How a Tech Founder Transformed into a CEO Championing M&A Growth

24:53We get approached every month. I get five to seven inbound inquiries, different investors. I'm like, you know, a little hard hit. I want to get to 25 million error. Then it'll do something. Because I gave equity to employees and they're incentivized. when you have the P firm, right away I'm thinking dilution. And it's for me, the exercise of like wealth preservation that, Hey, if I do this, I'm losing up control, equity. And you did that, but that you came up with that piece of like, Hey, we got this pool of debt that we're going to use and really do some big, bold moves. That's going to walk a lot of value.

25:22Can you click me through this a little bit more of like what that thought process was to get you to like change your mind? Certainly to do M &A, it's really hard if you're small. We were approaching 45 million in revenue when we did the deal with Vista. That size, you can start to think about doing M &A. When you're 10 million and you're growing really fast, all you can do is hang on to your hat. I'm looking at really crappy deals is what you do when you're at 10 million. I'm a deal guy. I gave up all the operational stuff because I don't like doing that. I want figure out how to get the business to a point to do M &A?

25:56I think the calculus around anytime you're taking on a private equity investor and engaging a sponsor, you have to say, okay, yeah, I'm going to cede some control. But if I do a great job, I control the destiny of the company because as the CEO, if I have a great vision, those investors are just going to want to go along with me on the journey. And I think that's the thing that people forget. They think, oh, the financial sponsor gives me the vision. Sometimes that can be true, but it's not ideal because then your CEO, you're trying to paint by numbers and follow somebody else's lead. It's much better when the CEO and the management team have a vision and they say, okay, this is where we think we can go.

26:45This is how we're going to get there. Financial sponsor helps you think through things you might have missed in your plan, helps you think through how you're going to finance acquisitions and how to make the numbers work. But ultimately, you're in the driver's seat. And the other thing is, okay, if you do a deal with a private equity sponsor and there's looking for you and your team, now you can take risks that you might not have taken. And I think that's an important thing. That was an important thing for Bullhorn. If you look at my management team, everybody's been in this business a while. The least amount of tenure in the company is five years for my direct reports.

27:23And the most is over 20. I have a number of executives who've been at it 20 years or more. And so it's a very long tenured team. And what that means is they haven't been in the C-suite or the SVP or EVP level for 25 years or 20 years, they started their journey with Bullhorn at the entry level and worked their way up to vice president or director, vice president, eventually senior vice president, and some of them now in the C-suite. And I think when you have that, you have almost like a founder mentality. I really say like, yeah, I'm the last remaining co-founder in the business, but I have new co-founders, newly minted in the last decade, in the last 20 years, because these people grew up and they feel a sense of ownership.

28:12What that leads to is, okay, then at a certain point, because they grew up, they started their career, their bullhorn experience is like their whole life. It's like their livelihood. And so you do have to de-risk that a little bit to say, okay, let's get everybody focused on taking some risks and taking some bets as opposed to being, like you said, thinking about, I just want to preserve what we have. That's why sponsor deals can be really helpful. Having a great vision and having that relationship with investors that they're really aligned with that vision, ultimately creating a positive relationship.

28:48The bad is if it's some friction or you hear the stories of having friction and then you give up control and life isn't as nice as it was. That happens. You see it all the time. It's really hard to predict who's going to have trouble and who's not. We'll have to come back to picking up the good investors. I'm curious about that. I'm going to make a note on that. I don't actually think it's good investors, bad investors. There are such things as bad investors who behave badly. But most investors, I found, the last thing they want to do is a CEO search. That is not what they want to do. It's time consuming.

29:20It's stressful. It can break the business. It can lose lots of good talent along the way. It's really bad for them. They really want the original CEO who was at the helm to stay at the helm. What I see a lot though is that people struggle with the transition from either venture back or bootstrap to private equity back because it's so different. There's a high level of scrutiny on the finances. And if you're not a detailed person, you don't care about the finances that much. Suddenly somebody who owns a big share of your business does and they detect you do not care about the thing they care most about, that creates an impedance mismatch.

30:00It's like trying to put two magnets together. It's never going to work. Or if you don't care about operational metrics that they care about, we got to improve our cost to customer acquisition or customer retention. No, no, no, no. We just sell more software. Don't worry about it. Two magnets coming together. Or you're used to burning money every year and they want you to be profitable. And you don't understand why they don't get it. You got to understand that stuff. You really got to understand what good looks like for them. How do they make money and align with, okay, if I do a deal with them, I need to make them money.

30:36I need to help them such that we're going to make them two to three times their money in the next three to five years. If you don't know how to do that, then you will probably end up being one of those CEOs that doesn't work out. because they're going to figure out how to get to their return. That's probably the best thing is to get aligned on what those key metrics are going to be, what their ultimate goal is, profitability versus your growth, the returns that they're looking to make, and have that level of confidence that you can deliver on that. The M &A part of that story, do you already know that, hey, with this capital, you can make some bigger moves?

31:17Do you already have some thoughts? Is there like an initial pipeline that, hey, we could go after this company? Or is a P firm coming to you and saying, hey, we're interested in this because we mapped the marketplace out and see there's a lot of opportunities for you to consolidate? Vista was the latter. We created our own internal team at the end of our hold with Vista. Beginning as private equity led, then later as more internal. Yeah. So we brought it internal 2016. 2016. And so now today, when we go sit with a financial sponsor and talk about what could it look like, we have hundreds of targets in our M &A database.

31:55We've got them tiered. We know what their revenue is. We know how they're growing. We know which ones are A targets versus B targets versus C targets. We track them. We try to contact them once every quarter, at least once every six months and get an update how they're doing. We talk to their customers. We're gathering data all the time. And we know which ones are actionable. Here are A targets that we want to go after in the next 12 months together. That's a very productive conversation. How many deals have you done total? It's in the teens. Okay, teens. Yeah, high teens. How many other P firms came after Vista?

32:31First it was Vista. Then Insight and Genstar came in together at the same time and bought down Vista. and then stone point came in 2020 and bought a share from both insight and genstar well those your current shareholders yeah yeah so and they've all been fantastic every single one has been a great partner i think i've heard good things about insight i have now worked with them directly but i've heard really good things i can say great things about vista genstar insight and stone point they're all phenomenal and stone point we is now a primary shareholder we work with the most during the years that we worked with Insight and Genstar.

33:11They were super helpful, but both very different firms in the help that they provide. And then StumpPoint. StumpPoint's unique in that they have concentration in the human capital space and they know a lot about our customers. They own a staffing business, so they understand what is it like to be on the other side and be the customer. But they also own a vendor management business that our customers interact with and the buyers of our customers interact with. And so they know a lot about the human capital space, which is fantastic. Give you the good and bad about the private equity firms. It feels like it's really interesting that you got a lot of acceleration and the maturity of building your M &A muscle capability early on with Vista.

33:52In the SharePoint example, you're getting a lot of interesting market intel from them. It sounds like there are some like the right investors, you got alignment on what the goals are in the business that they do help you out quite a bit. The knock on private equity has always been, oh, it's slash and burn and cut costs. And yeah, of course, there's a focus on profitability. People's perception of it is, oh, profitability means you're like firing people all the time. That is not what we do. In fact, we like to hire people and grow the business. The business when Vista acquired us was probably 150 people.

34:28It's well over 1 ,600 today. A lot of the focus is on, okay, what about the M &A you do? The thing that we've learned that's been really great is like, how do you integrate these businesses into yours? A lot of people who do M &A, I don't know how other software companies do it across the board, but I do know anecdotally that what I hear from other CEOs is like, oh yeah, we acquired this business and we're going to leave them alone for at least the first two years. And I don't like that. And my team doesn't like that. We feel, and we learned this with Vista, when you go into a business and you acquire a business, the worst thing you can do is tell people, we're going to leave you alone.

35:08Sure, you can do that. But usually what happens is once you own the business, you see things that you want to change. But if you've said, we're going to leave you alone, and then you go to try to change, well, I just want to change this one thing. People say, well, you said you were going to leave us alone. Now you want to change our compliance. Now you want to change our benefits. Now you want to if you want to leave it alone. You could invest in the business. Now you own it. You should be upfront. We are going to change stuff. You have to be transparent. I think that's key. And you can't go in guns blazing and start making changes.

35:41Like, oh, we know best. In the early days with Vista, we learned that because Vista's playbook back in 2012 said, you go in, you catalog every single change you want to make in the business and you make it right away. We learned and they learned that's not always the best thing to do. because you make mistakes. So we together with Vista quickly calibrated like, well, maybe we need a period of time to learn about the business. But the first thing you do is you go and you say, look, we bought the business. Things are going to change. Dear employee, congratulations. You've been acquired by Bullhorn because your business is amazing.

36:16You built something fantastic. You worked for a great company. Now you're joining a great company and you should learn about our culture and what it's like to work here. And people will say, what about our culture? Congratulations. You built a great business, a great culture. It's been acquired now. And so you need to think about it as if you've started a new job. And the new job is at this company, Bullhorn. And we don't say that in a harsh way. We say it in a way that's like, we want to be honest because you're a smaller company. We're a bigger company. Our culture is going to be the culture that ends up staying long-term.

36:52You will become part of Bullhorn's fabric. And we want you to embrace our culture. We would never hire somebody and say, hey, we behave a certain way, but you can behave however you want because you're cool, we hired you, we're going to leave you alone. We have behavioral norms. Our employees need to adhere to them. And we call those our core values and their behaviors, like respond quickly to customers or give people the benefit of the doubt or always do what you say you're going to do. We expect the people we acquire to adopt these cultural norms. We tell people we're going to make change. we evaluate the business for three or four months and then we say here's our plan this is what we're going to do this is what we're going to change this we're going to leave the same and people love that they don't love it at first because people hate change but then once they embrace it and some people leave some people are like i wanted to be part of a small company okay good to know thank you for raising your hand we can work with you let's do a smooth transition maybe we'll even help you find something else if a big company isn't where you want to work but great Let's know that early so we can wrap our arms around the people who do want to stay.

37:59Because I think what happens is a lot of these businesses, you leave them alone, but they're working for a bigger company. You start to chip away at their employee experience. They're not at a startup anymore. The best people leave because you haven't gone in and gotten to know them because you're leaving them alone. It's like the worst thing you can do because the best people leave and the people who don't have great job prospects actually stay. you may not want those people. You have no idea whether they're good or bad. You need to get in there, evaluate people, make them part of your culture and see who's going to be a great performer in your business.

38:34And then say, we really value you. You're fantastic. We have a VP spot open over here. Are you interested in that? That completely changes the game, makes them feel like they're part of something that's special, as opposed to being an appendage on a bigger business. And oh, they don't really care about us. We don't matter. All they do is screw with us at the end of the year on our bonus and commission plan. That's the word. To me, it's the word. It's very proactive, especially around the change that you're communicating. This is like a new job. And I think that maybe it's going to give that same shock effect, but it's not keeping them in the dark.

39:07You're still keeping them in the light. And it came in that transparency communication that, yeah, there's going to be changes, but at least they'll come around and say, okay, these people aren't that bad. It's being honest about what it is. Because when you say we're going to leave you alone, that is not true. It's dishonest. Either people know it and they know it's not true. And now you've established that you're lying to them. Or they don't know it. And then they're horrified when you don't leave them alone. And they say, wait a minute, you told us you weren't going to. Oh, well, it's just this one thing.

39:38We're just making this one change. And the next two months, you do it again. And they're like, you have no credibility. I hate you. I'm leaving. And so it's like, be honest, that's going to change. We don't know exactly what yet. We'll let you know in three to four months. We'll have a plan, communicate it with you. We'll be open. People can appreciate that. They may say, I don't like it. At least you can deal with that. And you'd find out who doesn't want to work for a company of 1600 people. That's good to know. And maybe you don't lose as many people as you would have lost. And you can get in front of these problems a lot easier when you're up front.

40:14I like that, being up front and the cultural piece. I think it was a new job. Are there anything else that you do to make integration go smoothly and quickly? A lot of planning. We track all the things we need to do. And we have a database of things that we know we need to do. Stupid stuff that people forget. Oh, how are we going to cut over their email? Are we going to cut over their Slack? When is that going to be done? Have a plan before we even close the acquisition of when that will be done. So on day one, we can communicate, hey, everybody, you're going to get brought into our email platform or Slack on this date.

40:48And here's how that's going to go. And then all that stuff, there's like a million things. What about the website? Are we going to drape our logo over their logo? No, we're going to put a little banner at the top. You plan all these things and everything's planned out. That makes people feel comfortable. Oh, okay. There's a plan here. It's not going to be crazy haphazard stuff happening as people think of it. And that also prevents a lot of mistakes. If you just leave it to chance, oh, shoot, we forgot to update the website. There's nothing on the web. Then customer calls and says, I read you were acquired, but there's nothing on your website.

41:24All of a sudden now you have frontline tech support people feeling, does this company even know what they're doing? Horrible. So you got to get all that stuff right because customers see it, everybody's watching. And so you need to say, okay, here's how we do this. Here's the playbook of every time we were on an acquisition. I was going to say, you're probably building playbooks over time to really make sure you don't miss those details. And all you have to do to get that stuff right is put yourself in the shoes of an employee. Okay, how am I going to feel when this happens or that happens? And what questions might I have?

41:59Oh, are we changing email systems? Oh, yeah, they're going to ask that. Oh, yeah, we should have a plan. Then do the same thing, customers and partners. And if you do that, if you do that perspective take, customers are going to have a lot of questions. Why don't we have a frequently asked questions that we can give to customers or at least give to our sales and customer facing staff so that when customers ask, they can read off a sheet. Oh, yeah, yeah. We have no plans at all to end of life that product. In fact, we're going to be investing more. And now all of a sudden the customer goes, oh, that's cool.

42:31Really great. As opposed to like that. Oh, we just got acquired. I have no idea. That's like the worst thing you can say to a customer. They're like, great, thank you. I will create an RFP and I will go to the competition. It's important an exercise to imagine being a customer, what questions you might have. Imagine being an employee. So we create these FAQs and that helps inform some of our planning. And you can have that with customers, but probably other areas as well, like with obviously leadership or working with their own employees. Our employees are going to have questions too. So we have to create internal FAQs.

43:05Oh, what does this mean? What does this acquisition mean? What's happening? A lot of FAQs when we do an acquisition. But if you don't do that, it's chaos. You quickly learn, hey, we got to answer these questions once in a document rather than having every single leader in the business trying to come up with answers on the fly, giving the wrong answer. Now we're going to clean up the wrong answer. Somebody told the customer that we're going to end the life of product. Oh my God, why did they do that? Let me get on the phone with the customer and calm them down. So what could have taken five seconds takes hours.

43:40It's a lot of planning to make something really efficient. When you get the LOI signed, how much integration do you have planned? At LOI, we don't do a lot. Usually from LOI to closing, we're building our sort of, what is our plan for the first 90 days? There's stuff we know we're going to do day one, like update websites, press releases, FAQs. But then the 90 days after is when you go in and you say, okay, what do these people do all day? And what would those roles look like if we integrated them into our business? If they were using our support methodology, would their jobs be different? Oh, what tools did they use for development?

44:22Okay, we want to try to migrate them to our tool set. That might be hard. We'll leave them on that tool set, but we'll integrate them in. And who are we going to have lead that team who has experience with the tools that they use? All that sort of stuff that you've got to answer. Are the products already integrated because they're a partner? Great. They're not. How are we going to integrate the products? Who's going to own that? I was wondering if you try to identify big risks early, like even before signing LOI, i.e. the tech stacks are totally different. They're Python or based or.NET or something like that.

44:53Yeah. In diligence, we spend a lot of time on tech stack. We spent a lot of time on code quality and a ton of time on cyber. This is post-LOI. Post-LOI. A ton of time on cyber because it's very important to understand how has this company protected its customer data and its employee data in the past? And how are we going to protect it once we own it? Because the minute we close the deal, we own that. And so you really got to understand what are their cyber defenses? and most smaller companies are unsophisticated in that. Does that emerge as like, hey, this is going to be a red flag, we can't do the deal, or this is us having to really get serious about a roadmap to get this company up to standard?

45:38It's both. You had security so bad that you're like, we can't do this deal. Yeah, unfortunately. That concludes our intro. I feel like we got through that. Are you ready for the real interview? You know, I'm interested to just walk back at like the timeline of some of the M &A deals and really understanding the strategies of the deal. And then I guess for me, it'd be really interesting to really get an understanding of learning how you look at synergy. I think that's something even I'm trying to figure out looking at deals. Right now I'm looking at really shitty deals where I got to kill the product and move customers over.

46:06Did you ever do that before? Kill the product and move customers over. Yeah. I would not do that. I don't recommend that. Have you done it before? In fact, when we first started working with Vista, we acquired a product that had a ton of overlap with our core product. And so I said, we don't want to sell two competitive products. Should we kill it? And they looked at me like, never kill a product. If you say we no longer support this product. And it's funny because we had a competitor that killed the product line that competed with Bullhorn. It was a field day for us. And they called us and they said, do you want to buy this business from us?

46:46And we're like, no, I don't think we want to buy it. And that was when we were venture back. our thesis was if they kill it and they shut it down we're going to get 70 of the customers and we did if you acquire a business and your intent is to say i will no longer offer that product anymore and you must move to this other product you're just going to lose the customers because nobody likes to be forced to change software it's an awful thing people hate especially if it's like mission critical software that's really important the best practice would be you acquire the business they have a product line that you don't want to continue to invest in you have to maintain it you have to continue to fix bugs make sure that it if there's stuff you got to stay on top of regulatory standpoint you got to stay on top of that stuff but you can tell the customers hey we really want you to migrate to our flagship we're never going to force you to get off this thing unless something maybe 10 years from now we might have to have that conversation but we will support you, but our intent is for customers to migrate to this platform over here.

47:51And that works really well because customers get that. They're like, yeah, I get that. Okay. Your product's better than theirs. Okay, fine. And if your product's not, they'll say your product's not better. Here's what I would expect your product needs to do. I'm going to migrate. Okay. Do those things immediately. Close the gaps. We've done that before. We'll go in and say, okay, we know our product has some gaps. We close them. Will you migrate? And eventually customers will migrate. Now they might go to competition over time, but they're not going to rush for the door. You've done that before where it's acquiring a business, but you have a very similar product.

48:27It sounds like a big piece of it is understanding where the feature gaps are. If it's addressable, then you can eventually move those customers over to that product. That's right. But if my competitors are listening and they make an acquisition, they should definitely end of life the product immediately. Yeah. So if you do that fast, that's what's going to happen. They're going to scramble. But if you... Unless you can be with Bullhorn because then it's the right thing to do. It's the right thing. Yeah. Force the customers to move. You're not. Then put a nice runway in there and really give some time for that to happen.

48:58Nobody wants to be forced to do anything. Nobody likes that. I would only do it if you intend to continue to support the customers that want to be on that system, at least for a period of time. What is that? 12 months? A year? Longer? Years. Years? Then you'd keep the product at maintenance mode, basically. Yeah. And that's fine. Customers understand that. Okay. You're not advancing this product line, but I love it and I want to continue to use it. And I'm paying you every, especially if it's SaaS, totally different story if it's client server, but if it's a recurring revenue stream, like why wouldn't you continue to keep that?

49:33Keep the maintenance and then just run it and try to move the customers over as you You don't have to invest a lot in R &D to maintain a product unless the product has terrible issues or something like that. That's true. Can you give me a little timeline? I'm just curious, what did the first deal you did look like? What drove you to even do the first deal? The first M &A deal we did with Vista, we bought two companies at once, Sendouts and MaxHire. And we announced them on the same day and they both competed with each other. And that's where that competitive dynamic came in. And that was a blast because you're negotiating with two competitors and you're kind of hinting, well, I might do a deal with you, but I might also do a deal with somebody else.

50:17And you probably wouldn't like to read that press release. And then at one point, Vista said, why don't we do them both? It went from telling them we might do a deal with one of you to like, hey, wouldn't it be great if all three of us did a deal together? and it was super complex negotiation, but it worked out really well. And both CEOs of the businesses loved the idea of the combination of the three. How did the negotiation go? Did you get them all together in a room? No, no, no. It was shuttle diplomacy. No, that would have been weird. But I would go and sit with one CEO and say, hey, here's what we can do and here's what it would look like.

50:56But I'm also talking to those other guys. And if we did something together, the three of us, It could be really great. And your employees would probably really, all my employees would love that. That would be so cool. We've hated those guys. So if like we don't have to compete anymore, we could put our forces together. It could be really great. And in fact, customers like that too. They like the notion that these three companies were coming together to create the best solution possible. And some of the customers didn't like that. Okay, my solution didn't end up being the best solution, but it did actually, it played out really well and that we were able to, the three of us, took the best features of all the products and put them in together into one and it ended up being great.

51:37I'm trying to understand the driver of that deal. How do we feel like there's the three buckets? Either the tech, the customers, or the tech? Well, this is an interesting one. All three companies, Bullhorn, Senhance, and Maxhire, were facing, okay, we built our original flagship products in 2001, 2002, 2003. All three companies started around the same time. All competed. Bullworn was bigger. But they had all built on the wrong tech. We had built on Coal Fusion. They had built on.NET, smart clients. So they were making people install software on the desktop to run the software. We were browser-based, which is probably why we ended up being the biggest.

52:22But we had to update our backend. And they had more features and their smart client product was faster than ours in certain functions. And they knew they were going to have to invest. We were going to have to invest. These were businesses that did not want to invest millions of dollars in R &D to re-platform. And so we said, rather than do that and fight us, why don't we join forces, make one best-of-breed product on our platform for our joint customers? And that vision actually helped codify like this will be the best way forward. That's interesting. It is a pretty powerful vision for the market.

52:59To do that, you had to replatform and you bring these companies over, but you're not like you're rebuilding a feature set across the board. You're combining it into one. Rebuild all that. We rebuilt the Bullhorn platform with the product lead for sendouts became part of the product team at Bullhorn. So he was deeply involved in what the new product user interface would look like. And then there were some features in the MaxHire product that people loved. And we would talk to customers about how do we replicate those in the new platform. It's almost all three, the tech, customers, and talent. Yeah.

53:35It wasn't free. Well, no. But what's interesting about that is the product lead for Sendouts ended up leaving Bullhorn a few years later, started a company called Hearfish. And he built a product that was fantastic marketing automation product for the staffing industry. So we ended up acquiring that company once he hit around a million, million and a half in revenue. And that has been one of our most successful acquisitions we've ever done. How do you look at timing on doing a deal? Because it's a really early stage company to buy at like a million revenue. Really early stage. But it's a big win.

54:14Product market fit is really important. And I look at two things. One, what do the customers say about the product? And I get very nervous if I ask a customer, what do you think of it? They're like, yeah, it's good. And then I say, okay, what do you wish it did differently? And they can't tell me. With Hearfish, my customers were telling me, product's really good. But you know what he's got to do? He's got to fix this and this and this. And then he'll be ready for prime time. I hear that. That's product market fit. The product is providing value. Customers want more of it. They're thumping the table saying like, this thing needs to do this and this.

54:53You have achieved something great. That tells me this isn't just the revenue is going to be, it won't be that sticky. That gave us the confidence to buy a company at a million and a half, rather than waiting until they got to 10 million. You mentioned earlier, like horizontal versus vertical. I'm thinking of that, but I'm also thinking close to your core, further away from your core. There you go. What does the thinking look like around that? You buy a business, it's in recruiting management side. And then you, is it like, here's a really light product, but they have their own customers. We leave it alone.

55:26Then you do something that's further away. How do you sort of market map that? I mean, the best acquisitions we've done are ones that are products that our customers could use that we don't sell. Same customer. But you look at it as vertical. New product. That's cross-sell opportunity. Right. But you could also say we have done some deals that are, hey, this is a new customer segment. New geography. Yep. That's an easy one. We've done re-deals in the Netherlands now to really bolster our Netherlands presence, which has been great. But it's still the same profile. Who's your biggest customer profile?

56:07Of the top 10 staffing firms globally, we service, I think, almost all of them in some capacity. So staffing firms, basically, that's your core customer base. So a good example is we spent most of our time servicing staffing businesses. people would always ask about what about exec search what's kind of a different business than a contingent staffing business or a perm placement business so we acquired a company that did exec search software and similar but there are some critical differences in the software that's actually been a really good acquisition because we can cover the the accounts with our existing sales team they're calling on those accounts anyway because sometimes they're in the database not tagged as exact search.

56:55And so we tend to call on those customers. And so now having a product to sell them is great. But that's an example of an adjacency. And so going after a different type of customer that you don't service well. I get that. What about like a go-to-market? Like maybe the staffing firm example, where you have a direct sales model, you're selling a certain profile into the staffing firm. Here's another company that does something totally different. Maybe it's more inbound or inside sales and they're actually hitting another profile to sell their product. And it could be similar-ish. Or maybe it's like hitting a different size of firm.

57:30We will look for assets that target a different buyer inside of our customer. So CFO or the payroll department or compliance. And so we'll buy companies that service that side of it as well. But what we won't do is say, this business is selling widgets to manufacturers. I don't know anything about manufacturing, maybe a little bit, but automotive. Oh, if they're serving a completely different industry. Yeah. We're very focused on contingent labor, exec search, human capital providers. That's who we focus on. And so TextKernel, they actually focus on providing software to a lot of the software players in human capital space.

58:18So now those are our customers. But again, it's okay. It's all related to human capital. And so we feel comfortable in that domain and recruiting. Like we get outside of that domain and it's, oh, okay. We should go sell software to hospitals. Yeah, I'm not good at that. Got it. So let's keep that domain focus. And then it sounds like cross-sell is sort of the gold. Like if you can find where there's a clear cross-sell, like here's a product adjacent but not too far away that your existing team could sell it. that seems to be the biggest win. What about the geographies? Like going international?

58:53Like when did you start doing that? We did that in 2008. We sent some folks over to the UK to help open that market. And we hired a managing director who's still with us today. And it's fantastic. You went organic. Started building an office, setting up shop there. Yeah. When did it come to the point to say, hey, we should accelerate internationally with M &A? When we wanted to go into mainland Europe, found a business called Connexus in the Netherlands. And so we acquired that business. We acquired two other businesses in the Netherlands, as I mentioned, TexKernel in the most recent. And so now we have a big presence in the Netherlands.

59:29Fun and easy? No. Doing business in Europe is very different than doing business in the United States. For instance, they have something called the Works Council. You can't roll in and say, hey, we're going to make these changes to the, oh, these salespeople are going to have a different territory. Time out. There's a Works Council that you have to go before. It's made up of employees. And you have to talk to them about any sort of personnel changes you want to make or any changes to sales territory or compensation plans. It's much more complicated. Regulatory scrutiny on businesses is much higher.

1:00:02Even privacy, all that stuff. Very difficult. But why do businesses do it? Because you can still generate an incredible revenue stream and income and profits. And it's great, but it's hard. It's different, especially for Americans who are not used to that kind of like regulatory environment. Don't do it for an ego. Have a good business case. That's like a whole topic we can cover. I was curious about the real early part because a lot of these are M &A deals or relationships. In that one example, when you did the first acquisition, two companies at once, that's a lot of conversations. I wanted to get an understanding of how do you approach it?

1:00:38Is it, do you have team members in-house that are really facilitating these early conversations? What's your approach? Yeah. So I mentioned the MD who opened up UK for us. He now runs corporate development. His superpower is he loves deals. He really loves deals. But his superpower is building a bond and a connection with the selling CEO, whether it's a founder or CEO that's been brought in by investors. He's really good at understanding what they're trying to achieve and what they want out of a deal, not the financing. A lot of times it is about you need to hit my number and I don't care and I'm a mercenary.

1:01:17We see that. But we also see CEOs who really care about their product or their people or other things. You have to navigate that. Okay, what are you trying to achieve? Some CEOs, they care about a press release. How's it going to look? And you have to understand that psyche and get inside their head and say, okay, if I were them, what would I want? and how would I want it? And Pete's very good at that. Our corp dev team does a lot of that actually in trying to understand seller motivations. He's all in from London? Yeah, London. Yeah. Our SVP at corp dev also is in London. So yeah, we have a London-based, maybe it's like the British accent thing helps.

1:01:57I don't know. Maybe, but you're still doing a lot of domestic deals. We are, yeah. Buy back and forth. I feel like you'd have to face-to-face to really get that kind of rapport and understanding of somebody. You do. You have to do some fair amount of face-to-face. Well, that's the key thing. build a relationship and really understand what's the motivator and drivers. Yeah. What's the craziest thing you see in M &A? I think the craziest thing was during the pandemic, during lockdown, I was having conversations with the team from Stone Point about, hey, when we get out of lockdown and things open up and COVID's behind us, we should do a deal.

1:02:36And at one point they said, you know what? I think now is the time to do a deal. And this was like August of 2020 when the world was really not recovered by any stretch. And it was a big deal for a firm Stonepoint Capital is not thought of as risk-taking. That was a very bold move. And to Jared Levine's credit at Stonepoint, he approached that at the right time in August of 2020. He approached us and we said, okay, if you hit this price, we will sell you the business. Now, in our view, the business was uncertain because we didn't know whether or not the staffing industry was going to shoot out of this thing into growth or have another period of lockdown in December.

1:03:24We talked about if there's another lockdown in December, that would be harmful to our customers. And so maybe there's some risk here, or maybe it's a good idea. Now, it may not be the highest price we could possibly get, if things take off, but it seems like a good risk-adjusted price. Sure enough, things took off, but we did the deal. It actually worked out really well for StonePoint. And they were the beneficiaries of the fact that the staffing industry had this huge growth spurt coming out of 2020 into 21 and 22 and continued into 23. We did really well. And StonePoint is really happy they did the deal when they did.

1:04:02Now, Insight and GenStar might've had some hindsight of like, Like, well, if we had waited six months, we probably could have sold for even more. But they also didn't know whether or not there was going to be another lockdown. And okay, they rolled some equity into Stone Point's deal, which allows them to feel good about the equity they maintain and retained. I thought that was crazy. Like, we couldn't believe it. We kept saying, is this guy for real? Like, we're in the middle of lockdown. Yeah. We're doing a deal over Zoom. I haven't even met his partners in person. I haven't seen my own team in six months.

1:04:34This is nuts. We didn't even have a closing dinner because nobody was getting dinner that time. People were still terrified. You got to give Jared credit at some point for leaning in and being like, okay, I believe. I want to own this company. Yeah, the price might seem a little aggressive at the time, but in hindsight, it really worked out. Yeah, it's doing deals during turbulent times. Yeah, it was great. We all thought it was crazy. None of us could believe it when it finally closed. We were still like, did that actually happen? How can we celebrate? We can't really even celebrate. Zoom cheers?

1:05:06Yeah, Zoom cheers is lame. I know. That was like the lamest thing. Yeah. All right, this has been a great conversation. I learned a lot. Helped me become a better M &A scientist. Yeah, I really enjoyed it. Thanks for having me. Those of you still listening, fellow M &A scientists, I appreciate you. Always welcome feedback, criticism. I learned a lot from criticism. Reach out to me on LinkedIn. Topic ideas are things that we can do to improve. Until next time, here's to the deal.

1:06:03have. 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. Again, that's mascience.com. Here's to the deal.

1:06:46Views and opinions expressed on M &A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational.