How to Close Deals in 30 Days

When it comes to M&A, time is of the essence. As a buyer, it’s best to identify whether to pursue the deal or not as soon as possible to avoid wasting money and time. Also, if the seller is a good target company, procrastinating could lead to more competition. In this episode of the M&A Science Podcast, Jeremy Segal, Executive Vice President Corporate Development at Progress, shares their strategy on how to close deals in 30 days.

How to Close Deals in 30 Days

27 May
with 
Jeremy Segal
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How to Close Deals in 30 Days

How to Close Deals in 30 Days

“No matter how much diligence you do, there's always going to be surprises. So what's important in diligence is to really focus on key things that could potentially influence your decision to do or not to do a deal.” - Jeremy Segal

When it comes to M&A, time is of the essence. As a buyer, it’s best to identify whether to pursue the deal or not as soon as possible, to avoid wasting money and time. Also, if the seller is a good target company, procrastinating could lead to more competition. In this episode of the M&A Science Podcast, Jeremy Segal, Executive Vice President Corporate Development at Progress, shares their strategy on how to close deals in 30 days.

special guests

Jeremy Segal
Senior Vice President Corporate Development at Progress

Hosted by

Kison Patel

Episode Transcript

Initial conversations with the target company

Early on, it is more of what I like to refer to as a dating process. It's really about getting to know the target company, but also giving them an opportunity to get to know Progress. 

What we're doing at the end of the day is selling ourselves. We're trying to learn more about the target company to see if it makes sense from an acquisition standpoint, and we also want them to be excited about potentially being part of Progress.

So, we spend a lot of time in the early going, in dialogue with prospective target companies, just building that trust, building that understanding of who we are and seeing if there are angles where we can get excited, where M&A makes the most sense.

And then it will get to the point where they will realize it does make sense to do M&A. And no one wants to waste cycles. So one of the things we've done is we've created this very simple one-page set of questions that we can use to learn some of the key things really quickly about a company.

In addition to those questions, a few core things of data requests like an anonymized census, a financial pack with some financial details. From that data, we can pretty quickly determine what we think an appropriate value is. 

We can have that conversation with the company and say, 'Hey, we think that we could be in a valuation range of around X.'

'Does that resonate with you?' If it does, great, let's continue the dialogue. If it doesn’t, we're comfortable walking away or potentially revisiting at a later time. 

During this initial conversation, there are a few primary areas that we really want to dig in on.

First, we want to understand what the product set is. What are the products that you offer? How do those products potentially fit within Progress? How are those products differentiated? Is there a lot of technical debt? Will it require a lot of work to get your technology and products to be more on par with current technology?

That can help inform how much work, how much investment we might have to make. So, understanding the product, understanding the competitive environment, and understanding how the product is differentiated is really important.

Price negotiations

We usually sign NDAs early in the process so that we can be more transparent, and so the seller can also be more transparent. This allows them to give us information that can really help us to evaluate where we could potentially be from a purchase price standpoint. 

It's important to not jump too quickly into stating, 'We want to buy you, and this is what we will pay you.'

Like I talked about before, it's really about building that relationship, building that trust, getting the excitement level on both sides, because that's really important. And maybe through that process, a potential acquisition target can say, 'Hey, Progress is a great platform for me, and they can get a deal done quickly.'

Maybe I'm better off going down that path with Progress. Maybe I could get more money if I went and did a market check or hired an investment banker

But let's go down this path with Progress because they're a great home, they're an acquirer of choice, they've had successful acquisitions, and they have a team that's dedicated to doing M&A and has built an M&A readiness machine. And maybe that's the better path.

Ideally, we'd like to submit an LOI and gain exclusivity so that we can be the only party negotiating. The last thing I want is to commit significant time to diligencing a company if there are five other companies also bidding on that target. It requires a lot of work and external resources, only to potentially lose the deal.

It can be challenging. It can be tough on you as the acquirer, and on your team as you try to put yourself in the best position for success where you can control the process. 

What we've done is developed a simple one-page set of questions and a core set of requests. These requests include an anonymized census, a financial pack with some financial data, and possibly a CIM that gives you more detail on the company, the products, and more. 

From that data, we use a one-pager valuation model that allows us to quickly plug in assumptions and get a sense of where we can be on value.

If we can align on value with the target company, we can propose to enter into an LOI, aim for exclusivity, and say that within 30 days, we will complete all our diligence and negotiate a definitive agreement. With speed and certainty to close, and over a billion dollars on the balance sheet for M&A, that's not an issue for us. 

This combination of speed, certainty to close, and a compelling valuation can be very appealing to sellers. Then, we're not wasting each other's time, and at the end of those 30 days, we have a deal.

We have a great track record. If we enter into an LOI, unless we learn something very concerning from a diligence standpoint that would cause us to walk away, we're going to do that deal. Having that kind of reputation and track record is really important.

You can visit the progress.com website, where we have a section on corporate development and M&A. It discusses our status as an acquirer of choice. You can see how we take good care of the customers and the people. 

We are focused on speed and certainty to close. We've built playbooks. So, we have all these elements that make the experience of doing a deal much more appealing to a seller.

Preliminary due diligence list

I talked about the requests. There's nothing really surprising there, and we can certainly discuss some of those different requests. These are things that will help inform us as we consider where we can potentially identify synergies.

For example, if they have real estate or leases in a bunch of expensive cities, we're in a more hybrid-oriented world these days. Maybe we can exit those leases for immediate savings. Where is their IT spend? Are there opportunities for efficiency by leveraging our bigger platform?

So, there are a bunch of straightforward questions that allow us to quickly determine where we think a company could be from a value standpoint within Progress. This preliminary data list is a pretty valuable asset tool right here. 

You've refined this over 25 plus years of experience, technically expanding to three pages because you have a few different sections.

Right, so the go-to-market stuff, like product, sales, and go-to-market, and then the back office.

We're really trying to dig in on the people side. There are very simple questions to ask about the people, like what kind of attrition have you experienced? Have you done any reductions in force? What is the morale of the company currently? 

How do you compensate your employees? Are we going to need to recalibrate the entire team because they're paid at the 25th percentile and we pay at the 50th percentile?"

Really, what we're trying to do is, when we're typically looking at a potential acquisition target, we know there are multiple companies in the same space.

Let's hypothetically say we're considering an acquisition of a company in the application performance monitoring space. This is hypothetical, and suppose there are 10 to 15 companies in that space. 

When we're having conversations with a couple of companies that could be potential acquisition targets, we want to understand: Why is your product the best? How are you differentiated? How easy is it to replace your product? How sticky is your product? 

Because these factors inform our thinking as we're building out our valuation model. For example, if the product isn't sticky and customers can easily switch to another product, we'll need to consider that in our valuation modeling.

Similarly, if the product is outdated and has a lot of technical debt, requiring significant work to update the technology to align with market leaders, we need to evaluate what kind of investment that would entail and how it would affect our model. These kinds of questions help inform how we're thinking about the valuation.

They're aimed at determining how this influences our valuation model and our desire to proceed with a deal or not. If the company has significant technical debt and high customer churn, those are major red flags. Maybe that's not the right company for us.

By asking these questions early on, we can quickly make a determination: Is this an asset we want to explore further, or is this one to pass on? We strive to conduct these assessments quickly so we’re not wasting anyone's time, being respectful to the target company. 

The last thing we want is to string the target company along by having numerous meetings and requiring them to spend excessive time with us.

If we can make these decisions quickly, they appreciate that. My M&A team certainly appreciates it because they're not spending time on something that isn't going to make sense for us. That's really the intent with this set of questions we ask.

It’s all straightforward, none of this is rocket science. These are the kinds of questions that allow us to be more informed and to be informed quickly.

When to ask questions

This list is referred to as the master list when we're looking at an acquisition target. We'll customize some of the questions based on our understanding of the specific company. 

These are more generic questions, but we might have some more specific questions for the specific company. We send this in advance because we want to give the company an opportunity to think about it and potentially present some materials based on this. 

Ideally, in some situations, they can send us responses in advance, which makes the initial conversation when you do that call much more interactive and focused as opposed to being high level, which is more of a waste of time.

So they'll typically take a pass at answering it, but then instead of a call, they'll really follow up on any additional clarification needed. This allows us to dig in and hone in on follow-up questions. 

One of the things we're very focused on at Progress is making sure we ask the hard questions and ensure we ask questions that don't just yield a yes or no answer but force the seller to provide a lot more detail and context to really help you understand the company. 

Avoid asking questions that can be answered by a  'yes,’ or ‘no’ ; it provides no value. Frame the question in such a way that they have to explain how they approach it, how they differentiate in an area, and you can learn a lot more about the company.

People involved

Yeah, it's typically a very limited subset of the C-suite. It could potentially be the CFO, depending on how well the CEO understands the business. If the CEO is also a founder and more technical, they could probably go pretty deep on the product side. If not, they'll want to bring their chief product officer. 

The same thing applies to the go-to-market side. Depending on if the CEO is very go-to-market oriented, they can answer a lot of that as well. If not, bringing in the chief revenue officer to help elaborate is important. And then the CFO can provide a lot of color and context, particularly from a financial perspective.

Sales and Go-to-Market

So, there are a bunch of things here, and I'll share why we're asking these questions. We're asking questions like, who is the buyer of the product? Who is your ideal customer? 

These questions are informative because if their buyer is completely different from our buyer, we're probably not going to achieve the same level of efficiency, so it's helpful for us to know that.

For instance, if the ideal customer profile is heavily enterprise and our expertise is in the mid-market or lower mid-market, then we're probably not going to get the same level of efficiency. We're trying to see if there is alignment and if we can achieve efficiencies from a go-to-market standpoint due to similarities.

Similarly, is it a long sales cycle? For Progress, if our sales cycle is short and our average deal price is small, but their average deal size is a million dollars or half a million dollars, and it takes them nine to 12 months to close a deal, it represents a very different go-to-market motion.

So, maybe we're not going to get the right kind of efficiency. By asking these questions, we're able to get smarter and really be able to inform our financial model. 

I keep going back to that financial model because it's really important for us. As a value buyer, it's crucial for us to identify areas where we can gain efficiency so we can create more shareholder value with the acquisitions we do.

By understanding different aspects, like what kind of channel ecosystem they have—whether they are a pure direct sales motion or leverage channels, and whether the channels they have are similar to ours—can we gain efficiencies there or will we have to create an entirely new channel ecosystem?

All these questions help to inform our thinking, and that's really what we're intending to do by asking these questions. Have you ever heard of synergies? Yes, very familiar with synergies.

Revenue synergies

Actually, this can be considered an OPEX synergy too. If you don’t need their sales team because our sales team can sell their product easily and just add it to the bag, that’s great. 

But from a revenue synergy standpoint, if you think there are opportunities for cross-selling because it's a similar buyer who is buying this now, if we get that customer, we can also go in and sell them something from our bag.

We are very focused on operational efficiencies, much more than revenue synergies. If there are revenue synergies or cross-sell opportunities that result from a deal, we refer to that as upside.

We're not going to typically model that. We're not going to use that as the justification for value. We're going to determine if we can make this deal work from a valuation standpoint with operational efficiencies and operational synergies. 

If the answer is yes, that’s great. And if we then do the deal and revenue synergies result, like take for instance our last acquisition, MarkLogic.

We leveraged their access to a very robust federal government and public sector ecosystem of customers. We didn’t have a lot of expertise there. We have leveraged that and now can find ways to use it to cross-sell through this Progress Federal Solutions group to create opportunities for new revenue.

We didn't model this when we initially did the deal. It’s a nice surprise/result of the acquisition. You're right, operational efficiencies are much more manageable and you can control them a lot better. 

Revenue synergies are a lot harder and unpredictable. And if you're depending on them for valuation and then you don’t achieve them, it makes the acquisition a lot tougher.

And sometimes we end up losing deals because if another acquirer is willing to value based on potential revenue synergies and thus can be more aggressive from a value standpoint, all the power to them. And that happens, and as a disciplined acquirer that we are, we're okay with that.

We're okay if someone else beats us on price because they are doing things to be more aggressive than we think are realistic or defensible. Being a disciplined buyer means that we’re comfortable walking away from an acquisition.

Customer journey

You know, it's a great question. We start really thinking about that after the LOI and while we're negotiating the definitive agreement and doing some of the preliminary integration planning. 

However, we don't get much interaction with the target company or certainly with the folks responsible for the sales and go-to-market until after we've signed a definitive agreement and actually have access to a broader set of people. So, it takes a bit more time before you can really map that out. 

But we've done so many deals, and my head of integration is a rock star. She knows the things to be thinking about, so we can do a lot from a preliminary integration planning standpoint with our team. But then we want to move forward, post-LOI, pre-signing of the definitive agreement.

Surprises

There's always going to be a gotcha. This is something that we discuss a lot internally at Progress. No matter how much diligence you do, and no matter how thorough you are, there are always going to be surprises

There are always things that you learn on the other side. It's one of the reasons why we've put such a concerted effort into focusing on what we need from a diligence standpoint, emphasizing the must-haves, not the nice-to-haves. 

It's great to get all kinds of information, all the nice-to-haves, and to understand every little thing about a business, but at the end of the day, you can do all that and still learn something after you've owned the company that you didn't find out in diligence.

What's important in diligence is to really focus on the key things that could potentially influence your decision to do or not do a deal. For example:

  • Is there standing litigation that could cost you a lot of money? 
  • Has the company been experiencing significant attrition? Why is that? 
  • Is the company experiencing lots of customer churn? 

These are the types of things that make you smarter and help you decide whether to proceed or not.

It's important to be comfortable being uncomfortable. Because, yes, it'd be great to have 100 percent precision. But are you ever going to have 100 percent precision? No. 

So, for instance, when you're thinking about which employees you want to keep in a transaction, and which you don't, you can make educated guesses around that, but at the end of the day, you're probably going to make some mistakes. 

Maybe you'll decide you don't need someone, then learn after the fact that they could have been valuable for reasons X, Y, and Z. That's going to happen. It's never going to be perfect. But the whole point of M&A is getting to a point where there's enough conviction to want to proceed. 

There's enough belief that the value of the deal is worth it, and you understand that you're going to learn some things afterwards that you would have loved to have known during the diligence process, but it just isn't realistic.

Yeah, we have good conviction, we have good confidence, and we also have what we refer to as a contingency line. This contingency line allows for things that you may potentially miss. 

You can dip into that contingency, and as long as you stay within that contingency that you've modeled, then the model's still going to be a success, even by missing a few things. If you don't have that contingency, and the model requires you to be 100 percent precise, then learning things after the fact can be more challenging.

That's why we always have a contingency line, because we know there are always going to be surprises. As long as those surprises are within the bucket of that contingency, it's okay; the model will still work. You have to have your own deal philosophy.

Customer success

We're thinking about a couple of things. We're considering how many touchpoints are required to keep a customer happy. 

  • Do you need a lot of personnel involved? 
  • How hard is it to get a customer up and running on your product? 
  • Is it very intensive from a professional services standpoint? 

These kinds of things are really important for us. Remember, Progress isn't necessarily planning to model this deal and chase a lot of net new business. Our focus is really around what we refer to as maintain and retain. The customer success piece is really important. 

  • How good is the company at retaining customers? 
  • How happy are those customers? 

Because our focus is, if we can build on a model where we have a lot of conviction that we will maintain the core set of customers that are driving the majority of the revenue, that's great.

But we want to understand who is critical to helping us achieve that. That's why asking questions about customer success and professional services is important.

Financials

We'd like to look back two or three years to try to understand trends. We're trying to understand what's going on with annual recurring revenue. 

Is it growing? Is it shrinking? Are you seeing a lot of expansion with your install base? Does growth heavily depend on a lot of net new or is it highly dependent on the install base that you have?

These are some of the key things we want to really understand. They will inform our model because we're very focused on operational efficiencies. If we have to chase a lot of net news to keep revenue flat or to grow it slightly, that's going to be much more expensive than being able to maintain, retain, and grow an install base.

For the retention rate and key metrics, we're looking for net retention rates that are north of 90 percent and gross retention rates north of 80 percent. That's roughly where we are at Progress as a whole today; we are historically around 100 percent net retention. 

We're trying to find companies that are in that range or where we have conviction that we can improve those net retention rates a bit, given our robust platform of customers and distribution.

Good retention makes sense. Chase new dollars. People are very important. The people piece is super important at Progress. We talk a lot about how we care about our customers and our people. One of the fantastic things about our M&A strategy is the opportunity that people have to grow their careers within Progress.

If you go to our website, you'll see different profiles of people who have come to us through acquisitions and have been able to take on more responsibility and bigger roles on a bigger platform. We put a lot of emphasis on taking care of the people.

We know we're not going to be able to keep all the people. The important thing for us is to be transparent about that. For the people we aren't able to keep, we still take good care of them and are incredibly respectful. We've received a lot of credit for this.

It's hard to find out you don't have a role within the organization, within the bigger company. But sometimes that's just reality. You don't need two CFOs. You don't need two chief people officers. So there are obviously going to be roles that are redundant.

So thinking about where there are OpEx reductions, we're also trying to understand the trends the company is experiencing. For instance, if the company has already done a bunch of reductions in force, how has that affected morale?

If the company is seeing a lot of attrition, we need to understand why. Why do people not feel conviction or excitement about staying at the company? We're really trying to dig in on those pieces.

And from a culture standpoint, we do care about understanding the target company's culture. We're not one of those acquirers that just says, 'We're going to do it our way, take it or leave it.' 

We're very respectful of understanding what another company does, what's important from a cultural standpoint, and how we can incorporate that into what we do at Progress. 

We're not necessarily going to be able to incorporate everything, but we try to understand what's important from a cultural standpoint. When we're doing our integration planning, we're going to bake that into our thinking."

Given your interest in how businesses handle their strategic operations, especially in M&A contexts like in Ntiva's acquisition strategies you've mentioned before, focusing on cultural integration and OpEx efficiencies seems particularly relevant.

Understanding these nuances can indeed provide deeper insights into the overall success of an acquisition, not just from a financial standpoint but also in terms of employee retention and morale.

Red flags in people

Absolutely. If their culture is completely different from ours, like being incredibly entrepreneurial, and our practice has been around for 40 years, that's something that you have to take into account. 

If you learn things that give you discomfort from an ethics standpoint, we will absolutely walk away from that. Have I had that happen? Not specifically, but those are the kinds of things that would make us decide not to proceed with a deal because there's just too much risk involved.

Information technology

We want to understand what kind of security initiatives they have put in place. Is there the potential for risk and exposure from a vulnerability standpoint? 

In today's world of cybersecurity and cyber threats, this is an area that you just have to pay a lot more attention to than maybe you did five to ten years ago when it wasn't as much of a concern. 

Now it's something that you absolutely need to understand because the last thing you want to do is acquire a company, and then a couple of months after you've acquired the company, they have a vulnerability or some sort of ransomware.

In this preliminary stage, we’re looking at their historical track record. but we're also asking what kind of security initiatives do you have in place? Do you have a strong security protocol, or not? And if you don't, it's okay. 

We just need to make sure that we're proactive in thinking about what we need to implement to get them to a security level that's at par with a public company like Progress.

It's pretty easy to ask simple questions like, 'Have you had any vulnerabilities? Have you had any security breaches? What did those entail? What did you do to respond to that?' 

It's straightforward to inquire about the kind of security measures in place and the tools and technology used from a security standpoint. If the answer is that they don't do anything around security, that's probably a red flag.

Or, at least it's an opportunity for our IT and CISO team to say, 'Here's what we need to make sure we model into this deal to ensure that we put the right protections in place once we own this asset.

Legal

Regarding legal issues, obviously, you're digging into customer contracts, trying to see if there are clauses that would be concerning, like most favored nation type clauses, or restrictions on being able to transfer a customer contract upon a change of control.

Litigation is also important to understand because we need to ensure there are going to be certain special escrows that we need to put in place to protect us from potentially ongoing litigation. 

Progress, as a public company, presents a different profile. A company or person litigating with a small private company might be looking for one thing, but now that the company is part of Progress, they might think they can get more because they're now part of a big public company. So, we need to be thinking about the risks and the exposure.

Marketing

Marketing is pretty straightforward. We're trying to understand where they are investing, how they are generating awareness, and how they are creating differentiation. 

What does the competitive landscape look like? Is the money being spent efficiently or poorly? Where can we achieve greater efficiencies? We have a great marketing team with a strong platform, which allows us to improve efficiency significantly.

It's really helpful for us to understand where the spend is going. Are they spending on conferences but getting no value from those conferences? We dig into things like that as they all inform our model. 

Can we achieve efficiencies, or do we need to increase spending in marketing just to maintain some level of revenue growth? If it requires a lot of spending to do that, it might lead us to reconsider the deal.

Again, these are the kinds of questions we ask early, pre-LOI, so we have that understanding.

Breakdown of COGS

Again, we're trying to understand the cost structure as detailed as possible. It's interesting for a company focused so much on operational efficiencies like Progress is, understanding what's going on in COGS and what kind of gross margins you have is very important. 

If we're trying to get an acquisition target's operating margins to align with Progress's, which are around 40%, but the target company's gross margins are around 60-65%, that doesn't leave a lot of room for preserving many people because you have to cut more from an OPEX standpoint. 

If gross margins are higher, north of 80%, it gives you much more leeway in your ability to find those operational efficiencies.

That's why it's really important for us to understand what makes up the COGS and gross margins, as well as the components of OPEX. For most of the companies we look at, the biggest percentage of OPEX is headcount. 

Is your headcount in high-cost centers? Is there an opportunity for us to leverage some of our lower-cost centers of excellence to achieve greater efficiencies while maintaining productivity from a product and development standpoint?

These are the kinds of things we're trying to dig in on.

To get accuracy on the numbers, we hire a third party, a transaction services team, that helps us conduct what we refer to as a quality of revenue and quality of earnings analysis

This happens early, once we have the LOI in place. We validate, and it goes back to the same point: if what they told us is not really what the business is, it's easy for us to say with a straight face that we need to walk away because you told us revenue is X, but when we went and did the analysis, revenue is actually Y, and that revenue Y is a lot lower than what you told us. 

And that has happened. So you have to take the information at face value, and if there are discrepancies, you can immediately raise questions.

In the LOI, we always state, 'Based on the information provided to date, we believe that a value of X is defensible.' When we dig in from a post-LOI standpoint with more detailed diligence and the information provided does not corroborate that, it's easy to go back and point to that discrepancy

Benefits template

Yeah, so again, we have put such an emphasis on M&A readiness and our M&A playbook, we've built out our own anonymized census/benefits template. This allows us to get visibility into the things that are important for us to understand as we're thinking about where there are potential synergies and potential dis-synergies. 

For instance, like I mentioned before, if a company is paying at an incredibly low compensation rate, we might need to calibrate salaries to be more competitive and appropriate.

That's obviously a dis-synergy. The company might have significantly worse benefits. For example, they may not have a 401(k) match, which is an additional cost. We're trying to ask different things in this template. It's really easy for the company to provide that, but it allows us to do that analysis and be a lot more efficient.

Other dis-synergies are bonuses. All kinds of bonuses and how they account for bonuses can end up being a dis-synergy. The benefits may not be as robust as ours, so there are a whole bunch of things to consider.

I would suggest doing a podcast with someone on the HR side to really diggin on that. It could be an interesting discussion because there's probably a lot to explore. We'll look for someone.

Operating expenses

What systems is the company using, and where can we leverage our systems? Where are we going to face greater complexity transitioning to our systems? This really helps to inform where there are cost savings and also aids in the integration planning. 

This is an interesting point that you might push to confirmatory diligence as opposed to pre-LOI. We have it on here because it's beneficial to get this information.

General 

Yeah, and again, on the facility side, where are there opportunities where they're spending a lot of money on a facility where no one's showing up in the office? That's an easy synergy. It's just about trying to understand that better. Do they have facilities in the same city where you have facilities? That's an easy synergy. 

So, it's really about understanding some of these things. From this list, both from the set of questions and the data requests, it's all going back to informing the valuation and where we think we can be.

So, one, we're trying to see if we are still excited about this company as a potential acquisition target. And then two, what kind of valuation do we think we can pay that is defensible and supportable?

Deal specific adjustments

Our requests certainly vary depending on the deal thesis. We're looking at a lot of companies and acquisition targets that tend to be interesting adjacencies to the products and the different solutions we have on our platform today. 

What it does is enhance our value proposition and further differentiates us as a key player in the areas we operate in.

We’re trying to front load this stuff before we get to an LOI, and that sets the tone to move quickly. From our perspective, it's very straightforward. There are simple questions. If the company understands their business well, there are no surprises there. 

The requests from a data standpoint are very straightforward and, ideally, are off the shelf, minus the benefits and compensation details in the census, which they have to incorporate into our template, but it's pretty straightforward to do that, too. We haven't had much pushback from targets.

Processing the preliminary diligence information

At this stage, it's a small team. We'll have the executive champion from the business unit that wants to do the deal, a couple of folks from CorpDev, maybe a couple of people from the business unit, thought leaders, leadership members from the team, and obviously our finance person who's helping to build the model. 

That person has built a simple one-page template where you can just plug in a bunch of numbers, and it helps spit out where we think we could be from a valuation standpoint. Remember, we are very focused on ensuring ample shareholder return.

We're very focused on certain parameters for how we determine value. Like you said before, we're never going to pay 15x for a company from a revenue multiple standpoint because we trade at four and a half times. We're never going to pay 30 times EBITDA multiple because we trade at 11 times multiple.

But one of the things we do is spend a lot of time thinking about, from a pro forma standpoint, once we've executed our synergies and the operational efficiencies, how much value we can create for our shareholders. If there's sufficient value that we can create, then we can get a lot of conviction around proceeding with that deal.

And if we can't, we'll walk away and we're comfortable doing that because we're just value-driven.

Confirmatory due diligence 

Once we get an executed LOI with exclusivity, we have a very disciplined approach. We have a focused diligence request list. We can lean on that, referring to the highest priority items, the P1s, that we can obtain during that diligence period. At the same time, we can start negotiating a definitive agreement.

The goal is to really be able to do it all concurrently so that at the end of those 30 days, you can be pencils down on diligence, and you can have a negotiated definitive agreement. If all that comes into play, that's what's appealing to a seller. Not having this process linger for 3, 6, 9, 12 months, but to know that in 30 days, we can have a deal in place. But you have to give us exclusivity.

However, delays are always possible.  I mean, you're always going to say 30 days for exclusivity with automatic extensions, as long as you're continuing to negotiate in good faith, because you're right. Take for instance, if the company isn't prepared to have the data room go live on day one post-LOI. 

That's going to delay the diligence process or if the negotiation is taking a bit longer than expected. That's going to delay the process. We all like to set that aggressive target of 30 days, and it's certainly realistic and achievable if all the stars are aligned.

If the data room is in place and ready to go from the get-go, if both sides are practical and reasonable from a negotiation standpoint, and if the sellers aren't being unreasonable and just trying to fight every single deal term, it could take longer. 

If the seller is taking time to build out the disclosure schedules, it could take longer. So it really requires everyone being bought in, there being alignment, and everyone being prepared and ready for that process. And if they're not, yes, the 30 days can be very aggressive and unrealistic.

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