Hiring to Scale a Corporate Development Function
It's hard to scale a brand new M&A function because when you're starting it up, you get to ramp yourself while you build out that function.
The main thing about Corp Dev in an early-stage company is you'll get to see a lot of different work. So typically, Corp Dev in a growth stage company will do fundraising. They will do M&A. They will do business deals that may require help. They will do corporate strategy.
So you need somebody who can plug in on what the need is. It's not necessarily just doing the M&A execution piece. It's everything from end to end. You want to hire people who are good and can take different roles on per need basis.
The second thing is you want people who have complementary skills. If you hire people who have very similar skill sets, it's going to be a problem. If somebody's good at strategy, but not so much in number crunching, that will be a problem.
Technical skill is still very important. What I try to look for is, that if a person is in a more junior role, like an associate manager role, it's okay not to have some technical skills. If they were a previous banker or consultant, they'll have some of it, but I'm here to help, and I can coach them on that.
If I'm going to hire for a director or senior director role, I tend to be a little bit more biased there to have those skills. It depends on the bandwidth I'm going to have to support, but I can't support everything.
Some people have those innate, and some don't, and one can coach as much as possible, but it takes a long time to acquire some of those skills.
You have to decide if you will put these people in a front-facing role? Are they more in analysis and strategy role? So that is also a critical distinguishment that you need to have. I do believe that a lot of those things are approachable. They just take a little bit more time.
Hiring Process for Success
If you're hiring high-potential people, they want progression in life. They want to learn. If you hire somebody who's done that already for five years in their life and you gave them the same role after a year, they’ll be bored.
Somebody who's not done that is more hungry. They want to learn more. They see more progression ahead of them, and they keep doing a much better job at it because they just want to learn. And I think typically, that keeps them excited.
When somebody joins, especially at junior ranks, the idea is to take them through the journey. When you start, you're going to do more strategy and analysis.
Can you then present that to the CEO? Put them into a call with the other side on negotiations?
Start in a safe environment, sit and listen to negotiate with me on a small agreement, like a TSA, which is not as critical as the main doc or, we can do that together.
And then, you can have them negotiate a bigger document. I'm going to start safe again, start with a more minor deal that's going to be less of a risk than a mega deal.
You have to give them a little work to keep learning and improving until they can do your job. That should be the progression.
Hiring is very important, but how do you do a good job?
- Screen the right set of people, and you need to screen more people.
At GoPuff, I had to build a team and it's tough for the recruiters to figure out what you are precisely looking for, especially when you have just started and they don't have a relationship with you.
So we posted on LinkedIn, and over a period of two months, we got 400 - 500 resumes. Half of them are not the right fit for the business because people just apply.
Then I went through the full 200 and the recruiter can get a rough idea and call 30, 40 other people out of which we said the 20 we're going to interview. So I did all the 20 first screens myself. I cannot outsource that.
- How do you make sure that these are the right set of people?
First is their background, have they shown good progress in their life? Have they gone to good schools? It's okay if you haven't gone to good schools, but have you worked at good places where you learned and progressed?
Look for a pattern that they have progressed. They need to have a certain spike on the resume. That's not enough, but I think that's at least important to see.
A case study is pretty important in a hiring process. So I would do a small case study just how people can think on their feet. It's not a complicated problem, like trying to think how they will solve an ambiguous problem. Like how would they think about it?
And there are no right or wrong answers, but the thought process is important. If they have cleared the screens with the full team, we would give them a full, pretty detailed case study.
If they have hunger, they do homework. They would've done some research. They would've put their best foot forward because that's where you should put your best foot forward.
This is an interview, you should be hungry for the job at least. And then you see what output they produce from that. There are no right or wrong answers. And no, you won't have inside information if you're interviewing, but at least you give it enough thought from that process. So this is all the hard set of skills.
After that is the soft set of skills. That will be done through some interviews. And that's why I try to have a fairly diverse interview panel; somebody from my team, somebody from the partner functions like finance or legal or otherwise. We will think through some of those partner functions and have diverse skill sets to interview this person.
It's essential for us to learn about how somebody thinks, but also for that person to understand what kind of problems we'll be solving.
It gives you a lot of exciting information. So I think it helps you decide if it’s something that you find interesting, or you don't like. You better do that before you do the job. So it's best for both sides to learn through the process.
The Right Time to Hire More People
“Hire enough people that they're pushed, but they're not bored. But they're not pushed so hard that they feel burnt out. So it's a very tricky balance. - Saurabh Tejwani.”
Another thing that is different for Corp Dev is the workload is a little spiky because the day-to-day role can change a lot depending on the transaction that's going on. So if you hire too many people, they're going to be bored in the low times.
However, if you hire too few people, the max becomes too difficult. So it's pretty difficult to really get your staffing model right. But I tend to staff a little bit leaner so they're pushed, but they don't have to burn the midnight all the time.
That means that when the spike comes, you have to push back and say you can't do this or ask a partner function for resources.
Developing New Hires
It's learning on the job for the most part. You have to be more hands-on to get started. The biggest mistake the managers make is making their time short, and not giving the junior folks enough context.
The context is super important so that they can make the right decisions themselves. So give more context, more help up front, and give more guidance, and ask them to ask more questions.
It is super important to have more standup meetings once or twice a week, giving more context, and then supervising their deliverables early on. You can typically see certain skill sets they're pretty good at.
You can back off and not be the person who is breathing down the neck and let them have their own freedom. But there can be certain places where they need more help, be more proactive about that.
Being a people manager, you have to balance your time well, so that you're not spending way too much of your time in the weeds because otherwise, you are not really able to execute at your level. At the same time, if you don't do some of that and it leads to errors down the lane that should not have been there, then it backfires.
So that trust comes with time. It takes a little bit of hand-holding and flows until you get that trust. Once you have the trust, it takes off. That's why hiring the right set of people is super, super important. Once you have a good team, it makes everybody's life easier.
And if you have hired the wrong person, it's a problem because they struggle, you struggle, and it is not fun for either side. So it's a tough one.
Hiring for M&A Integration
Integration is very hard. And most of the value of the deal is realized if you do the integration.
Integration has to be thought of right at the time of the deal execution itself. It can't be an afterthought and that's a mistake you will see being made time and again.
Some of the things you will figure out, but the high-level core principles, the high-level plan, and the resourcing have to be figured out upfront. Do that before you sign the deal because there is no walking away from the deal.
What we used to do is we would have at least one dedicated point of contact for Corp Dev for each of the functions. So we would review it with the dedicated contact, which could be a senior leader or their chief of staff or it could be a strategy person, and we would at least make sure there's no big red flag.
When you do M&A, you can only bring so many people under the tent. You always want to keep it smaller, especially if it's a sensitive deal. A divestiture is definitely way more sensitive than an acquisition. So you have to think through all the implications of that.
You have to bring the right set of people, which is important; you want continuity. If you have somebody from that function who does one deal, and then you have somebody completely different, they don't have the learnings, they don't have the experience to have done that.
So we try to have single points of contact. It may not work every time. It may be different, but you want continuity from that perspective.
Do they have the right balance of business and that skill set? Because you may be a great engineer, you need to have a little bit of business perspective to do that.
Also, we may have you negotiate some things with the other side, especially when trying to figure out a TSA. Can I put you on a call and have that discussion as well? So you need the right set of people for those sets of discussions.
For very large deals, thousands of people involved, you'll need a dedicated IMO for that.
That is a full time job for many people at that point in time. But if you're doing a few small deals here or there, you may not need a dedicated IMO, you may need an integration person, but you don't need every partner function to have dedicated people.
There are certain functions that you may still need, like HR. You definitely need somebody that's very heavy work, but not for every function.
For the most part, you can use consultants once in a while. It's helpful if you don't have the legs to do it and if you need additional resources. But many folks who internally have the context and understand the business, know the people internally. So if you have the right skill set internally, it's more efficient.
It's not one size fits all, you're going to deal with a mega project, you will need tens of integration people. You may not be able to hire them or may not have the right skill set internally, and then you can use external help if necessary.
You can only do a few deals, and if those are the deals that we are going to do, they have to be the most impactful. Most of the deals I'm proud of were the ones we sourced. A large part of it is driven by internal strategies, like:
- What should we do?
- Should we consolidate in this market?
- Should we divest in this market?
- Is this is a skill set we don't have?
- Do we need these capabilities?
- This business has huge synergies for us, so we should acquire.
If there is a strategy that's aligned with the business and the board has seen that and they know these are the targets we're looking at, you can also get their feedback early in the process. It's helpful.
There is no one hand clapping. The other side has to be interested. You want acquire a few companies, but it may not make sense because the other party may not be interested in selling so they may sell, but the price wouldn't make any sense.
It takes a while to develop that, so you stay engaged with those sides, and when the time comes, you do the transaction.
There will be assets that will come into play. And often they will not be well advertised. So you need to have a network through other Corp Dev professionals, bankers, consultants, or private equity professionals.
99% of those deals won't make any sense, but the 1% do, and you get a lot of inflow.
And the third set of deals will come through your internal network. You may be looking for a certain specific asset on the engineering side, and there may be a CTO or a VP of engineering who comes to you.
That is also another helpful channel because you get an internal deal champion who thinks that deal is valuable.
You still have to do diligence and make sure there are no vested interests. I think Corp Dev is the function that seeks truth. It may be really that this person wants to do the deal, but knowing if it’s the right thing for the business is super important.
A typical Corp Dev will look at hundreds of deals in a year. Some will be killed after one hour of analysis and research, some will get killed after a week, and some will get killed after a month, and some will get killed after a year.
Managing the Pipeline
Keeping track of the deals
It depends on when we are doing large landscaping work, you may need some scoring formulas. But in the end, these deals have a lot of judgment calls.
So we keep a track of these deals because you don't want to forget two years later if you talk to them. So we keep an internal tracker for some of that stuff. But then you have to pull a lot of information in your head. That's what it takes, you need to have a good recollection. We typically would circulate notes internally.
There are a lot of times when you have a conversation and you don't think that's the right fit at the moment. How do you keep that pipeline active for an extended period of time?
Keeping in Touch
People will use different best practices. For me, it's just around the time of the holidays. Investors, past colleagues, and companies see it's a great way to stay active. Forcing that touchpoint sometimes is helpful.
It's not an easy job because there is no immediate outcome you're going to get out of it. But I think that's where many people, including myself, struggle.
I have an interesting way to do it. I like reading, I read stuff and somehow I read something that is very relevant to the person we talked to or discussed, and I would always send them something that sparks a conversation.
People appreciate that when you read that, you thought about them. I think people care about the personalization piece. Holidays sometimes feels a little generic. Everybody's sending me holiday messages. And then it gets lost in the noise, but you still have to do it. I think for some of the people, it's a good touchpoint to do it, but I think the personalized checkpoint with people is super helpful.
I think it's always good to do some of this stuff in person. I like that. But managing remote teams is hard when we try to do that internally, like trying to run offsite to meet people. It's hard. But I think in-person interactions I think it adds another dimension to it.
Cold reaching out to people is very difficult, you will not get the response. You always need to find somebody who will help you make that connection.
I know people who know people, that's typically the best way. I will go to their LinkedIn profile, and see if we have some connections in common. And then you typically use that connection to help set up an introduction and then have the conversation.
Sometimes you will not have anybody in common, that will happen as well, but look at the company and try to see shared connections.
You have to use the connections that you trust in between. It has to be somebody with who you feel comfortable that they'll be okay reaching out on your behalf. That's why keeping those connections warm over a period of time helps. If you reach out to somebody 10 years later and asked for an intro, that's probably not a good idea.
Sometimes I may not need a favor, I may not need to be a friend about it, but often I'd ask for a catch up with that person, which gives you a touch point.
And I would be direct if they know the person well, because it's possible they’re connected on LinkedIn, but a gazillion people are connected on LinkedIn.
I don't wanna put them in a spot that they have to say yes, because it's not going to be helpful anyways, so I can find another contact in that situation.
The biggest challenge when building or scaling an M&A function
- Not knowing what you're hiring for sometimes. Because the objectives of a function change so you need to know what you're hiring for. What do you really want to attain?
- You hired the wrong skill set. What are you going to do now? You've hired the wrong person; what do you do with that? And that's a tough one. You should do an intense job at coaching if you feel like you have not hired the person, give them a chance.
If it still hasn't worked out, you figured out if you can help them find another role within the same group outside of the group, but just putting people in the same group, where it's not working out, it's not a great outcome. It creates strain on the function.
- How do you make sure that the function's interacting well with the other groups? Corp Dev fails if it's not working well with the other groups, whether it's finance, legal, product, and HR. So you need to have a team that understands everything that's going across the company.
You have to build and scale your own function, but you must be very well integrated with other people simultaneously.
5. Overall efficiency How do you ensure that you are working on the right set of problems all the time?
You will get the balance wrong if you scale the function inappropriately too much or too little.
Corp Dev's role is to seek the truth
You're making decisions based on incomplete information. So there will be biases that will come in. A person who may have seen a certain aspect of the deal but not the other aspects. They may or may not want to do a deal because they're biased by that.
And that is a bias based on their past experiences, there is a bias based on their function. Sometimes, they may be correct, and you can be wrong because that person or individual has more experience or expertise than you on a specific topic.
Corp Dev's role is to bring that to light and have a detailed, thorough analysis. Because an executive may say this is a great deal, but you realize the integration of this thing is impossible.
Corp Dev's sole responsibility is ensuring we got to the right deal. And everybody will make mistakes. They have been bad deals made by many companies in the past. But at least we had a very informed discussion and knew what we were getting, what we were getting into before we do that.
M&A, unlike some other things, is a one-way street. There's no coming back from that. If you want to launch a business, you can do a pilot. In M&A, there's no pilot. It's either all the way in or not. You just have to be fully informed of what you're getting into. - Saurabh Tejwani
Ground rules to a healthy debate
- Don't tell the answer upfront
You have to remove the biases. We always said start with the answer first and then give the reasons why to do it, which works fine in a lot of places. But sometimes, I would go in a meeting and ask not say the answer upfront, and just go through the facts so we can get to the right answer unbiased.
- Always have a discussion on what are the pros and cons
Even if it's a no-brainer, always discuss what are the pros and cons.
- What are the things that can go wrong in this transaction
Let's be clear and upfront about it, and what are we going to do about it? Also, plotting, what's the worst case scenario in this situation, if it does that.
Often people focus on like the base case scenario. When we don't know the outcome, having the worst case and best case scenario are equally important. We need to understand what that range looks like in terms of the outcome.
And in the end, having the right audience to have that discussion is important. If you're going to have just the discussion with the CEO, it's going to be probably a little narrow. So we want to make sure that the right functions are on the table to have that discussion.
Culture is very important. Can I actually have that discussion? So I will be upfront with my team. It's a top discussion, but we're going to have it because our only objective is to get to the right answer, and set that context upfront.
I maybe trying to be difficult in this conversation, but my intentions are to get the right answer. And if you get the right answer, that's going to be better for everybody. So setting that context is super important.