How do you manage a multi-vertical M&A strategy? IAC (NASDAQ: IAC) is one of the world’s leaders when it comes to building consumer internet companies. They are a proactive acquirer who always looks for opportunities in a new vertical space.
They have built many brands that everyone would recognize; such as Tinder, Expedia, and Vimeo, to name a few. Ailene Holderness, IAC's Head of M&A shares their strategy and how they build a team to execute these deals.
“Risk taking should be rewarded. Institutions who embrace that can find people who can add a lot of value to their teams because they have done something outside of the box.” - Ailene Holderness
Most of the industries they look at are those providing products and services that consumers have been using for decades. They look for inefficiencies. These are companies that are on the cusp of transitioning from offline to online. They like to use their abilities to speed up this transition.
Also, they like to look for businesses where scaling improves the product and not the price. The more users enter that marketplace, the better the product becomes for the supply. They focus on consumer experiences and look for ways to improve with a new business model.
What makes IAC unique is that they prefer to keep the acquired business. They like to think of themselves as the new permanent owners of the business, so they always look for long-term success. Unlike PE firms, they never look at long-term exits. They're even willing to sacrifice short-term profits for long-term growth sometimes. The top priority is to build a sustainable growing business with a strong margin profile, even if it takes them 20 years.
When it comes to the decision-making process, Ailene describes their company’s procedure as highly collaborative. Their entire M&A process is very team-oriented.
They have weekly meetings with the C-suite to discuss opportunities and funnel them down. They make sure that everyone understands what they're buying, especially looking across industries. They identify all the companies chasing the opportunity, and carefully assess who is best positioned to win.
Their entire culture is all about thinking like an owner. Every team member needs to have a conviction on their deals. Assess the transaction as if they are writing the check out of their own pocket. Especially the executives, they need to be able to stand in front of shareholders and support the acquisition.
As the head of M&A, Ailene’s core responsibility is to lead smart, ambitious, growth-minded team members. In a fast-paced industry, one of the qualities that she is looking for is the ability to take risks. She likes people who are aggressive and hungry to identify the next big thing. She also believes that you should not hire people based on their experience and capabilities today. You should hire because of their future potential.
Diversity is also one of her most important considerations when building a team. And this does not mean hiring people with different backgrounds, race, and ethnicity. Ailene is looking for diversity of thought and experience. This is key in managing a multi-vertical M&A strategy.
Finding good talent isn’t hard for IAC. They use LinkedIn heavily and people usually apply for the jobs that they post. But what makes them interesting is their referral program. They incentivize employees by referring people for roles. This motivates team members to find talent that would fit in their company. As a result, she has many team members that have been referrals of other people within the organization.
They also hire people internally. They are a huge advocate of risk-taking so they often move people to different positions. They value potential more than the current skills and capabilities of a person.
Managing a multi-vertical M&A strategy requires a high performing team, full of perpetual learners with a strong appetite for risk taking. Extreme collaboration is necessary to ensure everyone is on the same page as entering a new vertical requires a complete understanding of the industry, players and customers.