Beyond the Deal: How Buyers Evaluate Companies | Buyers Corner with Michael Magliochetti

Speaker A: Uh, on this Buyers Corner episode, we're speaking with Mike Magliaccetti, operating partner at the Riverside Company, a global private equity firm with nearly four decades of experience investing exclusively in healthcare and tech enabled healthcare services. Let's begin. Thanks Mike for joining us.

Speaker B: No, it's great uh, to be here. Thank you for having me.

Speaker A: To set the stage, can you briefly share your professional background and the firm you represent today? And also on the same note, you made a leap from a serial CEO to an operating partner in private equity. How was that?

Speaker B: Yeah, you know um, I've been an operating partner here at Riverside for uh, 14 years. Um, hard to believe, longest I've been anywhere in my career. But um, my background is very different than my partners. I originally trained uh, as a chemical Engineer, have a PhD in Chemical Engineering and uh, and then earlier my career was sent to get an MBA and shortly uh, thereafter my career sort of took a path of more of general management M and had the good fortune over 20 years before joining Riverside to uh, serve as CEO of three companies, uh, through successful sale transactions. One in urology, gynecology, another in orthopedics and my last in oncology diagnostics, a company called Claros. It was while I was at Claros that I met Riverside. I was introduced just by a mutual friend to the managing partner. And uh, we clicked right away and he asked me if I wanted to join Riverside's Healthcare Advisory Board, which is a real differentiated group of uh, executives from all the different subsectors in which Riverside plays to really help the firm, um, with diligence on opportunities, serve as an independent board member here and there and just add value. Uh, it didn't seem like too heavy of a lift while I was C.E.O. uh, of Claros. They were in Boston, I was in Boston. And uh, they had a terrific reputation. So I decided to uh, I decided to go ahead and do it. And fast forward four years. Uh, my company Claros was acquired. I stayed along to run the global diagnostics business, uh, uh, for the acquirer Oppco Health. Um, and uh, I did that for a little over a year and uh, had the opportunity, um, Riverside reached out uh, and asked if I wanted to really change up my career and join full time as a, uh, as a partner. I knew that I had the chemistry box checked. You know, I had been working with them for five years. I saw how they treated each other. I saw how they treated the management teams of the companies they invested in. And so I knew uh, that would make sense for me it was just really going from player to coach, which can be very different. Um, and so I gave myself a year to see if I'd like it or not. And you pick your head up and 14 years goes by. And I guess, um, lesson learned is if you like what you're doing, time just goes by.

Speaker A: I understand that you recently published a book, Dancing between the Toes of Elephants. Clever private equity idioms and anecdotes from an outsider's experience on the inside. Can you share a bit about how the book originated and a bit more about it?

Speaker B: Yeah, yeah, sure. Um, you know, um, I'll tell you any time. I was, uh, blessed to be offered a CEO role. Uh, um, over those 20 years before joining Riverside, whether it was in urology, orthopedics, oncology. Uh, funny, I never felt I was qualified, uh, not because of imposter syndrome, but, um, just because of the fact that, for example, I got tapped to run an orthopedics company. And I. I hadn't spent a day in orthopedics in my career. It was just. I had returned money for shareholders. I was bilingual in the sense I could understand technology and. And, uh, uh, it. Also finance. Uh, and. But what it meant to me was, uh, a very, very steep learning curve. Um, imagine having to go toe to toe with an orthopedic surgeon very early in your tenure on a. A value proposition that was either patient, uh, clinical or financial. You needed to be more than an inch deep and a mile wide. So I had a process that I used in these new assignments. Um, uh, when I was going through these learning curves, I would always listen three times before I spoke. I would be deferential to those around me who had lots of experience in the space. And I would never let something be set where I didn't understand, um, what it meant. I would always ask a lot of questions. It completely, completely immersed myself in these companies. Um, you know, for the first six months and maybe for the entire tenure of the CEO assignment, I. You know, the whole concept of work, life, balance was out the window. So, uh. And you pay a price for that, right? But, uh, that was. That's what worked for me. And. But when I made the move to private equity, when I joined Riverside, even though I had had, uh, pe, vc, family office investors in my companies in the past, I. I had, uh, um, had an mba, all that good stuff. I've been an advisor for four or five years to Riverside. It was still a steep learning curve, tremendous learning curve for me. Imagine getting into this ecosystem where you're surrounded by folks. That's all they've, they've really done, you know. And uh. So I used that same process as I did as a new CEO, but I did something a little bit different this time. I kept a journal. And anytime one of my colleagues used a phrase that I didn't quite understand or an idiom that I thought was really clever and unique, um, and maybe I'd roll my eyes at how absurd it was, uh, I wrote it down. I wrote down what it was, what it meant, how it was used, and a little bit of a blurb about it if you will. And I kept this as a living document over the years, meeting um, other PE firms, going to conferences, meeting with investment bankers. And over the years I've been fortunate to uh, present at uh, different colleges and universities on my kind of unique journey into private equity. And a college professor on a visit, um, uh had asked me how the heck did Someone with a PhD in chemical engineering ever wind up in private equity? And I shared with him sort of my journey, uh, and this tool that I use that helped me acclimate this journal. And he kind of really stopped in his tracks. And he said to me, you know, many of my students uh, work for private equity at venture capital firms. Many of them will work for companies that are funded by private equity and venture capital. You should really think about turning that journal into a manuscript for a book. Well, um, long story, uh, short I ended up getting network. This was around late 2022. I started, I started writing. Uh two years later I uh, I went, you know, I went over this time from, from paper to word document. Two years later I had about uh, 350 pages, know nothing about publishing. Uh, managed through the superpower of networking to um, connect with agents. One who, one of whom represented me. And the book was published dancing uh, between close developments late, late last year and um, um through many influencers who uh, took, who took to the book. Uh the book achieved uh number one bestseller status and uh, Amazon number one bestseller status for three categories, Private equity, venture capital and career professional development. So it's been an amazing uh, whirlwind if you will. I really enjoy the people that I'm meeting, the uh, feedback I'm getting on the book from executives that work for PE adventure funded companies, uh, from students. I've done over 25 events in a few months, uh, uh, while still trying to balance my role at Riverside, which is uh, no small task. So um, it's been incredible.

Speaker A: In your book you talk about navigating Large complex organizations while building a bridge between executive leadership teams and the investments firms with whom they partner. How does that thinking translate into your acquisition mandate today? Are there specific sectors, business models or growth profiles you actively seek or do you take a more opportunistic approach?

Speaker B: Yeah, yeah, you know we have a very, very targeted approach. Riverside, um, uh, quickly, uh, was founded 37 years ago and since day one we've been focused in healthcare and technology. Um, today we're 100% healthcare. Any technology that we do is tech enabled healthcare services. It has to have that healthcare overlay. Uh, and the companies that we invest in, these are companies that um, uh, aren't taking binary risk. We're not investing in companies that have reimbursement, our regulatory risk, pure play pharma, uh, molecules, um, uh, hospitals, clinics, physician practices. We're investing in companies that provide services that to those who do take the binary risk. So what that equates to is you know, um, a front to back end revenue cycle management services, coding, um, uh, uh, machine learning for uh, uh, revenue cycle management types, types of uh, businesses, uh, pharma services, uh, manufacturing, contract manufacturing for defense devices, diagnostics, um, uh, uh, medical pharmaceuticals, uh, um. There's not a whole heck of a lot we won't look at under that umbrella. Uh, but these are, these are good companies. They'd be good companies whether or not they met us. They're just at a point in their life cycle where you know, the founder has a good deal of sweat equity tied up into the business, maybe a good deal of their net worth concentrated in the company. Want to take some liquidity, want to take some chips off the table and keep a healthy percentage of equity uh, with us going forward. Uh, you know, in the 37 years we've never made an investment where the founder hasn't stayed engaged in the company in some way, shape or form, whether that's remaining as CEO or taking a different role or being on the board of directors and kept a healthy percentage of equity in uh, the company. We won't make an investment. Uh, if uh, if that's not, that's not the case, we just, we just won't do it. Um, and these are companies when we invest there that are generating revenues, I guess in PE speak it's lower middle market, uh, revenues that generate between say uh, 3 and 12 million. In that range we can go above that. But that's typically uh, where we, where we like to play. And these are companies, you know, they, they typically have you know, um, good foundational management teams Sustainable businesses and a real, you know, a real right to win. Real differentiation with respect to uh, sustainability and right to win um, and growth levers both you know, organic and inorganic.

Speaker A: Uh, you mentioned a bit about growth for the companies. At what stage of growth do you typically find companies most attractive for acquisition and why?

Speaker B: Yeah, you know, um, these, like I said these, these are, these are good companies. Right. Uh, it's all about, it's all about execution for us. We see, you know, we see a pattern recognition you know oftentimes where you know the, the, the founders, those, those who are really self aware will come to us and say you know um, I've taken this business to 25, 25 million. You know you've got a PhD computer scientist or, or biochemist and they're taking the company to a certain level and they don't know how to take it. They know what it should look like but they're not sure what it takes to get IT to, from 25 to 125 or 225 million in revenue. So very often it's all about intelligent execution and uh, that pattern recognition where we have a 37 year playbook to be able to engage and, and uh, and add value. So oftentimes we find ourselves with these businesses filling gaps in the executive leadership team, um, building out business development. These companies oftentimes they're growing 10, 15 percent a year with no formal business development function. Um, they're you know it's just based on client to client referrals and on the shoulders of the founders network which is a, which is a great thing. Um but you know for us the value creation comes in where you know this is an area I love to engage and build out a business development function. You know, bring on a chief commercial officer inside sales field, sales account management, uh, and the tools and processes that go along with that like implementing a CRM system or you know cross functionally an ERP or LIMS system also sort of professionalize uh, the organization and once we feel comfortable about the, you know, the people, the platform, the sustainability, um, we'll look to do you know, add on acquisitions to get a business into different geographies, different technologies, maybe diversification of clients or services. So there's a lot of these growth levers. The ability for us to be able to plug in and work with the team, help build a team and work with the team to take this company to a whole nother level, maybe a level that the founder dreamed about is, is really, really exciting for us.

Speaker A: Sounds really really insightful, Mike. Uh, you have a really good vantage point as both an acquirer and as an author too. So has the tech M and A landscape evolved over the last few years? What elephants do buyers and sellers need to learn how to dance with in today's market? And what trends do you see ahead?

Speaker B: Yeah, you know, um, it's interesting what I've seen, uh, because it's been more and more difficult for lower middle market private equity firms to raise capital. It's been tough over the past few years. So I've seen sort of a real increase in the scrutiny on sustainability and TAM and the growth prospects for these businesses. We, along with our other PE firms that I've interacted, um, with much more disciplined. Not uh, that we relax or cavalier in any way, but there's a real shift to greater selectivity and a premium on differentiation and real durable growth. What I've seen over the past few years, and it's continuing, is these companies that I describe, these companies that have positioned with strong management teams, sustainable businesses, growth levers, differentiation, these A assets, if you will, they're demanding a premium, they're trading at high multiples, investment banker led processes, the quick shot clocks on diligence, if you will. Um, and uh, and really, really high, high valuations. The companies that, that are sort of the, the B assets or have hair on them, as I say in my book, um, they're, they're either not trading or they're trading for lower multiples with, with lots of structure, you know, earnouts, seller notes and uh, uh, things like that. So that's what I'm, uh, that's what I've been seeing, uh, you know, over the past several years. And it's just that trend is just continuing.

Speaker A: Yeah, that sounds extremely challenging. On that note, from the buyer's perspective, what part of the acquisition process is most challenging and how does that align with the leadership and decision making lessons you highlight in your book?

Speaker B: Yeah, you know, um, it's a great question. You know, the challenge is there's a couple things here, uh, to unpack, you know, that having the seller comprehend the difference, first of all, between a private equity buyer and a strategic buyer, they're both very, very different paths for the, for the seller. Um, and uh, just, just kind of thinking about, uh, the, the P.E. side. Um, you know, that's not something founders and management teams have to realize. The challenge is having them realize that not all PE firms are created equal. Um, you know, everyone will come to the table saying they have capital, they have tenure, in the space, they have great returns. That's just table stakes. It's really the challenge is having the seller understand for them to realize what is day one going to look like with this partner, with this new partner, what's day 100, day 1000 going to look like? Uh, because this is a, you know, you're taking on a partner. It's probably the most important decision in the life cycle of the company. You're taking on a partner. This is a marriage, um, but, but it's a marriage that you can't get out of. So um, you know, valuation is important. I know it's a challenge to think through, you know, to move away from the highest upfront valuation. Uh, I think there's much more to it than that. One has to think about sort of that second bite out of the apple because the real win for the seller isn't the first check. It's that after three, four, five years taking on a partner, a PE firm partner, what partner are you going to want to be in the foxhole with for the next several years and who is going to add the most value, um, to get um, that largest end result in terms of that second, um, uh, liquidity event. And too many entrepreneurs, they fixate on that headline upfront valuation. They overlook complicated deal structures that can come behind it. And really the organizational behavior of the PE firm, uh, in which they're partnering with another thing too is, I think challenging is, you know, sellers should understand, you know, uh, they need to do what they say they're going to do in terms of hitting their numbers pre close. You know, for us as a, as investors, you know, we look at a confidential information memorandum. It has a management financial case and the timeline to close. During that timeline they should ensure that they're hitting their numbers, that that forecast, um, should have the credibility behind it that they can hit. And also I think it can be frustrating sometimes when you're under tight time, tight timelines to close. But the uh, seller is not prepared, they're not responsive, they don't have a rock solid data room where they can quickly give you the information you need to complete your diligence. So it's, you know, um, having them realize how important the decision making is to bring on that PE partner and who they bring on, uh, and really being prepared for that, for that, uh, for that journey.

Speaker A: Yeah, that makes a lot of sense and I think that's one of the big lessons that you give in your book. Can you give some highlights to our listeners about some lessons learned and Advice for new private equity backed CEOs from your book.

Speaker B: That's so, I mean that's so important, such an important question, you know, and I, I kind of look at, at least in the sliver of private equity that we play in, you know, these lower middle market founder majority management owned companies. You know, um, I think as a new, as a new CEO coming, coming into that type of environment, you have to ask yourself, was the founder involved in that decision making process to bring me on where they were they part of the interview process. Um, the, all of our, all of our founders and our companies, if we make the decision together to bring on a CEO for them to take a different role, they have full veto rights over the CEO hire. Um, and uh, that's something that we do every time. Uh, so you have to, ideally as a new CEO in that type of situation, you want to be in front of a town hall meeting with that founder with his or her arm around you, saying, you know, here's Valeria, she's our new CEO. Um, I, you know, I, I chose her. We're going to take this company to, to new levels together. You know, she's done this, this and that and has tremendous amount of experience in the space. Because if, if the employees get a whiff of any animosity or acrimony that, that you are forced down that founder's throat by the seat, by the PE firm, it's just a recipe for you know, um, uh, ah, attrition and ah, um, and discontent within the organization. So, but coming in, coming into that, coming into that business as a, as a new CEO, uh, PE founders, PE backers, I have to say that you know, private equity, and I talk about this in the book, private equity thrives on transparency and trust, you know, and you don't get the latter without the former former. So as a new CEO, uh, you know, you may have an investor that shows up once a quarter for board meetings and you don't see them again, well, good for you. But you're being shortchanged. Set up a weekly call on Fridays, a standing call with your investor deal team and um, to just check in that continuum of communications, to check in share any organizational updates, any business updates, any decisions that need to be made that uh, you may need their advice or counsel, keep uh, the lines of communication open with a vehicle like that, um, board meetings, um, you know, a few days before a board meeting, distribute a deck, call up your independent board members, call up your private equity board members and share with them some of the key Decisions you expect to be made at the board meeting. Any negative news, you know, you never want to have, you never want to share bad news for the first time at a, at a, at a board meeting. So, uh, you know, stay in front of that. Um, also, um, subtle but important point. You know, grow a thick skin. You know, accept and welcome feedback and critique. You know, you may be in a situation where you're being critiqued by someone who you feel isn't worthy to tie your shoes. Well, that may be the case, but you know, suck it up, Serve outcomes and not egos. Uh, and it's, it's, it's really important, um, that of course you haven't, you can have intelligent debate, but don't ever let it become emotional. You know, there was, it's interesting. I just want to share this anecdote, um, from my book. You know, we talk about, um, uh, being a new CEO and this type of an environment. And every year we have a, our CEO summit where we bring in all of our CEOs across our portfolio and we, um, have guest speakers. Each company talks about their business, there's opportunities for collaboration. Uh, we go through different market segments and uh, it's a great day, a full day. And at the end of, this is memorable for me, uh, at the end of, uh, one of these days, um, a new CEO, she asked the question when we were wrapping up. She said, you know, if you guys look at uh, over your 30 plus years of investing in this sector, what advice would you give me as a new CEO? You know, we're all qualified or else we wouldn't be here. But what advice would you give me as a new CEO to be successful in one of your businesses. And uh, you know, uh, one of my colleagues beat me to the punch and uh, he said, you know, um, I would, the advice I would give you, uh, gut feel advice is that in the boardroom for board meetings when you're surrounded by your investors and board members, and in your weekly staff meetings when you're surrounded by your executive leadership team, don't ever let there be a big elephant in the room. Run that elephant down, um, chase it to ground. And also, just as importantly, don't let there be a herd of little elephants because they can also stomp on and kill you. Um, it's ah, really good, really good advice to just be, you know, especially with, with your team, uh, investors and executives. You know, it's, it should never be us versus them. Um, uh, it should only be us. Them should be the competition. So that was really sage advice and it still resonates with me, um, uh, many years later.

Speaker A: I think that's really great advice for everyone listening. So now what does a typical acquisition timeline look like from first conversation to close? In your experience, what factors tend to accelerate or slow down the process? What are the non negotiables for you during an acquisition?

Speaker B: Yeah, yeah, yeah. No, another great question. You know, I'll follow up on time and timeline but you know, where things can go astray or what we call, I refer to in the book as third rail issues. Um because these companies that we invest in, at least the founder is sort of a nucleus behind the culture of the business. That for us if we can't get aligned with the founder on sharing control and uh, investment thesis, the strategy and tactics behind achieving the investment thesis, then you know that's, that's a non starter uh, uh, for us, you know, other, other sort of knockout factors on deals that we look at. And Valeria, we look at almost 300 deals a year and maybe in a good year we'll make two or three platform investments, we'll do all sorts of add on acquisitions. But there's such a tremendous amount of discipline that goes along with this. So uh, other areas that uh, sort of watch outs for us, you know, if, if there's a, if uh, it's a fragmented market with no clear path to consolidation or a constrained tam, that's an issue. If we see price erosion or margin erosion, you know, uh, customer concentration, customer attrition, um, employee attrition, um, and no sustainable clear right to win, um, those are all issues that will take us sideways away from uh, a deal in terms of non negotiables. Again I kind of come back to uh, the founder, if the founder or any M executive leadership team members want to walk away day one and sell 100% of their equity, that's not going to work for us. Uh, another, another area that's um, uh kind of nuanced is you know the, the we uh, like to call as part of our diligence we really like to call customers. And that comes really later in the process. And not because we're trying to have a gotcha of any sort. It's just really to try to understand you know, and present ourselves as a uh, partner, uh to the management team, an investor that's going to help take the company, increase the level of service, uh, and take the company to a new level of professionalization and to understand are there opportunities to go deeper with business with the existing customer. Are There areas where um, the company could improve uh, its service or product. Um, and so very often as you can imagine this is a point, point of contention a little bit, it's a bit like a tug of war on getting, getting access to customers. It can be and we like to at least speak to the top 10 plus. Um, and if we can't do that, that's a, that's a real problem. I can share with you one anecdote. You know one of our, one of our um, uh, companies, company called Unislink. When we were in the diligence process for Unislink, they do front to back end revenue cycle management services for the acquisition practices. When we were doing diligence on Unislink, uh, we got to that time, that point in diligence which was really close to the end, um, of wanting to speak to uh, customers and to our surprise the two, the co founders, uh, said to us, you know, uh, we have a, here's a, here's a list of 130 or 130 customers. Call whoever you want is all the contact information. So you know, if we were just checking performance, we wouldn't have to call anybody at that point with how open they were and transparent they were. Um, but it's just that, you know that that was a nice, a nice to see. Um, your question with respect to timelines, I guess, you know if, if we're dealing with an investment banker led process, you know, uh, very often, you know, um, these are, these are very structured processes where you know, you have a certain amount of time after you receive the sin, uh to submit an indication of interest, after which you know, it may be two weeks, um, uh, after which the investment, if you get selected, the investment banker sets up management uh, meetings which can take, you know, it can take 30 days for calendars for depending on how many private equity firms they're going to have in the mix. And then once you reach the letter of intent stage, it's typically a 60 day timeline to close, um, after that so you know, 90 days plus or minus, uh, from first meeting or first introduction or receiving the sim to closing is pretty typical in an investment banker led process. Um, depending on how, how prepared the company is, um, it can, it can go quicker. Uh, for proprietary deals, you know, I spend a lot of my time in proprietary deal origination. I'm seeking out and networking to founders of companies that may be attractive to us. And you know, honestly that can take a very long time in terms of, you know, when they're ready, um, from that first conversation I've, we have a deal under LOI right now where I met the founders in 2023 um, and just established a relationship over, over some time, uh, uh, until they felt comfortable and we were the first call that they made. Um, so um, you know once you get to an LOI with a proprietary deal the timeline is similar to close. It's typically 60 days, it can be less but uh, that's typically the landscape

Speaker A: in which we play when multiple buyers are in play. How do you differentiate yourself beyond valuation? What makes Riverside stand out as the right partner for founders?

Speaker B: Yeah, yeah. I mean first of all right off the top, I mean being in this space for 37 years, having been through six funds, um, you know um, it kind of, we have one of the most experienced uh, investment ah, professional teams in lower middle market healthcare, private equity. But I think that's, this is your question kind of is right over the plate for my role. Um, and I kind of come back to that whole fact of transparency and trust and building the trust, you know, uh, kind of, you know, advocating for who the founders or the management team are going to want to be partnered with for the next three, four or five plus plus years. And you know, I approach it where you know, you have to show that you can add outsized value, especially if you're thinking about you know, that second bite out of the apple for, for founders or management teams the companies have to be better because of my engagement, you know, my involvement and, and I kind of look at it as, as in two buckets. You know, one is really nuanced and subjective in differentiation for, for what my role kind of brings and, and the other is really objective and roll up your sleeves. You know. For me, you know I really try to, if you know, if I try to get in front of the founders one on one or the management team one on one during that, during you know the early stages of uh, villages when they're, when they're uh, meeting with many private equity firms and if I can get in front of them and kind of share my journey, my background, the value creation levers that I kind of bring to the table in my role at Ah, Riverside 30 person healthcare advisory board that I lead today, that I was part of to five years before I joined the company, very often by the time they get to the 8th or 9th or 10th private equity firm that they're meeting with, sort of like looking for a house by the time you get to, you know, if you're cramming through a weekend of Looking for homes by the time you get to the 9th or 10th one, you've forgotten the first few. Well, I can guarantee you if they meet with me early on, they're not going to forget me. And oftentimes we'll win a deal not because we're the highest bidder, uh, but because of the fact that we're the folks that they want to spend the next several years with and who they feel they can get the highest return from in the secondary uh, fruit of the event, you know. And over 30 years there's not too many landmines that I haven't stepped on as an operator in the lower, lower middle market. So really stressing the trusted confidant that I can be, that we can be with them and moving forward and sometimes it's baby steps, you know, but I really try to try to build a relationship where they can come to me, management can come to me at any point with issues that they're facing, challenges and I'm not going to wave the red flag, um, and say the sky is falling to my colleagues. We'll work through it together. And of course if it's a major crisis, we're going to circle the wagons uh, together to solve it. But to build that trust again, I kind of come back to uh, the us versus them where there's no them, uh, it's just us as a team building value together, moving forward. So really paint the picture of how, how we interact, how I interact from an organizational behavior standpoint more on the objective side. Um, you know, um, very often, um, since I really enjoy the business development aspect of, of the journey together, um, I'll find myself, I'm invited to the weekly business development team meetings. I'll share this um, uh, with the founders, with the management teams when we're, when we're differentiating ourselves. And I'll bring to bear, you know, we'll interrogate the pipeline and I'll bring to bear these connections, these resources, our healthcare advisory board, my 30 years to come in over the top for those large opportunities and advocate for the company on a C level basis to um, uh, help position the company to win the opportunity. Well we'll open new door, we'll open open doors at new logos for the business to, to uh, provide uh, warm introductions. I can point to tens of millions of dollars of new business that we've won for with our portfolio companies in this, in this fashion. If you want to differentiate yourself, show how you're going to move the needle on revenue for the business, show how you're going to build value, um, and not just be a messenger, be a translator, you know. Um, so that's, that's key for us.

Speaker A: I like how you mentioned that you guys move as a whole team. That's critical and that's also something that founders also need to consider. On a similar note, from your perspective, who are the critical team members or advisors founders need for a successful tech M and a transaction?

Speaker B: Yeah, you know uh, I don't mean to do a commercial for investment bankers but I really think you know the founders do a great job in what they do, building the company, taking it to a certain level. You know, how many times have they sold a company? Right. Um, and it's ah, a what's the saying that uh, a lawyer that represents themselves has a fool for a client. Um, I would say hire an advisor, uh investment ah, banker, someone who can position the narratives of the company, create a competitive tension, uh, manage the diligence, you know, shepherd the process through from loi to close, um, and really be that point uh person, uh, uh, that point entity for negotiations, take the founder out of it. Also I think you know, being surrounded by independent board members with real M and A reps if you will, you know, advisors who've been through it before for the board members, you know that can provide uh, an objective perspective, you know, pressure test the decisions and help help you avoid any missteps. You know uh, and, and also you know a scalable leadership team having, having you know, operators that can run the business. You know you, you've been the hero operator oftentimes as founder, but having that bench strength to, to really be able to day one after the investment, to be able to hit the ground running and not have to further build out the team with folks with scalable experience, have that ready and locked and loaded um, uh before a transaction. It would be a best case scenario.

Speaker A: Integrating teams, culture and technology is often where the real work begins. What are the biggest integration challenges you see post close and how can leaders better prepare for them?

Speaker B: So important, so important, you know, you know we do all sorts, as I mentioned, we do all sorts of add on acquisitions and integrations across our portfolio. And I can say you know, and I've been part of IT as an operator too in my previous lives. But uh, integration success is it's really one before the deal closes, you know and there are really two buckets right? There's, there's the operational component of IT and then there's the culture and talent, the people component of it from an Operational perspective, you know, pre close you should form. You know where I've seen most successful is when we form these cross functional teams, these cross functional integration task, task forces if you will that have preset, you know, integration milestones, timelines, responsibilities. That's all ready to go. Um, uh, before we close a deal, post close, it should be about you know, execution, management and delivery to those, to those objectives. There's tremendous amount of rigor behind it and you know there should be a point person, you know that, that wakes up in the morning with this mission, someone uh, assigned to the, ultimately to the success of, of the integration from an operational standpoint, culture and talent, um, you know that that really determines if the deal works. Right? I mean if missing here is a bigger risk than missing milestones, uh from an operational standpoint. And, and uh, you know you have to identify sort of mission critical staff early in the process that you have, you have folks that have a uh, you know that, that have aligned incentives that have the, the uh, vehicles for communication. There's an emphasis on clarity of decisions and who's actually in charge on day one. Um, and the leaders of the organizations, they must have to define the governance, the roles and the operational model uh before day one. Um so it's a multi pronged approach. Um, but uh, you know, from operations and from culture, um, it's just being proactive, being prepared, no ambiguity. Um, that's what's really, really important. I've seen at least uh overcome these challenges and to make sure it gets

Speaker A: done right to wrap up for founders and executives considering a tech M and a journey. Based on your experience and the lessons from your book, what's some advice you could give to founders to make their companies more attractive or help them navigate the M and A process successfully?

Speaker B: Yeah, yeah. You know I kind of come back to what the positioning the company in the, in the best light in terms of you know having uh, you know, professionalization that the management uh team in place, a scalable, scalable leaders in place that can demonstrate the business can grow without being founder dependent. You know um, having, having um the growth levers um, uh, ironed out, you know organic, inorganic, having that you're showing that durable differentiation. Uh you know buyers, buyers pay for depth of team and succession confidence. You know and, and I think in terms of also management control systems, you know I mentioned you know CRM systems, ERP systems, KPI dashboards, you know being able to have you know showing credibility with forecasting, accuracy, margin visibility and you know that operating discipline that's that's going to be uh, really, really important. And the advice also back to the representation, how you're, how you're representing the company to the market. And, and I would absolutely, strongly, uh, suggest having an advisor, either an individual advisor, uh, help represent you and take you through this thorn bush that these deals, uh, deal diligence can become, or a real professional investment banker who's been there, who has experience in the space, who can help really source potential acquirers that you had no idea existed. Um, and uh, um, uh, go down that, go down that path.

Speaker A: Fantastic advice. Thank you so much, Mike for your time today.

Speaker B: It was great, really enjoyed it.

Speaker A: Thank you for joining us today. Are you considering selling your tech company? Head over to quorumgroup.com our tech exit sponsor. If you'd like to learn more about selling your tech company, join us at one of our Tech M and A masterclass events. Attendees of the Tech M and A Masterclass will gain practical knowledge on how to achieve the maximum valuation for their company gained through expert guided workshops, hands on exercises and M and a case studies or online through our virtual conference and webcasts. Head over to WFS.com for more details. We'll see you again for the next episode.