M&A Deal Sourcing in the Tech Space

22:53So$1.6 billion buy price. 24 months almost to the day. Two years later. Not 10, not five, two. We sold it for three plus X, almost$5 billion. What did you see that other people didn't see? Because no one else was bidding on it, really. And Vista was able to get a really... Well, people were bidding on it, but certainly not for multiple billions of dollars. So what did you see? What I saw was a platform that characterized the right way. Instead of the knock on the door, hey, this is a marketing automation tool. You should buy it. No, we're actually an experience and engagement platform. a rethinking, if you will.

23:30But that rethinking of how to characterize it and then how you ultimately unpack it with a vision, blah, blah, blah. That enabled us to think differently about Marketo, to offer new solutions, build in new directions. So we did all that. The reason I share that story coming back to your question is, I know that people buy products, companies buy platforms, and I know platforms. Lots of people say platforms, they really don't know it. If you look at what I did at SAP, so Vishal Sika, Dr. Vishal Sika, who was part of my keynote today, he's got an amazing company they build called Vi and I. They build a conversational finance solution using large language models.

24:10Very cool. We've integrated that with Bumi. But when he was building HANA, I was asked when I was at SAP specifically, all right, how are we going to take an SAP database to market? Think about that. Before HANA, that was a laughable concept. SAP database, what are you talking about? SAP resold Oracle. It was not a thing. Vishal defied that notion, built an SAP database that is a very legitimate powerhouse for SAP customers today. I had the great fortune of working very closely with him and other brilliant people. But the notion was, we're going to build a platform where we have really no right to win right now.

24:49We're not Oracle. We're not these people. And so when I'm pitching the entrepreneur, I'm saying, I can help you find that right to win. I can give you the network that I have, the ability to scale and build a platform. I get if you stick with it for another 10 years, may work out for you. But if you become part of our organization, we will double, triple, quadruple in size and reach a scale globally that maybe with my help, you might be able to get to. I don't want to fall into the unicorn coming down the mountain category. That's not it at all. But I just think after 30 years of doing this, I know how to scale.

25:24Let me see if I'm hearing you here. Strength, like knowing your strength. We talked example around scale. I think there's this element of your bringing this combined vision to the entrepreneur. And that correlates with this combined vision of getting there faster with the higher level of certainty. A hundred percent. We know all the scary stats around X percent of startups fail, blah, blah, blah. And that is true. The road is littered with lots of failed technology startups. I think entering into that synergy and combined certainty, the right entrepreneur will find that compelling. What does it look like if we roleplay that out?

25:57Hypothetically, if you're looking for M &A software, you're trying to pitch in what that would look like. How would you approach it? So like a combined M &A software and Boomi? Yeah. All right. Now we got a full cycle. We got the whole front end, pipeline, diligence, and we can actually do integration. We're going to talk more about this. where we can actually help companies combine their data so they can hit their realization on their investment thesis much faster. Such a beautiful story. All right, here we go. Maybe I gave you too many clues on that one. I got it. I got it. I got this. First of all, Boomi's got a platform of over 20 ,000 customers.

26:30It's a good start. The vast majority of those being mid all the way up to the world's largest organizations. We like that. It's a good starting point. The second thing is we're connected to every single critical application and database in the world for those customers. All of them. We have customers that use Boomi to connect thousands of applications, creating tens of thousands of business processes. We have the data that matters. I mean, talk about the world of M &A. We want to drive M &A and science. I believe the convergence of those terms is compelling. You need information. Not a little bit, a lot of it.

27:03And the more information that you have access to, the more information that flows into your application, the more compelling your solution becomes. There is no company that can walk you into that level of information like Umi can. I love it. We should do this. We should do this. It's great. I'm sold. Let's get into negotiations. Speaking of negotiations, I'm wondering if you're seeing some value gaps. We just announced two deals and I always feel like it's just we had some great run in 2021. The 2021 vintage. Yes. Unbelievable. I had a friend told me a term sheet of 20x. I was like, what the hell?

27:36Revenue. Yeah, take that. As I told him. For some reason, they had a reason to get out. But still, really high valuation. And then these firms are trying to cling on to how they're going to get that money back. Expectations on exits are still high. Yeah. So how are you managing bridging those gaps when you're dealing with negotiations? First and foremost, the hard part is there's still a lot of hangover from the 2021 kind of funding craze, right? And the valuations. The first thing I always say in these discussions and negotiations is, look, if you're aware of a multi-trillion dollar stimulus package coming down the pipe, I'd like to know about it.

28:10But those days are gone. That happened during COVID, potentially the financial crisis of 08. We had a stimulus package right after that. But the multiple multi-trillion dollar stimulus packages that just flooded the market with cash and raised the ability for organizations to accrue and raise ungodly sums of money. I'm unaware of that happening currently. Number one. Number two is I get the expectations that were set with those 21 multiples. Totally get it. That's awesome. All you have to do is look at math. We have myriad publicly traded organization examples right now. And even in our industry, look at, we had Silver Lake that bought Software AG, I think.

28:48They acquired Software AG and that's a good company. It's even big revenue, blah, blah. And then IBM bought the web methods chunk of that. So again, we get a multiple exposure. I generally point to what are public markets actually dictating from a payment standpoint? Now, look at the Wall Street Journal. Just three weeks ago, there was this whole rumor mill that Salesforce might buy Informatica. And the rumor was somewhere in the$12 to$14 billion range. And Informatica is a good company, but that would be like a... Sort of knowing their revenue. I can't say it exactly. It was like a 7x multiple would be my guess on revenue.

29:21It was 7, 8, something like that. So that's not 2021, hey, I'm going to get 20x or 40x or whatever the crazy talk is. It's still a good multiple. I think we live in a normalized environment, not an abnormal environment. What we saw from 2020 to potentially the late 21, early 22, that was abnormal. You have to look at the macro for 30 years and multiples minus that kind of spike in that time, steadily improved, blah, blah, blah. But my argument is always the same. Show me how you're a durable company that's going to grow greater than 20, 30%. Show me how you're going to be profitable greater than 20 plus percent.

29:59then I'm willing to pay a high multiple. I got asked to come into Boomi. Boomi's been a terrific, consistent, 20 % plus growth company. Even at half a billion dollars, continue to grow north of 20%. That's good. Really good. In fact, the challenge with Boomi was, are we profitable? Can we walk and chew gum at the same time? And everybody has started to ebb towards, oh, profitability is a good thing. You can pay your bills. And so this year, Boomi will be, for the first time in its history, a rule of 40 or better company. So we'll be 20 % plus growth, 20 % plus profit at scale. That's unique. If someone can bring that to me, I'm all leaders.

30:34Up front on the parameters that really are attractive for payout premium. Otherwise, you're looking at the multiple exposures that you can find private or public. Yeah, the reality is, I'd say it's a dime a dozen, the entrepreneurs that can take $100 million and turn it into zero. Right. Any other tips on negotiating? Lessons I can learn from you. Having that strong vision for your own company, what we already talked about and leading with that number one. But number two, finding like-minded people, but they're willing to challenge you. Those are the kinds of people that I love to be around. So that's number two.

31:06Number three on negotiating is always level setting, as we've talked about. If you're owned by a private equity firm and you live in reality and someone else is owned by a venture capital firm and they don't, then it's really important to quickly align on those elements. Don't waste each other's time. They want 20x, you can pay six, whatever that multiple may be. So those are things to think about. But I would also say helping these entrepreneurs understand the kind of network that you can build. I'll give you a case in point without getting into too much detail. There's a company which when I was running CEO of iSIMS, this was before TA Associates came in and bought half of the company with Vista Co-Invest.

31:45We bought a video hiring technology with a brilliant founder. Brilliant guy. I remember saying to him, I know that you may not be getting the price that you perfectly aspire to. But if you do this with me now, I promise you, I will come to your aid and help you in your future endeavors. He has a new startup. We just demonstrated their new technology on stage today. It was part of the demo at Calpa. So it's the technology that's there. Less of a pitch and more of helping entrepreneurs understand that this software world is as much about the network as it is the technology itself. Yeah, that's true.

32:23And I think I know what you're talking about. I'm pretty sure it makes sense because we talk goes back to the scale thing because they got that business to a point when the scale factor really wasn't in reach. Yeah. So strong vision, fine, like-minded, willing to challenge, level set, the network. The network. Let's talk about Boomi itself because M &A, there's a use case for Boomi and M &A. And I wanted to hear a little bit from you about how's that work? The currency is data. I think we all know that. And when it comes to M &A, like there's a lot of use cases in M &A, but the biggest one is you can only move as quickly in M &A as your ability to integrate and metabolize companies, not how quickly can I sign agreements and buy them.

33:04That's the easy part to a certain degree. The hard part begins when you're tying in culture and human beings and process and data and systems and all the stuff that comes after M &A. There are really two use cases. One is Bumi being able to find, discover, connect, and access data that can help you in these M &A situations. The other part is, can I fold this in? Can I tie in the business processes? In fact, that is a massive use case for Bumi is, hey, I just bought a company. I need these things to talk to each other. And quickly, by the way, Bumi is often spun up for the, hey, you've got Oracle, you've got SAP.

33:42how are we going to produce consolidated financials? Enter Boomi. Integrating data. I feel like this is the biggest thing I'm seeing when I talk to integration practitioners. Yes, there's a lot of talk about culture, the leadership alignment, those things are really important. But so much is becoming more around the data. How quickly you can get the data integrated so that you have access to it. And obviously people want to get the quick wins. You bid this ambitious investment thesis. You're betting on all these synergy realizations. It involves the cross-selling, which everybody always puts in there.

34:12You can't have two different databases the data sits on and we can't have the redundancy of... I'll kind of adjust my jacket. As I say, we've all won acquisition arguments based on very strong cross-sell synergy projections. We have. The very next thing that comes out from that is, all right, how many of us have experienced, okay, we bought the company, that's great. But this one Salesforce over here that came from acquiring parent A, other Salesforce over here from just got bought company B, none of the salespeople can access an opportunity. or they're stepping all over each other. That is so fundamental and basic and it's trope-ish almost.

34:45Come on, man, we live in 2024. This should not be that hard. We can share information across different CRMs and financial systems. It just tends to be an afterthought. And I would actually just ask a really basic question up front before you go into M &A, which is how are we going to share information between... I'm talking data, not like I'll email you about an account later once I establish it as mine in the CRM system. But how are we going to share information? How are we going to collaborate? Those questions are often asked too late. I was going to say, do you use Boomi? Then how do you make your integration successful?

35:17We use Boomi. That's it. We're Boomi on Boomi here. That's the thing is we talk about Boomi on Boomi. And we will be with this solution as well. The reality is smart people with secure, but unfettered access to real data and information. Smart people and access to information generally make really good decisions. They generally do. But how often have you heard about the project, the acquisition that failed because we just couldn't get these teams to talk to each other. Oh, we couldn't report out to the board on were we actually cross-selling the things that we wanted to sell. It's too late when we found out.

35:48And I just find that these fundamental questions around access to information, sharing the data, if it's an afterthought, you've already failed. What are the top three to make integration successful? Obviously, you've got the booming data integration, but I don't think in your philosophy of setting this up with leaders to make them feel successful. I'm going to change my altitude for 30 brief seconds. Here we go. And then we'll come right back to it. So borrowing Shantanu's change in altitude statement from earlier. I believe that data is not... There's that whole phrase, data is the new oil. I could even just say data is the new, and I'm pretty sure every listener would say oil.

36:19It was a whole thing. We're all guilty of saying it. It was a cool thing to say 10 years ago, we all said it. I believe that data is not oil. I believe it is sand. It's infinitely abundant. There is a ridiculous amount of it. Some of it's useful if you melt it, turn it into things like silicon chips and glass, but there's an enormous amount of it. you just have to be really picky about what data you use. And that's the whole thing with Boomi. It's not, let's just carpet bomb the heck out of data. It's precision strike data. What matters when you get it. So the three tips are know what information you really need.

36:50What do you really need? That's the whole data is the do oil, blah, blah, blah, sand thing. Time will tell if that metaphor just worked there. But it's knowing what data you actually need to be successful. That's number one. Then number two is knowing how do we move information between our different systems to create outcomes. And what I mean is I think oftentimes organizations will say we're company A and we're buying company B in an M &A scenario. And one company has a culture of we have an inside sales motion and we move very quickly with our sales model. The other company would have maybe an enterprise sales model.

37:30And these deals take three times as long and they're more complicated. I would say that the second point is the cadence of data. How are you moving it? When are you moving it? It's more the when and how quickly are you moving data? But I'd say, what data do you need? How quickly do you need it? Is it real time in nature? Should have just started there. I think that's the second thing. And then the third, and really this is one of the most important things, will we consolidate our data over time? At Booby World today, we showed off a technology that with a few clicks using an AI agent can synchronize all of your data across Salesforce and Shopify and the list goes on.

38:10Why would you want to do that? I can guarantee you there is not a company on the planet that has a single definition of the word customer. You can go into one application and find the word customer. That's terrific. Go into the UK and that word is... household or account. Go to another country. And so you'll find account, household, customer, whatever it may be. They all mean customer, but not really at the same time. So you have to find a way to say, how do I make a kind of golden record for me to have a common conversation? If I'm going to buy a company and I'm betting big on the cross-sell upsell, that's great.

38:48What if my data is wrong? What if I don't have an accurate definition of customer between company A and company B. And we can solve that. That's part of what we do is say, hey, we can come in a few clicks later and you've got this magical golden record across customer. So I'd say making sure that you have accurate information is critical to success. So focus on the information you really need. I'll quickly need the information and think of your roadmap in terms of consolidation of that information over time. Exactly. It has to be right now. I'm sure I could have gone with the whole four Vs of data, veracity, blah, blah, blah.

39:20But I think what matters is really those three points in an M &A context. You're a tech guy. I'm a tech guy. Let's talk through the AI affecting the M &A space. I saw some kick-ass demos and my favorite was taking like qualitative instruction. This is what I want to do. I want to connect this data set with this data set and it builds it all out. And I was like, this is like the power of AI. Where do you see it? I want to, let's get to the AI vision. Most people are going to label me as like the AI. I'm on the bandwagon and a fanboy, whatever. Look, I haven't seen a technology in my lifetime where I can type in an abstract concept and then somehow this technology, in this case, it's using parameters and reward tokens and all.

40:01It's powerful technology, these large language models that can then come out and take a specific and darn near exact action based on an abstract task. That's what humans get paid to do for, right? It's like, oh, I have an abstract situation. I'll look around, figure this out. And then I'll get very specific in software, clicking buttons and moving records and things like that. What we've introduced is based on large language models. Credit where credit is due. The world is changing at a rate and pace I've never seen. Not in my 30 years of tech. And that rate and pace includes, we introduced a series of AI, what we call agents today.

40:36And these agents, they're helper agents that can do things like, I could say, Hey, I'd like to take the most recent five records or purchases in my Shopify system. every Tuesday and move those over into NetSuite. Just do it. And it just does. We've kind of reserved that work for the gods, the humans. We're like, hey, well, no, there's not really an AI system capable of, A, understanding what you really mean, and then B, connecting to those complex enterprise systems, C, verifying the security, D, identifying those records, and then going, yeah, I'll just move that and create an automation to do it every Tuesday.

41:12That's a human activity. And we just introduced our orchestration agent that can do all of that. It's literally taking your abstract request or notion and then turning it into a specific set of ones and zeros and ask. And I look at things like that and I just can't help but think that every single enterprise application, everything we've imagined for 30, 40 years, it has to get reimagined. These applications will begin to reason. And they should because infrastructure is too brittle. I always use the example of, I was meeting with this customer one time, and they use Boomi to screen scrape websites to collect data.

41:47I'm not saying that's good or bad. That's just what they do with Boomi. Now, they're doing that with their partners. They have permission to do it. But in that screen scrape, if the field moves one pixel, it breaks the integration. Shouldn't it be smart enough to just adapt and go, oh, it's the same field. It just moved one pixel to the right. I use that as an example of technology is too brittle. It's not malleable. if you have small language model, SLM-based connectors that go, oh, actually, it's the same. I'll make the adaptation here and then I'll just let you, the human, know and you can approve it.

42:17That's great. I also use the example of expense reports. Only I'm just on a holy war to get rid of expense reports. I hate expense reports. I'm with you. I hate it. I hate filling them out and I don't really fill them out anymore. My assistant does that, but I do approve them and I hate approving expense reports, but it's the perfect example of work that's going to go away because approving expense report is the convergence or confluence of human judgment and corporate policy. Those two things intersect. Yes, this is a good expense. Yes, I will approve it. No, the fun trip out to Vegas, not approved, whatever that may be.

42:49Organizations in this space, they're training models to do a better job at approving expense reports than humans. Two years from now, no human will approve expense reports. It's crazy talk. Why would I ever want to do that? But that's an example of a decision that's going away that humans reserve for themselves today. It won't exist in two years. Time's about 10 ,000 decisions two years from now. It's going to change. It's going to change. These are some killer examples. A bunch of people are going to reach out to me after we publish this podcast. We're going to have to come up with a list of contacts for them to go talk to.

43:17Sounds good. Yeah, we'll figure that out. We're on LinkedIn. It's all good. I was on the floor yesterday asking, hey, can you ask Steve where the company's going? Are we going to go get IPO? Are we going to get acquired? I think part of People got options in the company. They want to know. They got that and the big vision of their own personalized. I like making people money. And the company size, this is a sizable company. How do you think through that between like IPO path or sort of the strategic moves you could do with other big players out there? I think to a certain degree, it's private equity firms.

43:46And I've worked with many, and these are terrific firms like TPG and FP. They have their own set of objectives. But what we talk about frequently is just how do we make Bumi that durable, enduring technology asset, that great company. That's where the conversation starts. Ultimately, the decision is not really up to me. As the chairman and CEO of Boomi, I am part of that decision, but we have investors. It's partly that. The public markets, they are rough. They're sometimes rewarding. Now, say a year ago, they were nightmarish. Now they're just rough. And I'm starting to see some de-thought. I think we all are.

44:23And that's like I'm cheering for every tech IPO. I'm like, go. I think that there is a very strong argument that Boomi could be an extraordinary publicly traded company. I do. Now, that being said, I actually really like being a private company where we can innovate. We can make decisions that it's not about this quarter or next quarter. It's about the next three years. How do we transform? I'm not really sure if we were a publicly traded company, if the public markets would have signed off on, hey, let's have Boomy go build this agent architecture. What we talked about today. I don't know. I don't know.

44:55I was going to ask you how come you're such a hot ticket with these P firms to come in as a CEO. But I think this interview explains itself. It's one of those things. I had the good fortune of meeting a lot of amazing people and mentors over many years and building a network. Running a software company, what's the old like your network is your net worth or something. It's a thing. And when you're running a software company. I'm not sure there is a thing called a software company. There's just people, just people that care and are passionate about what they do. And they want to do amazing things and build really cool products.

45:30For me, what has been special about working, the people that I really like working with at Francisco, in particular NTPG, they've given me the permission to just be myself, invent, work with other great people. The cool thing for me at 51 years old is, So I got to bring in a chief marketing officer, Alison Biggin. She and I have known each other literally since we were like basically kids. We worked together when we were like 25, like at an early company. Amazing human being. Greg Wolf, who's my chief commercial officer. I used to work for Greg. He was the COO at Crystal, then Business Objects.

46:05Brilliant guy. Arlen Shankman, who I've known for 15 years. He was the CFO of Citrix before it got merged and acquired with TIBCO. We worked together at SAP and the list goes on and on. It's great people that care. I love that. I love it. I love how you attributed it back to that. Hey, so I got to ask for a wrap things up. What's the craziest thing you've seen in M &A? Many years ago when Qualtrics was acquired by SAP for an enormous amount of money. It was, I can't remember, it was like 8 billion or something like that at the time. You're right. I went down in history for saying, man, I don't get that at all.

46:43And then actually SAP spun the company out as a publicly traded entity and its market cap just went through the roof. So for me, it's the collectiveness of that craziness because it was private company and bought for all this money. And then what the heck is that doing at SAP and why? But then they spun it out. In the end, it worked out. But that's a lot of craziness. That's probably not the craziest thing I've seen in M &A, but it qualifies as crazy. I'm not sure the craziest thing that never went down was when the whole, I think it was Microsoft Salesforce rumor, that alternate universe that we're living in right now where they did buy Salesforce.

47:20That would have been very interesting. It really would have. But I think that the crazy stuff is coming soon. And it's going to be because there's too many companies sitting on their hands with this AI stuff. They're like, yeah, I just wait it out. Look at what Microsoft is investing right now in AI. That's crazy. With open AI. It's like$32 billion or some crazy amount in the next couple of years. It's insane amounts of money. And then full credit to Sam Altman. For the first time I ever heard a human being utter like, what we really need is a trillion dollars. You remember his quote on that? It's crazy.

47:52It is crazy, but is it? There's a moment where I'm like, oh. You've seen crazy. It's going to get crazier. It's going to get crazier. But I think it's these companies that are sitting on their hands, not moving quickly enough in and around all concepts related to AI. there will be an extinction level event for many of them. And I think crazy is yet to come. This has been an awesome conversation. Thank you. 100 % same. So much for taking the time, helping me become a better M &A scientist. Those of you still with us, you're the true M &A scientist. If you got this far in the interview, I'd love to hear from you.

48:24Give me some feedback on what you thought of this interview. Reach out to me on LinkedIn. Till next time, here's to the deal.

48:41Thank 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.

49:26Again, that's mascience.com. Here's to the deal. Thank you.