The Intricacies of M&A from Start to Finish

25:23Can they work with our people? That's interesting. It's not a one meeting that will give you everything. It's a series of meetings. It's a series of discussions with various individuals, especially if it is a private company and it's a smaller company than obviously where you are. And so you just have to basically understand, can they, for example, function in a larger company setup? Because our processes are very different compared to a small startup. Let's use an example. What questions would you use to help get that information? I have a diligence list that runs into 25 pages. For example, we are both a hardware and a software company.

26:07So there are certain things that are very important to us from a regulation perspective and how we approach the market, etc. And so our processes could to the other side seem very complex and complicated. Having a very clear idea in terms of, hey, how are their processes going to change? And having that conversation and getting a reaction from them about those kinds of things gives you a fair bit of idea as to whether they are flexible in terms of their approach. your, for example, HR structure, benefit structure could be very different from what they have. Sometimes what we find is, and this happens a lot with smaller companies, they may have policies that are extremely flexible.

26:49They may be able to bring their pets to the office or they may be able to have plants in their office. They may be able to have things that they do socially every Thursday or every Friday, how do your policies and benefits compare to that? And can you allow certain things that are very unique to them? So having those conversations at some point during the conversations that we have with executives gives us a very clear idea as to what the culture is like. And then I can tell you that we spend a lot of time with the founders and with the CEOs of the acquired or companies that are of interest to us.

27:28It's not we will have a conversation with the CEO and get excited about it and say, oh, that's the company that we want to acquire. That very rarely happens. It's usually months and months of dialogue where we have a very good idea as to the people and what they bring to the table and having a very clear idea about their culture also. During COVID, I actually ended up meeting the CEOs of the companies that I acquired personally. You knew too. Yeah, I had to. You had to look them in the eye and say, hey, are you doing this just to cash out or are you going to stay and what's your plan? I have no problem in having that conversation because I want to know, for example, if the leader of that entity is going to leave, who is the next set of executives that are going to be running that particular entity?

28:13You need trust. Absolutely. Absolutely. Trust, but verify. Okay. The example you had where you know that there's going to be changes to this organization that may have the impact. I like how you were pretty transparent. And it's like your hypothesis and you bring it forward and see how they respond. That, hey, you're going to have to deal with a lot more complex process than you currently have in this area to see how they respond to it. I am absolutely crystal clear every single time. Every single deal that I've done and where I have told the acquired company that, hey, these are the changes that you're going to expect.

28:47And tell us now so that we have a game plan to address that. we are very clear in terms of, for example, what the benefits are going to look like, what benefits they could lose, and what the appropriate benefit would be on our side, for example. And it's very important to have that conversation. Remember, the employees that you are acquiring, they sometimes don't want to get acquired. They were in a startup for a particular reason, or they were in a smaller company for a particular reason. So you have to essentially be able to appeal to all those. And so you're the CEO and the leadership team that you're trying to acquire become your eyes and ears into that organization so that you have a very clear idea of how certain individuals are going to react and have a game plan to address it.

29:29What you cannot afford to have is noise in the system. So we have a very clear game plan in terms of how we are going to go after things like that. And so far, we've been reasonably successful, I would say. I'll use the deal room company's example. If I did a capability play like we found some ai technology we want to add the capability hey we're going to end up doing that and really focus on integrating the product and not worry about selling it as a standalone right that's a pretty big change that we'd want to communicate up front i'll give you a little more extreme example i don't know why i'm after my competitors today but if we buy a competitor for the revenue and we're going to sunset the product like we know we're not going to support this old thing that hasn't been updated in decades we're going to end up sunsetting it same thing we bring that up?

30:13And I guess, like, how early would you bring that in the conversation? So it really depends on where you are from a negotiation perspective. What I always say to people that are in situations like that, as I said, acquiring a competitor is always challenging because the other side will not want to expose a lot of things till they have clarity on the deal. Deal certainty is very important in those situations in the sense that they don't want to expose a whole bunch of things to you till they know that this deal is going to go through. In my experience, I always tell, especially the first timers, is if you are a seller, be careful on who you want to include on the deal team.

30:53Because if the deal does not go through, you will have a lot of people on your side where they will have morale issues. They will start to question your strategy. And so that is very important. And I think as a buyer, if you're trying to buy into revenue and say, okay, I'm going to sunset the product, you then have to be very clear what the deal terms are and what the parameters are. Because you can't go down this path and saying, okay, I have all these assumptions, but I have no way of validating those assumptions. Because if you wait to validate those assumptions till you close, it's too late.

31:28At some point in the negotiation process, you have to bring it up and say, hey, this is our plan. Are we looking at it the same way or not. Yeah, because ultimately they shouldn't be surprised by it. They shouldn't be surprised. And this also becomes very important if you have an earn out, for example, associated with a transaction. I typically don't like earn outs unless they are structured in a manner that we know we're not going to get into litigation. And there are various ways in which you can do that. But you have to have that conversation. You have to know, is the other side going to be willing to work with you to make that transition happen.

32:05Because let's say you do the deal and the day you announce the acquisition and you say, hey, this is the plan, it's too late. I would say in the last few acquisitions, we've always been very clear with the acquired entity as to what the plans will be. We share the vision with the acquired entity's leadership team before we share that vision with the rest of the employees because we want them to be the champions of the deal. We want them to say, here is why we did this and here is why it is beneficial to your customers, to employees and shareholders. Okay. First conversation, I'm digging into learning about their leadership team, getting a sense of their culture, and then what's unique about that company.

32:48The culture thing, I get where you talk to somebody a handful of times, you start getting a sense of their culture. You get a sense of their personality type and things like that. Is there specific things that you ask for to get a broader view of the company culture? Not specific things, but as I said, we validate the narrative every time we have the conversation. And that validation can be over a series of conversations. They don't necessarily have to be just specific to, hey, tell me how you're doing on the revenue, tell me how you're doing with the customers, etc. But very casual conversation.

33:21And you will be amazed in terms of how much you can find out about that individual, about that individual's beliefs, about that individual's style of leadership. by having those conversations. Well, then that should allow me to be comfortable. Hey, this is a good team that's going to blend well together or align with what our objectives are here. For example, if they have told you during your initial discussion that, hey, this is a set of customers we are bringing to the table, here is the revenue, and we don't really have any complex agreement with any of our customers, and you get into diligence, even preliminary diligence, and you find out that some of their agreements are just completely bogus agreements.

34:02And that tells you that they're lying. The early red flags. I was going to ask you about red flags. The red flags, just all kinds of sirens go up at that point. If that sort of trend happens repeatedly in the conversations, you know what you have to do. Walk away. Yeah. Even though I've been in situations where people have said, hey, we still have to do it. It's a very tough call from my perspective in those situations. We get our NDA signed. We're going to ask for more information. start building a model and put an LOI together. The fun part of doing deals. What are like in that stage, these kind of red flags to look for?

34:38Because obviously we're probably going to learn more about their way of working, culture, how responsive they are, how organized their information is. Are there other things I should be really talking at to identify those reasons why I shouldn't go forward or just key information I should have actually? You have to have a very clear idea as to what your objectives are from the transaction. You have to have a very clear idea in terms of what are the assumptions you're making as far as your business plan is concerned. And then you have to figure out a way, how are you going to validate those assumptions?

35:08For example, if your assumption is that the leadership team is going to stay intact and it takes a certain amount of equity to hold these leaders together, and then you find out that out of the four people that you thought you were going to get to are going to walk away as soon as the deal is done, you have a problem. How are you going to bridge that gap? or how are you going to fill that particular scenario? The other issue is you get into a diligence and you say that I'm expecting, let's say 20 customers to come along with this transaction. And when you look at the agreements and out of the 20 agreement, 10 are where the customer has a right to cancel the contract on change of control.

35:49Then you're going to figure out, okay, how do I make sure that the customers are going to come intact as part of this deal? Because as I said, the customers, especially when they're dealing with smaller companies, have very tight agreements that are actually very customer friendly. So you just have to be very clear as to what your game plan is going to be under that situation. Your business plan is just not going to be even worth the paper it's written on if that happens. So you have to have that conversation with it. So what we tried, so here is what we, what has worked. A lot of the times you can't actually get into the actual contract for a wide variety of reasons, whether it is because of regulatory reasons or whether the entity that you're trying to acquire does not want to share all the details.

36:34But you ask for, hey, you've got, let's say, out of the 100 customers you have, you've got revenue dependence on five critical customers. They are 60 % of your revenue. You have to have some ideas to what their terms look like. What happens at change of control? What's the history with those customers? How dependent are those customers from an operational perspective on this particular product? And that will give you an idea in terms of the sickiness of the revenue, because the last thing you want is one of those big customers or the whales in that whole plan to churn. In the larger transactions, we always have a thorough quality of earnings analysis so that we have a very clear idea.

37:15What's the revenue? What are the expenses? Are there any trends that we need to worry about? Or are there any terms, for example, that can basically trip the business plan? And then make sure that as we go through the formal DD, we are validating all that. Because once you are in either exclusivity or a formal DD, you essentially get access to a whole bunch of things that you didn't have access to during preliminary DD. So you're hitting on some really key things, like the change of control type of stuff in agreement. It's pretty immaterial. And you're asking all this stuff before LOI and trying to get into it.

37:49Or you ask the customer, you ask the target, tell us about all your unusual terms, non-standard terms. That's a good way to ask. Yeah. But a lot of the times the target is, oh, I don't have any non-standard terms. And then you go and figure out in the agreements that they've got non-standard terms all over the place. So go back to the kill the competitor strategy. I don't know why it's top of mind, but I think it's just the complexity of it. Because here you're counting on moving customers to a new product, right? Because that's your hypothesis. What can I do to validate that if I can pre-LOI?

38:25Usually, if you're going after a competitor, as I said, it's difficult to validate that. Because the rules of engagement, if you're going after a competitor, especially in a publicly traded setting, are very different compared to what you would do if you were less than$5 million,$10 million in revenue. I don't think I want to do public company deals. I want to stick to private because I'm going to pick up the phone and start calling customers and saying, hey, man. Sometimes even the publicly traded companies, especially if you have a revenue of a certain size or magnitude, the regulators can come after you.

38:55Yeah. And you use the phrase, kill the competitor, which is pretty anti-competitive, but probably cut down really quick. Yeah. If we did as a private company, a little bit more room, you still got to be careful. You still have to be careful. As far as the rules of engagement are concerned, they can be a little bit loose, but generally you have to be very careful in terms of how you approach companies. How do you negotiate and put these terms together in deals? I can go either the competitor or capability play, but it seems like everybody uses earnouts. Even for us, we're a cash flow positive company.

39:28And we talked about this in prior conversation, the debt market is pretty high right now. That doesn't look super attractive. And you're more inclined to try to work out whatever terms you could with the principle you're acquiring. I almost think you want to understand what they want first, which is always cash off the table and run away. But how do you approach it? You have to have a very clear idea as to what terms you want. Well, put a little cash as possible on the table and get everything paid out over the next three, four years. Again, you're talking primarily from a private company setting perspective, but in public markets, that doesn't work in the sense that you can't basically tell the shareholders, I'm going to give you the money six months later or a year later.

40:07But if you're going after a private company, you have a lot more flexibility in terms of setting the terms. The private company will want deal certainty. So whatever you can give them in terms of assurances that you're going to complete, for example, the DD in 45 days or 60 days, whatever you're comfortable with, they will be looking for that. You will want exclusivity. They will want that you negotiate in under non-exclusive conditions. So you just have to be very clear. You're spending the money and the effort and the time. So you would want the exclusivity and you have to explain to the other side as to why you're pushing for exclusivity, for example.

40:43Sometimes you have got to include terms which would say, you know, what the treatment of benefits is going to be. A lot of the CEOs insist that the benefits that they're getting shouldn't be. and it's not just about the CEO, it's about the employees as well, that they're not in any way inferior compared to what you're willing to offer. So you have to understand as you go through the diligence process, how are you going to map their benefits into your benefits so that that is not an additional cost to you. As I said, all CEOs will insist on at one point, do you make sure that you have a deal on the table or you don't?

41:21They will look for certainty and whatever terms they can push for to get you to agree at the LOI stage, they will push for that. How do you get a read on how much to actually pay? I mean, are you building the model and bidding solely off of that? And I'm trying to get away from the competitive situation. So even at the stage where we're avoiding all that stuff, we're going after proprietary companies. But there's always this, hey, do I spend the effort to really pull and try to get a sense of what price they have in mind or figure out where that realm is? Or is solely I build something I'm confident put on the table and put my offer on?

41:53That's what it is. Whatever offer you put on the table, you have to be very clear as to how you got to that number. Because remember, the other side can do an equal amount of research on why they want more. You have to be able to defend your offer. And you have to understand what your walkaway positions are going to be if you are trying to negotiate, whether the terms or whether the purchase price itself. I think you know I'm raised Indian. And so we brought up on good immigrant culture to be very cheap on everything. And usually you find something for a dollar and you offer 50 cents and then you go from there.

42:29There is some of that. Yes. So that's where I want to know where does that shift? You have to also be fair to the other side. The way we approach it is that we are not acquiring that particular company just to squeeze the founders and the employees and basically suck every single piece of. blood out of that particular entity, we are acquiring to grow. We want them to be equal partners in our overall plan, in our strategy. And if that is the case, you approach it from a partnership perspective and you figure out what is a minimum that they would be willing to live with and then offer them an upside, whether it's in earnouts or whether it's in performance-related compensation that they will be comfortable with.

43:16Usually you come to an agreement where both sides come out as winners. I actually like that. It can be where you're basically trying to get a company on the cheap and then a year later or six months later that most of the employees of that company leave. I feel like I'm a little wired that way. Just my uncle, he just took me to garage sales when I was a kid and teach me how to negotiate. It's good to negotiate, but at the end of the day, if you want the people, if you want the people to run that particular business, you just have to be very fair to them. I'm understanding your philosophy is to be fair.

43:48because they should feel that they're treated fairly. And then also to add some incentives that allow them to perform beyond expectations. You don't have to sort of put incentives in a fashion that is going to break your bank. But at the same time, you have to basically think through that if, for example, you're trying to get into a new market, you're trying to build a new product line, the extent or the amount of involvement that you will need from the acquired entity to be successful. Because at the end of the day, you want that acquisition to be successful. You want to hit the ball out of the park.

44:25You just have to structure it in a manner where the other side is equally incented to participate in that success. If they feel that they were treated unfairly, which a lot of the CEOs do feel that, you just can't avoid it. They are wired that way. No matter what you do, they will think that they were not treated fairly. But on your end, you just have to make sure that whatever terms you're going to put forward, that you're very comfortable with it. Because you can't get into buyer's remorse 60 days into the deal. It just kills everything. It kills the morale. It kills the whole plan in terms of how you are going to execute.

45:02So we focus, for example, a lot on having a very clear understanding. Here is what it will take for us to execute successfully? What is the 30, 60, 90, 100-day plan? How do you scale it? Who moves where? What the chess moves are that need to be made as we progress? In many situations, and this is not true about NetApp today, but in my previous companies, I've actually been the general manager of the accord entity for a period of time because I wanted to be closer to the acquisition and make sure that the deal parameters that we had set were fulfilled and before we let someone else scale that particular business.

45:43That's a great advice. Okay, so we had the, I'm writing my notes here, but don't be too cheap. That's my big takeaway there. When you do put this offer together, I'm always curious, I don't know if is it market terms I should be reflecting on or just more of coming up my own scenarios? Because again, here's this offer, I want to buy a company. Let's say it's like a$10 million deal. I want to put as little as possible into this because cash on hand is king for a growing company because I can use that cash. I know where ROI is and allocating towards budget that's already people fighting over. If I only want to put like a million, two million, oh, do I look at the debt institutions out there?

46:20Now there's a variety of those because there's different funds and all different types of venture debt and things like that. But ideally, we always know traditionally the owner holding paper is good. So do I come up with a note term from the seller? Or do I come up with more of an earn-out base that others are? How do you start deciphering which path to go or what to present? If you come out with an earn-out-based structure, you just have to be very clear as to under what conditions the earn-out is going to get paid. And can you, for example, monitor that? Because what happens in, for example, if you say, okay, I'll pay you X only if I generate so much in profit or so much in revenue.

46:59Then you get into the complexity of saying, okay, if it is X amount of profit, how do I make sure that you're not burdening my team with additional cost? You may, six months after you do the deal, realize that in order to get to a certain revenue target, you need to add cost or you need to add more people. But because the other side has this turnout based on profitability, they will resist it. They will say, no, there is no way. We're going to let you add the expenses. So your whole thesis gets thrown out of the window because you had based the acquisition and the earn out on a certain parameter.

47:35That parameter changed during the course of the execution. And you have to make a course correction and you have to make an adjustment in order to meet your top line objectives. And that becomes a problem because that's when you will get into a pretty heated discussion with the other side and the other side is going to resist it. They will want to make sure that they get paid out under all scenarios. And they will have to have worked out what the different scenarios could be, what happens, where, etc. And so you get into a pretty bad situation very quickly. You want to avoid that at all costs.

48:09So why do an earn out over a seller note? Earn outs typically are used if you have a valuation gap. You are thinking of offering X. The other side is expecting Y. and the X is significantly less than Y. So you say, okay, I'm willing to get to your number provided you meet these criteria. What I like to do is under those situations, the earn-out criteria are very explicitly specified that the earn-out criteria are such that you know that the other side is going to meet at least 90 % of those objectives because you have to leave some room in terms of basically challenging them and trying to get the maximum out of the deal.

48:49You want some control. You want some leverage back. Again, going back to the debt, like why not just put paper on it and say we'll pay back this money in this much time. Sure. In this case, you're getting some leverage to say, hey, you got to do your end of the bargain. Otherwise, I'm going to pull the cord on this. But again, the other side is going to say, okay, where is the positive for me? Yep. That's when lawyers get involved and they'll put all kinds of terms and bells and whistles on their agreement and you'll find that, oh my God, operating under those conditions becomes very challenging.

49:18If I, More formally, I just want to lower my risk into the deal and put less cash in. Should I be looking more as the debt structure first? If it's not so much around a valuation gap and say, hey, we both agree it's around 10, 10, 12 million. Let me structure this. I'll give you a million and a half cash and then the rest will finance up. Yeah, you can do that. Just be aware that raising debt can be expensive and servicing debt can be expensive. Do you have a million dollars I could borrow at a pretty good rate right now? going back to even this example that if I own the debt, there's a variance in business.

49:55It puts me at risk. And there tends to be that associated cost because we're going to pay market rate on it. On the earn out, on the other hand, you don't really have an interest factor on earn out. It's just I can tend to basically create a higher purchase price, eliminate debt thinking considerations altogether and just put more accountability in achieving these goals. So example, if we went back to buy the competitor, migrate their customers, I think we'd migrate 65%. You think it's 75%. If we can do 75 % here, let's build an earn out around that. Those kinds of earn outs are pretty straightforward to structure because you have a very clear plan.

50:32You know that, for example, you have 50 customers that you need to migrate. And you say, I'm going to pay you no matter what the revenue is. if 10 customers migrate so much, if 20 customers migrate by so much, 30 customers migrate by so much, and you can structure and earn out according to that. Sometimes what the challenge is that you may want the customers to migrate at either a lower or higher revenue or a higher revenue or whatever their revenue is today, and the customers may not migrate at that. And what happens in those circumstances? You may not get the benefit that you were actually looking for.

51:07The customer might have migrated, but migrated at a much lower level. Are you still willing to pay what you said you're going to pay on a per-customer basis? Who do I work with to make sure we don't miss those things? Does the lawyers help you figure that out? Or do I got to call you? Usually people who have done these kinds of deals, they know what to look for, what are the gotchas. I've done enough of these where I know that there could be problems. And as I said, I structure very clean earnouts. Got it. And when you say clean... Clean is clean. I can measure. I know that the other side will have no issues in being able to monitor it, or I will not have any issues in the ability to monitor it, and it becomes a different situation for both sides.

51:49Structuring an earn out based on earning is extremely complex. How do you burden the OPEX on the other side? What kind of things can you put? Because you are in control. You can change that P &L any which way you want. And if you're doing it based on earnings, they will want that entity to be completely separate so that they control all that. And are your objectives going to get satisfied if they want to keep that entity separate? You're not realizing the employee synergy. You're not realizing the product synergy. What's like an ideal earn out structure for you? Ideal earn out structure is top line.

52:26Easy to maintain, easy to remember, easy to process. And then we just say, hey, this is your top line. I can still integrate my books and do the rest of the integration. You're just tracking the top line revenue. You're just tracking the top line revenue. What about the expense part of it where it's like, oh, we need more expenses and they're cutting off our ability to do that. That's where a lot of people have problems because they're going to say, okay, I expect a certain level of expenses to be maintained. And if you go below the expense, then you want to figure out, okay, how do I still keep the top line?

52:57That's why we got a bunch of lawyers that handle this in litigation. That's when litigation starts. Especially if you start moving the chairs, all bets are off. Is there a certain range or percentage of deal value that gets allocated to earn out versus the principal at close? It depends on the type of deal that you're trying to do. Smaller deals, you have a lot of flexibility. I have a friend who pretty much bought a company with no cash out. basically said, I'm going to do it on revenue-based milestones. And so long as you're generating X amount of revenue, I'm going to pay you over a period of two years.

53:31That's like a pure management takeover. Yeah, exactly. That's what I want to do. If anybody's got opportunities like that, call me after this. I'm listening to this podcast. I'm interested to talk to you. Yeah. There you have to have a very clear idea as to how you're going to operate, what the operating conditions are going to look like. The seller's kind of got to be stuck to the degree, where I'm imagining they got an asset that they can't really just take out to market through a branded bank. And they probably exercise a number of options. And they said, all right, I just have other concerns they prioritize.

54:03You're a seller, you are at the end of the day trying to maximize what your possible return is going to be. Because if, for example, you are a privately held company and you're having a certain amount of cash flow and the cash flow goes into your pocket every year, You just want to make sure that whatever deal you're going to have, you're going to generate more than that and some more. Because otherwise, why would you sell? That makes a lot of sense. So you've got to figure those parameters out in the sense, is that founder or group of founders better off holding on to the company for the next five years?

54:35Will they generate the same amount of cash that they get today? And you've got to run all the analysis based on that. That's where you got to really be the psychologist and understand their perspective. What are they trying to do? Is there urgency to get out of the business operationally and do something else? And that's essentially what you're doing is providing management service? Or they've been doing it for a long time and they just want to get tired and they want to get out of it. That happens a lot in smaller companies. That's true. Do you get that out in the first conversation you talk to somebody?

55:01I mean, I feel like it's hard. I feel like it's always the nice to know you conversation and then they reach out like if there is a real compelling thing. The business plan is so great. What are we missing? Why are you trying to sell? I always ask that question. I have no problem in asking that question. Okay. So just be real forward. It's a good thing to get the other side's perspective. I said there's a not for sale situation. It hasn't become aware that they're for sale, but you're basically probing to see where in the spectrum is there consideration around selling. How would you get to that?

55:31You have to have a very clear idea in terms of your market map, who's doing what, and typically who's willing to have that conversation. So you're already putting that in there. This is the reason for the conversation. We got some ideas over there. I have two individuals on my team, for example, who are constantly out there talking to companies, looking for who's doing what. And we have an extensive database of all the conversations we have had with anybody over the last 15 years. Come to my team and you can say, what happened on this day for this particular company? And they'll be able to give you the entire history.

56:07It's a lot like dating. Approach a lot of people until you find your match. Exactly. There is a company that I acquired where I would get the financials of that company every quarter. And it happened for three years. We didn't pull the trigger. And then finally, when the stock prices aligned, we were like, okay, this is the time to do the deal. Patience pays. That's true. Is there something you do to keep in touch with other relationships like that or founders? I feel like that's a challenge I have where I find like even an opportunity. I got one I'm thinking of right now. I know that could turn into something in maybe about a year.

56:42Is there anything you do as keeping a cadence of relationships to stay on top of mind? Or does it not matter? Do I just wait for a year, then reach out? Hey, why don't we catch up? It really depends on, again, what are you trying to get out of that particular relationship? Are you trying to get out of that deal? You can stay connected as much as you want without being obnoxious. And you can stay connected as few times as you want, depending on how you feel comfortable. Certainly, if there is some new information, you typically want to know. I have companies who I've talked to over the years, and they will always find something to send me or talk about and say, hey, or I'll say, hey, I'm going to be in this area.

57:26Do you want to meet for breakfast or do you want to meet for coffee? And so we stay connected. Yeah, I agree. The companies that I am interested in, I will always find a way to know what they're doing. That's a good point. The other source of information that we have, and we interact with a lot of investment banks, we truly look at our banking partners as true partners in this process. We may not engage them from a transaction perspective, but they do provide a lot of guidance, provide a lot of feedback, and typically they have a fair amount of information. They do. That's their job, is to keep tabs on the market.

58:06I can see the relationships helping with that sort of almost like a steroid for your network. It's a very small group of people who, at least in the tech world, know each other. We know what a person's style is. We know what that individual would like to see, etc. It becomes after some time, for example, the bankers know that if I get into diligence, even prior to the LOI, I will need a ton of information to get comfortable with the company. That's true. This is out there. But if I start an investment bank with all former heads of corporate development, Yeah. right? To compete with other investment banks, how well do you think that would play out?

58:46Not quite sure because bankers are wired very differently from corporate folks. I know, but that would be the selling point. A lot of the corporate development folks are ex-bankers. That's true, but I'm talking about the other way around. We're taking the corporate folks and making bankers. Yeah, the bankers, we can say they work harder, but this would be a whole level of thinking of the real strategy through integration that I don't think exists in any investment bank I've ever talked to, that we would bring as a value proposition and different terms. Forget the deal percentage. We're talking about just maybe hourly rates or something.

59:18Make it billable like our lawyers get paid. There are a lot of boutiques who function like that. For example, bankers don't stay with you through the entire deal or M &A lifecycle. Once a deal is closed, their job is done. In many of the corp dev teams, the work actually starts post-close, especially if you're running integration and especially if you are on the hook to deliver the results. You're wired differently. I 100 % agree. I'll make a note so that when we're ready to start the M &A Science Acquisition Services, we're going to group you in as one of our strategic advisors here. Sure. We'll revisit that one.

59:55Anything else, Rajiv, that I should be thinking about? Again, I'm doing my first deal, be it a competitor, buying a capability. So we talked through pretty much getting me up to an LOI in front of them and negotiating it, getting it signed. I don't think we'll have time to cover diligence through close. Maybe we'll have to save that for another conversation. Is there any other advice that we may have not touched on? The thing is that sometimes people forget is you have to understand where the other side is coming from in the sense that you have to get to know the people. you have to have some empathy because they're going to get acquired their life is going to change post acquisition so you have to understand where some of their fears are coming from and you have to work around that also a lot of the times when you have large companies acquiring small companies the dd teams on the large company side tend to be significantly larger number of functions get involved right and sometimes the functions ask for the same information from the other side And the other side may have just maybe three or four people involved in the DD.

1:00:57So don't come with a big hammer and say, do you want all this information? Just be aware that the other side has very limited resources to get you through the process. We actually run a boot camp prior to engaging in any serious diligence with the employees on our side who are going to be part of the process. And this is extremely helpful because a lot of the times there are new people who are new to the M &A process who have never been on a deal before. And so that they have a clear understanding. What are the boundaries? What can they ask? What they cannot ask? Has that information already been shared?

1:01:35Where they can get that information? We maintain, other than the data room and stuff like that, we have our own extensive notes from all the conversations as far as target is concerned. We ask them, go through it, read it. And if it's not there, only ask the question then. Otherwise, it's there. I like the idea of doing a bootcamp program. Yeah, we do that on all the deals. It makes a lot of sense. That would definitely help everybody out. There should be some kind of briefing around how this gets done. Other than the DD kickoff, which is what pretty much everyone does, we actually run people through the bootcamp and say, here are the things that you need to be aware of.

1:02:13And we maintain a fairly extensive list of PD questions that has been built over the years. People contribute to it. And it's pretty systematic. It's organized. And so they don't have to look for pieces of paper or PowerPoint presentations or Word documents. It's all standardized in one place. Rajiv, what's the craziest thing you've seen in M &A? People renegotiating the deal after the deal is closed. After the deal is closed? Yeah. You don't have to name any names and dates, but do you have an example? There are a few. Teach me how to do this. It's seller's remorse, right? Hey, I didn't really think that I could negotiate this down.

1:02:51Like, guys, that doesn't happen. The deal is already done. Does it work? No. Oh, okay. If it works, I was like, please teach me. Let's go off record with this. I want to learn how to do this. Yeah. But it's funny. Yeah. That's pretty crazy. But you'll need people to ask. Once you close. Once you close, you'll close. Yeah. This has been a great conversation. Thanks so much for taking the time from doing deals to teach me a few things about M &A and help me become a better M &A scientist. You're more than welcome. And thanks for being patient with me and chasing me now for this one. Those of you still with us, you're the best listeners.

1:03:26Reach out to me. Give me some feedback. I love hearing from you. Till next time, here's to the deal.

1:03:42Thank 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.

1:04:27Again, that's mascience.com. Here's to the deal.

1:04:40views 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