Episode References
WPP FGS Divestment Announcement: https://www.wpp.com/en/news/2024/08/wpp-to-sell-its-majority-stake-in-fgs-global
Reuters divestment press: https://www.reuters.com/business/wpp-is-considering-sale-stake-bains-kantar-source-2024-01-10/
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Summary
In this episode of the In/Organic Podcast, host Christian Hassold explains the “why” behind MasterCard's $2.6 billion acquisition of Recorded Future. Christian’s breakdown of the acquisition story explains Recorded Future’s role in cybersecurity, national security, and how the CIA venture arm, In-Q-Tel landed on their cap table. The discussion includes context on the origins of Recorded Future, its unusually limited capital requirements, and how Recorded Future has likely out performed many other companies that achieved near billion-dollar valuations over the past five years.
Takeaways
MasterCard acquired Recorded Future for $2.65 billion.Recorded Future is a significant player in cybersecurity.The CIA's investment highlights the strategic importance of Recorded Future.Cybercrime poses a $9 trillion threat globally.Recorded Future provides intelligence for both businesses and governments.Recorded Future's growth rate was impressive at 25% CAGR.The deal represents a 7.8x revenue multiple, indicating strong market confidence.Chapters
00:00 Introduction
02:43 Overview of Mastercard's Acquisition of Recorded Future
03:20 Analyzing Mastercard's Acquisition Strategy
03:56 Use Case: Credit Card & Fraud Transactions
07:31 Use Case: Protecting & Defending Assets
10:02 What Is Recorded Future?
12:33 In-Q-Tel and CIA's Involvement
18:22 What’s Next for Recorded Future?
18:58 Conclusion
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
Episode References
https://www.mastercard.com/news/press/2024/september/mastercard-invests-in-continued-defense-of-global-digital-economy-with-acquisition-of-recorded-future/
https://b2b.mastercard.com/news-and-insights/blog/ecommerce-fraud-trends-and-statistics-merchants-need-to-know-in-2024/
https://www.theinformation.com/briefings/insight-sells-cyber-firm-to-mastercard-for-2-65-billion
https://www.statista.com/forecasts/1280009/cost-cybercrime-worldwide
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Summary
In this episode of the In/Organic Podcast, host Christian Hassold provides a teardown on the massive $206 million acquisition of Bentonville-based SupplyPike by SPS Commerce (NASDAQ: SPSC). In this episode, Christian provides a deep dive into the deal's details, its structure, and an informed hypothesis on the deal multiple. Christian also explores the backgrounds and business models of both SPS Commerce and Supply Pike, highlighting their roles in facilitating commerce between brands and retailers. Further, he analyzes the strategic rationale behind the acquisition and the implications for investors, founders, and employees. The episode concludes with key takeaways, including the importance of focused leadership and the benefits of inorganic growth for public companies.
Takeaways
The acquisition of SupplyPike by SPS Commerce for $206 million is a notable deal based on the estimated multiple of >10x ARR. It was also SPS Commerce's largest acquisition by deal size and multiple in its history of acquisitions.SupplyPike was a Bentonville, Arkansas-based SaaS company that helped brands recover inaccurate chargebacks and other deductions from retailers like Amazon, Walmart, and TargetSPS Commerce is a commerce transaction infrastructure company that helps suppliers (brands) retailers and distributors better transact commerceThe acquisition of SupplyPike by SPS Commerce was logical because of the high fitment of the two companies' business modelThe acquisition expands SPS Commerce's total market opportunity by at least $750M and demonstrates the benefits of inorganic growth for public companies.Chapters
00:00 Welcome from Nantucket Island
01:02 Summary of the deal, players and deal structure
03:39 What is a competitive banker-run process
04:50 What is SPS Commerce business
06:38 SPS Commerce M&A history and this deals significance
04:54 What is SPS Commerce business
09:18 What is SupplyPike business and background
13:52 Analysis of the deal impact for Investors, the founder and employees
18:11 Learnings from the deal overall
20:45 Wrap up
Episode References
SPS Commerce Press Release
SPS Commerce Investor Conference Call
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
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Summary
In this episode, Christian Hassold, host of In/Organic Podcast provides a mid-year market update for the M&A market in the SaaS industry. He discusses the macro conditions and factors influencing M&A activity, such as interest rates and FTC oversight. He also reviews his prediction on the increase in startups buying startups and analyzes four specific deals completed in the past six months. Overall, M&A activity is slightly up, but valuations are down, and deals are stalled due to disagreements on purchase prices. However, deals are getting done, likely at lower valuations
Takeaways
• M&A activity in the SaaS industry is slightly up, but valuations are down.
• Misalignment on purchase prices are causing deals to get stalled.
• Some deals are still getting done, both by PE's and corporate-sponsors, but at lower valuations
• SaaS Startups are not being acquired at the levels predicted, we examined 4 deals that have gotten done in Q3 to get a sense of the market
Chapters
00:00: Welcome
00:33: Taylor Swifts EU Invasion
02:53: Macro Conditions and Factors Influencing SaaS M&A
07:07: PE-backed and Corporate-backed Deals
10:01: Stalled Deals in SaaS and Market Dynamics
14:05: Revisiting 2024 Startup M&A Predictions
17:53: Review of 4 Recently Announced Deals
Episode References
All In Podcast EP188
Pitchbook: The State of Enterprise SaaS M&A (Q324)
Carta: Q1 and Historical Startup Shutdowns
Carta: Startup Acquisition Metrics
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
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Episode Summary
There are plenty of problems to solve in the ecommerce space. As the market gets larger it also gets more complex with new problems to solve arriving almost daily. Throughout my career in ecommerce, I have come across a “mafia” of founders - that is people who see and experience the problems firsthand, build a software solution to solve it, get the business to the right scale for an exit; rinse, and repeat. We are oversimplifying some of the complexities, but it can never be understated how much focus and commitment is required to build and exit a software business in any market AND do it more than once.
In this episode of In/organic, I was joined by Chad Rubin, founder of commerce ecosystem notables including Prospershow, Skubana, Sellers Choice, and more recently Profasee. Every business Chad has built was started to solve a problem he experienced as an online retailer and whereby he brought the solution to market to help thousands of online sellers thrive. In this episode, I explore with Chad the formula for success as a repeat founder and his experiences and learnings along the way of building and exiting thoughtfully.
Takeaways
Chad's approach to building businesses involves identifying real pains in commerce, experiencing those pains directly, and building companies around them.The decision to sell a business involves considering market trends, acquisition behavior, and economic impact, as well as ensuring a successful outcome for stakeholders and employees.The sale process requires careful consideration of the vision and execution of the acquiring party, as well as the deal structure and post-sale arrangements.Chad's journey highlights the importance of perseverance, non-consensus thinking, and proving oneself right in the face of skepticism from investors and VCs. Life after a successful exit may not bring the expected life-changing outcomes.Balancing work and personal life is essential for long-term success and fulfillment.Market opportunities in e-commerce are evolving, with a focus on multichannel and niche markets.The entrepreneurship journey involves continuous learning and adaptation, focusing on personal growth and well-being.Chapters
00:00 Introduction
02:59 Chad Rubin's background
04:16 Building a business
06:53 Strategic thinking about outcomes
09:00 Learnings from selling a business
12:43 The decision to sell
17:42 Running the sale process
22:56 Insights for founders selling a business
25:42 Experiences as a serial founder and exiter
30:41 Optimizing for platforms of varying maturity levels
34:39 Maximizing the outcome
35:47 The pattern of building and selling
38:47 Advice for aspiring serial founders
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
Connect with Chad Rubin on LinkedIn
https://www.linkedin.com/in/itschadrubin/
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In this episode of the In/organic Podcast, our host, Christian Hassold discusses the concept of ecosystem mapping and its importance in corporate and inorganic strategy. He emphasizes the shift from market mapping to ecosystem mapping and provides insights on building a comprehensive ecosystem or market map. Christian also shares his approach to gathering information, categorizing companies, and creating market maps. In this conversation, Christian discusses the process of market mapping and rank stacking in the context of M&A strategy. He provides examples of market maps, explains the relationship between market maps and company strategy, and outlines the criteria for rank-stacking M&A targets. He emphasizes the importance of ecosystem mapping and the need for independent thought in the M&A process.
Key Takeaways
- Ecosystem mapping is an approach that considers the entire ecosystem surrounding a company, not just its competitors.
- The shift from market mapping to ecosystem mapping is essential for identifying inorganic growth opportunities and understanding the broader value creation within an ecosystem.
- Building a comprehensive ecosystem map involves gathering information from various sources, categorizing companies, and determining whether the companies are direct competition, indirect competition, or a partner.
- A sub-component of ecosystem mapping is identifying potential M&A targets and rank-stacking them in terms of revenue and potential fitment with an acquirer. Rank stacking drives clarity in terms of which M&A targets a company should prioritize from a list of targets.
Chapters
00:00 Introduction
02:30 Problem statement and preconditions
05:45 The ecosystem map
08:26 Building an ecosystem map
06:01 Sources of information
14:29 Categorizing companies and estimating revenues
16:40 Examples of ecosystem maps
22:19 Rank stacking process
24:46 Criteria for rank stacking M&A targets
33:39 Complimentary episode on M&A Science
34:41 Summary
36:31 Takeaways
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
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M&A in scaling SaaS companies is on a gradual incline. It's become a great way for SaaS companies to expand their reach into TAM, grow their share of wallet, or expand into new geographies. There is also a large pool of companies available to acquire. The challenge is the M&A function in scaling SaaS companies is often put at risk by hiring an inexperienced leader, not having any clear owner, or not setting the function up for success.
In this episode, Christian Hassold, host of the In/Organic Podcast provides a detailed understanding of the M&A opportunity for SaaS companies, the common obstacles for setting up the function, what to expect from a corporate development leader, and the role a leadership team can play in M&A success. This episode is a must-listen for founders, CEO's, and CFO's who are considering establishing a corporate development function in a scaling SaaS company.
Download the content from the episode
Episode Highlights
0:00 Intro
1:58 Reasons for Inorganic Scaling in SaaS
5:12 M&A: Large Corporations vs. Scaling SaaS
7:42 Why M&A in Scaling SaaS is Harder to Build
9:31 Common M&A Obstacles in Growth-Stage SaaS
14:46 Role of SaaS Corp Dev Leaders
19:35 Example RACI for Scaling SaaS Corp Dev
24:43 Common M&A Hiring Mistakes
27:04 Takeaways
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://linkedin.com/in/hassold
Visit In/Inorganic: https://inorganicpodcast.co
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This episode was recorded at Deloitte University in Westlake, Texas during the Deloitte M&A Executive Forum on March 7 & 8, 2024. I was joined by my friend and colleague Kim Baird, Principal at M&A Maximizer, a boutique integration consulting firm based in California.
In this episode, Kim and I took a break from the rich sessions we enjoyed at the Executive Forum to share our key learnings and insights from a series of panel sessions that included dealmakers and leaders from Deloitte's M&A practice, Bank of America, DLA Piper, and Generac Power Systems. Our discussion covers the key takeaways from the forum on the future of deal-making in 2024, the macro and micro-economic factors that will influence deal-making in the SaaS ecosystem.
Big thank you to Dan Helfrich, Chair and CEO of Deloitte Consulting for inviting us to the Deloitte Campus and for a great discussion on M&A!
Episode Highlights
00:00 Introduction
00:29 Setting Up
01:59 Deloitte's CEO: Market Optimism for 2024
03:14 Deloitte's Chief Economist: Economic Outlook
04:28 Potential Instability of Relations with China
05:51 Cross-Border Investment Patterns
8:10 Macroeconomics' Impact on SaaS Valuations
10:15 Generative AI in M&A
11:19 Utilizing Copilot
13:04 Mining Customer Data
15:11 Session on Gen AI: Takeaway
15:48 Closing
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on the web:
https://www.inorganicpodcast.co/
Connect with Kimberly Baird on LinkedIn
https://www.linkedin.com/in/kimberlybaird1/
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It’s a tough decision to exit a business, but it says a lot about a leader who can make a call on when it's the right time and gets it done. The alternative is kicking the can forward and risking the possibility that you lose control of your destiny. When selling a SaaS business, you optimize for 3 things; 1) best outcome for investors, 2) doing right by your people, 3) doing right by your customers. The trade-offs are never easy and it’s hard to 100% optimize for each.
In this episode of In/organic, I sat down with Jon Gregg, former President & CEO of Sellpoints which sold to Syndigo, a PE-backed SaaS company, in 2019. In this episode, Jon shares his experience of running a do-it-yourself sale process for his company. He discusses the decision-making process, the goals of the process, and the importance of building a strong team. Jon also explains the different phases of the process and the criteria for finding the right acquirer. He highlights the significance of trust and cultural alignment in the deal and reflects on the signing and closing day. Finally, he shares some lessons learned and offers advice for others considering a DIY sale process.
Chapters
00:00 Introduction and Background
03:57 Making the Decision to Sell
09:20 Goals of the Process
11:21 Reading In Customers
12:40 Building the Team
15:16 Reading In Non-Executives
20:05 Phases of the Sale Process
26:28 Criteria for Identifying Acquirers
30:09 Example Terms for Post-Deal Performance
35:06 Signing and Closing Experience
37:25 Lessons Learned
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
Connect with Jon Gregg on LinkedIn
https://www.linkedin.com/in/jongregg/
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Summary
Successful integrations are required to achieve the full value of any acquisition. Most know that the odds are stacked against the acquirer from the start - so how does one move the odds in their favor? How should a SaaS leadership team plan and execute an integration process with an acquired team of less than 100 people and the acquirer is less than 1,000 (roughly)? This is a large company buying a much smaller company and the assumption is the buyer is a first-time acquier. Deal economics certainly impact acquired founder and employee sentiment, but how the actual people integration is run has an outsized impact on realizing the full value of M&A.
In this episode of In/organic, we welcome Mohammed M. Baloch, Head of Integrations at Gainsight, a SaaS company backed by Vista Private Equity. During the discussion, Mohammed describes the key elements of a successful integration plan. He also lays out the key players, roles, and profiles of talent who can support an integration, even if they have never done the work before. We also discuss the role of an integration consultant (which is a must) and how to contemplate their role in the integration process.
Takeaways
People integration is a critical aspect of post-merger integration and should be given equal importance as the economic goals of the acquisition.When selecting an integration lead, look for someone who is well-networked, has a strategic mindset, and possesses strong project management skills.Consider outsourcing integration if you don't have a dedicated integration team, and look for a partner who is flexible, experienced, and familiar with your industry.Start integration planning as soon as the LOI is signed, and define a clear North Star that outlines the goals and criteria for success in the acquisition.Clear communication and a formal onboarding process are vital for successful people integration.Consider having acquired employees interview for their jobs to ensure cultural fit and mutual alignment.Highlights
00:00 Introduction
02:22 Mohammed Baloch's Background and Gainsight
04:01 Setting the Stage
06:08 Key Players in the Integration Process
9:56 Selecting an Integration Lead
11:40 Considerations for Outsourcing Integration
16:15 Defining the North Star
18:40 Enabling Sales Teams for Cross-Selling
19:49 Debate on Tiger Team vs. Full-Team Format
25:36 Ensuring Success in People Integration
29:52 Interviewing Acquired Employees for Their Jobs
31:22 Advice: Don't Wait, Start Integration Planning
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
Connect with Mohammad Baloch on LinkedIn
https://www.linkedin.com/in/mmbaloch/
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Building a multi-product company inorganically is no easy feat. It requires a strong product team, tight alignment among executive leadership, and a solid M&A function to identify and pursue the targets of interest. This is a fairly common strategy, but how does it work?
On this episode of In/Organic, we are joined by Chris Barnes, former SVP of Corporate Development at Syndigo, a SaaS and services business backed by Summit Partners and The Jordan Company. Syndigo was scaled to hundreds of millions in revenue through a sophisticated roll-up strategy. Under Chris's leadership, the company acquired twelve companies over 5 years. In this episode, we will discuss how Chris and the team at Syndigo ran their process with a lean team.
Takeaways
- Multiple acquisitions can be a strategic approach for SaaS CEOs to solve specific problems or drive platform expansion.
- Identifying and prioritizing acquisition targets requires thorough research and consideration of factors such as market size, growth potential, and cultural fit.
- Successful integration of acquired companies requires a focus on culture, process alignment, and a great customer experience.
- Investor partners can provide valuable resources and expertise in valuation, pricing strategy, and customer / market feedback.
Highlights
00:00 Introduction
01:23 Chris Barnes’ Background
04:53 Syndigo's Acquisition Model
07:21 Key Players on the M&A Team
09:08 Identifying Acquisition Targets
10:55 Prioritizing Acquisitions
12:18 Qualifying Potential Targets
14:03 Managing Multiple Acquisition Outreaches
17:43 Running Plays to Assess Targets
19:24 The Role of the Acquisition Team
22:38 Evaluating Business Growth Potential
25:17 Valuing an Acquisition
27:10 Involvement of Investor Partners
33:02 Lessons Learned
33:45 Limitations and Risks of Multiple Acquisitions
34:52 Key Takeaways
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
Connect with Chris Barnes on LinkedIn
https://www.linkedin.com/in/chris-barnes-a0a7022/
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In this episode, our host Christian Hassold is joined by Laurent Gout, VP of Corporate Development at Auctane, a Thoma Bravo-backed SaaS company that powers shipping businesses all over the globe. In this episode, Christian and Loran walk through building an M&A function from scratch with a SaaS company. Topics they cover in this episode include who should run the M&A function, what kind of support will they require, what is the leaderships role in the M&A process, how to inform M&A strategy, and working with financial sponsors. Laurent shares valuable insights and lessons learned from his 10-year career in corporate development.
Discussion Topics
Building an M&A function in a company requires a team that includes an M&A lead and a project manager.When selecting an M&A lead, look for someone with intellectual curiosity, an open mind, and the ability to communicate effectively with the rest of the C-suite.When deciding whether to build, buy, or partner, consider the market landscape, the cost and complexity of building internally, and the potential value of partnerships or acquisitions.Utilize the resources of financial sponsors, such as their financial modeling expertise and access to expert networks.Avoid insular thinking by engaging with customers, attending industry events, and seeking input from external sources.Use tools like Gong and Chorus to gather data and insights from customer calls and internal meetings.Be aware of potential pitfalls, such as lack of pre-planning for M&A integration, not conducting red team/green team exercises, and not celebrating the work done even if a deal falls through.Highlights
[00:00] Introduction
[02:12] How Loran Started His Career in M&A
[06:40] Building the Inorganic Strategy Team
[08:44] Traits of an M&A Lead
[12:11] Deciding to Build, Buy, or Partner
[17:10] Using Expert Networks and Tools
[18:18] Testing Buy and Partner Scenarios
[20:51] Avoiding Insular Thinking
[23:41] Utilizing Gong and Chorus
[26:06] Using Financial Sponsors' Resources
[32:07] Pitfalls to Avoid
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
Connect with Loran Gutt on LinkedIn
https://www.linkedin.com/in/loran-gutt/
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In this episode, we discuss the prediction that M&A activity among fast-growing SaaS companies will rise substantially in 2024. In support of this prediction, we share both data and reasoning for this prediction, including startup acquisition activity, shutdown and funding trends, and a broader market view of M&A activity. We also offer advice to founders considering M&A in 2024, emphasizing the importance of preparation and developing decision-making criteria in advance of contemplating M&A.
Discussion Topics
M&A activity among SaaS companies is predicted to increase in 2024.Startup acquisitions have been observed to increase since 2019, but there was a slight decrease in 2023 and why 2024 could be different.How startup shutdown activity and cash runway inform the prediction of heightened M&A activity.It can take founders & CEO’s several months to reach the conclusion to shut down a SaaS business, the faster one reaches that conclusion, the better when it comes to exploring acquisition options.A broader view on M&A activity in the market based on data recently shared by Pitchbook. Hint B2B M&A is stable!How SaaS companies that may be considering M&A should contemplate and prepare for possible M&A.Highlights
[00:00] Introduction to M&A activity prediction in 2024
[03:09] Startup M&A activity since 2019
[04:59] Significant increase in startup shutdowns and timing
[06:27] 57% of Startups will run out of cash in less than 18 months
[09:29] Cash is defensibility: don’t wait until the last minute to decide to sell or shutdown
[11:57] M&A activity more broadly with insights from Pitchbook
[15:21] Advice for startup founders and CEOs considering M&A in 2024
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
Data Referenced in this Episode
Clouded Judgement: https://cloudedjudgement.substack.com/p/clouded-judgement-12123-net-new-arr
Pitchbook: https://files.pitchbook.com/website/files/pdf/Q4_2023_PitchBook_Analyst_Note_Increased_Antitrust_Scrutiny_and_Complexity_for_MA.pdf
Carta/Peter Walker: https://www.linkedin.com/posts/peterjameswalker_cartadata-startups-founders-activity-7112949181815656448-06cy/ (Carta)
SaaStr: https://www.saastr.com/pilot-57-of-venture-startups-will-need-to-raise-more-in-2024/
Carta: https://carta.com/blog/mergers-acquisitions-outlook-2024/
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Startup shutdowns are at an all-time high in 2023. According to Carta, hundreds have shut down or gone bankrupt in 2023. Amid the gloom of these shutdowns is a positive trend, startups buying other startups, giving those short on cash a second chance at an exit. In a market where cash preservation is critical and borrowing costs are high, stock-heavy deals are more and more common. But, how do they work and what are the key considerations founders should consider before starting a process?
In this episode, Christian Hassold, host of the In/organic Podcast sat down with Lesley Adamo, Partner & Vice Chair, Tax and Meredith Beuchaw, Partner, Emerging Companies at Lowenstein Sandler, a full-service law firm with a large emerging companies venture capital practice that has extensive experience with fundraising and M&A in early stage companies. In this episode, Lesley and Meredith provide rich insights into what kinds of structures and strategies are getting deals done and how to avoid killing these kinds of deals.
Key Takeaways:
Stock-based deals are increasingly popular in the current market as a way to acquire startups.The mix of cash and stock in deals varies but is heavily weighted on common stock versus preferred, with buyers preferring to use cash only when necessary to get a deal done.Valuation differences between buyers and sellers can be resolved by agreeing on a mutually acceptable value or using a multiple that applies to both parties.Proper deal structuring and tax advice are crucial to avoid tax issues and ensure a successful transaction.Complexity and broken term sheets can be deal killers, and deals are taking longer to negotiate and close in the current market.Highlights
[00:00] Introduction and Background
[04:09] Different structuring options for M&A (asset vs. stock deals)
[08:47] How little cash can an acquirer get away with (reasons why you need cash at close)
[13:51] Relevance of valuation of stock deals and the significance of 409A’s
[18.48] When in the process of getting tax advice and why
[23:34] Impact of stock consideration and form types for employees
[31:30] How to solve valuation differences in stock-based deals (esp in the current environment where most companies are below pre-money from 2-3 years ago.
[35:21] Common Deal Killers
[36:21] Success Rate of Deals
[37:56] Wrap Up
Connect with Lesley and Meredith on LinkedIn:
https://www.linkedin.com/in/lesley-adamo-44481436/
https://www.linkedin.com/in/meredith-beuchaw-31305b37/
Learn more about Lowenstein Sandler practice: https://www.lowenstein.com
Connect with Christian & In/organic Podcast
Christian's LinkedIn: https://www.linkedin.com/in/hassold/
In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast
In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured
Articles References in this show:
https://news.crunchbase.com/startups/venture-backed-mergers-acquisitions-exits/
https://www.vccafe.com/2023/09/28/startup-death-rates-spike-as-we-approach-q4-2023/
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The business development function in early-stage SaaS companies tends to be a ‘catch all’ for partnerships, competitive intelligence, and increasingly, identifying potential acquisition targets. In a world where 90% of startups fail and of those that succeed, 90% exit to a strategic versus going public, every successful startup should know what potential acquisitions (of any size) can do to accelerate the business. But, where to start?
In this first edition of Ask the Expert, Alyshah Walji was kind enough to come on the pod and take on some burning questions on his mind as an up-and-coming business development leader. His questions span both how to think about the role as well as how to approach partnerships tactically, including how to begin building the M&A funnel early on. Alyshah is the Director of Partnerships at Vividly, a very active member of the Canadian startup community, and a passionate supporter of social causes related to youth, education, and gender.
Tune in to Episode 5 of In/organic Podcast, and discover new ways of cultivating partnerships to align short-term objectives with long-term vision.
In This Episode, You Will Learn:
[2:14] Background on Alyshah and his company Vividly
[7:00] How to think about the business development role & function
[9:11] Should you build or buy - assessing what to do and not do to
[16:10] The importance of aligning the leadership team with the company's strategy
[19:50] Prioritization and timing. How to balance short-term revenue goals with long-term strategic partnerships
[22:30] Prioritization of partnerships in a noisy ecosystem
[27:00] Developing partner & M&A pipeline is similar to running an enterprise sales process, here is how
[32:56] Where to go to get M&A advice and resources
Connect with Alyshah:
LinkedInTwitterConnect with Christian & In/organic Podcast
Christian's LinkedInIn/organic on LinkedInIn/organic on YouTubeHosted on Acast. See acast.com/privacy for more information.
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There are plenty of playbooks for developing an M&A strategy, but the kind of strategy that is best for one SaaS company versus another is less clear. For example, should one only buy tech they can integrate behind the scenes, or should you add new products that stand alone? How far outside your product focus should you expand, especially when pre-IPO? People are an important element of M&A success, how best to approach people integration?
In this episode, Rob Gonzalez, co-founder and CMO of Salsify, a category-defining SaaS company that helps brands win the e-commerce game joins us to share how Salsify approaches their M&A. Drawing on experiences from four acquisitions, including one cross-border acquisition of Paris-based Alkemics, one can gain some great insight into what M&A should and should not be about, according to Rob.
In this episode, Rob joins us to share his opinion on what kind of M&A makes sense for a company that seeks to provide a single consistent experience for its customers. During the discussion, Rob provided examples of how each of Salsify’s four acquisitions added value to the company, customers, and partners.
Throughout this episode, you'll learn about Rob's thoughts on using acquisitions to integrate third-party tools into a platform's core experience and using strategic partnerships with complementary services to create a competitive advantage. Rob also shares his own opinion on how to approach integrating talent from acquired companies and cultural integrations in cross-border transactions, and much more.
Tune in to Episode 4 of In/organic Podcast, and discover the best way of aligning your growth and M&A strategies with your product, culture, and talent.
In This Episode, You Will Learn:
Rob's background and past experiences (1:20)Pairing M&A and growth strategy (5:30)How to prioritize the core business in M&A (8:10)Betting on the ecosystem vs. owning every piece of the puzzle (12:00)The role of talent in M&A (17:30)How to approach cross-border deals (21:20)Connect with Rob:
LinkedInTwitterLet's connect:
LinkedInWebsiteHosted on Acast. See acast.com/privacy for more information.
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When is the right time to expand internationally? What are the moving parts of growing a SaaS company in a foreign territory that operates at a different timezone when you don't have market proof or boots on the ground?
In today's episode, Marcel Hollerbach visits us to talk about how it is to land in the U.S. market from the other side of the pond. Marcel is the Chief Innovation Officer and supervisory board member at Productsup, a founding partner of venture capital fund Cavalry Ventures, the founder of the video streaming platform hiClip, and the Host of the "World of Commerce Podcast."
Throughout this episode, you'll hear about Marcel's experience expanding Productsup to the U.S. market, the lessons learned along the way, and the specifics of how they decided it was the right time to expand internationally, and when they felt they evolved from "figuring things out" to a mature market player in the U.S. market.
Additionally, Marcel talks about his approach to Senior Leadership hiring, why some European companies fail when expanding to the U.S. market, and more.
Tune in to Episode 3 of In/organic Podcast and learn how to expand a tech company across timezones.
In This Episode, You Will Learn:
About Marcel's background and his broad of the Venture ecosystem (1:30)When is the right time to expand internationally? (3:10)How to make the right hires for an international expansion (7:50)Marcel shares his thoughts on hiring Senior Leadership (14:00)Why some European companies fail in the U.S. market (17:20)Marcel shares the lessons learned the hard way throughout Productsup's expansion (24:00)Connect with Marcel:
LinkedInListen to the World of Commerce PodcastVisit Productsup's websiteLet's connect:
LinkedInWebsiteHosted on Acast. See acast.com/privacy for more information.
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As a SaaS or startup founder, aren't you curious about how it is on the other side of an M&A?
Today, in our first episode together, I'm joined by Juan Mejia, Managing Director at BrightTower, to explore the sell side of an M&A, unpack a banker's role in it, and analyze the relational component of these operations. Juan started his journey as an IT guy, went in and out of business school, and switched to investment banking, accumulating 20 years of experience working for companies like Morgan Stanley, AGM Partners, Solomon Partners, and Drake Star before BrightTower. In 2022, Juan was awarded the "Boutique M&A Investment Banker of the Year" award at the 4th Annual USA M&A Atlas Awards, Middle Markets.
Throughout our conversation, Juan talks about his role as an advisor in an M&A, how to determine if a potential client is a good fit, and what SaaS and startup founders on a LOI stage can do to create a strategic advantage with potential buyers. Juan also talks about what SaaS companies should never do during a negotiation to avoid getting sideways with the banker or the process, the phases of a selling process, the boundaries buyers and sellers should know, and much more.
Tune in to the Episode 2 of In/organic Podcast, and get a glimpse of what happens on the banker's side of an M&A.
In This Episode, You Will Learn:
Juan talks about the role of a banker in an M&A (1:50)The relational side of Juan's job (4:20)How buyers can tell if a potential client is a good fit (11:00)The phases of a selling process (12:40)The M&A process is often a funnel (16:10)How to get strategic advantages with potential buyers (20:50)How to avoid getting sideways with a banker (27:10)Connect with Juan:
LinkedInLet's connect:
LinkedInWebsiteHosted on Acast. See acast.com/privacy for more information.
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Building a great M&A funnel starts with top of the funnel. Just as it is in sales, you need to cast a wide net at the top and make sure you advance both the right companies and relationships from top to bottom. Not all opportunities are are equal, some are sourced organically and some through banker led inbounds. Some have time urgency and some may require a long time to develop. What are other considerations in managing the M&A funnel?
In this episode, Erik Morton joins us to share his approach to building M&A pipeline in a SaaS company. We’ll double-click on the top funnel, including the criteria to consider when deciding what belongs in it or not. We also talk about the importance of building relationships with sell-side advisors, too. Erik is the Strategy SVP at CommerceHub and has over 20 years of experience in e-commerce and SaaS. Interestingly, he started as a software developer and product manager, which adds some superpowers to the way he is able to evaluate potential partner or acqusition opportunities.
Throughout our conversation, you'll hear about Erik's background and the moment he realized the most exciting place in a software business wasn't in finances but in engineering and product. He also shares his thoughts on the M&A funnel, the software development role in SaaS, and how to develop relationships and identify opportunities that can turn into revenue-driving partnerships or M&A opportunities.
Tune in to Episode 2 of In/Organic Podcast and learn the secrets to building a strong M&A pipeline.
In This Episode, You Will Learn:
About Erik's background and his passion for the engineering and product side of software businesses (1:20)How to maximize tools and partners to develop a great top funnel (6:00)Eriks view on the whole funnel in an M&A context (8:30)How Erik deals with organic versus banker-led inbound opportunities (15:40)Erik discusess differences in view on what qualifies as bottom funnel (27:50)Erik shares lessons learned from over 20 years in the industry (34:00)Connect with Erik:
LinkedInLet's connect:
LinkedInWebsiteHosted on Acast. See acast.com/privacy for more information.
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