Building Your M&A Reputation

Kison Patel: [00:00:00] I am Kison Patel, and you are listening to M&A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M&A deals.

Kison Patel: Hello, M&A scientists. Welcome to the M&A Science [00:00:30] podcast. This show is part of our mission to rethink how M&A has done and build the operating standard for buy-side M&A. That old school seller led approach, that era is over. Buyer led M&A is all about strategy, alignment and execution.

Kison Patel: Putting value creation at the center of every deal. And let's be real, not just about closing the deal, it's about making it successful. And we get there by learning directly from the best. If you want to go deeper into the framework, grab my book Buyer LED M&A if you want the [00:01:00] full system. Frameworks.

Kison Patel: Templates, exclusive content expert q and a sessions, access to me and the AI powered Intelligence hub. Join the M&A science membership@mascience.com. It's the Home of buyer LED M&A. While you're there, make sure to sign up for our free newsletter, lead the Deal, own the Outcome. Let's jump in. Today we're joined by Andy Cohen, vice President of Corporate Development at F five, the multi-cloud application security and delivery company traded [00:01:30] on Nasdaq under ticker FFIV.

Kison Patel: With a 30 year career in M&A. Andy's closed 60 deals across high growth tech companies, including Citrix, Acquia, and now F five, where he is executed eight acquisitions in just three years, including a record breaking year with four deals. What makes Andy's perspective especially valuable in his core belief that M&A is fundamentally about relationships?

Kison Patel: Not just transactions. He's built a reputation where every single CEO he's worked [00:02:00] with over six decades of deals will take his call tomorrow. And that kind of trust doesn't just happen by accident. Andy, how you doing? I'm awesome. How about yourself? Hey, thanks for taking the time here live in

Andrew Cohen: Miami. I know, it's exciting.

Andrew Cohen: Welcome. Be Venito. I,

Kison Patel: yes. I really appreciate it. You taking a break from doing some deals. Can we kick things off? A little background on yourself.

Andrew Cohen: I've been at F five for three years and have spent about 30 years doing mergers and acquisitions. Spent a couple years as a vc. I definitely don't [00:02:30] recommend becoming a VC in 98 before the market crashes.

Andrew Cohen: One of the things that is helpful from my perspective is I've been on the buy side, I've been on the sell side, I've been on the VC side, and I've been on the small company side. Having sat in every seat at that table just gives you a really good amount of empathy for what different people are going through.

Kison Patel: You got a fair point. Look at my own background where I did advisory, I saw some consulting work, is that the main driver is like you Now all of a sudden you, when you do work with one [00:03:00] perspective, that you start understanding like what the concerns are and things like that. Is that what helps you when it comes to deal making today?

Andrew Cohen: A hundred percent. To me, you're convincing people to change what they're doing and what they've been working on for years, and you've gotta convince them that your alternative is the best home for their team, for their technology, for them to help make their dreams come true. Understanding their perspective is super important.

Kison Patel: I have feelings gonna be a theme of our podcast here. Empathy is a big element [00:03:30] of building relationships, I think. So what's something you wish you knew before your first deal that took you years to figure out

Andrew Cohen: you don't win a deal. Zero sum thinking is really, really hard. I went in thinking I've gotta win everything.

Andrew Cohen: And it became very clear to me that it's actually the exact opposite

Kison Patel:. What's the mindset then? You should have to approach a deal.

Andrew Cohen: How do you make sure that everybody gets enough of what they want, that they are convinced that it's, that's the best alternative. So

Kison Patel: no clear winners. Everybody gets just enough.

Andrew Cohen: Yeah, [00:04:00] absolutely. There are lots of ways to define win. You'd love it to be win-win for everybody, and that's obviously always the ideal, but nobody gets everything that they want. 'cause if I'm happy and you're miserable and I feel really good, the deal's not gonna work. That's a fair point. I'm

Kison Patel: going through all these scenarios in my head to find out where That would not be true.

Andrew Cohen: It wouldn't be true in an asset deal where you're not picking up people. It wouldn't be true in a place where all [00:04:30] the management team is gone right away.

Kison Patel: Yep.

Andrew Cohen: In those cases you certainly negotiate harder, but again. The team has to want to be there. The vast majority of the things we're doing are technology deals and all the assets leave in the parking lot every night.

Kison Patel: And the ideal one where there's more of collaboration that's gonna happen after the deal, you wanna make sure there's alignment and you want to feel that, hey, this is enough work for it to worth it. And but then they're also optimistic about what the future state or the future lies.

Andrew Cohen: Absolutely. Gotta convince them that [00:05:00] the alternative of joining a bigger company is a better alternative than continuing to do what they're doing

Kison Patel: 30 years, 60 deals.

Kison Patel: You use this phrase, this is the best job in the world.

Andrew Cohen: Yeah, I'm super lucky. I love what I do. I get to work with the smartest people at my company and understand what we're doing and what we want to do. And then I get to work with bankers and VCs and advisors like yourself, meet lots of different companies, learn the newest and most interesting technology, have meetings with new [00:05:30] folks.

Andrew Cohen: If we can put a deal together, great. If not, I learned something and made new friends. And apparently every two weeks they give me money. It's great.

Kison Patel: What's like the least favorite part of it? I feel like it's not that Rosie, you gotta have a level of stress tolerance to manage these deals. Oh,

Andrew Cohen: there's a, there's a huge amount of ambiguity, chaos, change, disappointment, frustration for every deal that gets done.

Andrew Cohen: There's four or five that you would've liked to have done that. You can't. I've spent a lot of time working for medium [00:06:00] sized public companies. It's not the multi, you know, the giant ones. And oftentimes it's been traditional public companies. I'll say everything I like I can't afford and everything I can afford, I don't really like.

Andrew Cohen: So sometimes it's really finding that Goldilocks deal where it's not too big and it's not too small and it's growing enough that it's not too expensive, but not enough that it's not interesting. So it definitely is hard to find the needle in the haystack.

Kison Patel: That's true. That's I think the frustrating part of M&A is [00:06:30] that you could do a lot of work on a deal and then.

Kison Patel: There's a reason why you don't finish it,

Andrew Cohen: and most of those things are totally beyond your control.

Kison Patel: Okay. So you have this level of patience. Is that fair to say is like a required trait?

Andrew Cohen: Patience is an interesting way to say it because I'm an incredibly impatient person, but I agree

Kison Patel: that's another trait.

Kison Patel: Like you wanna keep pushing a deal, you, you've

Andrew Cohen: gotta be incredibly proactive. Time is the absolute enemy of all deals. You've gotta continue to build momentum

Kison Patel: and you know what? It's not patience, it's [00:07:00] resilience.

Andrew Cohen: Resilience and grit are probably the two ways that I would describe it. 'cause patience, if you wait for things to come to you, you'll be waiting a long time

Kison Patel: and that win makes up for those four or five that didn't pan out.

Kison Patel: Absolutely. Okay. We got this in terms of a sense of what it takes to be good at this role. Can we talk about what's your favorite part of the role? I love meeting new people and learning new things. Can we walk through? What's your approach? A big part of this is building relationships, right? That's of a theme of the podcast.

Kison Patel: It takes relationships. Walk me through what that looks like from the beginning. [00:07:30]

Andrew Cohen: Building relationships is about making sure that you understand what different people want. For me, I've had the benefit of having done this now for 30 years. I have a really large network of bankers and venture capitalists and former CEOs and former employees and friends.

Andrew Cohen: If there's a transaction or a space that we are interested in, I'm usually one phone call away from a really good warm introduction and people will say, Hey, we're not sure whether our deal's [00:08:00] gonna come through, but it'll be a good process. You'll enjoy meeting him and he'll treat you with respect and run a good process.

Kison Patel: So that's part of it is you got an ecosystem, you got your reputation. This is earned. This is like the equity you earned

Andrew Cohen: from doing this a number of years. Absolutely. And the other thing that we'll talk about is this is an apprenticeship and mentorship job. You learn it by sitting by somebody who's done it before understanding how they did it.

Andrew Cohen: And then just figuring [00:08:30] it out over time in spite of the fact that there are wonderful playbooks and things like what you represent, but it's really just repetition. And at

Kison Patel: bats most of the deals you've done are proactive versus

Andrew Cohen: almost all of the deals we've done are proactive.

Kison Patel: Almost all the deals you done proactive, it's clearly benefits of doing proactive deals versus jumping in the auction process.

Andrew Cohen: Yeah. I've participated in a couple auctions, maybe one deal. We won through that. In that process, that's not really the way that most strategics end up with transactions. That's much more a [00:09:00] PE type process than what we usually end up doing. We're looking for very specific pieces of technology and teams to get us either new functionality or into a new space, and those are usually not things that you end up with a big process around.

Kison Patel: So the, for you, it's very focused on this strategy that makes it where you have defined specific things that you're looking for in the market. Absolutely. And that kind of pushes you more so to look for things that aren't [00:09:30] necessarily being chopped around marketing. Yeah,

Andrew Cohen: and that's why a lot of it is making sure, ideally it is a company that is just at the place where it's making the decision of, we've got really good product market fit, we under, we've got really good technology and to get to the next level is gonna require us to raise a lot more money and do a bunch of new things.

Andrew Cohen: Maybe it's start a new sales force. Maybe it's going international things that big companies are really good at helping you to do and convincing them that. We can help you [00:10:00] adjust for that risk and get the appropriate payout as well as doing the right thing for the team in technology.

Kison Patel: I wanna take that apart, but I gotta ask.

Kison Patel: So all these proprietary deals you've done, if you look at your effort from building this relationship to turning the deal actionable, what's your average, you think it takes of that effort, building the relationship to the deal, turning actionable? I understand like somebody could already be contemplating go on to market and boom, things turn actionable rather quickly and some it could take like [00:10:30] decade and then Yeah.

Kison Patel: So I'm curious if there's like an average you've experienced.

Andrew Cohen: It's interesting. I haven't actually calculated an average. Usually it's a six to 12 month process. Yeah. From, Hey, let's start the discussion. Let's understand what you're doing. Let's learn the space. Let's understand all the other companies in the space.

Andrew Cohen: Why are you differentiated? What's your competitive advantage? Why do you fit best with us? It's usually a good amount of time in that process. I also think, by the way, and it's slightly different than the [00:11:00] M&A discussion, but one of the things that corporate development does and is really helpful is strategic investing, which I think gives you an opportunity to talk much earlier in that life cycle and build more of that relationship so that you're not talking about a, Hey, I'm only here to do an M&A deal in the next six months.

Andrew Cohen: It's let us participate in the process over the next couple years and understand if it does make sense.

Kison Patel: Was that common in most of the companies you worked with, that you had strategic investments as mm-hmm. Part of the approach

Andrew Cohen: and I think a [00:11:30] lot of forward thinking technology companies are doing that now.

Andrew Cohen: I did it, we had 30 investments at Citrix and we've done now just a couple at F five.

Kison Patel: That helps. Now let's walk to this timeline where you have first contact, because obviously you got big network introductions. If you don't, you're gonna have to hit the phones to your cold outreach and it probably what you did in the early days to really put the effort in there to get the folks on the phone.

Kison Patel: What does that look like? First conversation, like how are you facilitating it? What's relationship development look like from the first [00:12:00] touchpoint?

Andrew Cohen: I'll give you an example that happened this week. I was reaching out into a new category, kind of an AI adjacent space. We did a full review of the companies in the space.

Andrew Cohen: There are 30 companies. We triaged it down to eight that we thought would be a good fit for the approach that we're taking. There are four that we wanted to go to. First, I did a cold LinkedIn invite to one person and ended up talking to them. The other one I found somebody within our company actually is [00:12:30] CEO, former CEO of a company we brought in that knew the founders and made a warm introduction.

Andrew Cohen: And then just through a bunch of frankly, internet research found that the other company, the main investor, was a guy that I sat on a board with 15 years ago, reached out to him and he's introducing me to the company tomorrow.

Kison Patel: You're cold outreach on LinkedIn. What did that look like? What was the messaging?

Andrew Cohen: Hi Alex, I'm Andy. I run Corp dev at F five. We're really interested in [00:13:00] your space. We'd love to learn more. Look forward to speaking with you.

Kison Patel: Ooh, you assumed close there. Look forward to speaking with you.

Andrew Cohen: Yeah, I mean if if he doesn't wanna speak with me, then he's not gonna reply and that's okay too.

Kison Patel: I think I learned that I, I've had, that's like probably my expertise, probably cold outreach to you at some point.

Kison Patel: Mm-hmm. That's how we got to know each other and the gist of it. People actually, it was

Andrew Cohen: originally through Jeremy.

Kison Patel: Oh, Siegel. Yeah. Shout out to Jeremy Siegel, who absolutely,

Andrew Cohen: way back when.

Kison Patel: Yep. I don't know anybody more networked in the East coast in Corp. No doubt about it. [00:13:30] Absolutely. So there you go.

Kison Patel: That's, that was a warm introduction. So pays off. No doubt about it. That's ideal. You get the gist. People are like, I'll take the call. Not, and then you get the first conversation. What's your approach? Is there like a, almost like an outline or format that you follow or is it,

Andrew Cohen: it's probably not quite that formulaic.

Andrew Cohen: A lot of it is understanding where they are with their company, explaining to them why F five has interest, why doing something together could make sense, and understanding what they're thinking [00:14:00] and where they are in the process. But frankly, all of that starts after just meeting people, understanding this story, what they do, how they come up with the idea of the company.

Andrew Cohen: What in the rest of their career got them the right and ability to do what they're doing better than anybody else. And everybody likes to tell their story, and it's fun to hear when you say That's the

Kison Patel: start, I mean,

Andrew Cohen: places

Kison Patel: get

Andrew Cohen: the

Kison Patel: story.

Andrew Cohen: Yeah, absolutely. You

Kison Patel: can't know the company until you know the person and hearing about that, oh, I, I came from this aggressive academic [00:14:30] background, or I came from an immigrant family.

Kison Patel: Yep. Or just these little nuanced things that helps shape the story. Basically

Andrew Cohen: all of it are data points that help you understand what that person wants to do.

Kison Patel: This is

Andrew Cohen: the what different people

Kison Patel: want. Exactly. Is there anything specific that you're looking for in that story that gives you some indicators?

Andrew Cohen: I always wanna understand what drives somebody. Is it pure money? Is it the joy of building something? Is it seeing their technology become ubiquitous? Is it [00:15:00] doing the right thing for their team? Everybody's doing what they're doing for a slightly different reason, and finding out what their why is is super helpful.

Kison Patel: Yep. Are they doing it for the money? They got real passion for what they're doing,

Andrew Cohen: and it's not that one's better than the other. It leads to different types of A approaches. And then B, I have the, I'll say privilege of doing both the upfront work, the deal work, and the integration work. So understanding what drives people and what their motivations are, gives you an idea of whether they wanna stay long [00:15:30] term, what role they wanna play in a big company.

Andrew Cohen: Do they wanna be a technologist? Do they want to be a general manager? Do they want to cash a check and then move to Miami and go to out Basel? It's really important to understand motivations and what drives folks.

Kison Patel: Get the story, figure out what drives them, and then that also gives you a sense of where they're gonna fit in and the bigger picture of things.

Kison Patel: I always find it interesting to kind of bring up a deal. Mm-hmm. The acquisition. Is there a certain time when you do that? I've been approached where [00:16:00] the person, the executive was so blunt and forward about it, that it was a, it was such a big turnoff. Totally. And it was just funny 'cause I've just worked in M&A but never had that.

Kison Patel: And I was like, wow, this is absolutely the wrong way to do

Andrew Cohen: it. Aren't you gonna buy me a drink? There's gotta be some relationship understanding. Now obviously you get a call from a big company in the, with title of corporate development, you kind of know why they're calling.

Kison Patel: Right.

Andrew Cohen: But it's also an understanding of, at some point, especially [00:16:30] venture backed companies, in the vast majority of the companies that I've bought have been venture backed.

Andrew Cohen: At some point you need an exit, and whether that's short term or long term. You definitely wanna make sure you have the right relationships as an entrepreneur with the corp dev and product folks at the five or 10 companies, that over time might be an appropriate exit.

Kison Patel: Now, before I try to push to say, Hey, we should look at doing a deal, there's this better together story.

Kison Patel: Mm-hmm. Like the vision we talked about. Are you bringing that up this early in the first meeting?

Andrew Cohen: [00:17:00] Yes. 'cause oftentimes people think about F five and we're a 30-year-old company.

Kison Patel: Are you telling your story and you've sort of got always the person. So you come back and say, Hey, I've built my expertise around doing M&A, I've worked at a number of organizations, I'm here at F five, this is what our current goal is.

Kison Patel: Can you just sort of talk through like what your mission Absolutely. And why you're looking into space now. You're looking at adjacencies. Mm-hmm. Say Hey, this is what's drawing us.

Andrew Cohen: This is what we're doing. This is our strength. This is why we think we have permission to play in this space. This is why our customers give us permission to [00:17:30] sell them or talk to them about these things.

Andrew Cohen: And at the end of the day, how do we solve joint customer problems? 'cause that's the way people give you money.

Kison Patel: Do you ever feel like you could tell that story and that target executive almost concludes that better together?

Andrew Cohen: I hope that I am able to do it that well. 'cause that's certainly the goal,

Kison Patel: right?

Kison Patel: Because there's a little bit of, I feel like sometimes when you're building the narrative that you could be pushing it a little too much using the executive here that gave me that direct, you know? And it was almost like, I wanna know like the price you wanna sell for, because we could probably get you this much, which would be, [00:18:00] and I'm like, I'm already like nice house and car money isn't nothing.

Kison Patel: I already got the nice house and car. Like that's not. And then you could be this like chief product officer and I'm like, I'm the CEO. Why is that? Why is that exciting to me? Yeah, exactly. It was like everything could do wrong. I'm just like, no, I'm not interested in that at all. And that, that's what I'm wondering, like that play, 'cause it's a dance, no doubt about it.

Kison Patel: How do you sort of make sure that you don't get that? It's like you want that real alignment, you build that excitement. Is there specific things in the 30 years that you, I wanna learn [00:18:30] your approach and how you do it. You always

Andrew Cohen: are doing a ton of research before you do each call. You've gone through LinkedIn, you've read all their posts, you've looked at what blog posts they have.

Andrew Cohen: Oftentimes I will have listened to a couple of their, if the CEO has done podcasts, if he's talked to other folks, you search LinkedIn to figure out if you have any joint friends and which ones you can call to get some background and information on. So you try not to go into anything cold. At the end of the day, it's a sales call.

Kison Patel: How much time do you spend doing that for [00:19:00] everybody?

Andrew Cohen: Between

Kison Patel: two

Andrew Cohen: and 10 hours.

Kison Patel: Two and 10 hours. That's a target. So especially if you have that, hey, this is gonna be a really good fit. You're gonna spend anywhere from two to 10 hours.

Andrew Cohen: Well, the flip side is, and that's one of the things that's fun about being in Corp Dev is versus all the other folks, this is my day job and I take it seriously.

Andrew Cohen: Lots of folks say, oh, when we do M&A, I bring in my CFO and I bring in the product guy and I've got a marketing person and we're great and we put together a Tiger team and [00:19:30] do it. That's awesome. But at the end of the day. This is a day job.

Kison Patel: Are there things that you would say or do to flatter this target?

Kison Patel: I'll give you an example. Like when I was CEO of deal room and I had to go pitch to F five. Yep. I would listen to your last earnings call. Of course. Now it was easy. I'd just throw an AI and be like, exactly, gimme, gimme some references. The CEO or CFO made about M&A. And then I'd point that out and be like, Hey, I see your CFO talked about blank.

Kison Patel: And then you're like, oh, this guy actually did a little homework. And it could even come with a point of view of like, oh my, you know my assumptions. You're gonna be trying to scale out the way you guys do [00:20:00] integrations because you're planning to do a lot more deals. And that could be dead wrong, but at least you're like,

Andrew Cohen: but at least you come in with a point of view.

Andrew Cohen: I had a CEO many years ago who used to say, point of view is worth 10 IQ points. And I would say, good, I'm gonna have three points of view and I'll be equal.

Kison Patel: Yeah. Something if you don't have it because you're just coming in and uh, I felt like sometimes you get a little too much of that. You're just asking a million questions, but you don't come in with any kind of point.

Kison Patel: So that was my way to flatter. What's your way to flatter these target companies?

Andrew Cohen: It's understanding where they're at, [00:20:30] what they're doing, what excites them, why their space is important, what they've done to be successful, and how that's relevant to what we are doing. And at the end of the day, it comes down to trying to explain the better together story.

Andrew Cohen: We've got 20,000 customers. Every large enterprise is an F five customer, and we have permission to speak to them about infrastructure and security. What you're doing fits really well, ideally with what we're doing, and here's the reasons [00:21:00] why.

Kison Patel: It almost sounds like you're collaborating that better together story because you're having this conversation and you're validating through them.

Kison Patel: Like when you say, what are these things that you've done, what are these things that you're aspiring to do? What are you really good at? You're surfacing those things. You have some of the structure, but you're almost like taking those pieces to complete that story because it's not like I'm just making that shit up.

Kison Patel: No, not at

Andrew Cohen: all. It's exactly the reason that any good discussion is about listening and understanding and seeing if you can build a relationship [00:21:30] where what both of you are looking for can come together. And if it can't, and by the way, 98%, 99% of the time, nothing happens. Hopefully you provide some value to them.

Andrew Cohen: They provide some value to you. And I always end every discussion with, even if it's a short term discussion, anything I can do to help.

Kison Patel: And that that's usually happens. This is more of an intro call, maybe you got, you. Just try to get this, get to know each other, know what the general goals and intention are, and then there's always, people need this type [00:22:00] of stuff.

Kison Patel: You want time to think about it? Nice to know you. Boom. Part ways. Cordially like a typical introduction meeting. Mm-hmm. What happens after that? What's your philosophy? Do you convince people to sell or do you wait for them to be ready to sell?

Andrew Cohen: You can't convince somebody to sell that doesn't want to. You have to understand what they're trying to accomplish.

Andrew Cohen: Isn't

Kison Patel: that

Andrew Cohen: convincing them? Is that part of it's convincing? Part of it's understanding what makes sense for both of them. So yeah, it's certainly convincing. Any sales job is convincing [00:22:30] somebody there's a need and you can fill it, and in this case it's a, Hey, you are doing this for whether it's money, whether it's broadening technology, whether it's solving really hard problems for customers, and we can help you do that at better scale.

Kison Patel: There is different parts of convincing. Totally. I can help you get the deal actionable.

Andrew Cohen: The other side is, there's lots of times where it's, this is really interesting and we should continue the discussion. And it's not a no, it's just a not [00:23:00] now. Okay, we're not ready. You are not ready. You go on, continue to grow, continue to get things, we'll learn more about the space, and if things continue to align, let's continue the discussion.

Kison Patel: Okay, so you have this intro meeting, you'll have some interpretation of where they're at. Mm-hmm. Oh, this could potentially be actionable near term or more of a long term. That's how you frame your next steps, where it's like, if it's actionable, it's like, oh, we should probably connect in a few weeks, or we should probably loop in, so.

Kison Patel: Mm-hmm. And get the, continue the discussion. And then if not, it's nice to know you, but [00:23:30] we still got all these things we're trying to achieve.

Andrew Cohen: Absolutely.

Kison Patel: And this and that. And best

Andrew Cohen: of luck, we won't again, you wanna be respectful of people's time. If there's not a good fit, hey, this was great. Thanks a lot.

Andrew Cohen: If I can help with something else, let me know. And in the interim, that space is one that's not of immediate near term interest to us.

Kison Patel: What if it's something interest, you can tell that, hey, hey, we're not gonna do it because we got timeline for the next couple years on these milestones. Is it, let's just make a point to stay in touch once a quarter or, or something like that?

Kison Patel: Absolute. I'll

Andrew Cohen: see you. What? RSA and Black Cat look forward to having a drink. Best of luck. There are [00:24:00] lots of companies that, you know, it's IPO or bust. You know, we, we don't want to sell. There are plenty of CEOs that frankly don't need to sell and they don't want to. And you have to respect it and say, okay, best of luck.

Kison Patel: So I remember losing a deal where in my head I was like, oh, I should like follow up this founder in six months. And I didn't. And then he got a deal done like 11 months later. I was like kicking myself in the butt. What do you do to keep in touch?

Andrew Cohen: You have a [00:24:30] CRM system, you have something that says, really, I don't know how to use that very well.

Andrew Cohen: Yeah. You know, my complicated CRM system is I put in Outlook, call this person in three months and have it show up as a reminder. In three months, you're supposed to call Keon and see what's going on. It doesn't have to be wildly complicated. And the other side is if there's something that happens in the industry, I have Google alerts on every company that I'm looking at and make sure that I'm following them on LinkedIn and on Instagram and see if there's [00:25:00] something new that happens.

Andrew Cohen: And if there's something that is of interest, I'll send them an email. Hey, have you seen this? I saw this, uh, from you. Congratulations. Look forward to talking about it.

Kison Patel: Honestly, you, you throw 'em on Google alerts. Mm-hmm. So that way you can, do you have all your prospective targets on Google alerts?

Andrew Cohen: I have the main

Kison Patel: ones.

Kison Patel: The main ones, yeah. I like that. And that if you see something, it's like you can always use that as a, a way to get in. So trust is like the big thing. I feel like. How do you think of trust as. Maybe don't think of it as a strategy, but like, say you were, [00:25:30] how would you think of it as a strategic approach?

Andrew Cohen: Have our reputation for being trustworthy for the last 20 years and say you can meet a bunch of people that will know you and be introduced. Okay. So you, that's your point of reference. Yeah. I trusted you because Jeremy said, Hey, he's a really good guy. You should talk to him.

Kison Patel: Ah, that's good. I,

Andrew Cohen: yeah, I mean, it's the transitory powers of friendship.

Kison Patel: Yeah. If

Andrew Cohen: somebody you trust says, I trust him, you should meet him. You do

Kison Patel: it. So you got these references. When [00:26:00] do you use that though? If you're like, Hey, just so you know, if you, I've done a lot of these deals. If you wanna talk to other folks I've done deals with, like, where do you interject with that in terms of having your, there's people don't know you, Jeremy knows you.

Kison Patel: So it's o obviously through the association. Mm-hmm. Okay. There, there is trust there through that association, but you're approaching a target. They don't necessarily have that. Was it more of, can you imply that, hey, there's references or

Andrew Cohen: you can certainly imply that there's references. Again, that's the point [00:26:30] where it's always great if you can say, Hey, I was speaking to our mutual friend Neil, who was the guy I was talking to this week and I've known Neil for 15 years, and he said, I really should talk to you and what you're doing is really cool.

Andrew Cohen: And then if the guy has a question, he'll immediately call Neil. Or ideally, Neil's already called him and vouched for you.

Kison Patel: That makes sense. If he can get that, the, the common contacts, using them as proof points, you're reminding me of a deal I need to follow up on based off of that actually, because there is somebody that's like, oh, we actually know that same investor I'm [00:27:00] working deal on.

Kison Patel: Perfect. I should like go back to him to help me kick him to get the deal going. What else do we do to build trust?

Andrew Cohen: Run a good process. Do what you say you're gonna do, follow up and don't waste people's time. It's about basic general respect and being a good person. What about getting people drunk? I'm a big fan.

Andrew Cohen: I mean that it is great to break bread with folks. I can't think of any deal that went well that didn't involve getting together and having a [00:27:30] meal. You don't really learn what people think until you've had a second glass of wine. You've, and it doesn't have to be a second glass of wine. It can be a long walk.

Andrew Cohen: It can be seeing a ball game. It can be talking about what music you did or what you do over your Thanksgiving weekend and why was that cool and what was fun for you about it. And you learn about what makes that person tick. And at the end of the day, people are people and they want to know that you care about 'em.

Kison Patel: That's true. There's time and having [00:28:00] more of the, like a personal setting to get to know the person personally.

Andrew Cohen: Huge what? Especially when you're in due diligence and you're trying to figure out what's going on for integration, you've gotta really know what each of the, what drives each of these

Kison Patel: people.

Kison Patel: And we're gonna like, like we're picking up an integration here. I like that. One. I still like alcohol 'cause I feel like it's a true serum. I agree. So, okay. With or without alcohol, is there things that you've uncovered that kind of really, oh by the way, I'm going through this really bad divorce [00:28:30] or something like that.

Kison Patel: Is there stuff like that you uncover that all of a sudden you relay back to what the deal process is gonna get impacted? Absolutely.

Andrew Cohen: CEO that nobody in the company liked.

Kison Patel: Do you find out from the CEO? No. No.

Andrew Cohen: You find out from the other people that you went to dinner with when the CEO's in the bathroom.

Andrew Cohen: My favorite example is seeing at dinner how the CEO or the other senior people treat the staff. Yes.

Kison Patel: Big on

Andrew Cohen: that. I worked at a company called Modernizing [00:29:00] Medicine for a couple years and their CEO, a great guy named Dan Kane, if you walked into the building with him. Dan knew the name of every person at the front desk who picked up the trash, who worked in the building, who was at the coffee store, and you just knew that he was a good, caring, nice man.

Andrew Cohen: Those tiny little details that you don't think matter make a ton of difference.

Kison Patel: You're picking up on like the culture cues too, which [00:29:30] I feel like we do a lot of these podcasts and it comes up so much when you think about integration and speaking of integration, I'm almost convinced there's three schools of thought.

Kison Patel: Maybe there's a fourth, but I forgot it. One is the old school, Hey, we're just gonna put these companies together and they're gonna figure it out and create a new unique culture. Old school. There's more of this progressive of we really wanna understand this culture. Not necessarily, oh, this is we, we shouldn't do the deal 'cause it's indifferent.

Kison Patel: But this will help us shape our integration strategy. Mm-hmm. [00:30:00] Knowing that certain functions would probably. We could fully integrate. Some are gonna be uniquely different the way they operate. Maybe we should add them independent. It really helps you shape your integration approach. And then I've seen companies like Gary Waymiller, LCI in Industries, is it Lippard?

Kison Patel: Yeah. Jason Lippard runs that company where they're using their culture is almost like the driver of like, Hey, just so you know, this is our culture and this is how we're gonna change our company to fit our culture. And they bring in like [00:30:30] coaches and things to just get their leadership on board. And this, it's actually pretty interesting if you haven't read it.

Kison Patel: I think he, he just updated his book, Bob Chapman, like Why Everybody Matters. But that's the other School is Yep. Almost using as a strategy of culture, where do you sit on that spectrum?

Andrew Cohen: It's important to understand both companies cultures and then figure out how to get the best of both at the end of the day.

Andrew Cohen: And again, the vast majority of the transactions I've done have been. Small to medium sized transactions where it's [00:31:00] unlikely that a small company's gonna come in and totally change the big company's culture, whether that's for better or worse. It's very different if you're doing a merger of equals where you do have to pick one culture or really adapt the two of them.

Andrew Cohen: For us, it's been mostly making sure that people understand what the culture of F five is and if they're comfortable joining that. So I'd say for small to medium sized deals, you gotta figure out if they're a cultural fit [00:31:30] for a larger deal. It's a very different discussion. That's really an integration, not a bringing it in and figuring out what you're gonna do with it.

Kison Patel: So you're almost prepping them in a ways to be amenable to some cultural changes as they become part of a five.

Andrew Cohen: Yes,

Kison Patel: versus, oh, I promise you all the autonomy and you're gonna preserve your culture and do everything just like you are.

Andrew Cohen: And there have been times where you do want to keep things autonomous because it's a small company going at a super high velocity, and you don't wanna slow that down with the traditional big [00:32:00] company, a Coutre mall of process, et cetera.

Andrew Cohen: So you really have to figure out the best of both worlds. But a lot of that is really spending the time during due diligence trying to figure out what the appropriate integration strategy is. I'm a big fan and my team hates it 'cause they're sick and tired of hearing me say this, but due diligence does two things.

Andrew Cohen: It's binary up or down. Do we do it or do we not do it? And the rest of the entire due diligence process is about integration planning.

Kison Patel: How's your approach? Because [00:32:30] we oftentimes, the whole buyer led framework, it's all about creating synchronization between diligence, integration, and essentially it's just integration forward.

Kison Patel: What is it like integration thinking look like through the process?

Andrew Cohen: Really understanding that all the information you're getting is to help you figure out how you're gonna be able to create value. What are the main value drivers that you need to focus on? So all your

Kison Patel: diligence is all about integration.

Andrew Cohen: It's confirmatory. By the time you get to due diligence, at least as a strategic, you understand their technology, you understand their strategy, and you believe you [00:33:00] wanna do it. I've never gone into a transaction wondering if I wanna close it, I want to close it. I want to confirm that the assumptions that I have made are correct.

Andrew Cohen: And that's the go, no go. But everything else is what do they do? How do they do it, and how would it fit with what we're doing? What are going to be the value drivers going forward?

Kison Patel: That's interesting. And then you get aligned on that. And then you're, you're working, I mean, so the target company's aligned about how you're gonna integrate foreclose.

Andrew Cohen: Absolutely. There should be no [00:33:30] surprises when you go through this process. And part of that is explaining the day we sign an LOI. We walk through the entire due diligence and integration process with the company. So they understand timing, they understand who's gonna be doing what, they know what our process looks like, and we're all aligned on expectations.

Andrew Cohen: A

Kison Patel: pretty detailed plan. Yes. That's what you miss out when you have a sell led process. There's only focus on closing the deal. They compress all the timelines to close as fast as possible and with the [00:34:00] highest certainty to close. But here's a strategic, you want high certainty of value generation. So for you, the big focus is how things are actually gonna come together and make sure there's true alignment between both sides.

Kison Patel: All the folks eventually are coming together as one team

Andrew Cohen: at the end of the day. They're very different processes. I've lost lots of deals to PE companies that can move so much faster than I can because they're mostly numerically driven or they have a thesis. They're willing to take [00:34:30] very different types of risk and underwrite it differently than a public company can.

Andrew Cohen: They can get things done much faster. They can get a different certainty of close, but it's a different process for what the future's gonna look like

Kison Patel: because it's just boom, go figure it out. It because the PE firm will close and give it to the business and say, go figure out how to integrate this.

Kison Patel: That's the

Andrew Cohen: difference between a transaction and a relationship.

Kison Patel: I've heard the story, so how that goes. Oh yeah. Yep. What's really interesting is what we described of building trust. This is pre LOI, [00:35:00] you're building trust and you're already starting to think of how some of these things you're learning is gonna impact integration.

Kison Patel: Mm-hmm. That's interesting to me. That's higher led

Andrew Cohen: baby. Absolutely. It's the reason why you spend so much time together. It's to get as many data points as you can and learn as much as you can. Not just because it's, it's interesting and fun to put together the puzzle, but because it just helps you do a better job and make better decisions and build more value,

Kison Patel: it's all integration forward.

Kison Patel: You, you build trust. Okay, so we go through this journey, you build trust and we get to that point. Yep. And it's like, Hey, look, we'd [00:35:30] wanna see an offer from you. You get to the point of getting an offer out there. I wanna know about negotiations because you made this point where you said the harder negotiations are actually internal negotiations.

Kison Patel: Yeah. Versus the external or with the counterparty. Talk me through that.

Andrew Cohen: The negotiations internally about whether or not to do the deal, not about the actual price. Internally. Nobody cared. Okay. Yeah.

Kison Patel: Negotiations, negotiation. Yeah. So making a go. No go decision. Gimme examples like show, walk me through that.

Kison Patel: How does that go down?

Andrew Cohen: The big [00:36:00] internal go no go Decision is about issuing the LOI up until the LOI point. This is why strategic is slower than pe. No doubt about it. PEs also don't run an operating business. That's their job. They're just doing these things, so it's very different for us. I've gotta convince people that have day jobs, that are reporting their quarter, that are building their product, that have an annual plan that they should mess with, that pate it, spend a bunch of time [00:36:30] and do something external instead.

Andrew Cohen: Convincing them that what a lot of the process is spending time with them upfront, understanding their roadmap, understanding what their build to buy is, understanding what they're, what they need, and if it's something that they need and can't do internally, obviously it makes an awful lot easier to get a transaction approved if it's a, when F five bought Engine X spectacular transaction been very successful, there [00:37:00] was an internal product that was doing the exact same thing.

Andrew Cohen: Oh, interesting. Convincing internally, both management and the team, that it's better to buy an external product and no longer do what you're doing internally

Kison Patel: is really hard. Let's case study that for a second because that is really interesting and I've always been curious about that. You have an existing product and Engine X is, I mean I, we've used it, of course, yeah.

Kison Patel: I dunno if it's still on our stack anymore, but Yeah. A great product so you get the opportunity. How do you [00:37:30] do that?

Andrew Cohen: You recognize what the skills it takes to get from where you are to where you want to be, and do you have those skills and market internally? Another example, in really recent, we bought a company very recently called Calypso ai.

Andrew Cohen: In the AI security space. We had an internal AI gateway product with a non-trivial number of people working on it. It became clear to us that while we had great engineers and great [00:38:00] technology, we didn't have the AI and domain specific expertise to really understand exactly what the market wanted. So we ended up buying the company and then taking a number, the vast majority of the internal team and moving it over into the Calypso team and merged.

Andrew Cohen: Hopefully we'll get the best of both

Kison Patel: worlds. It was a reverse integration. Yeah. Talk to me, the negotiations, are you talking to product leaders and are you convincing them like, absolutely. I know you got a little hope and dream here, but

Andrew Cohen: [00:38:30] ideally, you never want a deal to be only pushed by Corp dev. You need to have a product and sales co-sponsor.

Andrew Cohen: And by the way, the CEO and CTO should not be those sponsors because they're way too busy to be able to do the rest of the work. So I want a senior product manager who owns that space or will own that space. And if it's a revenue based company, not just purely technology, I wanna have a sales co-sponsor.

Andrew Cohen: If we're gonna sign up to a number, somebody in the [00:39:00] Salesforce has to sign up to that number. 'cause a number that doesn't bring around incremental quota is not a number

Kison Patel: you want real ownership of. Yep.

Andrew Cohen: Everybody's gonna sign in blood. Maybe on the dotted line. Blood sounds a little bit harsh.

Kison Patel: Yeah. That it is.

Kison Patel: Interesting. Here's all this negotiation on alignment. I'm curious if you had like a defined M&A strategy. Mm-hmm. Like if you used either these examples, pso, engine X. Yep. And you know, it's like, hey, we already had this strategy, it was defined and we're executing against it. That's why we have this [00:39:30] opportunity.

Kison Patel: Or is it more we've identified it and now we need to justify this and, and maybe shape the strategy if like you found the opportunity and then you gotta go back and convince internal stakeholders like these product leaders. Is it more of like, we have a loose strategy and then we're still rationalizing this particular one?

Andrew Cohen: If your M&A team is that far out ahead of your product guys. There's not good strategic alignment within the company, so you need to understand what the company's strategy is and what the [00:40:00] company's ability to execute

Kison Patel: is. So you probably had that alignment before you went out and and really shopped around and talked to the target.

Kison Patel: Absolutely. Of course. Okay, so this negotiation's even happening beforehand, and this is your negotiation to really shaped your M&A strategy

Andrew Cohen: in AI security. We knew it was an important market. We took a bunch of internal resources to begin working on it to learn and understand, and then as we were learning and understanding, we realized we don't have enough of these resources internally to be able to do it.

Andrew Cohen: We're gonna have to do this [00:40:30] in a combination of organic and inorganic.

Kison Patel: These are the tartar negotiations than much

Andrew Cohen: than the target were because it turns out the team that's developed it internally also thinks their baby's really cute.

Kison Patel: Any specific things have you've learned to really drive that? I feel like you could have somebody stubborn, I tell you the deal room culture over there.

Kison Patel: Anytime I found something where it's like, Hey, we can just buy this ip. They don't have a strong customer 'cause we're small. It's a 10 million revenue company. So you're looking at these couple hundred grand, you can go buy the ip. But then the engineer's always like, [00:41:00] we'll just build it. You build, how long does it take?

Kison Patel: Exactly. Are your engineers busy?

Andrew Cohen: Yes, exactly. It's software. You could build anything. So that's why, how do you end up convincing them? Teach me it's what's the highest and best use of your time. And if it exists, why recreate the wheel? It's time to market. Yeah. It's always easier to integrate an internal product than an external product.

Andrew Cohen: 'cause it's built with your tools, but

Kison Patel: you also scale. That's it's by the time we integrate it, we could have just built the whole thing from scratch.

Andrew Cohen: Which is the question of one of the reasons [00:41:30] why that internal negotiation's really hard. 'cause you also have to understand, it turns out if the integration is harder than building it yourself, then build it yourself.

Andrew Cohen: So you have to, that's part of that build versus buy that really is. Important 'cause it's build and integrate versus build, which is usually by definition, integrated versus buy and integrate. It's a full process stage. Do

Kison Patel: you have like product leaders then? Do you have like senior engineering that have a voice at this too?

Kison Patel: Absolutely. They're the ones that want to [00:42:00] go get drunk and figure out like, how do I,

Andrew Cohen: and you also have to have a CEO and a management team that understands the pros and cons of that. One of the things with the AI gateway and some of the products, when we decided that we weren't going to continue to do that internally and do it externally, you know, if you message that internally as, Hey, we failed internally and we're going outside to buy it, then everybody's really pissed off and it's bad.

Andrew Cohen: But if you explain, hey. We spent six months learning what the market [00:42:30] needs, understanding requirements, and then determining where the best way to meet those requirements are and celebrate it as a huge win, even if it means you're no longer doing the internal product. That's creating a culture of innovation.

Kison Patel: Interesting. Builder versus buy. It's interesting 'cause it's almost like a little red team blue team exercise there.

Andrew Cohen: Mm-hmm. Always. Yeah. And different people have very different opinions on which one you should do. Turns out engineers like to write code.

Kison Patel: They do. So I guess technically you're the red team because

Andrew Cohen: you [00:43:00] Yes.

Andrew Cohen: Go buy something. Exactly. The flip side is, especially in today's environment, yes a big company can build pretty much anything at wants, but it's not like though we have engineers sitting on the sideline waiting to do something.

Kison Patel: Everybody's fully committed, there's something else they can do. Is it the biggest element of that business case?

Kison Patel: Time to market speed. It's time to

Andrew Cohen: market, it's speed, its skill sets and it's opportunity cost.

Kison Patel: Okay. You build R around all those pillars. All right, there we have it. [00:43:30] That's our framework to assess bill versus buy. When you have to make this go, no go decision. What is that framework? Triaging all that look like, how many platforms do you guys have at a five right now?

Kison Patel: Three main ones. Three main ones. I'm wondering if it's you prioritize mandates between different platforms and then within that, how do you quickly get to, I guess more so like a no than

Andrew Cohen: when you're in due diligence or when you're actually triaging new ideas?

Kison Patel: [00:44:00] Oh, it could be both actually. I didn't even think about the new ideas.

Kison Patel: That's the whole thing. And I guess that's more the strategy exercise. Yes. So strategy. Let's go run through both to go from ideas and then deals.

Andrew Cohen: So ideas are, we are always the frontline when things come in and try to do that triage as quickly as possible. If a new idea comes in a, it's up to the corp dev folks to understand does this fit with our strategy?

Andrew Cohen: Is it a market we are interested in? Does it fit the big criteria? And I will tell you, bankers [00:44:30] and companies appreciate a fast, no, much more than a long, maybe because you're not wasting people's time, and again, plays into the reputation of having a good user interface. The other side is knowing your tech stack, knowing your roadmap, and being able to say, yeah, this makes sense.

Andrew Cohen: It might be a little orthogonal or a little bit out there, but it's worth the time and expense of getting product and engineering folks to spend an hour to learn more about it.

Kison Patel: That makes sense. [00:45:00] This is actually fun. Can I keep using the deal room reference, but I gotta work across like 200 course. Yeah.

Kison Patel: 200 corp dev teams. Yep. Which, again, like one extreme is just, I, you almost feel like they're just like gut decisions where it's just, and the other one I've seen the most sophisticated scoring systems you can ever imagine where they're just like 30 different little 30 different variables. One to 10 on each of 'em and Exactly.

Kison Patel: Yep. What do you guys do? Like, is there sort of a, a metric driven system to get to that No-go decision.

Andrew Cohen: There's a metric driven system when comparing similar companies. [00:45:30] If there are four different companies in a space, I would like, I'll work with the product and sales folks to say, what are the decision criteria?

Andrew Cohen: What's important to us? How do we assign relative value to each of those rankings? You come up with a numerical way to look at these things based on those decision criteria. At the end of the day, it's a gut decision that's made with the entire team, but being able to actually. Put down the decision criteria, makes it [00:46:00] much more of an organized set of discussions.

Kison Patel: Is a 10 point list. Yeah. Oh yeah.

Andrew Cohen: We've got a 10 point rubric that comes up and says, these are the 10 decision criteria. What's the relative weight for each of 'em and how do we compare? And it's helpful. It usually isn't the final decision maker, but it definitely helps knock out things that don't actually make sense.

Andrew Cohen: Once you figure out what are the really important criteria,

Kison Patel: who are the stakeholders to make the no-go decision.

Andrew Cohen: We go through [00:46:30] in front of our ELT after due diligence. Wait, what does ELT

Kison Patel: stand for? Sorry. Uh,

Andrew Cohen: I'd like to say executive leadership team, but I also call them executives, lettuce and tomato sometimes.

Andrew Cohen: So it's basically the CEO and the ex Yep. And the executive staff. Yep. When we are finished with the preliminary due diligence, we will have each of the, we have five different tracks, each of the track leaders. Put together their report with a go no go recommendation. And we go through the report, the [00:47:00] highlights, any red flags that come up in each of those groups.

Andrew Cohen: Wait, each

Kison Patel: executive comes with the,

Andrew Cohen: each of the five track leads

Kison Patel: with track leads from the CET, hr,

Andrew Cohen: finance, product sales, marketing. That's who makes up the ELT. That's who makes up the due diligence tracks.

Kison Patel: Okay. So you got your due diligence. So this is your functional leads. Functional

Andrew Cohen: leads and the go no go meeting.

Kison Patel: Ah, so the functional leads come up with their summary. So they do their diligence. Yes. And they come up with this. Now this is pre LOI?

Andrew Cohen: No, this [00:47:30] is after LOI after we've done the deep due

Kison Patel: diligence. Okay. So the, so this is

Andrew Cohen: the go no go for the transaction. So there's, there's no,

Kison Patel: there's go no go at L loi.

Kison Patel: Yep. Then there's go. No go at sign. Yes. Okay. So let's break that down. At L loi, who are your stakeholders? Who.

Andrew Cohen: Product leadership, C-E-O-C-F-O, myself and the COO.

Kison Patel: Okay. Pretty tight tent. Yep. About four or five folks there. Yep. And then now we get into actual sign where all these functional leads come in done.

Kison Patel: Absolutely. They got diligence readouts. What does that summary [00:48:00] look like from the functional leads to do a no go? Is it they kind of referencing, Hey, based on this, our diligence, previous summary of it? Yeah. No, there's a,

Andrew Cohen: there's a specific due diligence report. We've got very formal AIC ideas of what it is with highlights and color codes.

Andrew Cohen: And if there are reds, how are we gonna address it? As we go through during the due diligence, we say, Hey, if there's a red flag showstopper, you raise that day because we don't want to waste any more time and energy if they, if somebody finds something that we think is [00:48:30] gonna stop the deal. It doesn't happen very often, but when it does, we want to stream and make sure we get, we address that ASAP, and then when we get to the end of that due diligence for the go, no go decision.

Andrew Cohen: Each of the functional leaders presents their findings to Corp dev and the ELT is integration any part of it? Absolutely. They're one of the stakeholders. There's an integration report as part of that. Oh no-go.

Kison Patel: Do the functions mention anything on integration or is that [00:49:00] all strictly through the integration team?

Andrew Cohen: I mean, the integration is a function of the discussions that have happened with those leaders. And most of those leaders are gonna own their individual integration

Kison Patel: processes. Well, they have a concern around integration that they would raise as part of go no go.

Andrew Cohen: Absolutely. They have an obligation to do that.

Andrew Cohen: Okay. And we let them know that.

Kison Patel: So part of diligence is here's fly diligence exercise to minimize your risk, but there's risks that corresponds with integration. It bring that up there.

Andrew Cohen: It could be a great company, but we just can't integrate [00:49:30] it.

Kison Patel: Okay. You get all these readouts that essentially are their summaries of a go no go decision.

Kison Patel: Mm-hmm. So they ultimately say, Hey, we should do it. We shouldn't do it.

Andrew Cohen: Everybody has to vote. And by the way, it's not just the track leads. We make sure that at the end of each of the groups, we specifically say anybody. And it's a little bit like a wedding. If anybody here has feels they need to say something or that their perspective hasn't been heard, please let us know.

Andrew Cohen: Because we don't want there to be anybody that says, oh, I meant to tell you that [00:50:00] beforehand. And I didn't, don't want anybody to have that excuse. If one person says, I disagree with this vehemently. We want to make sure that we have the culture and the availability for them to speak up.

Kison Patel: Is it like a, like a democratic vote?

Kison Patel: You just kind of get majority or

Andrew Cohen: No, at the end of the day it's the ELT and CEO's decision. Okay. But it's based on that information,

Kison Patel: do you have a deal where they've had several people object to it and they still move forward with it?

Andrew Cohen: Yes.

Kison Patel: How does that pan out?

Andrew Cohen: Obviously it depends on why they're objecting, but oftentimes they're [00:50:30] objecting because they think they can do it better themselves or they're competing priorities, and at the end of the day, that's the type of decision that A CEO needs to make of, do I want to focus on this or do I wanna focus on that?

Andrew Cohen: Because always limited resources and the opportunity cost of people's time. Even a small acquisition takes a ton of time and energy internally, so you've gotta make sure the juice is worth the squeeze.

Kison Patel: So they got votes for the elts, got the corporations

Andrew Cohen: and not

Kison Patel: [00:51:00] democracies. Fair enough. We talked a lot about integration, and I like how you start cultivating this stuff when you build like your deal thesis.

Kison Patel: Is having a thesis on integration part of that, like what Absolutely. What level of detail do you get

Andrew Cohen: at the LOI? We wanna have an idea of what we think the integration strategy is. Obviously you haven't gone and understood it in great detail yet. You've gotta have a thesis for what it's going to be and people have to agree that it makes sense.

Kison Patel: Can you [00:51:30] gimme like a rough, like what is it just pretty broad, you know? Or if you kind of identified that there may be some challenges.

Andrew Cohen: Yeah. The things where it would become interesting is, hey, this is a very different culture or this is has a different business model, or we are an enterprise direct sales business and this is an SM, I'm making it up an S-M-B-P-L-G sales

Kison Patel: approach.

Kison Patel: You're seeing integration challenges. Yeah. You have to making that part of their, and

Andrew Cohen: we've also done a really good [00:52:00] job of spending a lot of time doing after action reviews of every deal and putting together the criteria that are important for F five. The companies that we wanna work with definitely have to be able to scale to enterprise.

Andrew Cohen: 'cause our biggest customers are enterprise and our biggest asset as my CRO tells me all the time is our customer base and the faith that they have in us. We sell primarily to NetOps, SecOps, and a little bit to DevOps. So they're, if it is a bottoms up open source, [00:52:30] PLG motion sales that is selling to cloud native new companies doesn't make sense for us.

Andrew Cohen: It's not gonna fit with our model.

Kison Patel: Okay. Yeah. It helps flush that out so that way you get ahead of it and then make sure you got a solid case and

Andrew Cohen: Absolutely. Gotta have your decision criteria and understand what knocks things out upfront.

Kison Patel: Yeah. The sooner you get to it, the better much. Yeah. There's no sweeping things on the rug here.

Andrew Cohen: Even if it's the greatest technology in the world, if it doesn't fit your team, if it doesn't fit with what you have permission to do, it doesn't make sense for us.

Kison Patel: [00:53:00] You mentioned before we talked that you'd rather walk away from a deal than compromise in your core principles. What does that mean? What are your core principles?

Andrew Cohen: Treating people ethically and fairly and doing the right thing. Okay. What happened? Gimme some example. I know now. I know, I know. Yeah. We were in a potential transaction where, and again, everybody has their own perspective. We had signed an LOI, it had been approved by our board and the board of the other company.

Andrew Cohen: And then as we got to the end, [00:53:30] the other side decided they wanted to renegotiate both price and terms. And one of the things that that included was changing the articles in of incorporation and the cap table, basically to take more money for the preferred versus the common in employees. And it actually didn't dramatically affect the economics for F five, but it would've not treated [00:54:00] people the way that they were supposed to be treated.

Andrew Cohen: And we said we can talk about renegotiating.

Kison Patel: Like would've diluted all the employee shareholders.

Andrew Cohen: Exactly. But we can't agree to something upfront and then you change it at the end and hurt other people. We're not willing to have F five be associated with those types of business practices. And if we have to walk away and start again, we'd rather walk away and start again than compromise on those beliefs.

Andrew Cohen: By the way, that's one of the [00:54:30] reasons that I really like working at F five because in fairness, I had spent a bunch of time with lawyers that say, Hey, if they do, this is how we can be indemnified and this is how we don't have to worry about it. Exactly. And this is how we, we, if something happens and one of the shareholders sues, this is how we get back.

Andrew Cohen: And our management team said, that's great. We won't touch that. It's not a money issue.

Kison Patel: It's a reputation issue. Principal. Yeah. Yeah. On principle. That's cool. Yeah, I like that

Andrew Cohen: was, that was one of those really defining moments of, oh, this is why it's [00:55:00] a company I wanna work at.

Kison Patel: I like that. Can you tell me about.

Kison Patel: Fail deal that you turned around.

Andrew Cohen: Sure. We bought a company many years ago. This was, when I say we, I was back at Citrix, a company called Ardent. Gosh, this is 2008. 2007 was the deal. Really interesting deal. We got one piece of technology that we really wanted provisioning server. But within that business, there was a small, little real time operating system.

Andrew Cohen: Business didn't fit with our [00:55:30] strategy and every time we were gonna do something where headcount had to come out, oh, let's just take it outta there. It's not strategic. And we realized that there were a bunch of big customers that were using it. There were 30 or 40 people in the business and we weren't gonna do the right thing for 'em, we were just gonna drive it to zero.

Andrew Cohen: So we said, what can we do versus just writing this part of the business off? It was 2008. It was the financial crisis. Nobody was funding things, there were no buyouts, and we ended up creating a management spin out. So actually my [00:56:00] favorite deal of the, of all the deals I've done. We got the head of marketing and sales from that business to give up his big company job, put in his life savings and buy out the business.

Andrew Cohen: He fundamentally believed in the technology. He, he pitched

Kison Patel: it.

Andrew Cohen: We were looking at selling the business. We couldn't find somebody to buy the business, and he said, he came to us and said, would you consider selling it to us? And we're like, you can't afford it. We came up with a really creative financial structure.

Andrew Cohen: He took a bunch of risk. We spun it out. [00:56:30] It was a very tough time. They went from 40 people to 25 and then 22, and then built it back up and 15 years later, it's a standalone, really viable, profitable company.

Kison Patel: That's cool.

Andrew Cohen: Yeah. I'm going to Boston next week to do a board meeting with them.

Kison Patel: Oh, that's a good spinoff.

Kison Patel: I run into you. I go to Boston week after next week. Awesome. Yeah. That's actually worked out really well. Yeah, it was

Andrew Cohen: really win, win, win, which is very unusual. Right? It was

Kison Patel: good for the employees, especially the persons in the [00:57:00] business. 'cause I know there's a lot of firms, I don't wanna knock anybody.

Kison Patel: Carve outs are great opportunities and strategies. Sure. But like, when you're just bang on doors looking like, what do you got? Carve out, what do you got? Hey, actually, how many times a month do you get approached by? I know. Who do you get approached by? Uh, who's knocking at your door between consultants, bankers, and the PE firms looking for carve outs?

Andrew Cohen: Uh, we probably get two to four divestiture carve out calls a week. A week a okay. And it's funny 'cause sometimes, and again, I give business development folks lots [00:57:30] of credit, their sales folks, and they're trying to, they're working hard. If I say no, everybody on my team will get a sa, will get the same email or LinkedIn saying, Hey, I'd love to talk to you about this.

Andrew Cohen: So I was like, Hey, here's the list. We're not doing carve outs. If we do, we have you on the list and we will definitely let you know.

Kison Patel: So you get two to four on the carve outs. How many from consultants, makers?

Andrew Cohen: Oh. We probably have a group of 10 to 15 bankers that we work with [00:58:00] regularly to help understand what our strategy is.

Andrew Cohen: Wow. So that they can be proactive looking for the things that we are looking for. Yep. And you know, we obviously have a couple big relationship banks that we work with and have done a lot of work with us. And then you never know where a good idea is gonna come from. So we'll talk to, I'll spend a half hour with most bankers or VCs that wanna understand what we're looking for and what's important to us.

Kison Patel: What about consulting firms?

Andrew Cohen: Not as much. There are a bunch of smaller advisors that want to understand what we're doing, [00:58:30] but not a lot of consulting firms have come. At least I'm sure they're bothering the product folks and the engineering folks, but less the corp debt folks.

Kison Patel: You know this, that's what this whole podcast's about.

Kison Patel: It's to get you in a funnel to find your next carve out. So I'll, uh, whatever it takes.

Andrew Cohen: By the way, if, if it doesn't work with me, I'll give you the names of the rest of my team. You can talk to them too. There you

Kison Patel: go. This is the MA Science Carve Out podcast. Exactly. And then I want a hundred percent financing these carve outs by the way.

Kison Patel: Of course. Yeah. From the family. Exactly. We've gotta go payment plan, run the business, and then I'll, [00:59:00] what would

Andrew Cohen: it take to get you in this carve out today?

Kison Patel: I'm just thinking 30 years, all the deals you've worked on, anything you wanna teach me? Negotiations, stuff. Just sending like what's my big takeaway before we wrap up?

Andrew Cohen: The biggest thing I'd say is transactions and meetings are short and careers and reputations are long. Do the right thing, give first, provide value, and over time it'll work out.

Kison Patel: That's true. The best I've seen CareerWise is that [00:59:30] provide value. Give first. Yep. Even the best attorneys I've ever met in this industry, they've always had that.

Kison Patel: They literally told me. Yep. I remember one specifically. I was just blown away by their office. I could, this is a big time lawyer. And I asked them like, what? Which was your driver success? I was pretty young over my career. He is like. I always just believe in keeping value upfront for free, and I just would offer clients to do half a dozen hours.

Andrew Cohen: Remember me when you're big and successful because you do right around the corner, there's a firm Akerman Center Fit. They're not the F five lawyer. They were a lawyer I worked with previously. [01:00:00] Guy provided a ton of value when I needed it, and I will never forget that.

Kison Patel: Yeah, it does. Absolutely. The only

Andrew Cohen: other thing, and it's less for corp dev folks than for entrepreneurs, expensive banking, accounting and lawyers are worth it.

Kison Patel: Accountants, bankers, lawyers, if

Andrew Cohen: you don't have your financials in good shape, if you don't have your documents in good shape, if your articles in incorporation aren't in good shape, make sure they are before you have these discussions. A hundred

Kison Patel: percent.

Andrew Cohen: A hundred percent. Oh God, it's such a nightmare. And yeah, [01:00:30] M&A lawyers are expensive but bad lawyers are much more expensive in the long run.

Andrew Cohen: I,

Kison Patel: I agree. Yeah. As finding the right ones, I think too, like. Dialed in with you, like you talked about culture and the industry.

Andrew Cohen: Yeah. They gotta understand the problems. They're unique. No matter how smart an entrepreneur is or A CEO is, they might sell a company once, twice, three, maybe four times in a career.

Andrew Cohen: I do four deals a year. A good [01:01:00] M&A banker or M&A lawyer is gonna do 10 to 12 deals a year. Really good experience is worth it.

Kison Patel: What's the craziest thing you've seen at M&A

Andrew Cohen: Prima Donna founders who tell you, oh, this other company was just bought for a billion dollars. I'm worth a billion dollars.

Andrew Cohen: And I'm like, somebody pay you that billion. No, then I guess you're not worth it. Oh yeah, there, there can be some really crazy expectations, especially during bull markets like we are now in ai and the other side is. The pendulum between fear [01:01:30] and greed, man, it moves quickly.

Kison Patel: That's so true. You go from one extreme to the other.

Kison Patel: That's why I'm always conscious about that. You know, the market goes in cycles.

Andrew Cohen: Well, you know, the market goes in cycles 'cause you've seen it. If you haven't lived through it yet, you don't have that learned experience.

Kison Patel: I said, right. I talked to a founder that did 2021 raise. Mm-hmm. And it's, uh, he's working on his next round and it's, it's almost impossible.

Kison Patel: I bet it's so tough.

Andrew Cohen: I call it the, when bad cap tables happen to good people.

Kison Patel: Yeah.

Andrew Cohen: It's really hard.

Kison Patel: He's done [01:02:00] well from that time period, but it's just like your sandbag so much.

Andrew Cohen: Oh yeah. And, and then I've looked at a bunch of companies that had $20 million of a RR in a hot market and were growing fast and raised at a billion dollars and we're all excited 'cause they were unicorns.

Andrew Cohen: And then three years later the markets changed. Maybe they even grow to 50 or a hundred. But now their company's worth a market multiple. And it's worth, I dunno, three, 400 million. And they've got a cap table that says they're worth a billion and a half. I see. How do you do a deal

Kison Patel: like that? It still gets me.

Kison Patel: I've, it's [01:02:30] crazy. A lot of these like first rounds that are 5 million to 50 million and it's just, in my head I'm like, oh my God. Like it's a skill of capital allocation is what it comes down to, and it's just a first round with that much during an early stage. It's just, it's so hard to do. It's so, I get it when, okay, we got a 10 million revenue business and I understand where that capital's going.

Kison Patel: I understand like there's a bit of a formula here. If it scales like we're in great shape, there's a little more predictability, but we don't have five customers, we just [01:03:00] raise 8 million bucks. It's hard to grow into that. Yeah. Yeah. But they, and again, it's that pre Madonna, you got this, we're worth a couple hundred million now and no doubt about it.

Kison Patel: Gimme that Porsche and access to the private clubs. Exactly. Yeah. Stay humble. Stay hungry, I think was a, the famous word, time from. Andy, thank you so much for taking time. This was fun. Thanks a lot. Enjoyed it. Taking a break from deals to helping me become a better M&A scientist. My pleasure. And thank you for teaching me.

Kison Patel: Thanks, man. Hey, those of you still listening. I am amazed. My [01:03:30] fellow M&A scientists, brothers and sisters, reach out to me. I love to hear feedback. What'd you think of this podcast? If you have any feedback from me, criticism, I'll take it so I get better at this. Or other topic ideas I'm trying to expand now that I'm on full M&A science carved out operating independent company, I wanna make this the best out there in the world when it comes to buy-side M&A.

Kison Patel: So gimme some ideas till next time. Here's to the deal.[01:04:00]

Kison Patel: Thank 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 Podcast. 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.

Kison Patel: You can reach out to [01:04:30] me by email Kison, K-I-S-O-N, at ma science.com, or you can text me directly at 3 1 2 8 5 7 3 7 1 1. If you just wanna keep learning at your own pace, visit ma science.com for a lot more content and resources. That's where you can also subscribe to our newsletter. Again, that's ma science.com.

Kison Patel: Here's to the deal.[01:05:00]

Kison Patel: 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.