Buyer-Led vs. Seller-Led M&A with Matthew Person

21:43We'll get past that. We can fix their sales. So is it a bad product? Can you fix it? There's some major assumptions you've made there around our ability to affect scale. Do they have good salespeople? Because we need them to cross-train us as much as we're going to cross-train them. If we don't think their sales team's that great, how well is that cross-selling synergy going to be? It's a major factor. I probably am more conservative than most when it comes to revenue synergies. I get a badge for every deal I get done. You know that? So that's why... You can probably push to get the cross. Push to get the deal.

22:09I got to get the badge, just like scouts. There's so much more risk on the buy side where we really have to put our name to it. I'll tell you, trying to set up the first deal for this company, so hard. Like I've advised on well over 30 companies, but there's nothing in place. Nothing. Just the whole process of evaluating. And just like we're talking about, like now I got to go back and say, hey, let's start factoring in disenergies. And then at least I feel like we'd get towards a common view with the leadership team of evaluating these opportunities. You have to have a fair and rational assessment.

22:38And that's probably the hardest part at times, especially with M &A too, especially on the buy side, a factor that people don't consider as much is everyone always talks about the target. But sometimes the biggest change is actually in the acquiring entity, in that home entity. What does it mean for me is just as applicable to the colleagues that I work with, that I have to collaborate with to convince that this is a good idea. We have stakeholders in sales and product and engineering and marketing that all of a sudden start going, wait a second, we're bringing in an AI team. What does that mean for me?

23:07We're bringing in a new widget. Is my widget now not as important as the one we just acquired? All those things factor where you end up getting biased, at least you can have biased opinions around synergies, both cost and revenue that can impact your ability to do a deal. Making sure your stakeholders are aligned and believe that we're trying not just to push a deal through for the sake of doing a deal, but really trying to build the company the right way and assessing dissynergies as much as we have possibilities. That's how you get trust and you get those people to get the deal done. How do you do that?

23:35Communication. A lot of communication. A lot of communication and listening. Could I run the whole entire deal myself? Sure. Anyone in this role could probably do a deal themselves and put synergies on paper and make assumptions. What I've found is I actually do less. And by that, I mean, I actually make my stakeholders part of the process, part of the decisioning, and they're the ones who are putting the numbers on paper with support and guidance from CorpDev so that they own it. And when you own something and your own numbers on it, and we're all part of that discussion, there's a little more comfort as opposed to me walking and saying, hey, you're expected to do X and Y and Z.

24:06synergies. It's a little bit of a different approach. How do you balance getting the right stakeholders in too? Because I feel like it goes to the same thing. When you're looking at these deals early, you don't want to distract people. And then the same thing, if you're trying to get alignment with all these stakeholders, then you're trying to do the opposite. You're trying to rein them all in and get their opinions and make them feel part of this. How do you strike the right balance? Who do you usually bring in? It's tough because everyone says they want to do M &A and then no one has time for it because they always have organic things to work on.

24:33What I've done is identified teams. And I break them into small groups by product or by attribute or what we know the job to be done that we're trying to solve for. So we have an AI team. And there's just a couple of people who are just assigned to that. And then we have for different products and capabilities, we have people who look at those things. And they know that around 20, 30 % of their job is to be spent on early stage assessment of M &A. Their work schedule has allowed for that ebb and flow. And everyone else is supportive of it. One of the first things they did was went around and said to all of our function leads, okay, finance, I need one or two people here.

25:04tax, I need one person there. And I went across and we identified those people. And then I've been training them along the way in group sections and in function-specific sections around what to do and how. And I always say that part of my role is just to make this lift for them as easy as possible. That's actually why we have Dealroom because we got everyone set up and trained on how to do diligence lists and how to do integration lists. And even though we haven't worked through a deal yet because I'm relatively new at QuickBase, every single stakeholder at QuickBase has already opined on the integration checklist and on the diligence checklist.

25:33And they already know how to use deal room. So when we have a deal coming in, they don't need me. They can actually just go do on their own and then we'll adjust to the minutia that pops up along the way. But 80 % of the work's already done and that could just freeze up everyone's time. So I just pre-trained everybody. And then it also selected a few people so that they knew that was part of their job as opposed to randomly pulling people in. We talked a lot about here shaping the strategy, being proactive on the deals. And now we're talking about aligning the stakeholders. You brought in the technology piece for both diligence integration, I wanted to get an understanding.

26:07Right now I'm just using our own product to build a pipeline. I've done up to LOI. It's kind of fun. You certainly just even the small list, you're still getting back and forth comments and stuff. But I'm curious about, you have a much bigger team on this. How are you aligning them or using the platform to sort of align them? Is it more of just, here's the steps of the process that we are now standardizing for doing diligence integration. I'm just... So I live by the 80-20 rule. I basically standardized 80 % of the acquisition process. I got alignment on, again, those big strategic pillars, those capabilities we're going to go after.

26:40So everyone knows that what we're looking at is on strategy. It's not a wild card. And then I work to understand the pros and cons and the granularity of those pillars so that everyone knows the attributes that really will drive impact and show accretion as opposed to, I don't know if we need this, which is usually where things get caught on the buy side when people say, we could build this internally. And QuickBase is a home of app builders. So everyone thinks they could build stuff. We have to do more work around saying, maybe we should look at this from an acquisition perspective instead. And we already got that alignment before we even started doing Pipeline.

27:09So when stuff does come in, they already know that this is on strategy and it's a uplift in capability. And that's true for not just my colleagues at QuickBase, but for private equity, for the board. They know what we're looking at and why. You're building in pre-approval along the way. And when it comes to the diligence process, and preliminary diligence, we did training sessions with all those identified stakeholders to know what to look for and brought them in early so that they're actually the key. It's not me. Again, I say I do very little. I just move pieces around. The people who will opine as to whether or not it's a good deal or not are our subject matter experts.

27:43It has to pass their muster first. They've got to believe this is the right tech, that this is the right solution, that they can sell it. So we do a demo. We get through the NDA process, which is my first criteria when we look at companies and I'll decide whether or not based on that conversation, and this gets past NDA and into demo. And when we have demos, it's only an hour. And that's usually enough because most of the people we work with are really skilled and qualified. They kind of will know relatively quickly if there's a there there. All I've done is maybe obligated my team by capability focus to an hour of time.

28:13So standardize about 80 % of it. That's where the tech stack can be helpful. Create continuity between just your deal stages and also help with alignment. There's report outs that you can do for members and so forth. just have general collaboration between your different departments. Going back to the process itself. So you get an NDA signed and then you will do a demo of the product. Is it solely their demo or are you demoing some of your stuff too? It's usually their demo with maybe a little bit of time about us just to help them understand the why. If you have that dual symbiotic synergy, hey, wait a second, guys, you don't have a CRM and an ERP.

28:51We can be that repository. You have this data field. There's ways in which we already know, because we've done that capabilities assessment, how we can help the target and how the target can help us. And usually that approach goes a long way, especially with founder-led businesses, for them to understanding why you reached out as opposed to just having a generic smile and alcohol. And then you do the demo. This looks good. There's interest. We want to move to preliminary diligence requests. We standardize that request list. We ask for some base level of information. We already know from talking to all of our stakeholders the key things they're going to look for and offer approval.

29:23And we get that information. We might have another couple of meetings around finance, like everyone has to. And we dig in a little bit on tech and on staffing. And we make some assumptions internally. We'll walk through a synergies model with our stakeholders, select stakeholders. That's a relatively quick process once you standardize it to get to where you want to be from an approval process to get an offer out the door. And then once you get the approval, you'll get the offer in front. How do you approach negotiations? Part of me is like, do you really dig in and get a sense of what are their expectations?

29:51to me, I feel like the golden rule of negotiations, don't put the first offer. Yeah, it's true. He who speaks first loses. Usually we kind of get into ourselves what I call, again, that box of preference. The deal process, that negotiation process, like the IOI versus LOI helps you either way. Sometimes when I talk to people and say, hey, what is a perfect outcome look for you? Sometimes, first off, no one's ever given me a low number of what they're worth. If I had a dollar for every$100 million company, I'd be a hundred millionaire is my common joke. Everyone thinks they're worth$100 million.

30:19dollars. When you know you have a real conversation to be had is when someone doesn't throw out a hundred million at you is when they throw out a real number. When they throw out a range that's real. You can tell. And I think for people who've been around M &A long enough, we all know the kind of where the market moves and the bell curve that exists for companies in their industry. When we talk very vaguely about what does a good outcome look for you and the other side throws out a range that's reasonable, then we know we have something that we could work on. And then we let the natural IOI versus LOI process help us whittle into a range of agreement.

30:51Pretty straightforward. You're right. I mean, there's general multipliers people look at. I still find some bid-ass spread challenges. It's terrible. It still exists. The COVID hangover has not gone away. It is because they'll still see stuff in the news and then you got to break it down and say, listen, that company's at a 50 % year-over-year growth. You're zero. Yeah. Let's put that into perspective. They're making money. You're losing money. Revenue model is completely different. They're ARR, you're transactional. Put all those factors together and you're nowhere close to what they're getting.

31:21What makes this negotiation easy, going back to that box of preference, that creation of a programmatic approach, I kind of already know from working with our board, with our PE partner, how we're going to allocate funds and what we want to do with each deal. That does put a valuation limit on what we're going to approach. Not because we couldn't do something that's different, but because we don't want to. You're being pragmatic about it. Being pragmatic about it. Exactly. When we do get someone in the air of rationality, it's really easy then to say no. Say, listen, this is where we need to be.

31:52This is what we're looking at for market. And that helps us whittle down the prospects a little bit. That said, people who've been around M &A know enough to know when someone's throwing a highball at you, but really doesn't mean it. It's just waiting to see what you say. And we take a different approach. And that just happened to me on something, a transaction. We had a material bid-ask spread. We just let the negotiation process and the IY process get ourselves into a zone of reason. Partly because I kind of felt like, yeah, I don't think that's a real number. You're just saying 100 million for the sake of 100 million.

32:19And so we got ourselves down there. So sometimes you got to throw out something on paper as a buyer. Okay. So we're being on the supply demand curve. Yep. In my head, as you describe this, I'm thinking like there's a rationalized value curve and then there's a relationship curve. Yep. What I wanted to understand is like, how does that relation development fit into this? It's a huge factor. Money is not the only driving factor. I know that sounds as a capitalist, someone who believes in supply and demands, and bankers would probably disagree on that one too. But I've definitely found that if you're known as a good home, if they like who they've met along the way in that process, not just me, but all the other people that they meet along the way.

32:54And that's what the buyer-led process gets you. Is that more of that individual interaction that's not maybe overseen by a banker? You build that trust factor, you want to be known as a good home. That is just so valuable. Because founders and CEOs really do generally care about their employees and they don't want to have them sent somewhere where they're going to have a bad experience where their reputation is stained. If you can really prove that you are a great place to work and a great home for the acquired entity's employees, that is going to chip away at most bid-accès spread unless it's just a bridge too far.

33:24Like how much? Like a turn? Yeah, it could be a turn. Yeah, definitely. It can be that meaningful. You can see 20, 30, 40 million dollar spreads from way down. I put a perspective with maybe a percentage. Yeah, it's percentage is probably better than it turns. It depends on the EBITDA. But yeah, it can have a meaningful impact on your ability. Maybe like 10, 20 % or something like that. Or are you thinking even 20, 30 %? Well, I'll give you a frame of reference on some stuff in the last six to nine months I've worked on where we've been able to negotiate down. And yeah, it was probably 20, 30 % off of their ask.

33:52That's total ask. It wasn't, hey, I'm just going to throw you in a crazy earn out and let you go work for it. Deal structure cures all wounds. Everyone has hesitation around earn outs. There are definitely times that I've been part of those and they've been wonderful, but they're also just more complicated from an integration perspective. Everyone loves that all cash or combo equity kind of deal where you just, it's a clean slate. You don't have to worry about that hanging Chad. But for the most part, being viewed as a good home, having the relationship that the buyer led process allows you to build, it's going to get, it's going to get you from 10 to 20, maybe even more of a bid-off spread problem.

34:23All right. Got to spend more time hanging out. Yeah. Build relationships. A couple of drinks at the bar. Yeah. Any hacks? That's what I was thinking was, I got the one deal now where I just know there's an advisor in between and I'm like, I got to go to, have a beer with them. Like it's just bottom line. The advisor is going to do their job and they're going to fight for every dollar. But at the end of the day, they work for the founder, the CEO. They are. And I'm like, look, you got to give me more confidence in this deal and I'm not going to have confidence unless I get trust with the seller.

34:47And you need to not stay in the way of building that relationship. We'll have to see how that goes because they do revert to put themselves right in the middle and disconnect the direct communication, which I don't like. No, it's true. Then it goes back to the other deal, which I got the proprietary deal, which is great. I like the seller. We've got a great relationship, but expectations are not there. that box of preference when you are looking at metrics that are below threshold. And again, it's not binary. You're not saying no. You're just looking at, okay, what do I need to believe to then right-size that problem or understand why it occurred?

35:16And in a seller-led process, sometimes you don't get the benefit of that understanding. In a buyer-led process where you can have more relaxed conversation is probably the best way to put that because it's not overseen by the banker. Then you can really get to the bottom of the truth usually around what happened and why, and it's not some made-up story or sugar-coated anecdote about what happened with X, Y, and Z. You get to the truth. And that, again, builds that rapport, builds that trust, that builds a relationship that allows you to be viewed as a good home. I agree. Because there's no reason to have the lipstick or sugarcoat.

35:46Then you have the real trust. And when you have the trust, you'll work through issues. Issues come up, you have a working relationship. It's like that's the thing I struggle with. Trust is key, and a buyer-led process will help with that trust. It helps you understand your synergies. It helps you understand maybe the historical operating path of that business. It just aids, to me, it aids confidence in deal certainty. You heard me say earlier, I have more confidence in a buyer-led process at LOI stage into closing a deal than I would on a sell-side process. And again, it's because there's just more trust that's been able to be built.

36:12When we talk about putting an offer together, there's that component of financial risk. I don't know if you come across debt covenants or over-leveraging in a competitive, high-pressure environment. Do those happen at all? Because it's just what I'm looking at right now, where I'm like, private credit's expensive. One thing people don't think about is when you put together a synergies plan and there's debt raised against that synergies plan, if that falls apart, you've put your home entity where I work, I've put them at risk. And that's something that I think about because we don't want to damage the business in the light of just doing a transaction for transaction's sake.

36:46The true operating characteristics that I talk about, what do we reasonably believe we can achieve is the goal that I always strive to. Along the way, people have said to me, Matt, what's the number that I need to get to? I answer back, there is no target you're trying to get to because we're not trying to solve for the valuation or the ROI. We're trying to get to what we really think we can achieve with this integration. So I often do a lot of the work with synergies with colleagues effectively blind. And by that, I mean, they don't really understand what the impact of what they're putting on paper is because I don't want them to know.

37:16And then we'll determine whether or not we can actually do the deal after that. They need to have like an open, honest approach. The right way to do it. Yeah. A lot of people just want to do the deal. Yeah, that's why we reverse engineer it. This is what's going to get the right debt ratio. So what's going to get approved? I might be a unicorn then in the industry. I don't do that. It can do a lot of damage. There's no reason to do a deal just for doing a deal. Anyone can put that stuff on paper. And here's the big part about it. You lose trust. I would lose trust. I would lose faith with my stakeholders if I just overestimated everything and forced them into stuff they don't believe in.

37:47Because then they have to own that plan and they have to own the revenue. So if you look back at all those salespeople who have to then drive those synergies, and if it's impossible to hit, I've now impacted their ability to feed their family, take home commissions, take home bonuses. That's something I really think about. If we can't affect the cost synergies the right way and we end up hurting our own profile and then our own performance drops, I've now impacted my colleagues. That's the right thing to do. You do good deals, don't do bad deals. It's hard not to do bad deals. I'm going to tell you, therapy confession here on this podcast.

38:18In the early days, I'd do these interviews and like, yeah, deal fever, like blah, blah, blah. But man, just like early stages of trying to build an M &A program, it's like falling prey to all this stuff that I used to joke at. I had deals happen. I had one, we had some fraud and it was years after we did diligence that it was uncovered and it really hurt. And it hurt me because I take so much pride in trying to get to the heart of everything and say, hey, we did our best to diligence this one and we missed it. What could have you done different to like catch it? I would have done more on the tech deep dive, really spent more time on the tech.

38:50Also, it wasn't financial. It was actual tech. That was... It was actual tech. Yeah. The problem with the technology. And I don't know if anyone would have caught it in diligence or not. You kind of question those things sometimes when you have a deal that goes sideways and it makes you reconsider how you approach everything. But I probably would have just been more stringent on some stuff. That's true. It's okay to be tough. You learn through experience. Like you're not going to do this, what you did before again. No. Sometimes as an acquirer, you're doing diligence, but sometimes you have this fear of being too tough.

39:16That goes back to that whole being a good home. So if I'm really a stickler indulgence, am I hurting our view? But we have a fiduciary responsibility to properly assess a business and we've got to ask tough questions sometimes. And sometimes that fear of being known as a bad home or being too tough or being too difficult or halting a deal, everyone's looking at the deadline. We're going to close the deal at the end of the month and you're the guy that's got to stand up there and say, hey, maybe we shouldn't. That could be a tough place to be sometimes. That's another thing to strike the right balance on because even now, I've really pared down my initial diligence list just to keep it friendly.

39:47I'm not asking you for a hundred things. I got 10 things I'm asking you for just to start us building a model and starting to talk through what a deal would look like. And that obviously expands to more things. But that's part of it. It's kind of realizing like the NDA, let's keep negotiations simple. Let's keep this a good experience. But you got the flip side of you can't be too naive on this stuff. I guess there's no such thing as overly cautious. You should dig in and look at these things. Going back to trust, going back to that buyer versus seller-led, going back to programmatic M &A, standardizing those processes.

40:17The buyer-led process allows you to standardize. It allows you to get the big rocks uncovered. It allows you to maybe slow down to uncover the things you might miss in a seller-led process. Going back to that debt covenants and those problems that can pop up, getting those things right, getting all your assumptions down. The buyer-led process allows you to put all the pieces up in advance that you know are going to matter for your company and make sure you hit those check marks in a softer timeline. Because the banker is going to force you into that date. They're going to force you, hey, you said on your offer, you'd close it by this date.

40:48You get a little more of a relaxed process. And it's not by much. To be honest with you, I think diligence periods have dropped so much. One time I had a banker tell me, I should diligence the company in four weeks, which is a near impossibility. I don't even know if we can do financial Q of E in that period of time, to be honest with you. I don't want to run it long because everyone knows time kills deals. But you can probably get yourself an extra half a month, extra couple of weeks in a buyer-led process, which usually is more than enough just to calm down a little bit and give yourself that breathing room to get it right to catch everything.

41:17Other than the negotiations, just when things pop up, I feel like you build that working relationship, which is hard if you are running a bank process. You don't get that. It's a little bit of a dictated process. It's a dictated process, yeah. That is fun to be in. But if it's truly worth it, then sure, you could win the auction. they say never a winner when you win an auction it's because you've overpaid exactly yeah you know when you say break your debt covenants what usually triggers that just hey you drew too much debt on the company usually it's a combination of your ratios are off so you don't have like your EBITDA to debt to EBITDA ratios off or your stuff like that your cash flow is off compared to what you said you'd have then you get in trouble then you get in trouble yeah bank comes after you yeah it could then what you gotta work through them and no one wants to be in the zone of restructuring see if this gets bad CFO wants to talk to you in his office.

42:06Exactly. You said you would do this. Didn't happen. What happened? That's the toughest job. I thought being a CEO was the toughest job. I think even the CFO is like really the toughest job. It's because you're on the hook for future projection performance. That was, it's tough. The literal buck stops there. Like literal. You could just, the CEO's like, the CFO, what are you doing? I know. It's hard. It is a hard spot to be. And Cortez is the same place. We own that financial model with them and the underwrite of the transaction. Do you guys report up to the CEO, CFO? CEO. CEO. Yeah. Okay. I've seen a lot where a lot of feedback companies goes up to the CFO.

42:37I've seen both. Depends on how you do the function and where strategy sits. I'm definitely more that CorpDev is part of the strategy function and is helping to align the future position in the business. Is it a separate strategy group or are they combined? It's separate. Where I am now, strategy sits more in corporate development and alongside products, we kind of work together and collaborate. So product and CorpDev work together to set that. It depends on each company structure. If the CorpDev function is really more executional and really is just focused on not even deal origination, but just transacting, it's going to probably sit in the CFO department because it's more of a finance function.

43:09If it's more origination and corporate, like actual positioning and competitive intelligence in those kinds of dynamics, you're going to sit more on the CEO side. That's what I find interesting. It's always different where strategy, corporate dev and integration sits. Let's talk about integration. Like this is the magic of deals being more successful. I've seen the industry sort of wake up and be more attuned to it. Even for us, building technology. We've even are building so much more around things that attribute to early integration planning and creating continuity between diligence integration.

43:40What have you seen work well? Integration starts in diligence and you have to carry the same team members who are in diligence in integration. One of the areas where things fall apart is if you have separate integration intelligence teams and there's this quote unquote handoff of learnings, it doesn't work as well. Everything that you find in diligence becomes that which you action in integration. In order for that to work, you have to have the same people involved in the process. That's why I went and pre-picked all the people because you want those leaders involved throughout the entirety. Now, you might have a varying degree of supporting staff in integration who actually has to go affect all the different tasks.

44:14And that's fine. You can have a lot more people involved in integration than indulgence. So same team members, and you really want to have them continuing, taking all this information, they pick up indulgence and turning it into action and integration. What does that team look like? It's a function lead for every function in the company alongside the subject matter experts, depending on what you're acquiring. Okay, so I'll pick a function lead and maybe I can give an opportunity to pick up a sidekick if they need it. And they say, okay, you're going to be doing diligence, but you're also going to be building an integration plan.

44:41That's right. Do you have like a central integration office or anything? No, that's me. And then the corp dev department here at QuickBase, we have a operations manager, Brittany. She's wonderful. She helps organize a lot of that stuff. Technically, there's no like formal handoff from this integration function to the business. It's like just picked up by the business from the beginning. That isn't interesting. I feel like this is like an emerging new school of thought. It might be. It's always what I've done. It's like the pendulum goes over. You didn't have an IMO. You get to the point you're running like concurrent deals.

45:08So you're like, oh, we need to have an integration function. You set up this integration function and then you're trying to see the pros and cons of it. There is like pragmatic of how you integrate companies that could have a significant value. But then there's this handoff that you handed off to this IMO, and then hand it off to the business, which creates points of friction where here you're describing having the pragmatic approach, but it's directly owned by the business from the very beginning. And it just continued. There is no handoff between... There's no handoff. If only because sometimes what will happen is the integration team will have a different view on what matters and they'll have their own experiences related to, you didn't know this or you should have asked for this and you didn't get it in diligence.

45:44You end up with the diligence team focused potentially on the wrong things and integration focused on their things. And those two things don't connect. If you have two different groups, they either need to be really well coached and aligned and have everything organized in a way to make sure there is no opportunity cost to having the separation and that knowledge transfer. Why set yourself up for that risk? Have everyone on the same team. And usually what I've done, if we do need to do two deals at one time, you have your A list of senior people who work on the bigger deals. And then if you have a smaller transaction that you're doing at the same time, what a great opportunity to up-level those people and help them manifest and become leaders and be part of that deal.

46:21And it's usually smaller, so there's less risk. The corp dev team is there and they can check in with their direct report and their senior report if they need to. But then they can run that small deal themselves and then they learn. Now you've got two groups of people who can do it instead of one. I like this. I was going to ask you how do you manage this with concurrent deals because that's where things really get crazy. But I like that you're leveling up folks and giving them an opportunity to do what they're made of basically. You manage it through standardization and coaching. You get everybody on the same systems and the same processes.

46:49It's that 80-20 rule. You get everyone on the same stuff And then the 20 % of variability is just that deal-specific minutiae. The continuity would be the corporate development team making sure that we handle all of the 20 % of stuff that goes awry. And everything else is roughly standardized. So integration comprises of tons of decisions to make. And you want to keep a strong base of getting decisions and executing them. Do you supplement like steering committee, anything of this stuff, just to make sure you have a strong cadence of making those decisions? Yeah, we meet weekly. Who meets weekly?

47:18It's the leads, the function leads meets weekly. All the functional leads in one room all at the same time. So you have cross-functional. You don't have a third, like a set up steering committee. It's just, hey, we're there at that point. Do we just create this? Like big companies just create layers to create layers? Is that the... Maybe. There's definitely junior people, but if you trust the function leads to manage their specific function, they're the ones capable of making those micro decisions. And you just have to have trust that the head of tax and the head of HR and the head of product knows what they need that the company has.

47:46If a company's organized the right way, they all know what they need to get done. That's the thing. If you can get that 80 % like pragmatic and it's in a system that folks can follow, then trust the system. Then trust the system. Yeah, you trust the box to play in. And then the 20 % is that unknown. You're always going to have that. And then that's what you talk about. And you can focus on fixing those things. And all the other stuff, just they all know how to do it. Okay, so let's loop back to the culture piece. Because when I talk to integration folks and you ask them like, why integration goes wrong?

48:12They're always like, bad culture mismatch. Those deal people screwed this one up. Yeah. They just didn't think about the culture and blah, blah, blah. Exactly. They blame you. Yep. I'm always wrong. That's the problem with CorpDev. I'm always wrong. Evaluation is never right. The process isn't right. I'm really fascinated by the culture piece because it constantly comes up in this podcast. Even though I didn't ask to make this a culture podcast, it just happens that way. But I've been so intrigued by the schools of thought of, hey, bad culture fit, walk away from the deal. Hey, bad culture fit, it doesn't matter.

48:39You're going to make unique culture anyways. Just do the deal. Yeah. Makes financial sense, do the deal. And then there's this, I've seen this new school where it's, we have a very unique, empowering culture and a part of our strategy is going to be to get their culture conformed to our culture. Yeah, I don't think that works. I'm going to send you some podcasts. I would love to hear it. I love that this has turned into a culture conversation because I have a strong opinion around it. I do believe that you need to have the constitution to keep your culture. But I also don't believe that culture is binary.

49:05Culture exists in, again, in a square where people bounce around known frameworks. Some frameworks are very constrained and very tight. They don't have a lot of autonomy. And some cultures are very wide. Where you fit as a person, culture's alignment between you and your preferences and ways of doing and the company's ways of doing. That's really what it comes down to. That's why I believe it is identifiable through processes. And you can ask all the questions around how people work to kind of figure out if your way of working is the way that they work. And if those things are aligned generally, then you're going to be okay.

49:34I'm going to get you a couple podcasts. There's one I did with LCI industry and then the other Barry Waymiller. Okay. Multi-billion large corporations. Love to get your take. And it's kind of like the extreme, right? You sort of have this, we're going to acquire this company and just not even do anything with them. Or, hey, we're going to really look for culture fix the way we're going to plan to integrate them. Or we're just going to make new cultures come together if numbers make sense versus culture is our strategy. We're going to change this company's culture strategically to be like ours.

50:02I'm probably more on the end of if it's not going to be a fit and it's identifiable, we don't do the deal. An example of this I would tell you is we had a meeting a couple months ago where we were looking at the company and the incoming CEO needed to be the leader of this function. He needed to be the person who was going to take control of it and run it. He was an eccentric, which is great. He was actually a great person, wonderful, but he was a little bit of a bouncing ball and he didn't quite fit the culture and he didn't quite mesh with someone who we needed for that function. And it wasn't that he was a bad employee or a bad person.

50:33He was extremely successful, extremely intelligent, but he wasn't going to fit. And we decided, hey, you know what? We're going to go a different direction. And we were rather have, even though the technology was great and it could have been additive to our company, the culture wouldn't have allowed those synergies to manifest. It just wouldn't have let that M &A deal work. You can see that friction. And the other variable too is like the industries, I feel like they're very different in tech, especially like it's just, you're right. There's an expectation of what you're actually going to change versus what you're going to live with.

51:03Culture change is again, to me, the ability to say, Hey, we're going to go in and change that culture of that acquired entity, that is over-rationalizing. That's very hard to do. Anything you do particularly to set up the sort of win-win? I liked how you referenced that it's just as much change for your organization. Is there things that you sort of help with readiness or just anything in specific to make some great outcomes besides using Dealroom? It's advanced training. I do everything in advance. I know a lot of people say, well, every deal is different. We can't do anything until we know about this specific deal.

51:35and I don't believe in that at all. I believe that deals are roughly 80 % the same and that you can standardize most of that and you can set up your box of preference. One time I was talking about negotiating and they talked about mins and maxes and they said, if you change your min, then that isn't really min. Your min obviously wasn't that, you have a new min. You have to have the constitution to stick to what your principles are and know how to fix them and believe in them and that becomes what you train people around, that standardization. And then everyone is on the same page and aligned and they know what to expect and that fear goes away because a lot of people and companies don't have as much M &A experience.

52:09They're coming in and they've maybe haven't been a part of it. There's a lot of fear of the unknown. If you over-communicate and you standardize and you give them context and teaching, then they get more comfortable with the process because they know what to expect when it actually happens. And that's, to me, is the biggest key about doing this successfully across a couple of different feedback, poor codes is that advanced training. Do as much as you can upfront, knowing that it's going to probably change. But if you don't know what the barriers, the foundation is, or success or good looks like, how are you ever going to know what's a diligence?

52:36How are you ever going to know what a problem is? You're never going to know. So we as corp dev people, we have to set the table for what good looks like, what the process looks like. And then when we do make changes, we explain why that happened. So here's a process. Here's how we're going to report out findings. Here's kind of expectation for you to approach diligencing and surfacing those findings. This is how we're going to get together and discuss and address those things. You're just laying out the whole entire thing. But you're giving that process a little bit of flexibility. You're not saying this is binary.

53:04You're not saying that we're not going to change. We're just saying this is what good looks like to us. And then we will augment it based on what we know. But that augmentation then becomes known and communicated and understood as opposed to being seen as ad hoc if you never had a standard process in the first place. What's the hardest part of M &A? The hardest part of M &A is getting everyone to agree. You heard me joke. I'm always wrong. There's so many opinions and there's so many preferences and there's so many stakeholders that if you do it right, a lot of people sometimes say, I can buy something for the company.

53:32with a couple of people, but I don't believe in that. I believe you have to have the collective buy-in of the right people. That is also harder because you've got to get, instead of four or five people to agree, I've got to get maybe 15, 20 people to think that's a good idea. That's a whole conversation for us to have because there is that, hey, are you just the CEO who decides to do the deal or do you actually get the right stakeholders and committee to have consensus, which is technically the right way to do it, but much harder. It's like you said. Harder. And you see the range that it can, Here's the thing.

54:03When you get those 15, 20, whatever people, the right stakeholders in, and you've got a company that's the right company, it's easy. It works. Synergies just fall out. And it's not even hard. It becomes so much faster when you have that right company. And then everyone says, well, Matt, there's no right company. There's no perfect. I'm not talking about binary for the box of good. That box of good, it's got its wiggle room. But everyone knows and is aligned and agrees. And then when something falls inside the box, it just goes. It's easy. Like the golden rule for doing M &A is have stakeholder alignment.

54:32Yeah, 100%. Got it. Because you have one dissenting person, just like, I'm going to go back to my sports background. You got one bad egg in a clubhouse can infect the entire clubhouse. You got one dissenting stakeholder. You just know who they, for identifying them early. Yep. What's the craziest thing you see in M &A? You know, as much as I have stories about, from my sports days, about athletes doing dumb things or crazy things, I have more stories now about entrepreneurs and founders and CEOs and all kinds of stuff. It's probably what makes the job the most fun is the people you get to meet along the way.

54:58There's just endless amounts of conversation with great, smart people. How companies came to be, it's a favorite topic of mine of how this company came to be. So I've seen a lot of different things. The craziest thing I saw was a company years and years ago when I was a banker. And the guy who started the company was from Belarus, obviously didn't like communism. And we figured out through some diligence that he had been adjusting some expense lines using a management estimate of inventory value to reduce his taxes, which is obviously not good. And the answer he gave me was, I don't want to pay Mother Russia a dime more than I have to.

55:34And we all laughed because he didn't live in Russia anymore. But at the same time, he was so impacted by that upbringing that he had effectively adjusted his taxes to not have to pay because of that experience. And it was interesting to see him do that. We couldn't sell the company, unfortunately, because of that. He had to do a lot of work to right-size the business, but it was one of the more entertaining things I've seen along the way. Crazy stuff like that happens all the time. Happens all the time. Matt, thank you so much for taking the time. You helped me understand a lot about just this process, getting the right people involved, really what buyer-led means in contrast to a banker-led process.

56:05Thanks for helping me become better M &A scientists. Yeah, fun conversation. Thanks for having me. Really appreciate it. You've listened this far. Family, my fellow M &A science brother, sister, I'd love to hear from you. Reach out to me on LinkedIn. I always welcome the feedback from these podcasts, topic ideas, and criticism. I do actually get some criticism now that I've been asking for it on this sign off here. Actually, it is. Sometimes I get a little defensive, but after you soak it in, I honestly, it's helped shape even our lineup. Some of the approaches I do and things I shouldn't, shouldn't ask.

56:37So I'll take it. Sometimes I'll deflect on it. But most of the time, I welcome the criticism. Till next time. Here's to the deal.

56:56Thank you for taking the time to explore the world of M &A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M &A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email, Kisan, K-I-S-O-N, at mascience.com, or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter.

57:41Again, that's mascience.com. Here's to the deal. Thank you.