Buyer-Led vs. Seller-Led M&A

Kison: [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: Hello, M&A scientists. Welcome to the M&A [00:00:30] Science podcast. This podcast is part of a mission to rethink how M&A is done. The old school seller led approach, it's dead fire led M&A, is all about strategy, alignment, and efficiency. Putting value creation at the center of every deal. Now, let's be real.

Kison: It's not just about closing the deal. It's about making it successful. If you're ready to challenge a status quo, ditch outdated methods and learn how to minimize risk while maximizing value. Episodes, resources, tools To elevate your M&A [00:01:00] game, visit ma science.com. Follow us on LinkedIn. I'm your host, Kison Patel, founder and CEO of Deal, room, and Chief Scientist at M&A Science.

Kison: Join me today is Matt Pearson, senior Vice President of Corporate Development at QuickBase. QuickBase is a low code platform that allows businesses to create custom applications and workflows. QuickBase empowers organizations to connect their people data and workflows through a user-friendly platform made for those [00:01:30] without coding or development experience in mind.

Kison: Today we're gonna talk about structuring buyer led M&A processes, avoiding common pitfalls, like over rationalizing deals and balancing stakeholder priorities to ensure strategic alignment and long-term success. Matt, how are you doing today?

Mathew Person: I'm great. Thanks for having me.

Kison: Thanks for making it happen.

Kison: We are live in person in Boston. Yeah, my hometown at the Deal Room Office. Brand new Deal room Office, brand new. Beautiful new office. Thank you. And first podcast. We're recording at this office.

Mathew Person: Yeah. Honored. [00:02:00]

Kison: Hopefully we don't run into too many kinks and hiccups here, but. We're used to doing this. Can we kick things off a little bit about your background?

Mathew Person: My background's a little bit different than most. I kind of have a three leg stool, so to speak. When it comes to corporate development. I actually started in executive management and business management in the sports industry, and it spent a good decade plus running and flipping sports franchises all over the country.

Mathew Person: All of those lessons around how to operate and build a company parlayed well, when I finally, I say grow up and went back to business school. Became an investment banker helped me really understand how to go from [00:02:30] rating value to capturing it in the M&A process. And the sell side was really interesting.

Mathew Person: I was a middle market investment banker for a couple years until I started missing how to grow and build companies again and flip myself to a perfect wedge in the middle, which is corporate development. It's a combination of strategy and acquisitions that helps build and grow companies. So it's a great home for me long term.

Kison: That's a the journey. So you really had front end. Hands on operational experience. Move to the investment banking side. See how the deals and value gets realized now. Back in between it all, which [00:03:00] is corporate development, which is seeing things through and making sure, sure. Deals are creative. That's

Mathew Person: right.

Mathew Person: Yeah. So I've had to own a p and l it. When you think of synergies you have to create in a buyer led process. I've been there alongside my partners owning that p and l. I understand the operational integration components can help me with understanding the pitfalls that you overestimate, and we'll talk about that when it comes to.

Mathew Person: Over rationalizing a deal. I've had to work through all that myself personally as an operator.

Kison: Hey, and a real quick on QuickBase too, that's got an interesting history. 'cause as far as I know, that was actually a carve out of Intuit. It was. And then it later got [00:03:30] acquired by big PE firm

Mathew Person: Vista. Yep. We had a couple different PE owners, but Vista's our current private equity partner.

Kison: Okay. So I went through a few different hands. A now it's currently backed by Vista. That's right. Let's talk about buyer led M&A. Let's define it, and I'd love to hear your views on your experience and how

Mathew Person: it's evolved. I love the term buyer led M&A 'cause it, I really do think it's different, but it's also in my view, the way to approach corporate development for PE, back pocos, or just any strategic that's looking to do equit.

Mathew Person: The reason for that is I'm a firm believer in programmatic. [00:04:00] Which is the kind of cadence, sequential acquisition of a few different targets. Every research point will tell you that companies that do this have a tendency to grow faster, to pivot to the market better, to withstand competitive pressures, but you gotta do two or three a year, and in order to do that, you kinda have to move fast.

Mathew Person: And that means you can't wait on incoming seller led M&A opportunities. You have to define what you're looking for and then go after that. That's a buyer led approach in order to succeed in that methodology. I really think that what you're starting to prioritize this buyer [00:04:30] led mantra is actually statistically backed up, is improved performance.

Kison: First and foremost, just being proactive about how you source deals and because you're proactive, you control your pipeline. Yep. And that allows you to do, yeah. Programmatic M&A, where you're doing multiple deals a year.

Mathew Person: If you're working across side strategy, your product team, sales and marketing, you're probably looking at a capability driven approach, which.

Mathew Person: Then allows you to focus on the key attributes in that target to acquire, and that will help you whittle down and cut the fat from the stuff that comes across your desk that this isn't gonna [00:05:00] fit. And you really only focus on the things that you need. A lot of people say M&A is a volume game, but I've always countered that by saying it's not.

Mathew Person: It's a volume game. When it's focused on the right arena, the capabilities that you're looking to acquire, the problem you're trying to solve for,

Kison: so the clear your criteria is then that's gonna allow you to just quickly assess what's a fit versus not.

Mathew Person: Yeah, you have to have a box of preference. One of the things you wanna talk to me about is how to create that view and how to get all the stakeholders aligned, but that box of preferences, a mix of qualitative and quantitative metrics.

Mathew Person: That will align to the capabilities that you need and those [00:05:30] attributes become the things that you go search for.

Kison: When you say like, there's this assessment of quantitative versus qualitative, can you like break that down? Yeah. What that actually means. If, let's say mean you're like looking at a deal together, how would you break

Mathew Person: that

Kison: down into

Mathew Person: specifics?

Mathew Person: The box of preference. I like to think about this square. Can you wanna play in is something that you should actually do. It's like the first thing that I did when I got to QuickBase. Was work around these qualitative and quantitative metrics and actually worked with Vista and with our board and with our executive team to actually write down the min and max thresholds we had for about 20 [00:06:00] attributes, and they're a mix of qualitative and quantitative metrics.

Mathew Person: Some of them are things you would expect, like growth rates and more operating margin retention metrics, and other things are more off the cuff, like what our view of management strength might be, strategic fit or proprietary IP and patents. What it does is it gives you the chance to then frame what good looks like.

Mathew Person: So that when something comes in, you can know if it's in or outta the box. Now it's not binary. We're not gonna just walk away from something that doesn't fit that box of preference. But what it does do is it tells us if we, for example, the big [00:06:30] capability, the core thing that we're going after, that tech proficiency, and maybe it's behind on retention metrics or it's growth rate, hasn't been that great.

Mathew Person: That immediately helps us identify that which we need to believe in diligence. We automatically focus our diligence around those things, and we already know that we have buy-in from all of our stakeholders that, hey. This is what good looks like. We know this is below par. Here's our path to remediating that in integration.

Mathew Person: And we also understand why it happened, maybe why it's not where it should be, and that's gonna help us get deal approvals moving faster because we're already gonna attack the things [00:07:00] that we know all of our stakeholders care about.

Kison: Can you teach this to me? You don't have to use your company exact. I don't wanna put your playbook in public.

Kison: What I wanna understand is, there's two parts. I think I'm still wrapping my head around market mapping. Sure. A lot of the stuff I'm learning that we talk about here on this podcast is easier said than done. I'm learning it the hard way. I. One is I kind of wanna get a better sense of like, how do you sort of mature that?

Kison: Because I feel like at an early stage I'm very obvious about what the market map entails. Hey, these are business I'm really familiar with. So there's a little bit of, I'm curious of how do you [00:07:30] see that evolve? You mentioned the conversation, the P firm, are they helping shape what market map looks like and just your company strategy and how are you building an M&A strategy against it?

Kison: Let's start there. And then I kind of like click into the actual criteria 'cause I got more questions around that.

Mathew Person: Yeah. So if you go back and look at, again, programmatic M&A and that buyer led focus, we're focused on capabilities. But one of the first things that I did when I started QuickBase was took a step back, walk through with products with our corp Dev is obviously part of a strategy function.

Mathew Person: It's not just the execution mechanism. I always like to say that [00:08:00] M&A is the execution of that strategy. So we work on the strategy and build kind of a view for where the business is going to be in the next few years. And that's something that we work through with Vista and our board too. They wanna understand where we're pointing the spear.

Mathew Person: We looked at certain attributes. So even though we're a low-code, no-code app builder, we're focused around operational workflows. We need to attach resources to those workflows. So people management, asset management and communication, communicating with those people. Those are things we didn't do as well as we wanted to.

Mathew Person: And it, it was identified through some work streams early on with our product [00:08:30] team, and we had market surveys and all kind of research that would support that there was demand. So those are the capabilities that I'm talking about. You get those high level. Capabilities to say, okay, resource management is something that we need to focus on.

Mathew Person: What's more important? People are assets, people. Okay, let's work on people. Now let's get really granular as to what people management means. We have different verticals we serve, we have different ICPs. Let's get commonalities across those functions and work to define all the different capabilities and the metrics that matter, and don't those become the keywords for your organic search.[00:09:00]

Mathew Person: If something comes in and it's a low code operator in Europe, we're not looking there because we don't wanna open up our overseas. We only wanna look at something in source management that could solve the problem. That's how you take this universe of options and really cut ourselves down in just the things that matter.

Mathew Person: And then within people management, there's all these different attributes we wanted to focus on certain ones. We decided to only look at companies that did those things. And then with the scorecard, looked at growth rates and what do we think a good looks like from a margin perspective. Retention metrics, all that kind of [00:09:30] stuff.

Mathew Person: And it allowed us to hone in on size and it allowed us to hone in on companies that did or didn't fit so that we could further whittle down the universe and the core targets we want. And it really made the process a lot easier in helping us define that, which was good. Once you know the capability works, and that's your first stress test, let's get in front of the SMEs.

Mathew Person: Let's get it in front of the tech department. Does this capability solve for that need? That's first pass. Second pass is all the scorecard metrics around its operating financial profile. You can rank and look at that, and then you would already know what [00:10:00] you have the diligence to prove out. And that becomes your bid approval deck.

Mathew Person: Hey, here's this business. Here's why it's already a strategic fit. Here's why it's worth what it's worth based on its profiles, and here's our preliminary integration plan to address why it's gonna help us from positives and from the negatives perspective, what we're gonna do. And you have the whole plan before you've even bought the company.

Kison: I can't tell if you're making this interview easier or harder 'cause. We're gonna keep along the same track. Yeah, probably harder. You got the, you got the investment thesis. Yeah. Because it is based pretty much on capabilities and it could be different, it could be geographical expansion that would make [00:10:30] sense to go look at the company in Europe.

Kison: Yeah. Right. Because that's part of our plan. Or maybe it's just purely the talent, or we're trying to do an acquihire 'cause we just need kind of AI engineering. But this one makes a lot of sense. Capabilities is pretty common. Mm-hmm. You've identified ICPs where either you're planning to build that capability.

Kison: Or if you can somehow acquire it, it's gonna be something that would be synergistic to sell into the same ICPs. Does that sound about right? That's right. And then we wanna get your take on this. It's almost like your order of diligence here. 'cause obviously here's this clear [00:11:00] strategic fit part of it. And then when you look at it, I feel like coming up through finance, you tend to look at the numbers.

Kison: 'cause I think there's a clarity around what are the revenues people wanna know. Fundamentally, it's what a lot of this is gonna be based around. But then how strong is that revenue? What's the retention look like? What's the growth look like? What's the footprint and size of the company? Is that kind of the starting place?

Kison: And where do you go from there?

Mathew Person: It really is. It's the operating metrics and it's the financial metrics. Okay. And those things become things that in a buyer led process [00:11:30] we're gonna push for earlier. Where in a seller led process, maybe they wouldn't give you the benefit of time or the access saying, Hey.

Mathew Person: Let's get to an IOI first or an LOI before you get to that data in a buyer led process. We're gonna push to get some of those things answered earlier to make sure that we have more, what I would call like certainty around what we call true operating characteristics. The company is what it says it is, and we would do that earlier in the process and maybe a seller process.

Mathew Person: I think this is a good

Kison: time to break down for the record. Yeah. Seller led versus buyer led, seller led slash banker [00:12:00] led versus buyer led.

Mathew Person: The seller led process, which is I'm sure you've talked to on other podcasts, is obviously the banker led process where they've reached out with a prepackaged sim introductory materials.

Mathew Person: You get access to the management team for a short period of time, and there's a rigor around the communication, a limit on the data flow and the access to that team. And then you have to make a decision around value and whether or not you think it's an acquisition structured. You [00:12:30] sometimes don't always get the chance to get all of the information you might want as a buyer, which probably we have different key criteria than everyone else.

Mathew Person: We may not get that culture fit. We may not understand some of the operating metrics that we want to, and the tech proficiency, which is really the key thing we're looking at, is that capability, that key tech proficiency. You're gonna sometimes miss that. Unless you really know the business and it's an aha.

Mathew Person: 'cause bankers like to get the public logo and the brand equity behind the deals that they do, you may miss a really [00:13:00] great. Tech proficiency play that's a B minus or a C plus from an operating metrics perspective, but actually might be the right target for you to acquire. 'cause the tech's better than maybe the a plus one.

Kison: So in a banker led process, it's prepackaged. Yeah. Which I think there's some pluses with that. There is. It's like ready to initially, like first phase of reviewing numbers. It's put together pretty nicely. It's

Mathew Person: put together beautifully and you can make an assessment on what you get. Don't bet. Too hard on the forecast.

Mathew Person: Yeah. Never bet on the forecast. For the most part, the legacy data is validated. [00:13:30] They do a lot of work to make sure that the information they get is correct. It's consistent, it's accurate. You're gonna have a little more faith maybe in the accuracy of the data. But again, I would offset that with a buyer led process where maybe you have some reservation around the quality of data you get from founders, which maybe isn't as well kept.

Mathew Person: You have the time to go back and go check that and run the math and validate on your own accord. It's a pro and con to each one.

Kison: There's a limit on data and the team,

Mathew Person: there's definitely a limit on team for sure. In a seller led process, culture is a huge [00:14:00] part of what makes a deal work and what makes a deal fail potentially.

Mathew Person: And getting in involved with the, not just the CEO or the founder, but the rest of the management team is harder in a seller led process.

Kison: These things like interconnect because you, when you talk about the limitation on. The flow of data. The team then also lends to limitation. Team needs limitation on identifying the culture fit, and then you just got some general kind time constraints, which you mentioned like the tech proficiency, and you're basically short cutting your diligence.

Mathew Person: You have to make more assumptions [00:14:30] in a seller led process, at least at the front end of the process. That's the harder part about it, where I would actually argue in a buyer led process, when we get to an LOI, we probably have a lot more certainty in our ability to close that deal. In a seller led process, I have less certainty and I rely heavily on the actual post li diligence to make sure we've got it right.

Mathew Person: And I'd argue that's probably where seller led processes have a higher tendency to fail or have a retrade because they've forced so many assumptions on the front end of that process where you don't have to do that in a buyer led [00:15:00] process. You have the benefit of being able to gut check before you get to LOI.

Kison: The buyer led process, you get more control. You obviously got more time because you're working directly with a target onto a deal. That's pretty amicable. Mm-hmm. Tell me more about the culture fit. What are you actually doing? Yeah, identify culture fit. The thing I've realized is you don't have access to many people pre LOI.

Kison: Like you got, maybe on one hand you can count how many people you're really gonna be interfacing with. I mean, there's things you could do to understand culture. You can like yield the ecosystem and [00:15:30] figure things out. 'cause everybody's got a reputation organization, individuals. But yeah. I'd love to get your take.

Kison: Like how do you find culture fit?

Mathew Person: First off, separate from M&A culture and organizational culture is something that I actually care strongly about and have a whole entire thesis around what culture is. To me, it's actually an intentional construct. It's not amorphous. A lot of people think it's the ping pong table and letting bring your pet to work.

Mathew Person: But to me, culture's, the actual output of a system of processes and procedures, and you can quantify it. And I actually work with HR on a lot of these things to walk [00:16:00] through elements of what we consider culture to be, which is a combination of how people are, your identity, how people are instructor coached, the nature of their inner communication, which is often what people think culture is, which is that ping pong table and happy hours and stuff like that.

Mathew Person: And then feedback, and feedback is review systems and things like that. So when we look at culture, even though we may in a buyer or seller led process, only have access to 5, 6, 7 people, you do get the benefit in a buyer led process of more time in person. They don't have, you know, the bankers sitting next to you [00:16:30] the entire time.

Mathew Person: So it's a little bit more of a free conversation and you get the time in a meeting. We have one coming up. I'm headed to California tomorrow for a company that we're looking at where we have one-on-one set up with the key management team just to talk to them. And also a session around HR and benefits that digs into the staff to a degree that we probably wouldn't get access to in a seller led process where we're walking through major discussions around roles and responsibilities.

Mathew Person: How they go to work, what they do when they're at work. So we're breaking down culture into systems, into [00:17:00] processes and procedures that you can discuss and define along the way. Healthy exercise for every company as a buy-side is to actually write down and define their own view of what culture is, who they are.

Mathew Person: And a lot of companies don't have. A great view of what their own culture is. They might individually think they know, but there's definitely a difference in perception of what management thinks their company is and what the rest of the company the employees think. And being able to harmonize around a company view as who we are and then taking that and saying, okay, is this acquired entity like that?

Mathew Person: And it sounds [00:17:30] obvious, you wouldn't want to be, if I like working in an office in a suit. You don't wanna buy a company that has people in jeans and beanbags in the hall. That's never gonna work. And I know that's a high level example, but if you start to break down culture into its component parts and systems and processes, you're gonna be able to tell relatively quickly whether or not you have things you need to work through.

Mathew Person: I'm not saying you shouldn't buy the company, but I have definitely been when I was a banker in rooms where. Companies that were all in office and we were representing a 100% remote business, they didn't buy the company on that basis because they knew there was gonna be an [00:18:00] issue with having full remote staff of a material degree interacting with people who are only in offices.

Mathew Person: It does factor.

Kison: We're making a very hypothetical situation that I may or may not have encountered, but on a deal, you clearly see that there's gonna be cultural challenges. Yep. With a specific department, let's say tech company, sales and marketing. Great. Not a big deal that that part's fine, but the engineering, it's, whoa.

Kison: They're like very different cultures of that. And your engineering leads brought that up. Now you sort of know [00:18:30] that, but then there's this general business case of why we're trying to do this deal. There's geographic expansion at play and cross sell opportunities. Part of me goes to the value of the deal itself.

Kison: Like where you feel like generally this is gonna be a good deal. It'd be different if it's something that we're really spending a premium on. Sure. To get the deal done. Versus here it's, ah, there's like more room for I. How do you like cross those things when you put all these things together? I guess this goes to like

Mathew Person: if culture's gonna be such a factor where you, maybe you walk away or you don't do the deal.

Kison: Yeah. I almost think it's like it's [00:19:00] competing with other elements of the criteria. And I don't think it's basically this is a minus, this a minus, and you're out. I almost feel like it's pluses a minus. Where you say, Hey, you know what? There's a price for everything at the end of the day that, hey, this could be a total bag with a lot of these culture issues, but we're getting such a good deal on it.

Kison: Maybe we roll our sleeves up and fix it.

Mathew Person: It comes down to the pluses and minus all factor as to what I call true operating characteristics. And then we put those on paper in the form of synergies and they're on the bottom line and the top line. And when you get into culture differences, you have to step back and look at whether or not [00:19:30] you actually can achieve said assumptions in light of the aforementioned dispute.

Mathew Person: So if the degree of culture delta is going to affect your ability to integrate the business properly, or to achieve scale and achieve the synergies put on paper, that's when you start to look at whether or not you should do the deal.

Kison: It's almost like you calculate those DYS synergies

Mathew Person: a hundred percent.

Mathew Person: And there are times where we've been, I've been part of transactions where we actually went through adjustments to how we did integration and who came forward in the transaction based on the belief of [00:20:00] whether or not they were gonna factor in in the growth of the business. These synergies are something that people don't often put in as much attention to in a transaction that I

Kison: think that's what I need to do.

Kison: I need to like model that out and say, Hey, here's all the things that look good, but then I'll take it so least you got a voice on the table. I'm listening to head of engineering and saying, yep, we're calculate that as DYS synergies knowing that let's. A little objective here. What do we value that DYS synergies as the view how to deal with it.

Kison: Like how much impact should that do on the way we value this deal? Then it's good. Yep. Versus now I'm ignoring

Mathew Person: him just to get the deal done. That goes back [00:20:30] to that over rationalizing the deal. There's so many times people get so entrenched, excited about. This is gonna be great. We're gonna do X, Y, and Z, and they poo P and put this stuff to the side.

Mathew Person: And I see it all the time from the different places that I've been involved in M&A, whether it was a banker in Corp Dev where it's our go to market function is better, we'll get past that. We can fix their sales. So is it a bad product? Can you fix it? There's some major assumptions you've made there around our ability to affect scale.

Mathew Person: Do they have good salespeople? 'cause we need them to cross train us as much as we're gonna cross train them. If we don't think their sales team's that great, how well is that cross-selling synergy [00:21:00] gonna be? It's a major factor. I probably am more conservative than most when it comes to revenue synergies.

Mathew Person: I get a badge for every

Kison: deal I get done, you know that. So that's why, uh,

Mathew Person: you probably push to get the cross the line first to get

Kison: the deal. I gotta get the badge just like scouts.

Mathew Person: There's so much more risk on the buy side

Kison: where we really have to put our name to it. I'll tell you, trying to set up the first deal for this company, so hard, hard, like I've advised on well over 30 companies, but there's nothing in place, nothing.

Kison: Just the whole process of evaluating and just like what we're talking about. Like now I gotta go back and [00:21:30] say, Hey, let's start factoring in DYS synergies. And then at least I feel like we'd get towards a common view with the leadership team of evaluating these

Mathew Person: opportunities. You have to have a fair and rational assessment, and that's probably the hardest part at times, especially with M&A too, especially on the buy side.

Mathew Person: A factor that people don't consider as much is, everyone always talks about the target, but sometimes the biggest change is actually in the acquiring entity in that home entity. What does it mean for me is just as applicable. To the colleagues that I work with that I have to collaborate with to convince that this is a good idea, and we have [00:22:00] stakeholders in sales and product and engineering and marketing.

Mathew Person: All of a sudden start going, wait a second, we're bringing in an AI team. What does that mean for me? We're bringing in a new widget. Is my widget now not as important as the one we just acquired? All those things factor where you end up getting biased. At least you can have biased opinions around synergies, both cost and revenue that can impact your ability to do a deal, making sure your stakeholders are aligned.

Mathew Person: Believe that we're trying not just to push a deal through for the sake of doing a deal, but really trying to build the company the [00:22:30] right way and assessing DYS synergies as much as we have possibilities. That's how you get trust and you get those people to get the deal done. How do you do that? A communication.

Kison: A lot of communication.

Mathew Person: A lot of communication and listening. Could I run the whole entire deal myself? Sure. Anyone in this role could probably do a deal themselves and put synergies on paper and make assumptions. What I've found is I actually do less, and by that I mean I actually make my stakeholders part of the process, part of the decisioning, and they're the ones who are putting the numbers on paper with support and guidance from Corp Dev so that they own it.

Mathew Person: And when you own [00:23:00] something and your own numbers on it, and we're all part of that discussion, there's a little more comfort as opposed to me walking and saying, Hey, you're expected to do X and Y and Z in synergies. It's a little bit of a different approach.

Kison: How do you balance getting the right stakeholders in too?

Kison: Because I, I feel like it goes to the same thing when you're looking at these deals early, you don't wanna distract people. And then the same thing if you're trying to get alignment with all these stakeholders, then you're trying to do the opposite. You're trying to reign them all in and get their opinions and make 'em feel part of this.

Mathew Person: Yep.

Kison: How do you strike the right

Mathew Person: balance? Who do you usually bring in and. It's tough because [00:23:30] everyone says they wanna do M&A and then no one has time for it. 'cause they always have organic things to work on. What I've done is identified teams and I break 'em into small groups by product or by attribute or what we know the job to be done that we're trying to solve for.

Mathew Person: So we have an AI team and there's just a couple of people who are just assigned to that. And then we have for different products and capabilities, we have people who look at those things and they know that around 20, 30% of their job is to be spent on early stage assessment of M&A. Their work schedule has allowed for that ebb and flow, and everyone else is supportive of it.

Mathew Person: [00:24:00] One of the first things they did was went around and said, do all of our function leads. Okay, finance. I need one or two people here. Tax. I need one person there. And I went across and we identified those people and then I've been training them along the way in group sections and in function specific sections around what to do and how.

Mathew Person: And I always say that part of my role is just to make this lift for them as easy as possible. That's actually why we have Deal Room because we got everyone set up and trained on how to do diligence lists and how to do integration lists. And even though we haven't worked through a deal yet, 'cause I'm relatively new at Quick Base, every single stakeholder at [00:24:30] Quick Base has already opined on the integration checklist.

Mathew Person: Stand on the diligence checklist, and they already know how to use deal room. So when we have a deal coming in, they don't need me. They can actually just go do on their own and then we'll adjust to the minutia that pops up along the way. But 80% of the work's already done, and that could just frees up everyone's time.

Mathew Person: So I just pre-trained everybody. And then it also selected a few people so that they knew that was part of their job as opposed to randomly pulling people

Kison: in. Well, we talked a lot about here's shaping the strategy, being proactive on the deals, and now we're [00:25:00] talking about aligning the stakeholders. You brought in the technology piece for both diligence integration.

Kison: I wanted to get an understanding. Right now, I'm just, mm-hmm. Up to LOI is kind of fun. You certainly just, even the small list, you're still getting back and forth comments and stuff, but I'm, I'm curious about, you have a much bigger team on this. How are you aligning them or using the platform to sort of align them?

Kison: Is it more of just here's the steps of the process that we are now [00:25:30] standardizing for doing diligence integration? I'm just,

Mathew Person: so, I live by the 80 20 rule. I basically standardized 80% of the acquisition process. I got alignment on, again, those big strategic pillars, those capabilities we're gonna go after.

Mathew Person: So everyone knows that what we're looking at is on strategy. It's not a wild card. And then I work to understand the pros and cons and the granularity of those pillars so that everyone knows the attributes that really will drive impact and show accretion as opposed to, I don't know if we need this.

Mathew Person: Which is usually where things get caught on the buy side when people say, we could build this [00:26:00] internally. And QuickBase is an a home of app builders, so everyone thinks they can build stuff. We have to do more work around saying maybe we should look at this from an acquisition perspective instead. And we already got that alignment before we even started doing pipeline.

Mathew Person: So when stuff does come in, they already know that this is on strategy and it's a uplift in capability. And that's true for not just my colleagues at QuickBase, but for private equity for the board. They know what we're looking at and why you're building in pre-approval along the way. And when it comes to the diligence process and preliminary [00:26:30] diligence, we did training sessions with all those identified stakeholders to know what to look for and brought them in early so that they're actually the key.

Mathew Person: It's not me, again, I say I do very little. I just move pieces around. The people who opine as to whether or not it's a good deal or not are subject matter experts. It has to pass their muster first. They've gotta believe this is the right tech, that this is the right solution, that they can sell it. So we do a demo.

Mathew Person: We get through the NDA process, which is my first criteria. When we look at companies and I'll decide whether or not based on that conversation, this gets past NDA and into [00:27:00] demo. And when we have demos, it's only an hour and that's usually enough. 'cause most of the people we work with are really skilled and qualified.

Mathew Person: They kind of will know relatively quickly if there's a there, there. All I've done is maybe obligated my team by capability focus to an hour of time.

Kison: So standardize about 80% of it. That's where the tech stack can be helpful. Yep. Create continuity between just your deal stages and also help with alignment.

Kison: There's report outs that you can do. Yep. Board members and so forth. Just have general collaboration between your different [00:27:30] departments. Yep. Going back to the process itself, so you get an NDA signed and then you will do a demo of the product. Yep. Is it solely their demo or are you demoing some of your stuff too, or is it

Mathew Person: It's usually their demo with maybe a little bit of time about us just to help them understand the why.

Mathew Person: If you have that dual symbiotic synergy, Hey, wait a second, guys, you don't have a CRM&An ERP. We can be that repository. You have this data field. There's ways in which we already know because we've done that capabilities assessment. How we can help the target [00:28:00] and how the target can help us. And usually that approach goes a long way, especially with founder led businesses, for them to understanding why you reached out as opposed to just having a generic smile into alcohol.

Kison: And then you do the demo. This looks good, there's interest. We wanna move to preliminary diligence requests.

Mathew Person: We standardize that request list. We ask for some base level of information. We already know from talking to all of our stakeholders, the key things they're gonna look for and offer approval, and we get that information.

Mathew Person: We might have another couple meetings around finance, like everyone has to, and we dig in a [00:28:30] little bit on tech and on staffing, and we make some assumptions Internally. We'll walk through a syns model with our stakeholders, select stakeholders. That's relatively quick process once you standardize it to get to where you want to be from an approval process to get an offer door.

Kison: And then once get the approval, you'll get the offer in front. How do you approach negotiations? Part of me is like, do you really dig in and get a sense of what are their expectations? To me, I, I feel like golden rule of negotiations don't put the first offer.

Mathew Person: Yeah, yeah. It's true. He who speaks first loses [00:29:00] usually we kind of get into ourselves what I call again, that box of preference, the deal process, that negotiation process, like the IOI versus LOI helps you.

Mathew Person: Either way. Sometimes when I talk to people and say, Hey, what does a perfect outcome look for you? Sometimes? First off, no one's ever given me a low number of what they're worth. If I had a dollar for every a hundred million dollar company, I'd be a hundred millionaire is my common joke. Everyone thinks they're worth a hundred million dollars.

Mathew Person: When you know you have a real conversation to be had is when someone doesn't throw out a hundred million at you is when they throw out a real number, when they [00:29:30] throw out a range. That's real. You can tell. And I think for people who've been around M&A long enough, we all know the kind of where the market moves and the bell curve that exists for companies in their industry.

Mathew Person: When we talk very vaguely about what does a good outcome look for you and the other side throws at a range that's reasonable. Then we know we have something that we could work on, and then we let the natural IOI versus LOI process help us whittle into a range of agreement.

Kison: Pretty straightforward.

Kison: You're right. I mean there's general multipliers. People look at, I still find some bid ass spread [00:30:00] challenges. It's terrible.

Mathew Person: It still exists. The COVID hangover is not gone away.

Kison: It is. 'cause they'll still see stuff in the news and then you gotta break it down. Its, listen, like that company's at a 50% year over year growth.

Kison: You're zero. Yeah. Let's put that into perspective. They're making money. You're losing money. Revenue model is completely different. They're a RR. You're transactional. Put all those factors together and you're nowhere close to what they're getting.

Mathew Person: What makes this negotiation easy? Going back to that box of preference, that creation of a programmatic approach, I kind of already know [00:30:30] from working with our board, with our key partner, how we're gonna allocate funds and what we want to do with each deal.

Mathew Person: That does put a valuation limit on what we're gonna approach. Not because we couldn't do something that's different, but 'cause we don't want to You're being pragmatic about it. Yeah, being pragmatic about it. Exactly. When we do get someone in the air of a rationality, it's really easy then to say no. Say, listen, this is where we need to be.

Mathew Person: This is what we're looking at for market, and that helps us whittle down the prospects a little bit. I. That said, [00:31:00] people who've been around M&A know enough to know when someone's throwing a highball at you, but really doesn't mean it and is just waiting to see what you say. And we take a different approach and that just happened to me on something, a transaction, which we had a material bid ask spread.

Mathew Person: We just let the negotiation process and the IOI process get ourselves into a zone of reason. 'cause I kind of felt like, yeah, I don't think that's a real number. You're just saying a hundred million for the sake of a hundred million. And so we, we got ourselves down there, so sometimes you gotta throw out something on paper as a buyer.

Kison: Okay. So we're, we build a supply demand curve. Yep. In my head, I'm, as you describe this, I'm [00:31:30] thinking like there's a rationalized value curve and then there there's a relationship curve. Yep. What I wanted to understand is like how does that relation development fit into this? It's a huge factor.

Mathew Person: Money is not the only driving factor.

Mathew Person: I know that sounds as a capitalist, someone who believes in supply and demands and bankers would probably disagree on that one too. But I've definitely found that if you're known as good home, if they like who they've met along the way in that process, not just me, but all the other people that they meet along the way.

Mathew Person: And that's what the buyer led process gets you, is that more of that individual interaction that's [00:32:00] not maybe overseen by a banker. You build that trust factor. You wanna be known as a good home. That is just so valuable because founders and CEOs. Really do generally care about their employees and they don't want to have them sent somewhere where they're gonna have a bad experience, where their reputation is staying.

Mathew Person: If you can really prove that you are a great place to work and a great home for the acquired entities, employees, that is going to chip away at most bid X spread. Unless it's just a bridge too far.

Kison: Like how much? Like a turn? Yeah, it could be a turn.

Mathew Person: Yeah, definitely. It [00:32:30] can be that meaningful. You can see 20, 30, $40 million spreads from way down.

Mathew Person: To

Kison: put a perspective with maybe percentage?

Mathew Person: Yeah, per it's percentage. Probably better than it turns. It depends on the ebitda, but yeah, it can have a meaningful impact in your ability to maybe like a 10,

Kison: 20%, something like that, or are you thinking even 20, 30%?

Mathew Person: Well, I'll give you a frame of reference on some stuff.

Mathew Person: In the last six to nine months I've worked on where we've been able to negotiate down and. Yeah, it was probably 20, 30% off of their ask.

Kison: That's total ask. It wasn't, Hey, I'm just gonna throw you in a crazy earnout and let you

Mathew Person: go work for it. Deal structure cures all [00:33:00] wounds. I, everyone has hesitation around earnouts.

Mathew Person: There are definitely times that I've been part of those, and they've been wonderful, but they're also just more complicated from an integration perspective. Everyone loves that. All cash or combo equity kind of deal where you just, it's a clean slate. You don't have to worry about that hanging Chad. But for the most part, being viewed as a good home, having the relationship that the buyer led process allows you to build is gonna get, it's gonna get you from 10 to 20, maybe even more off a bed.

Mathew Person: Spread problem.

Kison: All

Mathew Person: right. Gotta spend more time hanging out.

Kison: Yeah. Build relationships. Couple drinks at the bar. You got any hack? That's what [00:33:30] I was thinking was I got the one deal now where I just know there's an advisor in between and I'm like, I gotta go have a beer with them. I just.

Mathew Person: Bottom

Kison: line,

Mathew Person: the advisor's gonna do their job and they're gonna fight for every dollar, but at the end of the day, they work for the founder, the CEO for the card.

Mathew Person: They, I'm

Kison: like, look, you gotta give me more confidence in this deal, and I'm not gonna have confidence unless I get trust with the seller. And you need to not stay in the way of building that relationship. We'll have to see how that goes. 'cause they do revert to put themselves right in the middle and disconnect the direct communication, which I don't like.

Kison: No, it's true. Then it goes back to the other deal, which I got the proprietary deal, [00:34:00] which is great. I like the seller. We've got a great relationship, but expectations are not there.

Mathew Person: It also matters 'cause we, again, going back to that box of preference, when you are looking at metrics that are below threshold, and again, it's not binary.

Mathew Person: You're not saying no, you're just looking at, okay, what do I need to believe to then rightsize that problem or understand why it occurred. In a seller led process, sometimes you don't get the benefit of that understanding. In a buyer led process where you can have more relaxed conversation is probably the best way to put that because it's not overseen by the banker.

Mathew Person: Then you can really get to the bottom of the [00:34:30] truth usually around what happened and why, and it's not some made up story or sugarcoated anecdote about what happened with X, Y, and Z. You get to the truth and that again, builds that rapport, builds that trust, that builds a relationship that allows you to be viewed as

Kison: a good home.

Kison: I agree, because there's no reason to have the lipstick or sugarcoat. Then you have the real trust. And when you have the trust, you'll work through issues. Issues come up. You have a working relationship. Like that's a thing I struggle with.

Mathew Person: Trust is key. And a buyer led process will help with that trust.

Mathew Person: It helps you understand your synergies. It helps you [00:35:00] understand maybe the historical operating path of that business. It just aids to me. It aids confidence in deal certainty. And you heard me say earlier, I have more confidence in a buyer led process at LOI stage into closing a deal than I would on a sell side process.

Mathew Person: And again, it's because there's just more trust that's been able to be built.

Kison: When we talk about putting an offer together, there's that component of financial risk. I don't know if you come across like debt covenants or over-leveraging in a competitive, high pressured environment. Those happen all 'cause it's just what I'm looking at right now where I'm like, private credit's expensive.

Kison: One thing [00:35:30] people

Mathew Person: don't think about. Is when you put together a synergies plan and there's debt raised against that synergies plan, if that falls apart, you've put your home entity. Where I work, I've put them at risk, and that's something that I think about because we don't wanna damage the business in the light of just doing a transaction for transaction's sake.

Mathew Person: The true operating characteristics that I talk about, what do we reasonably believe we can achieve is the goal that I always strive to Along the way, people have said to me, Matt, what's the number that I need to get to? I answer back, there is no target you're trying to get to. [00:36:00] 'cause we're not trying to solve for the valuation or the ROI, we're trying to get to what we really think we can achieve with this integration.

Mathew Person: So I often do a lot of the work with synergies with colleagues, effectively blind. And by that I mean they don't really understand what the impact of what they're putting on paper is because I don't want them to know. Then we'll determine whether or not we can actually do the deal after that. They need to have like an open, honest approach.

Mathew Person: The

Kison: right way to do it.

Mathew Person: Yeah. A lot of people just wanna do the deal. Yeah. That's why

Kison: we reverse engineer

Mathew Person: it. This is what's gonna

Kison: get the right debt [00:36:30] ratio is what's gonna get approved.

Mathew Person: I might be a unicorn then in the industry. I don't do that. I can do a lot of damage. There's no reason to do a deal just for doing a deal.

Mathew Person: Anyone can put that stuff on paper. And here's the big part about it. You lose trust. I would lose trust. I would lose faith with my stakeholders if I just overestimated everything and forced them into stuff they don't believe in, because then they have to own that plan and they have to own the revenue.

Mathew Person: So if you look back at all those salespeople who have to then drive those synergies, and if it's impossible to hit, I've now impacted their [00:37:00] ability to feed their family, take home commissions, take home bonuses. That's something I really think about. If we can't affect the cost synergies the right way and we end up hurting our own profile and then our own performance drops, I've now impacted my colleagues.

Kison: That's the right thing to do. You do good deals. Don't do bad deals. Yeah, it's hard not to do bad deals. I'm gonna tell you Therapy confession here on this podcast. In the early days, I'd do these interviews. I'm like, yeah, deal fever, like blah, blah, blah. But man, just like early stages of trying to build an M&A program, it's like falling prey to all this [00:37:30] stuff that I used to joke at and

Mathew Person: had deals happen.

Mathew Person: I had one, we had some fraud and it was years after we did diligence that it was so uncovered and it really hurt and it hurt me. 'cause I take so much pride in trying to get to the heart of everything and say, Hey, we did our best to diligence this one and we missed it. Could you have done different to like catch it?

Mathew Person: I would've done more on the tech deep dive. Really spent more time on the tech also wasn't a financial, it was actual tech that was, yeah, it was actual tech. Yeah. The problem with the technology, and I don't know if anyone would've caught in diligence or not, you kind of [00:38:00] question those things sometimes when you have a deal that goes sideways, I.

Mathew Person: And it makes you reconsider how you approach everything. But I probably would've just been more stringent on some stuff. That's true. It's okay to tough. It's okay to be tough.

Kison: You learn through experience, like you're not gonna do this what you did before. Again,

Mathew Person: no. Sometimes as an acquirer you're doing diligence, but sometimes you have this fear of being too tough.

Mathew Person: That goes back to that whole being a good home. So if I'm really a stickler indulge, am I hurting our view? But we have a fiduciary responsibility to properly assess a business, and we've gotta ask tough questions sometimes. And [00:38:30] sometimes that fear of being known as a bad home or being too tough or being too difficult or halting a deal, everyone's looking at the deadline, we're gonna close the deal at the end of the month.

Mathew Person: And you're the guy that's gotta stand up there and say, Hey, I. Maybe we shouldn't. That could be a tough place to be.

Kison: Sometimes that's another thing to strike a right balance on because even now, like I've really paired down my initial diligence list just to keep it friendly. I'm not asking you for a hundred things.

Kison: I got 10 things I'm asking you for just to start us building a model and starting to talk through what a deal would look like, and then obviously expands to more things. But [00:39:00] that's part of it is kind of realizing like the NDA, let's keep negotiations simple. Let's keep this as a good experience. But you got the flip side of it can't be too.

Kison: Naive on this stuff. I guess there's no such thing as like overly cautious, like you should dig in and look at these things.

Mathew Person: Yep. Going back to trust, going back to that buyer versus seller led, going back to programmatic M&A, standardizing those processes that the buyer led process allows you to standardize, it allows you to get the big rocks uncovered.

Mathew Person: It allows you to maybe slow down to uncover the things you might miss in a seller led [00:39:30] process. Going back to that debt covenants and those problems that can pop up. Getting those things right, getting all your assumptions down. The buyer led process allows you to put all the pieces up in advance that you know are gonna matter for your company and make sure you hit those check marks in a software timeline because the banker's gonna force you into that date.

Mathew Person: They're gonna force you, Hey, you said you, you set on your offer, you'd close it by this date. You get a little more of a relaxed process, and it's not by much, to be honest with you. I think diligence periods have dropped so much. One time I had a banker tell me I should diligence the company in four weeks.

Mathew Person: Which [00:40:00] is a near impossibility. I don't even know if we can do financial Q of E in that period of time. To be honest with you, I don't wanna run long. 'cause everyone knows time kills deals. Yep. But you can probably get yourself an extra half a month, extra couple weeks in a buyer led process, which usually is more than enough just to calm down a little bit and give yourself that breathing room to get it right, to catch everything

Kison: other than the negotiations, just when things pop up, I feel like you build that working relationship, which is hard if you.

Kison: We're running a bank process. You don't get that. It's a little bit of a dictated process. It's a dictated process. Yeah. [00:40:30] That is fun to be in, but if it's truly worth it, then sure you could win the auction. They say never a winner. When you win an auction, it's 'cause you've overpaid. Exactly, yeah. You know, when you say break your debt covenants, what usually triggers that?

Kison: Just, Hey, you drew too much

Mathew Person: debt on the company. Usually it's a combination of your ratios are off so you don't have like your EBITDA to. The EBITDA ratios off or your stuff like that, your cash flow is off compared to what you said you'd have. Then you get in trouble. Then you get in trouble. Yeah. Bank

Kison: comes after you.

Mathew Person: [00:41:00] Yeah. Could. Then you gotta work through them and

Kison: no one wants to be in the zone of restructuring. Gets bad. See if Phil wants to talk to you in this office. Exactly. You said you would do this. Didn't happen. What happened? That's the toughest job. I thought being a CEO is the toughest job. I think seeing the CFO is like really the toughest job.

Mathew Person: It's because you're on the hook for future projection performance. That was, it's tough.

Kison: The literal buck stops there. Yeah, like literal. You just the CEO's like the CFO. What are you doing?

Mathew Person: I know it's hard. It is a hard spot to be, and Core Dev is the same place. We own that financial model [00:41:30] with them and the underwrite of the transaction.

Kison: Did you guys report up to the C-E-O-C-F-O?

Mathew Person: CEO. Yeah. Okay. I've

Kison: seen a lot where a lot of feedback companies goes up to the CO.

Mathew Person: I've seen both depends on how you view the function and where strategy sits. I'm definitely more that corp dev is part of the strategy function and is helping to align the future position in the business.

Mathew Person: Is it a

Kison: separate strategy group or are

Mathew Person: they

Kison: combined?

Mathew Person: It's separate. Where I am now, strategy sits more in corporate development and alongside products. We kind of work together and collaborate. So product and corp dev work together to set that. It depends on each company structure. If [00:42:00] the corp dev function is really more executional and really is just focused on, not even dill origination, but just transacting.

Mathew Person: It's gonna probably sit in the CFO department 'cause it's more of a finance function. If it's more origination and corporate dev, like actual positioning and competitive intelligence and those kind of dynamics, you're gonna sit more on the CEO side.

Kison: That's always find interesting. It's always different where strategy corp dev and integration sits.

Kison: Let's talk about integration like this is the magic of deals being more successful. I've seen the industry sort of wake up [00:42:30] and be more attuned to it. Even for us building technology, we've even. Are building so much more around things that attribute to early integration planning and create continuity between diligence integration.

Kison: What have you seen work? Well,

Mathew Person: integration starts diligence, and you have to carry the same team members who are in diligence. In integration, one of the areas where things fall apart is if you have separate integration diligence teams and there is this unquote handoff of learnings. It doesn't work as well.

Mathew Person: Everything that you find in diligence becomes that what you action in [00:43:00] integration. In order for that to work, you have to have the same people involved in the process. That's why I went and pre-picked all the people because you want those leaders involved throughout the entirety. Now, you might have a varying degree of supporting staff in integration who actually has to go affect all the different tasks, and that's fine.

Mathew Person: You can have a lot more people involved in integration than indulgence.

Kison: So same team members. And then you really want to have them continuing taking all this information they pick up in diligence and turning into action and integration. What does that team look like? It's a function lead [00:43:30]

Mathew Person: for every function in the company alongside the subject matter experts, depending on what you're acquiring.

Kison: Okay. So I'll pick a function lead, and maybe I can give an opportunity to pick up a sidekick if they need it. Yep. And they say, okay, you're gonna be doing diligence, but you're also gonna be building the integration plan. That's right. Do you have like a central integration office or anything?

Mathew Person: No, that's me and then the corp dev department here at QuickBase, we have a operations manager, Brittany.

Mathew Person: She's wonderful and she helps organize a lot of that stuff.

Kison: Technically, there's no like formal handoff from this integration function to the business. It's like just picked up by the business from the beginning. [00:44:00] There's an interesting, I feel like this, like an emerging new school of thought. It might be.

Kison: It's always what I've done is long. It's like the lum goes over, you didn't have an IMO. You get to the point you're running like concurrent deals, so you're like, oh, we need to have an integration function. You set up this integration function and then you're trying to see the pros and cons of it. There is like pragmatic of how you integrate companies that could have the significant value.

Kison: But then there's this handoff that you hand it off to the IMO that hand it off to the business, right? Which creates points of friction where here you're describing having [00:44:30] the pragmatic approach, but it's directly owned by the business from the very beginning. Yep. And it just continue. There is no handoff between.

Kison: It's no

Mathew Person: handoff. If only because sometimes what'll happen is the integration team will have a different view on what matters. They all have their own experiences related to, you didn't know this, or You should have asked for this and you didn't get it. IND diligence. You end up with the diligence team focused potentially on the wrong things and integration focused on their things.

Mathew Person: And those two things don't connect. If you have two different groups, they either need to be really well coached and aligned and have everything organized in a way to make sure there is no opportunity [00:45:00] cost to having the separation of that knowledge transfer. Why set yourself up for that risk? Have everyone on the same team.

Mathew Person: And usually what I've done, if we do need to do two deals at one time, you have your a list of senior people who work on the bigger deals, and then if you have a smaller transaction that you're doing at the same time, what a great opportunity to uplevel those people and help them manifest and become leaders and be part of that deal.

Mathew Person: And it's usually smaller, so there's less risk. The corp dev team is there. And they can check in with their direct report and their senior report if they need [00:45:30] to, but then they can run the whole, that small deal themselves. Then they learn. Now you've got two groups of people who can do it instead of one,

Kison: Hey, I like this.

Kison: I was gonna ask you how do you manage this with concurrent deals? Because that's where things really get crazy. But I, I like that you're leveling up folks and given the opportunity to. What they're made of. Basically,

Mathew Person: you manage it through standardization and coaching. You get everybody on the same systems and the same processes.

Mathew Person: It's that 80 to 20 rule. You get everyone on the same stuff, and then the 20% of variability is just that deal specific minutiae. The continuity would be the corporate development team, making sure that we handle [00:46:00] all of the 20% of stuff that goes awry and everything else is roughly standardized.

Kison: So integration comprises of tons of decisions to make and you wanna keep a strong base of getting decisions and executing them.

Kison: Do you supplement, like steering committee, any of this stuff just to make sure you have a strong cadence of making those decisions? Yeah. We meet weekly.

Mathew Person: Who meets weekly? It's the leads, the function leads meets weekly, all the functional leads, all the functionally leads in one room all at the same time.

Mathew Person: So you have cross-functional lounge, you have

Kison: a third, like a setup steering committee. It's just. Yeah, we're there at that point, right? Do we [00:46:30] just create this, like big companies just create layers to create layers? Is that the,

Mathew Person: maybe There's definitely junior people, but if you trust the function leads to manage their specific function, they're the ones capable of making those micro decisions, and you just have to have trust that the head of tax and the head of HR and the head of product knows what they need.

Mathew Person: That the company has, if a company's organized the right way, they all know what they need to get done. That's the thing. If you can get

Kison: that 80% like pragmatic and it's in a system that folks can follow,

Mathew Person: then trust the system, then trust the system. Yeah. You trust the box to play in, and then the [00:47:00] 20 percent's that unknown.

Mathew Person: You're always gonna have that, and then that's what you talk about and you can focus on fixing those things. And all the other stuff, just, they all know how to do it.

Kison: Okay, so let's loop back to the culture piece. Sure. Because when I talk to integration folks and you ask 'em like why integration goes wrong, they're always like, bad culture mismatched those deal people have screwed this one up.

Kison: Yeah. They just didn't think about the culture and blah, blah, blah. Exactly. Blame you. Yep. I'm always wrong. That's problem with quick

Mathew Person: dev. I'm always wrong. Evaluation's never right. The process isn't right.

Kison: I'm really fascinated by the culture piece. 'cause it constantly comes up in this podcast, [00:47:30] even though I didn't ask to make this a culture podcast.

Kison: It just happens that way. What I been so intrigued by the schools of thought of, hey, bad culture fit. Walk away from the deal. Hey, bad culture fit, it doesn't matter. You're gonna make unique culture anyways. Just do the deal. Yeah. Makes financial sense to the deal. And then there's this, I've seen this new school where it's, we have a very, I.

Kison: Unique, empowering culture and a part of our strategy is gonna be to get their culture to conform to our culture.

Mathew Person: Yeah, I don't think that works.

Kison: I'm gonna send you some

Mathew Person: podcasts. I would love to hear it. I love that this has turned into a culture conversation 'cause I have a strong [00:48:00] opinion around it. I do believe that you need to have the Constitution to keep your culture.

Mathew Person: I. But I also don't believe that culture is binary. Culture exists in, again, in a square where people bounce around known frameworks. Some frameworks are very constrained and very tight. They don't have a lot of autonomy, and some cultures are very wide, where you fit as a person. Culture's alignment between you and your preferences and ways of doing, and the company's ways of doing.

Mathew Person: That's really what it comes down to. That's why I believe it is identifiable through processes and you can ask all the questions around how people work to kind of figure out [00:48:30] if your way of working is the way that they work. And if those things are aligned generally, then you're gonna be okay.

Kison: I'm gonna get you a couple podcasts.

Kison: There's one I did with LCI industry and then the other Barry Waymiller. Okay. William? Yeah. Multi-billion large corporations. I love to get your take and it's kinda like the extreme, right? You sort of have this, we're gonna acquire this company and just not even do anything with them, or, Hey, we're gonna really look for culture fix the way we're gonna plan to integrate them.

Kison: We're just gonna make new cultures come together. Numbers make sense, versus culture's our strategy. We're gonna [00:49:00] change this companies culture strategically to be like

Mathew Person: ours. I'm probably more on the end of, if it's not gonna be a fit and it's identifiable, we don't do the deal. Example of this, I would tell you is we had a meeting a couple months ago.

Mathew Person: Where we were looking at the company and the incoming CEO needed to be the leader of this function. He needed to be the person who was gonna take control of it and run it. He was an eccentric, which is great. He was actually a great person. Wonderful. But he was a little bit of a bouncing ball and he didn't quite fit the culture and he didn't quite mesh with someone [00:49:30] who we needed for that function.

Mathew Person: And it wasn't that he was a bad employee or a bad person. It was, he was extremely successful, extremely intelligent. He wasn't gonna fit. And we decided, hey, you know what? We're gonna go a different direction. And we were okay with that because we would rather have, even though the technology was great and it could have been additive to our company, the culture wouldn't have allowed those synergies to manifest.

Mathew Person: It just wouldn't have let that M&A deal work.

Kison: You can see that friction. And the other variable too is like the industry is, I feel like they're very different in tech especially. Yeah. Like it's [00:50:00] just, you're right. There's this expectation of what you're actually gonna change versus what

Mathew Person: you're gonna live with.

Mathew Person: Yeah. Culture change is, again, that to me, the ability to say, Hey, we're gonna go in and change that culture of that acquired entity that is over rationalizing. That's very hard to do.

Kison: Anything you do particularly to set up this sort of win-win. I liked how you referenced that. It's just as much change for your organization.

Kison: Is there things that you sort of help with readiness or just anything in specific to make great outcomes?

Mathew Person: Besides using deal room, it's advanced [00:50:30] training. I do everything in advance. I know a lot of people say, well, every deal is different. I. We can't do anything until we know about this specific deal, and I don't believe in that at all.

Mathew Person: I believe that deals are roughly 80% the same and that you can standardize most of that and you can set up your box of preference. One time I was talking about negotiating and they talked about mins and maxes and they said if you change your min, then that isn't really min. Your min obviously wasn't that you have a new man.

Mathew Person: You have to have the Constitution to stick to what your principles are and know how to fix them and believe in them. [00:51:00] And that becomes what you train people around that standardization. And then everyone is on the same page and aligned and they know what to expect. And that fear goes away because a lot of people and companies don't have as much M&A experience.

Mathew Person: They're coming in and they've maybe haven't been a part of it. There's a lot of fear of the unknown. If you overcommunicate and you standardize and you give them context and teaching. Then they get more comfortable with the process 'cause they know what to expect when it actually happens. And that's, to me, is the biggest key about doing this successfully across a couple different feedback work codes, is that advanced training I.

Mathew Person: Do as much as [00:51:30] you can upfront knowing that it's gonna probably change. But if you don't know what the barrier is, the foundation is, or success or good looks like, how are you ever gonna know what due diligence, how are you ever gonna know what a problem is you, you're never gonna know. So we as corp dev people, we have to set the table for what good looks like.

Mathew Person: What the process looks like. And then when we do make changes, we explain why that happened.

Kison: So here's a process. Here's how we're gonna report out findings. Here's kind of expectation for you to approach ding and mm-hmm. Surfacing those findings. This is how we're gonna get together and discuss and address those things.

Kison: And

Mathew Person: you're just [00:52:00] laying out the whole entire thing, but you're giving that process a little bit of flexibility. You're not saying this is binary. You're not saying that we're not gonna change. We're just saying this is what good looks like to us. Then we will augment it based on what we know, but that augmentation then becomes known and communicated and understood as opposed to being seen as ad hoc if you've never had a standard process in the first place.

Mathew Person: What's the hardest part of M&A? Oh, the hardest part of M&A is getting everyone to agree. You heard me joke, I'm always wrong. You. There's so many opinions and there's so many preferences and there's so many [00:52:30] stakeholders that if you do it right, a lot of people sometimes say, I can buy something for the company with a couple people, but I don't believe in that.

Mathew Person: I believe you have to have the collective buy-in of the right people. That is also harder because you've gotta get, instead of four or five people to agree, I've gotta get maybe 15, 20 people to think that's a good idea. That's a

Kison: whole conversation for us to have. 'cause there is that, Hey, are you just the CEO decides to do the deal or do you actually get the right stakeholders and committee?

Kison: You gotta get everyone have consensus. Yep. Which is technically the right way to do it, but much harder. Just like you said, [00:53:00] harder. Yeah. And you see the range.

Mathew Person: Like it can, like here's the thing. When you get those 15, 20, whatever people, the right stakeholders in, and you've got a company that's the right company, it's easy, it works.

Mathew Person: Synergies just fall out and it's not even hard. It becomes so much faster. When you have that right company and then everyone says, well, Matt, there's no right company. There's no perfect. I'm not talking about binary. For the box of good, that box of good, it's got its wiggle room, but everyone knows and is aligned and agrees.

Mathew Person: And then when something falls inside the box and it just [00:53:30] goes, it's easy. Like the golden rule for doing M&As have stakeholder alignment. Yeah, a hundred percent. Got it. Because you have one dissenting person. Just like in, I'm go back to my sports background. You got one bad egg in a clubhouse can infect the entire clubhouse.

Mathew Person: You got one dissenting stakeholder. You just know who they've identifying them early. Yeah. What's the craziest thing you've seen in M&A? You know, as much as I have stories about from my sports days about athletes doing dumb things or crazy things, I have more stories now about entrepreneurs and founders and CEOs and all kinds of stuff.

Mathew Person: It's probably what makes the job the most fun is the people you get to meet along the [00:54:00] way. There's just endless amounts of conversation with great, smart people, how companies came to be as a favorite topic of mine, of how this company came to be. So I've seen a lot of different things. The craziest thing I saw.

Mathew Person: Was a company years and years ago when I was a banker, and the guy who started the company was from Belarus, obviously didn't like communism, and we figured out through some diligence that he had been adjusting. Some expense lines using a management estimate of inventory value to reduce his taxes, which is obviously [00:54:30] not good.

Mathew Person: And the answer he gave me was, I don't wanna pay mother Russia a dime more than I have to. And we all laughed because he didn't live in Russia anymore. But at the same time, he was so impacted by that upbringing that he had effectively adjusted his taxes to, to not have to pay because of that experience.

Mathew Person: And it was interesting to see him do that. We couldn't sell the company unfortunately because of that. Had to do a lot of work to right size the business, but. It was one of the more entertaining things I've seen along the way.

Kison: Crazy stuff like that happens all the time. Happens all

Mathew Person: the time.

Kison: Matt, thank you so much for taking the time.

Kison: You helped me understand a lot about just [00:55:00] this process, getting the right people involved, really what buyer led means in contrast to a banker led process. Thanks for helping me become better MA scientists.

Mathew Person: No fun conversation. Thanks for having me. Really appreciate it.

Kison: You listened this far family. My fellow MA science brother, sister.

Kison: I love to hear from you. Reach out to me on LinkedIn. I always welcome the feedback from these podcast topic ideas. And criticism. I do actually get some criticism now that I've been asking for it on this. Yeah, it's always helpful sign off here. Actually it is. [00:55:30] Sometimes I get a little defensive, but after you soak it in, I honestly, it's helped shape even our lineup.

Kison: Some of the approaches I, I do and, and things I should and shouldn't ask, so I'll take it. Sometimes I'll deflect on it, but most of the time I welcome the criticism till next time. Here's to the deal.

Kison: Thank you for taking the time to explore [00:56:00] 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: You can reach out to 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 [00:56:30] 1 1. If you just want to 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: Here's to the deal.

Kison: Views and opinions expressed on M&A science reflect [00:57:00] 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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