Conducting Effective M&A Without a Dedicated Team

Alexi Venneri

In this episode, Alexi Venneri, founder, and CEO of Digital Air Strike, shares her process as to why she thinks not having a dedicated team is actually better.

Jeff Desroches
VP of Corporate Development at Atlas Copco
Ivan Golubic
Former VP Corporate Development at Goodyear
Erik Levy
Group Head Corp Dev and M&A at DMGT PLC
Kison Patel
CEO at DealRoom

Conducting Effective M&A Without a Dedicated Team

21 Jun
Alexi Venneri
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Conducting Effective M&A Without a Dedicated Team

Conducting Effective M&A Without a Dedicated Team

Have you ever wondered what the secret is to executing successful M&A deals without a dedicated team? I had a recent interview with Alexi Venneri, founder and CEO of Digital Air Strike. She shares great insights as to why they are successful even without a dedicated team. Here are some of the highlights;

“Life is too short to work with people you don’t like or aren’t as open as I’d like them to be.” - Alexi Venneri.

Better Ownership

For a company that runs M&A transactions without a dedicated team, Alexi finds that it tends to have better ownership. As previously part of an internal M&A team, she has witnessed firsthand the lack of attachment of the deal team to the transaction. In Digital Air Strike, they tend to be more attached to the deal and have a vested interest to see it through to the end. 

Putting an Offer

Before they put on an offer for any transaction, Alexi makes sure that she talks to the Founder or CEO one-on-one. She focuses on the people and the target company’s culture and wants to know what kind of people she will be working with. It is imperative for her to like the people she’s working alongside. 

Also, they tend to offer equity as part of their offer. This is why Alexi heavily educates the target company on what their company is all about.

Team Alignment and Integration 

For their strong team alignment, it is all attributed to the core value of their organization; Think like an owner. All of their employees have stock options, which means the more the company grows, the more money they will be making.

They do quarterly meetings with new employees to discuss this matter to ensure that they completely understand what their stock option means. This is what ultimately drives everyone else to make the acquisition much more successful. 

special guests

Alexi Venneri
Co-Founder and CEO of Digital Air Strike

special guests

Alexi Venneri
Co-Founder and CEO of Digital Air Strike

Hosted by

Kison Patel

Episode Transcript

I'm your host, Kison Patel, CEO, and Founder of M&A Science and Dealroom. Joining me today is Alexi Venneri Co-Founder and CEO of Digital Air Strike. 

Digital Air Strike, provides ROI-driven, social media marketing, AI messaging, reputation management, lead response, customer engagement, and digital marketing technology solutions for over 5,000 businesses.

Today, we're going to talk about how to execute successful transactions without a dedicated M&A team. 

Can we kick things off with a little bit about your background? 

Many years ago, I started with a startup out of Seattle and I was one of the original founding executive teams. We actually didn't do any M&A, but we did take that company to 75 million in MRR in four and a half years. 

So that was my first foray into tech, really. Before that I was working for a major league baseball team, so that was really cool. 

But then I was recruited specifically to join a company called Dealertrack out of New York because they wanted my help in marketing, but also running investor relations. And they had a very specific M&A plan. 

So it was to do a number of acquisitions, pre-IPO, and then also continue down that path of acquisitions as well as certainly developing our own technology. 

But I was part of an M&A team and it was an internal team. And we did I think 11 transactions when I was there and just a couple of years. 

So a very active company, working with a bunch of fast New Yorkers, which I loved. I think that set the stage for me to really have an appetite and to certainly learn, especially when you're doing it for a publicly traded company.

There's no room for error. You learn everything by the book, but we moved pretty quickly. So that was my deepest M&A experience before I Co-Founded Digital Air Strike. And in the last 11 years, we've been a part of six mergers or acquisitions. 

That's really interesting how your initial exposure to M&A was through the IRR lens. 

Yes. And marketing, being part of the team and one of the things I wanted to talk about is so important with it, with the people. Everyone says that or with M&A they can make or break an acquisition to get those folks on board. 

It’s really understanding what you're working with. It really is the first asset that I look at. Who is the team, what's the culture? And that was my role on the M&A side. 

It was certainly to look at how we position an acquisition branding and present it to the analysts, but also how do I embrace them and how do we become one culture, one team? So that was my original background and it served me well understanding that out of the gate.

How do you effectively do deals without a dedicated team? 

It’s actually an advantage. It's more work for us. My team that works with me on it, they all have regular jobs. They're probably a little exhausted, but it's a real advantage. 

I saw a little bit at Dealertrack, we had definitely had a dedicated M&A team. I was a member of the team, but I had my other, day-to-day marketing and IRR responsibilities. 

Sometimes , when there's this dedicated M&A group, internal, as well as working with a banker, they get your input as maybe, someone in the company they vet and float the idea. They want to make sure products align. 

But it's off on its own course and the day-to-day team that's going to inherit the acquisition they’re not really involved in until it's basically a done deal. You're maybe doing a little bit of due diligence, but it's not your baby. 

And then suddenly it's dumped in your lap. I think it's just slower when there is that dedicated team and it's given to the in-house team to then run with. 

With our group, it's primarily me, our COO, and our CFO, and our head of product strategy. And we're in it from the beginning. We know from the beginning that we're going to do this deal, it is our baby, we're pregnant with it, during the negotiation stage. 

So it helps us as the core team then it's going to have to execute once the deal is done. We will already be so much further ahead. We are in the weeds, we know the financials, we know the products, we know the people because we've been the one that's, looking at the deal. 

It doesn't mean that we wouldn't let you know a bit more help, but I think it has made us very successful in the time of the deal transaction to then monetizing it or being able to make an impact.

It's really truncated compared to what I've seen at other companies. So we can realize the benefits faster.

I've been a part of one of those bigger teams and I was given my access, Hey Lexi, look at this. This might happen, this might not. And then you think it's not going to happen. 

And boom, six months later they somehow did the transaction and they gave it to you. So I've seen both sides. And as we continue to grow as a company, I'm sure we're going to have some resources. 

But I would say the other sort of not dedicated team we have is I've been pretty open with bankers. So we've got some folks, either looking to go do the ground M&A, or you're looking for a transaction yourself. 

It's interesting to get ahead of my bankers all the time. And I'm always thinking of them more like real estate agents. 

I might not be in the market right now to buy a house, but if you find a good deal and you're out there talking about books and then you want to bring it to me, I'll pay you.

You can be a part of that deal, but I'm not exclusively working with you because that also limits your options in terms of their lens and who they're connected to, and what they're looking at.

So I take it in addition to having a network of the bankers, you're still looking at some of the proprietary deals and building their relationships with other CEOs that could be potential targets. 

Yes. A hundred percent. I actually have to come across my desk today out of the blue. So we've been pretty open even to your show. Thank you. As people are looking at this and you're thinking, Hey, let me go see what Digital Air Strike does.  

I've spoken at conferences, on panels, on podcasts and I've just grown out there. If you've got great technology that helps consumers do research or buy online, that helps them, in the CX space, maybe talk to us. 

And there could be something, either a partnership or actually a deal, whether it's now or down the road. 

So we've had folks that in fact, one of our recent deals, we were pitched to them from a banker who knew we're in the space, a couple of years prior at the time it didn't make sense for us. They didn't end up doing a deal. 

One of the founders remembered us and was no longer working with the banker and just reached out, and we just kept in touch. And then, when maybe the timing was better for both of us, then we, a little bit like dating

You're like dating people for a while and then you can decide that you're getting married too. There have been all sorts of ways that deals have come to us board members. 

I'm very open about it. We built a lot of our own technology. We love our development team, but if we can get to a certain point faster if there's really an asset that we couldn't just manufacture. 

It's relationships, it's the people, it allows us to maybe certainly build our own tech but then get something else concurrently that's very cohesive and works with our strategy, I'm all about it. 

And it's interesting I don't think enough companies throw that out there. There’s some secret about it. 

I'm not running around telling everybody, everyone we're talking to. I don't want to get a bit more with somebody, but I do think that when you're open to doing M&A, you need to talk about it.

What about internally, do product folks get engaged?

They do, our internal team is pretty excited about it. So if I see a company, even purchase for a partnership.

Someone on the product side, that's going to take a demo or take a call, I'm always like, Hey, just maybe see what size of company they are and really what they're doing.

The timing might be. In fact, one of our other transactions came across my desk, the total cold vendor outreach, just somebody saying, Hey, do you want to buy our solution? 

And I just checked out their website and I sent it over to some of the products that he had. This is pretty cool. This is interesting. I have no idea about the life cycle of this company, but as you start to take demos or you're looking at them, why don't you approach it? 

And that's literally how we got one deal. Didn't get it to happen overnight, but we’re just very open to that. Especially, I find when people come to you once you're a certain size like we are, we're actually now 7,800 clients, which is cool.  

And now that we're at a certain size, people think that they can come to us and get us to resell their services and products. I'm like, I didn't build this one company, we didn't build this company just to sell your product. How does that happen?  

Just cause you haven't got invested and built a sales team and account team but whenever I hear that someone's pitching us that way, I'd still take a call, but obviously, they have a distribution challenge. 

They need something, they might have a great product. They've not yet really found a way to bring it to market. So that's also a trigger.

I would say to them, look, exactly that, I'm not here to just help your sales, I want to build this company, but do you want to do it together? 

And that's been a really successful approach with some of the founders that maybe aren't so early stage, or they think they're a unicorn still. 

And they think everything's going to align, but they've been using, five, six years and they're still wearing all the hats. Their HR, their finance, their still the founder. They're doing all the things and they've gotten away from maybe what they got excited about in the beginning. 

And I almost think of it like a farmer's co-op, do you want to come in and take some money off the table now, earn out more money with us, but you're a part of our larger structure.

So you benefit from them, our sales and marketing account teams, and our reputation but then you get that bigger payday once we all get a bigger payday down the road. 

So it's interesting. Again, I'm very open with everybody. I tell them that's how it is. I talk about my story and what I've done.

So for the right company that could be an exciting option for them because they're just not ready to fully sell out or their numbers wouldn't give them the multiple they want, but they're also a little overwhelmed wearing all the hats.

What's your thought process on strategy? Are you looking at these deals for the people, the product, the market, how do you assess that and figure out what's the most important to you? 

I actually like to find out early on what's broken. I like to find a diamond in the rough. And it's very critical in a collaborative way where I'm not beating anybody up because I've also seen certain investors do that. 

But really, what is that problem that stopped you from going alone or stopped and limited your growth? And be very much a partner in it out of the gate with the founder or the CEO or whoever investor.

Sometimes it's an investor that got stuck with something. And then just collaborate a little bit together because again it has to be a shared vision out of the gate. You don't want skeletons in the closet popping up during due diligence. 

So I start there. I think that's also a really good way to see if you can build rapport with these humans. You're going to work with them because most of the time, it's not just during the deal, there's an earn-out.

They join your company. You gotta be able to work with them. And life is too short to work with people you don't like or that aren't going to be as open as I'd like them to be.

So I think that's a very good exercise to get to know the humans that you're going to be working with if they're going to do the deal. I'm starting with the people. And then what is the culture like? 

Sometimes that's part of the problem. Maybe they just haven't focused on culture or maybe the benefits aren't great and they have a lot of turnovers. Those things are fixable. Because I always look at it once we're together, it's us. It's not us versus them. 

Once you do a deal, it is the team. And it's not always that Digital Air Strike has all the right answers. I'm looking for those little nuggets that they can bring to the table as well. And together we build a great brand and a great company and a great culture. 

But I think starting those questions with those hard questions out of the gate, what is, what keeps you up at night? How can we fix this? What's stopping you from going from here to there? Why isn't your EBITDA, where it should be? Why don't you have more clients? 

I like to get in there cause I've got a story or an experience that I can relate to. I'm not that young anymore. So I've definitely got an experience somewhere that I can not commiserate with, but relate to, I would say. 

You're looking for opportunities to create value. 

That's right. And honestly, when there is a problem that helps us cause that's the upside. And I think that's what I also try to remind them of. If they weren’t perfect, we probably couldn’t afford them. And what is the upside for us? 

It's how do we find a way to work together to fix some of those things but always get that, it's very everyone says one plus one equals three, but four or five with what does that look like?

And I also don't ever come to it with me personally, our team having all the answers. They have lived in this business. They know what's going on and what they need. 

So the more we can learn from them the better, even if they don't continue with the company post-acquisition. 

So maybe if you can walk me through the deal lifecycle. What does that timeline look like and who are you bringing in internally at what times throughout this lifecycle and how you're utilizing the resources that you have?

I start with our CFO at the gate. He's a great guy. Even today I'm like, Hey, do you want to sign this NDA? It always starts at the NDA if they're in any sort of a process. 

Sometimes they're not, sometimes it's just an introduction, but if there's an NDA that goes to our CFO, I let him handle that. He tracks the copies, he looks for anything weird. He has worked with me for eight years, so he knows what we're looking for. It always starts there. 

And then the first conversation, it really depends on who we're talking to and who's approached me. If it's CEO to CEO or founder to founder, I will take anyone's call. I'm not going to relegate that down to something more junior. 

I do want to meet them. I do want to get to them and just get a sense of them. But I'm not saying I'm doing a lengthy call. It might be 15, 20 minutes where it’s just tell me what you're thinking. 

Usually, though it would probably be one of the next steps is usually with our COO and our head of product strategy because we just want to see what they're doing. And maybe there is a biz dev. Maybe it's not a full-on acquisition. 

So before we go any further, I just like to see what they're going to show us. And that's supposed to be a lot about the people. Do they launch in a full sales pitch mode? Did they have a full loan out? IRR deck, like what, the banker put together, what are they not saying?

I'm like, what's on your, why'd you leave this off? You're not talking about churn at all. What kind of a red flag is that? So you can learn a lot about them and that's even pre or post-NDA.  

Sometimes folks just want to talk. As I said, if it's a biz dev thing, the guys have a biz dev meeting.

And then we just start to think about it. We see how much they are, what's the team line, and you just start to run the numbers. It doesn't usually happen right away. We put them on a spreadsheet and do get a sense of urgency from them. 

If there's desperation and they're following up too much, as you're like, something's wrong here, they're doing their own thing. We actually do like to track them for press releases and what they say online and on social media. How active are you? 

Even if there's not a lot to say, if they're active, it shows they're still in it or if are they totally checked out. Cause the last time they posted on social three years ago, we try to then investigate a little bit about the backing.

If they've not disclosed that you got to know who owns them. And you have to know who the decision-maker is. It's gonna waste a lot of time talking to somebody that just joined the team. 

Our CEO is great about an online sleuth. We look at different mediums and look at a LinkedIn profile, how many people have come and gone from the company, right?

When you go on LinkedIn, you can see people that aren't there just now, but you look in the people tab and see how much turnover there is as well. 

So we tend to go probably a little quiet and do our own little investigative journalism, so to speak. And then at least monthly we're talking as a team about what's next?

What are we seeing? Is there something complimentary? And then just seeing if there's any urgency to move faster on any one deal.

When do you get to that point when you make an offer? What does that look like? 

So we should have a matrix that works for us, sometimes it has to do with the stage that we're in. 

If we've recently, as we have done two acquisitions, right now, unless it was an amazing deal or there was some crazy reason to jump into another one like tomorrow, we're not rushing to do another one. We'd like to execute really well. So some of its timing for us. 

If we actually think that companies even if we're interested in, we think it's an early stage and their process and they don't really have to sell but they're exploring some options. We would stay engaged with them. 

And maybe there is some light partnership we could do, but we're not ready yet. There's no one size fits all and how we run a process or the timing, but we do like to keep an eye on it. We'd like to be aware and stay in touch. 

I would, for example, have my CFO checking quarterly for updated financials. So it's not uncommon. We wouldn't be talking to a company over a couple of quarters before we might get serious and say, okay, let's talk about what a deal looks like.

Usually, if I've gotten enough information, I would just have a one-on-one talk with the founder or CEO. And depending on again, where they're at, talk about timing, what might make sense with the structure. 

They may not be familiar with what we're doing. And if we're pitching part of the deal as equity in our company, they need to know about us. And I would tell them that we're going to now tell you a lot about us. 

So you see that we've got a lot of upsides which we do, and then you've got a bet as their founder. Do you have more of an exit yourself going in alone? Are you going to be diluted by having to take on more investment if that's your next potential option? 

Or as a part of our group, can we get to where we want to go together faster? And then we actually even do a, we give, depending on the size of the company and depending on their internal finance team. We'll actually build their own spreadsheet and give it to them.

I know a lot of PE firms and VCs don't do that, but I believe in luck, this is what we're seeing, these are the metrics, but not just what we think we can do. 

And this is a bit more in LOI, but let's just run some numbers on a spreadsheet, but let's show you a couple of scenarios for you. 

If you're going to come in, you're going to stay a part of the combined entity. How could you crush it if there's an earn-out? What could the stock look like? 

We can't promise but if we're going to have an exit one day, let's run some numbers and then let them play around with the spreadsheet. 

I find again, that being very open and transparent about where we can go together. And again, each deal is a little different, but that has been very helpful.

And now that we've done a number of them, some of these tools that we have found work we have in place. So again, why can we do this look three or four of us on the executive team? I think it's because of that. 

Because we've seen how this goes and you don't always peg every deal the same way, but again, it's just talking to the people that are involved, that are running the other business day to day that'll let you know where you go next. 

And sometimes we've done deals in a couple of months. We can do due diligence pretty quickly. Again, because we've already done it. It's not that handoff from the dedicated M&A team but then you have to find time on your calendar. and Let’s start that process right now. I've been part of one of those dedicated teams and when they've got so many deals they're working, they do all their stuff. 

Then they try to turn it over to the internal team and you almost have to do the whole dog and pony show again, which extends everything.

So our due diligence, usually people find that they're surprised we can get through it in 30 to 45 days. When you're pegging for like three to four months but we've already done a lot of the work ourselves.

That's interesting. It's a little bit more like good steps to add in that focuses more on getting alignment than what I typically hear. 

Yeah, and then it would be LOI. So there's no big surprise. And then that's usually what they'd have to circulate to investors, the board, and whomever. 

I think it's important though because the worst thing you can do is get an LOI and then spend months and due diligence and then things fall apart because you're not as transparent and they thought something with something else on either side, I had that happen. 

I don't like to waste my time on that anymore. I'd rather do it on the front end. And again, maybe the timing's just not right. And that's, I think being that open and collaborative, it also takes the fear factor out. 

Every single owner, investor, CEO, founder, you never know that the deal you're going to take is the right one. You just don't know. 

Sometimes you don't know for years post-transaction if it's really going to transpire the way you think. 

So there's that fear and I think the more transparent you are and collaborative like I said, talk, one-on-one, ask me anything. As long as we've got an NDA, let's go through some of those things.

That's really important. And it's been interesting even when the founder decided to walk away or at the time he wasn't right. Or we couldn't do a deal. We've remained in touch. 

There's not that hard feeling where I think with some investors and the way some folks do a process. 

It's just like breaking up with a boyfriend here and I'm like, Hey if it was worth my time to spend a little bit of time with him in the beginning, I'm not going to get offended. I don't want them to get offended for either reason we don't want to do the deal.

Then you move into confirmatory diligence. How does that go down? 

And that's the real fun checklist that comes out as you know, what those look like. I warn them again, depending on the size of the deal, unlike we got to ask these things, don't freak out. 

And because again, I think you have that rapport it also alleviates some of the angst when they've got to really open up the kimono then right.

They've got to really share some things. Sometimes it's mostly a lot about them when you thought that you asked those questions more informally and it doesn't come out until they're like legally pretty much obligated to disclose. 

It's just some of this stuff, like how did we not know there was an employee lawsuit up there. We've talked about things like that and barriers to your success.

So sometimes those little hairy things pop up, but that too, just the fact that maybe they weren't as open in the front and then when they actually have to show you the real deal. 

That may have us have some pause, and we've got a comparison point to be like, oh, they pretty much told us, okay. We were expecting that.

Or, wow. That is a 180 from what we were told. That to me speaks to the character of the individuals. And if again, I've got to work with these folks long-term. For that reason, we may stop the discussions. 

So it's good to have that baseline and formally ask a lot of questions, get to know them, go to dinner, and know what's going on.

And then once you really get into it we put it on paper. In the formal due diligence, you gotta outline all these things you have to disclose. It's just very interesting to see if things change or not.

 You don’t have a dedicated Corp Dev person that you can just put in charge of this. So can you explain to me your involvement during confirmatory diligence and what are you looking into? 

We divide and conquer quite a bit. So I do have a great executive team as I said, and they kinda know the boxes they're going to have to check. We will set up a data room. 

Sometimes, oftentimes that the companies we're talking to are not in the formal process, or if they are, they've got a data room.

We know what to go look for. We always ask for disclosure though, even just in a word doc, even if they're supplying different documents. I just want to see down our list of pretty standard questions for every deal we ask. 

I want that founder, CEO to sign off on something. I want to know, yet provided is in the data room or never had that.. 

It's almost like an appendix. I want the clip notes. And then depending on what that tells me, I sent our team off to go, okay, go in the data room or they'll hunt this down.

Why are they delayed in getting us that document? So that's interesting. We spend a lot of time. I think the air traffic controller is looking at it from the top level. 

But then once our team tells me something if a product is digging down on the platform and looking at their documentation on the technology or the tech stack or whatever, their vendor contracts, I'm very curious as to how they structure vendor contracts.

There's a lot of things, either certain kind of red flags I would ask them to bring to me, but I'm not the one in the data room. We divide and conquer that. And then once there is an issue, that's when I'm like, okay. Let's go look at this together.

So your team has regular day jobs on top of working on deals. How do you prevent burnout? 

They do but I actually think we all think this is the work hard play hard. This is the fun stuff because we all have regular day jobs, but to get in there and if a deal doesn't happen, sometimes we learn something it's almost like ongoing executive education. 

You learn about how somebody else structured a vendor contract. And we're like, that's a great idea. We need to do that or. Wow. Look at their benefit plan. We never thought of doing that. Let's maybe pick that up. 

Not that we're stealing information, but you're always learning. I think more than when you're doing that and you expose the executives to how other businesses are truly run if you're in diligence. 

Going to a conference, okay, what are we going to learn in the afternoon? We didn't go to them anymore. They’re virtual, retired. I do think that when you search to really understand how other companies work that's where our team learns a lot as well.

And even if the deal doesn't get done, we always pick up something that we can use. We're not stealing information, but it's more of a process or an idea or wow, I never thought that we could leverage something in the way that another company did. 

So there's always some learning. I think it's actually really fun for our executive team. And our company as a whole gets excited. When I get asked by all of our team members, we've got 165 and we'll do company meetings, like when are doing another acquisition? 

Is there anything up and coming? And we don't like to disclose everything, but it is fun to involve more of the team. 

And again, I think it's because it's not just this thing off on an island, like a skunk works M&A group, that's doing something behind closed doors. We really make it a part of our culture.

When you're going through confirmatory diligence. When and how do you start thinking about integration? 

Day one. We start thinking about it before that. We really do try to think about even the folks that we may bring in to do more of the deeper dive like a director of technology or someone, a product manager, we're pretty open. 

We're like, we're looking at this company. I want you to look at this if we might buy them.

Maybe there's a partnership opportunity, but we want them to be thinking about it right then. But we're thinking about it before them. 

We're just trying to see how the pieces fit. Sometimes though, it's a grab bag and you think, you know how it's going to work until you buy it. Sometimes it's good, sometimes it's not too good. 

You're thinking, oh, wow, they've got this one bolt-on thing that would really work well with our platform and we don't have to build it. And you get in and no matter what question you asked, you're like, oh, that's not going to work. 

That code's messy. It's easier and cleaner for us to rebuild it or you just really didn't realize they had some partnership that they failed to tell you about that actually is meaningful down the road. We had that happen where we didn't serve the time of acquisition needed. 

But a couple of months later, man, that came in handy because some partner changed some code or something, that shifted and they already had a different backdoor to integrate with somebody that maybe we do.

So that's the fun stuff. I love always getting like a gift or purchase. When you find something like that after that.

Were there good surprises or bad surprises?

It's always both, but I think we have more good than bad for sure. Again, cause I think we're so involved in the front end. 

There's not much, it had us feeling oh, they're saying this, we've looked at this, we looked at the code, but I think usually you're right. But it's okay, we expected that we thought we'd have to rewrite that, or we thought we'd have to redo that. 

But sometimes there's something, they just literally didn't think it was a big deal and they didn't realize it might be a big deal to us. And then we get an upside later. 

Or talent, oftentimes when you're talking to the companies you're just talking to the senior level. They don't want the staff to know they're looking to sell.

And you don't want them to necessarily either because people get distracted. Are they looking for jobs? Are they worried once they get sold? What's the new culture? 

So from day one, something we do once a deal goes down and we make sure pre-COVID we would physically go to the location. I would always go, but we've done a couple of deals now during COVID we had to be on, virtual, FaceTime, Zoom meetings. 

We made sure we had all of our executives on a video call. We talked about our benefits on day one. I wanted them on my cell phone. We all did individual calls with the team members, divided, and conquered that. 

And that's where you sometimes get the biggest bonus because you just don't get a chance to talk to all of the humans. And once they're part of your team, you do. And I always like to incentivize them as well. Even if they're not owners, I want them to hit the ground running. 

And we always like to give them a near term, like 90 days upside for them. If they help us with this transition, if we don't lose any customers, if you know, we're in lockstep from day one telling clients that this acquisition has gone down, that's been very beneficial for us.

And every time I can say without a doubt, we always got excellent talent that we didn't know. It wasn't that we were surprised by it. We just didn't get a chance to talk to the broader team.

What about communication with existing and acquiring customers? What does that look like during integration? 

Each deal is different but we like to do it as quickly as possible. Again, I'm all about being transparent. So we want to get out of the gate and get to obviously the largest customers first. 

We've already been thinking about what the message is, what's the benefit, what's in it for them?

So we're ready to go and we ideally do it with a member of the acquired team that already has a relationship. 

If we don't know the customer partner and show them out of the gate within 24 hours of a deal getting done we're together on a call or in the past we'd fly out to meet that customer.

That's really important. You can't just let that simmer set. And then we would do press releases. We talked to the media, we let folks know that this has been done. 

We don't try to change too many things especially if it's not broken. But what's interesting is when you offer such in that first initial outreach, we want to do meetings.

Usually, they've got a laundry list of things they wish that they could have done. And so far we've always been acquiring smaller companies which means that we've had more resources. 

So usually in those client or partner conversations, we might already have something already built that they were waiting for from the smaller entity and they're just thrilled. 

And we don't run out and raise rates out of the gate, we look for and listen to them too. What has been your blocker? How can we, together, do more for you? And that's really helpful and just keep that open communication.

And then just give them something, what do they need right now? Get it early and then look to build if they need custom reporting or how it goes, right? 

You got to really support that individual that has the existing legacy relationship, but also you've got a pretty quickly make sure a broader team understands that this is now our combined client or partner. We've got to support them out of the gate.


Let’s go back to the inside view of distributing or putting the resources in play. What does that look like when you're deploying your internal resources again, without having a dedicated team? 

So before we even do the deal we have in mind what we're going to do in terms of some goals and even some compensation, even for our internal team. 

Because we know this might, you still have your day job, but if we can together hit some goals, they might have some short-term bonuses or things that we're letting them know.

We do realize out of the gate, you might be putting in a few more hours. But we want everyone to win. So we also have some values. We really live and breathe our values. 

So one of them is to think like an owner, all of our employees have stock options and we're pretty clear. We're like, I can't make guarantees, but the more we grow, the more we do successful acquisitions. 

At some point as a stock owner, an option holder your stock would be worth more because together we're bigger, we're better, we're growing faster. So we remind them of that. 

Too often, I think companies that have stock option plans never explain anything about stock options to their employees. We do a quarterly meeting with anybody that's new to the company or newly getting stock options. And I talk about what they are. 

So I think that's important to get that buy-in and really our team gets excited. Our sales team gets excited about can they sell something new because of that acquisition? 

Our product team, I'm always like, guys does this mean we've got some new feature or partner? Can we reduce expenses? Does that improve our margin? Like a puzzle, we're all together trying to figure out how it fits together. 

And again, I think it's because internally we do all this, it's not an us versus them with an M&A department. Oh, that M&A team forcing this on us. Oh, the M&A team made a bad decision now we're stuck with it. 

There is no one to blame if we're doing it ourselves, right? You can't just point fingers at the M&A guys. You actually, as a team, we all had a chance to vet these things. Now, of course, the one thing we're always also very careful of leverage is you have to have confidentiality.

So if a deal doesn't happen, but once that deal happens, we really want people to know about it. From day one, we invite the new team members to our company. 

We will sometimes even retro something. I'll give you an example of one of our recent acquisitions the prior company never did like an annual President's Club trip for their top salespeople. They just didn't have that. 

And we inherited some great people and they did great numbers or else, that helped us want to buy the company. And they were still putting up great numbers. 

And even though the trip we recently took was for last year and they weren't even part of our company, I was like, guys, let's bring them. I know where we're awarding them for revenue that the higher owner received, but I think this is awesome. 

And by taking those steps and bringing people into the fold and explaining why we're doing this, it really does help you move forward together faster and realize that from my end benefit, which is the reason why he did the deal sooner.

Our four values are, think like an owner because we're all owners. We also have clients win. 

So suddenly, on day one, our client base just grew. I think at the opening, there used to be over 5,000 businesses. Because of some of our new acquisitions, we're over 7,700 now.

So we got to think of everybody now. And that's our clients’ win. We also have a value called whatever it takes and that goes to everybody. Day one, or two, you've been here 10 years, we're always doing whatever it takes. 

There is no, that's not my job. There is no stay in your box. We work together to do whatever it takes for each other and our clients so they have success. And then we really have another value for passion and action. 

We love what we do. So we don't always get everybody in the right seats on the best day one. But even when bringing in that new team, what's your passion? What do you want to do?

I know you're a customer service agent right now, but is there something else you want to do? And really we try to get everybody really excited about what they're working on and that's a big part of it as well.

So let's look at the first half dozen deals you've done as a company. And I want to know what are the biggest lessons learned? 

Sometimes you learn the most from the deals that you don't do. Early on in our NDAs, we did not have a no-solicit policy. And we actually had somebody come after us just to take our team once they learned a bit more about us. So that was interesting. 

So that's a non-negotiable we think on both sides like we're not just taking meetings, so then go hire your people or vice versa.

So that's a lesson I would say people need to think about when they're doing these meetings. What else did we learn? It's very hard if there isn't day-to-day management or the founder still involved. 

And if truly the process is being run only by the VC that's the challenge. No matter what they say, something's going on there. 

If there's no more leadership team in place and they're trying to still convince you, it's a great deal. It's probably not. And it's interesting, I've learned how little they know. That sounds horrible. I'm sorry for any VCs or PE firms, but it was difficult.

It took longer than it should have. We ended up not doing the deal. I think that would be something you've learned to avoid that we really want to know. 

We're going to be able to talk one-on-one just being in the deal consideration phase with somebody that's really running the business. So those would be a couple of takeaways for sure.

And then, devil's in the details. Really know the numbers, trust but verify it's not like the KGB. I think that's their slogan. But you gotta really look at these things, verify, make sure that there's no little shell game going on.

Any other red flags to look out for? 

I would say again, see what they're doing online, talk to customers if you can. Now, you're under NDA. We can always go interview customers but get a sense of the space. 

If you're looking at a company that's one of a couple of players, go to some key clients, key partners, key vendors, and say who he's really got it going on in this space.

Who's got the best product? And you've got to do your own research. Even before you're in diligence. That's my big takeaway.

What's advice you'd give to a CEO that's pursuing their first acquisition?

I would tell you that, and this is my own advice. I waited too long for us to do more of them. So we did one early on and then we spent a lot of time trying to do the integration and get it perfect. And I wish we would've done a few more sooner. 

So I think that there's a lot of variables there. It depends on your ownership structure. You know what your board's comfortable with whatever you're doing that I do wish we would have done some more sooner. 

So that would be my advice. Don't be afraid and certainly take meetings. I take calls bi-directional. Right now, folks come to us and say, Hey, are you guys up for sale? And I'm like, no, but you never know.

So I take a lot of calls. I talk to a lot of people and I think that's also the key. Don't shy away from something and assume assumptions are horrible. What do they do to make an asset? 

So I just wouldn't assume, I would take more calls. I would talk to more people and don't be afraid of it, even if you're not quite ready.

Be open-minded and when you say, go for that first deal sooner is that essentially M&A is a learning curve and that sooner you start the better you'll get at it over time, or is there something else? 

I think so and I think that sometimes we'll get so wrapped up and I have to go on my own. 

You can still be doing that while you're concurrently, maybe buying some technology or looking for those other opportunities. I think you can do things in parallel paths. I really do. 

And sometimes we get so in the weeds on our head down doing our own thing thinking we have the answers. I just think it helps broaden your perspective to be open-minded to be a little more willing to do some of those deals sooner.

What's the craziest thing you've seen in M&A? 

I've seen a lot of things. Not with Digital Air Strike, but on a prior transaction, just complete cluelessness as to the people they were coming with the deal like literally had not taught culture, did not know anything. 

I remember being on calls with a company and they were actually from California telling New Yorkers that they had to end a call cause they had to go surfing.

Just a total disconnect and I'm like, have you guys even talked to each other? You're on different schedules. The whole thing was weird. I don't know if that's exactly crazy. 

I don't have any dirt to share, but I do think that that to me is crazy because I'm like, how could you break out into a deal stage and just be so off sync with you out of sync with each other. 

That just blows up cause I guess I'm just more open and I talk to everybody a lot. So it just blew my mind or they didn't even know the people that were coming with the deal. 

And vice versa how they're going to work together. That's crazy to me. I think you've really got again, starts and ends with the people.

You didn't know, you were getting surfers to run this company and that we don't work from New York hours. And how do you guys not know this? That kind of a thing. 

I've heard about other things where it wasn't a deal I was on, but through my peers at the company, not understanding they're in different states with different policies, but cannabis.

And they were like letting people smoke weed in the office. And then they were shocked once the deal was done. I'm like, how do you not know this? You didn't look at the state or the HR policies? Those kinds of things. 

So I'm sure they all worked through all that, but for me, I just like that to me it's crazy. You really got to know what you're getting and be comfortable with it. And sometimes, honestly, those different cultures could actually help your culture. 

There's something new they bring to the table, some new energy, knew they're really creative because they let them do that. I don't know, but I really do think that not knowing people out of the gate before you even get to talking about an LOI is crazy to me.

Ending Credits

Thank you for taking the time to explore the world of M&A with our podcast. Please subscribe for more content conversations with industry leaders. If you like our podcast, please support us by leaving a five-star review and sharing it. 

I enjoy hearing feedback and connecting with our listeners. You can reach me by my email. It's kison@dealroom.net. M&A Science is sponsored by Dealroom a project management solution for mergers and acquisitions. 

Additional educational content is available on Dealroom's blog at dealroom.net/blog. Thank you again for listening to M&A Science. See you next time.

The views 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 and is not intended to serve as a basis for any investment or financial decisions.

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