How to Build an M&A Team That Can Support Multi-Vertical Strategies

Managing a multi-vertical M&A strategy requires a high-performing team, full of perpetual learners and with a strong appetite for risk-taking. In this episode, Ailene Holderness, Head of M&A at IAC, talks about how they manage their multi-vertical strategy and how to build a high-performing M&A team.

How to Build an M&A Team That Can Support Multi-Vertical Strategies

2 Aug
Ailene Holderness
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How to Build an M&A Team That Can Support Multi-Vertical Strategies

How to Build an M&A Team That Can Support Multi-Vertical Strategies

“Risk-taking should be rewarded. Institutions who embrace that can find people who adds a lot of value to their teams because they have done something outside of the box.” - Ailene Holderness

For this episode of the M&A Science podcast, Kison interviewed IAC's Head of M&A Ailene Holderness, about how they manage their multi-vertical strategy and how she builds a high-performing M&A team. 

Ailene shares her experience in finding talent, their hiring process inside IAC, and the criteria she uses to build her M&A team to support their multi-vertical strategy. 

special guests

Ailene Holderness
Head of M&A at IAC (NASDAQ: IAC)

Hosted by

Kison Patel

Episode Transcript

Text Version of the Interview

How Did You Build the M&A Team?

One of my goals was to build a robust and high-functioning team. It's a fascinating time in IAC's history. We're in build mode.

We are looking for hungry self-starters who have demonstrated some level of risk-taking in their careers and have a growth mindset. We want to build the team's talent with people who would really take the opportunity at hand and run with it and work independently and collaborate with the rest of the team. 

So, my approach was to work collaboratively with our recruiting team. They helped me look for and articulate why IAC is different, and what types of people, and what skill sets fit within our ecosystem. And of course, taking feedback of people who have sat in this role before, but go out there and see who was attracted to the current mandate and find the best people we could.

Matching Skills with Culture

We don't hire someone solely based on their experience and capabilities today. We're looking for future potential. That's what you're hiring. 

There were requisite skills that you needed educational and requisite experience, but we did look beyond someone who ended up being a great hire. He didn't have consumer tech experience in his resume, but you could tell there was that genuine interest and passion for what we were trying to accomplish, the history and legacy of IAC. 

Sometimes people overlook and focus too much on resumes and what can be demonstrated in words. But when you speak to someone and look across the table and ask them to tell you about a company they find exciting and why you can tell if they have a vested interest or they're just speaking academically. 

So, I always ask, would you put your own money and bet on this company? Would you quit your job to be part of this company? And that's the type of conviction I like to see in a pitch. 

You can sense a genuine interest in a video call from someone if that's coming from a place of passion. 

Getting the Right Combination of Skill Sets in Building a Team

The word diversity has been used a lot, and building a diverse team doesn't just mean hiring people with different backgrounds of race, ethnicity, and socioeconomic status. Diversity of thought and experience are some of the things I often think about, which I come across based on someone's personal experiences and work experiences. 

Bringing people together with diverse experiences is something that was a priority for me. It's overlooked sometimes that someone's personal experience doesn't fit into the perfect cookie-cutter path, gives them an edge, or gives them a different way of looking at something. You see how people with different experiences consume products and services differently. They can contribute around the table.

That's part of something I always set out for. Trying to hire people who won't have the exact same experience has different perceptions and beliefs because of where they grew up and their work experience.

Is it not Just Hiring from Big firms? 

It's a tough one because, coming from the world of investment banking, I do think excellent training comes from any of those institutions you mentioned. Rigorous and very technical skillsets are developed at places like Goldman.

But I think that a perfect example is that some team members come from very similar backgrounds, investment banking to private equity, who also have that skill set.

Again, we have purposely looked for people who have an edge or a difference of opinion. As simple as working at a public fund, as opposed to a private fund, Has experienced doing something entrepreneurial has experienced working at a startup. These things jump off a resume page for me because it shows a level of risk-taking. It offers a level of just breaking off from the norm. 

Key Things You Look Out For In Candidates 

A couple of things: one is growth-minded and growth-oriented in nature—people who are willing to accept that what they know now might no longer be true.

Some people are hesitant to rethink what they know because it makes them uncomfortable. It's a learned skill set, for sure. It makes people uncomfortable to learn new things. 

Where do you find talent? 

We use LinkedIn a lot. You don't need to go down a traditional path to find people. Generally, people who are interested in your company apply to roles that you put out.

But you can find talent in places you wouldn't usually look like people who are off the beaten path and are interested in potentially making a career pivot. Or those who came from business school and tried their hand at something now want to get back into investing. 

This should not be a ding on people's resumes. Risk-taking should be rewarded.

We also have a great referral program. We incentivize our employees by referring people for roles that they think they'd be great at. They're also being monetarily rewarded if that person ultimately takes the job.

We also make sure that we build a pipeline for future prospects at the very top of the funnel. So we go to career fairs. We participate at schools where there's a top talent, and we're, of course, like every other firm fighting for that top talent and getting our name out there.

Internal Mobility

Yes, we like to hire from within. But you make a bet on someone who you think has the growth potential to do a great job in that role. Find someone ambitious, driven, and smart, and you throw them into a role, and they either sink or swim.

I can point to several examples where people have been given a shot to take the top spot at a company. Having never run a company, but have the building blocks needed to run a company successfully, like people's judgment, leadership skills, organization, keen understanding of growth, and M&A, and all of the above.

Many companies would hire someone who has a track record of 25 years of running a business. But, we've done the opposite. Young, ambitious people are at the helm of most IAC companies. And that's another reason we are able to attract great talent is people see that IAC does what it says in terms of giving people a shot and internal mobility. 

We continuously promote from within and let people wear both hats because we'd rather have someone who has been in and around IAC stay within the organization. It's also a great way to retain employees by giving them a new role to go and crush it. 

Advice in Getting Your Desired Roles

It depends on where you are trying to go. If you are trying to get to a leadership position, get to know those companies and the people leading those companies as best you can. Reach out; you have to be proactive in your career and try to deliver value to them. People are generally receptive to others who are trying to help them in their mission. 

And the next time a role opens up, they'll remember you. 

The wrong approach is to be passive about it. If you wait for the spot to be open, often, the spot will be filled by someone who's already laid the groundwork to win it.

Another piece of advice would be to understand what you know and what you do well, and what you're excited about.

Why do you want to shift your career or move into a different division, or a different role, or position? Try to find the linkages between what you're doing now and what you want to be doing and why your current skill set can translate or add value to what you ultimately want to do.

And that's a critical gap in the bridge because wanting and doing are different things. I also think there are a lot of roles that people think they'd be great at, but it's not a great fit. And what you enjoy doing has nothing to do with the job you think is the right fit for you. 

COVID Impact on Culture 

I must say, I started this role virtually in a COVID world just over a year ago. I am amazed that most people can say the teamwork and collaboration unfolded seamlessly. But, there's been lots of discussion of just how much work and productivity can be done virtually. 

From my own experience, I think you can get lots done virtually, but it doesn't replace some in-person collaboration.

M&A Approach to Portfolio Companies 

When we look at portfolio companies, our goal is really to be strategic first. But it's never without the full buy-in of the management team on faster, better, and more efficient. So we look at what the company is trying to achieve over the near term and the longer-term horizon. Then look for ways that M&A can either accelerate that plan or help them reach those goals. 

I think there's this notion that if you're strategic, you always have a lower cost of capital. And you should always be able to pay more. And that's certainly not the truth in this current state of M&A we live in. So, it's part of the M&A team's role to think through deal strategy and execution why we win the race. 

Mapping Deals to Strategy for Market Expansion

It varies across the companies. Some are more defined that their organic growth plan is tied to a product roadmap. But, we're trying to get deeper into on-demand services, and we're building a product to turn a subscription service into on-demand. At this time, M&A has looked at the buy versus build lens.

Market expansion is something we think about along with supply in a marketplace because we're supply constraints. The consumer demand for these services outstrips the supply we have in the network. So do we think about how to accelerate supply with the acquisition? Absolutely.

Approach to New Verticals

On a new vertical, it's much more top-down. We like to look at industries where we think the end state is obvious. 

Several of our businesses are consumer marketplaces. So, we can see industries that are on that cusp of an offline to online transition. And what can we do with our expertise in consumer marketing to accelerate that adoption of offline to online?

We try not to lead with what we can do to a business, but we like to look at what's happening. What are the secular trends that are happening in the industry? Who are the incumbent players? 

And you can't do any of those things without taking a certain level of risk. We say that a lot in our industry, but of course, it's always qualified risk with outcomes that we like to say, you understand your baseline outcomes. 

But we want a path to have exponential growth or an unlock opportunity that everything can go. This will be a great investment in a big industry and a team we believe in. And if everything goes well and you get lucky, this could be a 10X. 

We like to find those unlock opportunities on the team that we believe in, not banking on that unlock happening—but certainly fueling that with our capital, our expertise.

And if everything goes right, you still have that chance to see the full vision take place. That's exciting to us.

There's a lot of opportunities to create value, especially at a particular scale. I think we're trying to put 3 billion to work right now. We have to think about capital allocation. And what's the best return on our capital and return on our management time. 

We are set up to build companies. Certainly, that's what we've done over our 25-year history. Thinking ahead, run businesses, but you can't do that across a portfolio of 50, and we recognize that. 

And so return on capital and return on time are both important considerations for us.

Decision-making Process 

I'll keep it at a high level. I'd describe it as collaborative and team-oriented throughout the entire process. 

We have a weekly meeting with our C-suite. We manage our deal process as anyone would with a funnel of opportunities at the top, which gets whittled down over time. 

The best opportunities give most of our executives the excitement at the end of the funnel. So make sure that we're looking at the right factors that there's interest in pursuing further as things progress at the very top of the funnel. Opportunities become more harvested, making sure reviewing in detail kind of due diligence.

Making sure that we understand what we're buying at the very top of our organization is the most important thing, but without having the previous steps, you miss it. 

The best process is to start at the top, where they're still in ideation discovery mode. You look across an industry that we think is exciting. We identify all the companies that are chasing that opportunity. We assess our management team on who we think is best positioned to win that industry.

Then, the actual deal-making process where our CEO, CFO, CSO are all involved in that process along the way. 

If it's a portfolio company acquisition, that management team is involved. So it is very much collaborative. I know that's a high-level way of describing it, but it has to be collaborative. 

In that, you have several actors that play here and have an M&A team, you have a potential portfolio company. Ultimately, our exec needs to stand in front of our shareholders and say, we support this acquisition.

This is the future of IAC growth, and we're putting your capital at work in this new investment. 

Who has the Most Influence?

We all have to think like owners and like you're writing a check from your pocketbook. That's the level of conviction you need to stand in front of our CEO, CFO, and CSO to recommend a deal.

That being said, it's evident that my position is to surface opportunities and put them in front of people. Make sure that all along the way, our team and our M&A team are working alongside the portfolio company where we would never do a deal without their one hundred percent buy-in.

Alongside managing the exec at IAC and ensuring we're all cohesive and agreed upon what the thesis is and what we're willing to pay and decide the check we're willing to write for a deal. 

There's no clear cut. There's a decision-maker; this is the process. I'd rather think about it as my team is responsible for sourcing diligence things and executing opportunities, and we bring people along the way and how are the decision-makers. 

It's a collaborative decision since we're all equity holders. It goes all the way to the top. If you have a conviction for an idea, and it's a good idea, would you write a check from your own bank account, and why? 

I think people have a different risk appetite, but if you don't have that level of conviction, you can't stand in front of our board and say, I recommend this deal if you wouldn't recommend it for yourself. 

Measuring Success on Your Deals

We are a public company. So, of course, an important measure is the value we deliver to our shareholders. We take a longer-term view. 

We set long-term goals for our businesses, like any other investor, but then we recognize that it's not necessarily a linear path to get there. Short-term pain for long-term gain, I believe if the ultimate long-term view is the right one. 

When you're in build mode, you need to invest, and sometimes you're sacrificing short-term profitability, and that's okay to distill it down more simply. 

We're not a private equity firm, so we don't look at a five-year exit. We're forever holders. That's the lens through that we look at things.

Challenges to Public Companies Being Evaluated Quarterly

We deliver strong results to our shareholders. We have for 15 years, if you look at our performance, but that growth has come in different ways from different businesses and different maturity points. 

If you looked five years ago, maybe you wouldn't be clear on this outcome and what a great investor return it has been.

But our investors have given us or given our performance, give us the flexibility and the benefit of the doubt that we are smart stewards of capital and can take a long-term view in building businesses is our core expertise. 

How Do You Stay true to your vision?

We haven't strayed from it. I've only been here a year, but that legacy imbues everything that we do.

We look at what's happened in the past, rethink it, and form our view going forward. So we don't have to think history will repeat itself a hundred times over; of course, it won't. 

But using past experience to color our view on what might happen in other industries has certainly been a great pattern.

And you can point to many similarities between what we accomplished and Expedia, Ticketmaster, etc, to know that consumer marketplaces are the theme that I see. But to distill that down as our only strategy would be probably too simplistic. 

What Got You in M&A?

I had an undergraduate business degree, so I studied business at Michigan. The same coursework you would have as a BBA, as an MBA where you learn accounting, finance, and marketing, you need to find a job after you graduate. 

So I stumbled upon M&A through Investment Banking. I was attracted to investment banking because I knew that it was fast-paced, highly intellectually stimulating, and other ambitious people hoped that it would be a platform to do something else. But, as a lifelong banker, that was less attractive to me. 

When I was in investment banking, I was in a sector-focused group, which was consumer retail. I wanted to learn everything about doing deals within that sector. Some companies are masters of M&A; they just see the future and get there that much faster and accelerate their growth by acquiring other businesses. 

The speed and excitement attracted me. I like to read about it outside of my day job. I like to follow what was happening on the deal block. 

What do you love about being M&A? 

It is a fascinating place to be because you have to understand all the dynamics at play for a company, where they fit within the competitive landscape, what their strategy is, and you can read that through their financial statements. 

It's such an excellent way to distill down the value of the business. So you're looking at how I should value this business. You need to understand their strategy. 

I liked the finality of it. The deal process to me offers a lot in that there's a time horizon generally competitive. Through that process, you learn so much just by sheer effort. You can't get to the answer without knowing everything that comes before it. 

What do you dislike about being an M&A? 

M&A is very demanding and highly competitive. It happens on a timeline that you can often not control. It attracts people who tend to like the same things about it so that it's fast-paced and I have to move at a quick clip. 

It requires a lot of dedication and rigor; there's no state where you get to in M&A where you can just cruise because it's always the next challenge and the next deal.

You're always learning. But with that comes pressure. 

Advice you'd give to those interested in pursuing a career in M&A 

If you feel like analytical skill was the number one thing that they would say is needed to have a job in M&A, that's just the baseline. 

Talk to people who are in the field. Ask them what their workday looks like or the steps to get to what they're doing now.

If it sounds like a challenge that you want to do, spend all of your time reading about what's happening. 

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