Name: Buyer-Led M&A™ Masterclass 9: Navigating Founder-Owned Acquisitions
Uploaded: 2025-07-23T16:30:35.288Z
Duration: 1 h 5 min 48 s
Description: Buyer-Led M&A™ Masterclass 9: Navigating Founder-Owned Acquisitions

Transcript for "Buyer-Led M&A™ Masterclass 9: Navigating Founder-Owned Acquisitions": Alright. I think we are live. And I see there's a batch of folks already on here. Give it a minute or so for others to join. But if you are tuned in, can you hear us, see us, love to hear where you're dialing in from just to get a a sense of where folks are from, and maybe where your function is. You know, if you're more on ArcDev, integration, consulting, you know, love to get a sense of audience. Okay. So we're in Netherlands. We're right off the bat. International, Arizona, my hometown, Chicago, London, saw my stuff. I'm in South Of France right now and and can. We'll be in London next week. Well, I think you're from France. Alright. So I'm I'm very with the drone. Cool. Ireland. Man, we got a big, European group on this call. Canada, Florida. International today. In house. Yeah. I like it. That's good. Barcelona. We got most of the European countries covered. Hey. This is great. I'm gonna get going with our intro here and just keep joining in the intro with the the introductions. You know, that sort of thing we wanna collaborate. And I think you can also connect with folks directly too if you can see our attendees. Hey. Today, we're gonna focus on one of the most relationship driven areas in deal making, which is founder and employee owned m and a. We were talking about deals that are not structure led processes driven by banker. No prepackaged them or data room waiting for you. These deals are based on running them with trust, energy the timing, and judgment. And when you get into it, they're they tend to be some of the most strategic high impact moves you can make. Joining me today is Christina Ungaro, chief global mergers and acquisition officer at Qualfon. Christina has led dozens of these transactions involving founder led and bootstrap companies, often in off market situation. She's built a reputation for getting deals done where EQ matters as much as the model. So really excited to have this conversation with her. I'll let her add more for for her background, and and learn from her we're gonna learn from her experience. Key things we're gonna cover today is number one, how to define and identify founder and employee owned targets. We'll also talk about the tools and tactics for sourcing bootstrap companies. And then we'll talk about outreach strategies that balance personalization with scale and deal structures that reflect both economics and retention goals and how to start integration conversations early without losing the deal. So this is a great session if you're a buyer who really wants to build real relationships and win without a competitive process, this session's for you. Hey, Christina. I'll hand it off for you for, expanding our intro. Yeah. Thanks, Kison. Thanks so much for having me. Great to be here. This is a subject that's really near and dear to my heart. As you mentioned, I've worked on a lot of these transactions over the last decade or so. Just a little bit of background on myself. I've been, engaged in corporate development, for over twenty years now and, really spent actually the first half of my career in this function, not working on founder led m and a. I was working with IBM and and work on a lot of transactions that were venture backed, p e backed, public companies. And then I transitioned when I transitioned to a different role into, services company. What started to work on a lot of founder, and employee owned m and a. And it was it was a different animal, and it required a different approach. And and there's a learning curve there. But fast forward to, you know, several years later, and and I've, closed, a few dozen of these transactions now over the years and, you know, hope to impart some, you know, some some wisdom and experience here as we walk through the presentation on how to approach these transactions. And, the last thing I'll say just as a quick intro, I I, you know, developed this, presentation with not just, m and a practitioners and corporate development professionals in mind, but with with the founders and the sellers in mind as well. You know? And and as I well kinda went through the process of developing content, I was continuously asking myself, am I okay with a founder, you know, sort of hearing this, you know, these insights? What would the founders think about this? And, so this this presentation is really intended, you know, not just to be directed at m and a professionals, but everyone involved in the process. And the goal here is really to develop some some tools and practices to get to successful transactions that are really a win win for everybody. So should we Kison, should we proceed through the Yeah. The presentation or do you have a segment here upfront? No. I I think you covered it. I mean, we sort of got we can jump into our our first, topic. So the you know, actually, I do have a session. I didn't see on that. I mean, I've I've got a few slides here. I thought you might have fly over. Yeah. I mean, so I guess one one of the just the general themes to build around is this buyer led m and a. A lot of this is the a synthesis from a reflection on doing interviews. If you're familiar with the M and A Science podcast, we got over 350 published interviews. I personally have the opportunity to work with about a 100 different corporate development teams with the the DealRoom software. And, you know, the consistent pattern is really looking at how an m and a function evolves as they continue executing more deals from the buy side. And and that's where some of the things that we'll we'll sort of recognize with some of the patterns. I'll quickly cover the the pillars. There's sort of five key pillars when we think about the bio led m and a framework. The first is just never doing deals on impulse that there is a clear strategy driving your m and a strategy, that really defines your criteria so that you can be very proactive about sourcing these opportunities. The second is really centralizing your data so that you can enable collaboration with your internal team, external counterparty, managing priorities, but also getting that that, ability to repurpose your your data across the life cycle. The third is synchronization with your integration planning and your diligence execution. Really key. I mean, there's the better you plan integration, ultimately the better you execute better, integration. So we've just seen that as a consistent pattern. And then building for scalability, so the nuances that really go into running concurrent transactions, you know, how do you optimize your resources, across your departments to be able to to run m and a program at scale with concurrent transactions. And then the fifth is really focusing on the the people element, to really focus on on enabling the human capital, the culture elements for both sides so that, you know, teams are really set up for success when when it comes to executing integration. But that's the framework in that show. We're we're gonna dig into some real specific examples because, a lot of what we're gonna talk to is we can skip these slides, Christina, and go to. Great. So, yeah, I just wanna go to the next slide. We'll just quickly walk through the agenda, what we're gonna talk about here today. The first thing we're gonna do is define, what would what we mean by founder owned acquisitions. We're gonna talk through, you know, why these are attractive, some of the common issues that we run into, as well as how to source these acquisitions. And then we'll get into, you know, a little bit more detail on actually navigating, a founder of acquisition and, some tips and best practices. So why don't we go to skip ahead a couple of slides here, Suprita? It's good to go to the next one. Okay. And one more. Here we go. So, so the first, the first topic is really, you know, what are we talking about when we say founder owned acquisitions? And what, what I'm referring to specifically are companies that are principally owned by the founder or founders and or employees. These are typically bootstrapped companies. There's usually very little to no institutional investment, although there there are certainly a lot of situations where there might be a minority, institutional investor in the mix. And, and we're we typically see, companies in this position thinking about an exit, as a way to, address those succession plan or, potentially as a way to unlock, you know, new avenues of growth for the business and not just commercial growth, but also growth for the employees as well, development opportunities. And so, you know, I've also run into a lot of situations where, the company maybe was owned by a founder and was already passed on to the employees through a management buyout, and now that management team is looking to, perform an exit. But in any case, we're talking about companies where the the owners of the company are principally also employed, and, there's very little institutional involvement. And and, therefore, you know, it's it's it's gonna be a very different process to walking through the acquisition. And this just goes really hand in hand with the whole buyer led m and a framework. We're really trying to, you know, trying to avoid those competitive processes. So next, next slide, Sprita. So what makes these attractive? Couple of the things that, I'll talk about here, is sort of three I put these sort of into three pillars. Well, culture perspective, founder owned deals, employee owned deals, tend to have very unique and rich cultures. And they tend to be because they're not working for the benefit of a private equity investor or venture investor, they're working for their own benefit, and they're working for the benefit of their customers and their employees. So they tend to be very employee centric, very customer centric, and often a very family like atmosphere, you know, which has its pros and cons. Right? And I think it it, you know, there's noting that, you know, when you have a strong distinctive culture, you gotta do a lot of diligence to determine if that's gonna be compatible with your own culture, of course. We tend to see owners who you know, founders who run their business have a lot of passion for their business, and there's obviously strong, you know, incentive alignment there. From an opportunity perspective, these businesses, tend to be, you know, not as, operationally or technologically savvy necessarily as an institutionally owned company or as a larger company. So there's a lot of opportunity for operational efficiency and economies of scale. Could be a simple things as, you know, getting better pricing on, supply chain, elements, vendor components, you know, all the way through business systems and and technology and transformations. There's a lot of opportunity there to take these, you know, sometimes, diamonds in the rough, if you will, and and really kind of polish them. And then from a value perspective, these businesses, you know, the the the owners have been bootstrapped. They understand how important it is to balance profitability and investment and growth and and all of those things, and they've had to they've had to make those trade offs for years. And so they're very cash flow oriented, cash flow driven. The valuations tend to be a little bit more fair market value. Valuations, we're not talk we're typically not talking about pie in the sky multiples, a little bit more little bit more grounded to usually on expectations. And sometimes you can get flexible financing here, seller financing, in some cases, and and and even I've been in situations where the owner actually wants to create more of a staged, buyout or an installment purchase to provide them with an annuity stream to help fund their retirement or maybe stage their tax liability. So there's sometimes there's some creative things you can do here on the financing side of things. And then lastly, we tend to see in these companies very rich customer relationships, because it's a typically of maybe a smaller or midsized company. You know, maybe not as much brand recognition as some of the splashier, you know, brands that might be out there. They really have to maintain their customer relationships with a lot of, personalization and and high touch. And and there's there can be a lot of great undiscovered talent in these companies as well. So lots of, you know, there are really a lot of lot of great reasons to to pursue founder of deals. But let's talk next about some of the common, you know, issues that we run into as well. So, and these are not unique to found road deals. Right? You we see these issues in all types of transactions, you know, and particularly small companies. But some of the things that we sort of run into over and over again, you know, we don't we don't often see audited financials in in a in a smaller founder owned company. We might see reviewed financials, but sometimes not even that. There's typically a lack of process, a lack of documentation, and maybe some underinvestment in the systems or the facilities of the company. And, you know, particularly where, step well, a lack of separation of duties, that can often be an issue. We tell sometimes see, friends or family members in in key managerial roles that maybe are not the people that we would have selected for that role, and so we need to do a little bit more diligence there. For contract terms, that's very common with with lots of companies, particularly smaller companies where you might have, a lot of things like unlimited liabilities and, you know, most favored nation clauses and noncompete clauses and things like that. And oftentimes, the target doesn't even know that those terms are in there and certainly, will have a hard time repping that they're complying with them. So that's something we look for. We also see sometimes off market salaries, benefits that are off market. And then lastly, and these two really go hand in hand, sometimes we run into, you know, company that's being run with more of a command and control style, from the from the CEO or founder and, you know, kind of an autocratic leadership style. And that can often lead to a lack of succession planning, you know, if that individual has been reluctant to delegate or groom you know, delegate key tasks or groom, you know, the next the next level of leadership. So so you run into some of these issues. What do you do about it? Right? Let's get into some potential remediation when we run into these things. And, and I do wanna caveat that, you know, of course, it always it depends. Right? There are a lot of different ways that these things can manifest and many more issues beyond this list, of course. These are just some potential ways that you might be able to approach some of these things in a transaction, but it will, of course, depend on the context of the situation. So, we've got I run into, small companies with unaudited financials all the time. It's a a a heightened level of diligence is going to be required where you have to actually do some of the auditing yourself, revenue and expense testing. And maybe it makes sense to invest in an outside accounting firm to help with the quality of earnings. That that will depend on, you know, the the size of the investment overall. When it comes to lack of process and documentation as well as underinvestment in systems or facilities or technology, I think the key thing early on is to identify where these things are actually creating real risks to the business. For example, I mentioned, you know, a lack of separation of duties. Maybe there's one person who is a family member, by the way, who is doing accounts receivable and payables and running payroll and depositing and withdrawing cash from the bank. And, you know, doing all of those things, then, you know, how do you know that there's no malfeasance going on? So, that's an area where, you know, there's an actual business risk here and, you know, it requires immediate action post closing to rectify those things. And in some cases, it may even require some indemnities in the purchase agreement or some pre closing action to be taken to to remedy that risk. But generally speaking, these items can be addressed in the integration phase and should be, you know, should be brought into consideration when you're developing the integration plan. The one, watch out I would call for is when we talk about investment, it's very tempting as a buyer to want to just layer a lot of cost on to a potential target. You know? Hey. We need to bring them on to these systems. We need to upgrade their their facility. We need to, you know, move them to the cloud, whatever the case may be. As you do those things, keep in mind, why are we doing those things? Is there a benefit to those actions? You know, is there, is there an actual return on that investment? You know, sometimes there might not be. It may just be a compliance, topic. But other times, you know, why why do we make these investments in the first place? It's it's to get better efficiency and insight, from the business, and so there should be a benefit to that. So just a word of caution, you know, if we're gonna layer going to layer cost into the business case and into the integration plan, what's the benefit of that as well? So we don't wanna overburden the seller with that. When we run into poor contract terms, you know, again, some of these might need to be remediated prior to closing. I've worked on transactions in the past where, the company is go has a change of control clause where the source code is gonna get released to our competitor as soon as the deal closes. That's obviously a deal breaker, nonstarter. Need to renegotiate that term prior to closing. And it's it's it's probably an eleventh hour activity, frankly, because you don't wanna derail the deal too early. Other other items, you know, can be renegotiated after closing. You might need to keep the entity separate for a period of time so that the parent, the the buyer, or the parent company doesn't inherit some of those terms such as most favored nation clauses or noncompete clauses. You know, you wanna be careful about some of those items. But generally speaking, a lot of these can be handled, you know, during post closing as you migrate the contracts and and start to renegotiate those terms. When we're talking about off market salaries or benefits, then it depends here who we're talking about. Are we talking about the owner, him or herself, or some of the management team? Maybe they have equity in the business. Maybe they don't. That all needs to be sort of taken into consideration. It's a lot easier to remix somebody's salary and bonus if they're benefiting from the transaction than the other way than if they're not. But generally speaking here, this requires, you know, carefully working with your HR leadership to develop, you know, a remedy or a glide path to get folks onto an appropriate salary bonus mix post closing. And there may be you know, when you're moving people to benefits, assuming that's what you decide to do post closing, you know, there may be some impacts there. I've worked in situations in the past where, we've done a onetime HSA true you know, onetime HSA, deposit, if you will, to sort of true someone up to our benefit plan. So So there's all sorts of creative things you can do to help ease the pain of moving people to a different salary compensation benefit structure post closing. Then lastly, you know and, again, I take these two together all potentially autocratic leadership with, you know, combined with maybe a lack of succession planning. There's two sides to this point that really need to be looked at. One is understanding the CEO him or herself. And, you know, is that person prepared to sell their business? Are they prepared to no longer be the boss? And being very clear with them about what the expectations are going to be post closing, assuming they intend to stay on with the business. Right? And there may be situations where they don't wanna stay on with the business, so that's that's okay. But if they're gonna be working for you now as a senior leader within the company, be clear with them upfront about, you know, what that's going to entail down to detailed things like, hey. We have a meeting every Monday. You're gonna need to report on your pipeline. We, you know, we have these these requirements on a weekly, monthly, quarterly basis. This is going to be what's required. And, you know, and here are the other all the other areas where you will have autonomy. And so be very clear about what it's going to be like working as a leader within the company, and and, you know, you'll have to determine with that person if they're ready for that step. And and sometimes they aren't, sometimes they're not. So that's one element of this. But the other side of it is if this person is not going to continue with the business or they or just there's a risk that they'll they'll leave, I think it requires a lot of during diligence, deep talent assessment, into the c suite, the management team, one layer down, two layers down, maybe even three layers down. We all know that there are folks within any organization who know, you sort of know everything backwards and forwards. Who are those people? Who are those people that really know how to how to keep the ship, you know, on course? And are those individuals are they ready to take on more of a leadership role if they need to? And so that's a diligence exercise, and then it moves into an integration exercise where, you know, we've identified these people who, you know, could potentially be the bench that we're looking for. And we're gonna, you know, day one, start with a deep knowledge transfer plan to start to prep those individuals. And maybe it's individuals from your own organization as well, to really start to build that bench quickly if succession planning is something that hasn't been paid enough attention to. So just, just some thoughts here on how to work through some of these things. But, again, you know, there's gonna be a wide range of variability here in how these issues present themselves and how and how we might go about remediating them in practice. So next next slide. Yeah. Christina, maybe I can get a couple of questions in topics. I have I think we're pointing out one of the the ones that's most common is that founders may not have much experience with selecting high quality advisers to support them in the deal process. As well as the negotiation, unpleasant surprises on their end, tax implications. How do you approach that? You know, you're sort of like We're getting ahead a little bit. Yeah. We're getting ahead a little bit because we do talk about this later, but, I am a big I'm a big proponent of encouraging the seller at an early stage to seek professional advice, particularly when it comes to legal and tax, tax and accounting, issues. Now we don't wanna necessarily encourage the seller to go hire an investment banker. That's that sort of defeats the purpose of the buyer led m and a approach. But we do want them to get professional and targeted legal and m and a advice. And and, and that's something we see a lot in these transactions is, you know, they wanna use their long time trusted attorney who's worked with them on their estate planning and their real estate and but this person has no experience with m and a. So I try to get, you know, I try to have that discussion very early on and encourage them to get, a professional experienced m and a attorney, as well as someone who's experienced in, business ownership transfer tax and accounting, to to start to get that advice early on, even if it's someone they've never worked with before. And and we've even supplied sometimes a list of potential names, of multiple names of people that can reach out to. Awesome. I, you know, we can get some I see there's another question, but it's more of the structure of deals. Maybe we can kinda hold more of the presentation. I can come back to some of these other questions. Sure. So, next topic, sourcing. So how do we source these transactions? The first and most important, element to the sourcing process, if you will, is establishing the criteria. And you touched on this a little bit, Kison, in in your presentation. It's really important to understand what are we looking for from a qualitative and a quantitative perspective, strategically, operationally, what, you know, what kind of business are we looking for, that that supports the broader strategy of of our corporation? And then, you know, is are there size parameters? Are we looking for, you know, a certain number of employees? Are we looking for certain geographic locations? Things like that. And then in this case, we're sourcing founder own deals, so we're looking for bootstrap deals. And and that's where the the company databases, come into play. So I have found in practice that when you're looking for, more bootstrap organizations, there are certain tools that lend themselves better to that than others. So, I have a world of respect for, the PitchBooks and Crunchbase, you know, companies of the world. I've used them a lot. Really great data there, but it tends to be more focused on institutionally backed companies. So and and they really sort of fall down when you're looking for those bootstrap companies. And, what I have found in practice is that some of the you know, these are all, you know, newer platforms in the grand scheme of things. They're a little bit more AI driven. Companies like Grata, SourceScrub, Invent. You know, they, they are using AI and algorithms to build continuously build database their database which contain each of these each of these companies has millions of companies in their database, and they're building company profiles off the company's actual websites. So you they're pulling in, you know, actual capabilities and geographies and keywords from the company's websites as opposed to a stale profile that someone wrote, you know, twenty years ago. So, they've been really great in helping in helping us unearth, bootstrap companies. And, you know, it's always nobody's perfect. It's always a little bit hit or miss, and there's always a little bit of, you know, massaging that has to happen once you sort of get these these queries and these lists back. But these are some these are some of the tools to look into. I leverage trade shows, conferences, and, you know, not just go meet the companies themselves, although I will do that. But beyond just visiting a potential target at their booth, I actually get a lot more, information from just conversations in the hallways, conversations, you know, sitting next to someone at a presentation, talking to customers that are there, and asking them, you know, hey. Who are you working with? Who do you like? Who do you not like? Who do you have challenges with? You know, I've and I've, gotten I guarantee you, you know, if you take that approach, you'll hear names you've never heard of before. And it's you know, but it's really just putting yourself out there, networking at every turn at these at these trade shows, and unearthing as many names as you can possibly unearth, from customers and partners and folks who are there. And then and then lastly, pulling my my internal team, my sales team, my operations team, these the field, if you will, these folks are running into other companies, you know, as competitors. They're working with customers who might be onboarding or offboarding, you know, other companies. So, they always my sales team always has ideas, and sometimes they're very good ideas as to who we should be looking at and talking to. So, you know, I call that sort of the grassroots approach. So, you know, lots of different avenues to take here, but, you know, it it requires a lot. You know, these can be hard companies to find, so it definitely requires getting a little bit creative and and, smoothie. Next next slide. So you've you developed your criteria. You built your list of potential companies. How you go about reaching out and actually try to forge contact and and ultimately a relationship with these companies? You know, first and foremost first and foremost, you know, personalize your outreach. Use AI, you know, prescriptively, carefully. We don't wanna send a mass email, the same email to a 100 companies. We wanna be very thoughtful about why are we reaching out to you. What do we like about your company specifically? Maybe it's a specific component of your strategy or specific customer stuff that you're working with or technology. Make it personal. Leverage connections wherever possible. If you've got anyone in your network who knows someone there, leverage those connections. You know, just, find whatever connection you can and and try to, make it more, you know, make it more face to face. Be prepared once you do, establish contact and the ball starts to get rolling, to invest months or years in in these in building this relationship. And, and it will require a lot of, you know, in person interactions and, you know, not just meetings, but dinners, lunches, meeting up at trade shows, inviting them to your headquarters. Whatever the case may be, it it takes this is a long, this is a long game, working through founder led m and a. Make sure from the beginning it's a very two way dialogue. This is a process of mutual discovery. I think when I think about, sourcing, employee owned companies, it's almost a recruiting exercise, really. You're trying to, convince them that this is a good home for you and their employees and that this is you know, why is this a great place to be? So, help them understand your company and and what you had to offer and what your culture is like as you're simultaneously looking to understand their their company as well. You know, take the time to really understand who they are as people, their motivations, their values, their vision for the company, and spend more time listening than talking if you can. And we just adapt continuously. And you wanna you know, I always say corporate development requires people to be chameleons, really, and but in a good way. You know, we don't wanna be disingenuine, But, you know, we need all kinds of people, who have all kinds of different styles of of, communicating, different styles of leadership. Some people are very detail oriented. Some people are very big picture. Some people are, you know, no nonsense down to business. Other people, you know, don't wanna talk business. So, you know, figure out who you're dealing with on the other side of the table and adapt your approach to that person as much as you can, you know, without being disingenuine. Continuing on on this theme, start talking about integration early, and that's part of the two way dialogue. You know, every owner wants to know, why are you interested in my company, and how is it gonna fit in, you know, to your company post closing? What what's the endgame here? What's your vision? So start talking about that early, and and that really becomes a collaborative dialogue throughout the whole process here. It takes time to build trust, build trust through honesty, fairness, show genuine interest in their business and them as people. And, you know, this is where I get into the in in a you know, in an auction led process, you might, get a bunch of information. You develop an indication of interest. You throw it over the wall. There's not a lot of context behind, you know, the details of your offer. We don't want that approach here at all. Right? We want to explain, you know, what we what we are learning through the process, what insights do we have into the business, how do we see the future, how does our forecast look. And, you know, when we present a a potential deal structure, explain how we got there. You know, why are we proposing it this way? And so I I take a lot of, sort of extra steps in dealing with, you know, working with founders, or employee owned businesses in really sharing a lot of the logic and analysis behind behind the details of our offer. And in some cases, you know, we'll even help the founder sort of think through, work through different alternatives that they might be looking at. And there are a lot of different pathways that they could take their business, and they could take they could take some private equity money. They could go with different types of buyers. They could go through, and then, you know, an employee buyout even. Help them sort of think through those options and how and maybe lay out how your option might compare to some of those options. But, yeah, here, know your boundaries. That's really important. It's not, it's not your job to give them tax advice. It's not your job to give them legal advice. So, you know, there are going to be different tax implications of, you know, selling your business to buyer a versus buyer b. It's okay to point out that that's the case, but you don't wanna start doing tax analysis for them. That's that's not your job. And that goes back to the point of, you know, bringing professional advisers in when it's appropriate. In some cases, you know, it might be necessary to partner as a first step. And, you know, this is this is not very practical advice if your competitors. Right? It's hard to partner with your competitor. The more direct competitor we're talking about, the harder it is. But if this is something that, you know, is more complimentary, maybe partner on some client pursuits, or, you know, you know, even a techno joint technology development or whatever the case may be, as a first step to sort of, a, prove out the that you are a trustworthy counterparty, but, b, also to prove out some of the synergy as well. And so, we've actually got, a couple of these that are live right now where we've we've had some active dialogues around acquisition companies not really ready yet to sell, but they see the synergy. They see the vision and, you know, hey. Let's partner in a few areas and see how that goes. So that may be an option as a as a branch to get to the acquisition. And then lastly, you know, you go through all of this, you know, when things just aren't bearing fruit or, you know, maybe it becomes obvious somewhere during the process that this just isn't the right fit, just know when to walk away. I think it's easy to, get emotionally invested sometimes into this process. You get to know individuals as people. You know, I've been in situations where it's been months have gone by. Hey. I really like this team. I'd love for them to be my colleagues. But you know what? The more I learn, the more I realize it's not the right acquisition fit, and they probably are better off somewhere else. And so, you know, it sometimes that can be hard. It feels like a breakup in a way, but, you know, you wanna you wanna stay objective and and know, you know, when, when to walk away and and, and disengage and, you know, in the interest of both parties. Any other thoughts or questions there, Kison? Or should we keep, a couple of them. I can get them real quick. One, I I was curious about when you define the criteria, you know, how do you get the, like, the right scope where you're not trying to boil the ocean, you you you know, and you you you got enough targets that you can go after with that more of a quality approach and just spending a bunch of people so that you you do get, a better engagement. And then at the same note, like, really try to to use that criteria just so you're you're not wasting time on on things that you really shouldn't be going after and can sort of qualify as fast as possible. Yeah. I mean, this is where it's really critical that, as a corporate development professional, that you are plugged into the organization and and the leadership team. Maybe and in some cases, you might be part of that leadership team. In some cases, you might be one step removed from it. But you need that visibility into the corporate strategy and forcing what are the key priorities. If the company has 10 priorities and that's driving, you know, a huge range of criteria from an m and a perspective, you probably need to narrow down and and focus and filter a little bit. So I think there's a constant push pull there with corporate leadership, in in narrowing that criteria because, you know, you you don't want, I think I've seen it all the time. We see it all day long, right, where the tail is wagging the dog. The aqua an acquisition comes along, and now you're changing your strategy to sort of fit that acquisition. And, you know, that's that's usually not a a good thing. But, you know, so this is really a lot of a lot of continuous push and pull with the leadership team to clarify what the corporate strategy is and what are the what are the top three priorities, and being clear that this is where I'm gonna focus from an m and a perspective. Because I know if I bring in something that's priority eight, nine, or 10, it's probably not gonna get the focus or the sponsorship or advocacy internally that we need to make that a successful acquisition even if we hit it on the head with the criteria. Right? So it's gotta be a top priority for the organization overall. Have you found, like, a certain range of targets that's sort of ideal to to have in your pipeline to pursue? So, you know, we find that we need about 75 to a 100 potential opportunities to try to get maybe one, that that actually moves to closure. So, so, yeah, when we build these when we build these target lists, we might look at, you know, three or four different areas, and we might have, you know, 40 or 50, companies that are on each of those. So we've got a universe of maybe, you know, up to 200 potential names, and we wanna try to gradually filter that down to ultimately a handful of real opportunities where there is mutual interest in, in apportion. But I think early on, especially with especially with, food strap companies where, you know, it's a little harder to get information. The website maybe whether website is maybe not as developed. You know, it's just not as much out there in the public domain. You know, don't don't write off companies too quickly because you may just not know enough yet. You know, so we tend to sort of keep, you know, we might keep the list a little bit broader early on until we establish contact and and learn more firsthand about what does this company really do, where are they really positioned, who you know? And, oftentimes, it's not what you initially thought. And so, you know, maybe they're serving customers. You you were off base on, you know, the target market that they're serving or, you know, maybe they say they do 10 things on their website, but they really only do two and the other eight things are sort of aspirational. So it's really important to sort of just keep keep things a little bit more open in the beginning, and then, you know, don't don't write companies off until you actually know a little bit more if you can. Yeah. So that's helpful guidance. When it comes to engaging with these companies, I know, like, warm introductions are obviously the best, but oftentimes when you're calling after a lot of these companies, it's hard to get those. Can you give me more of just, like, a a bit of a concrete example in terms of bringing that message? Do you do you find sending emails versus LinkedIn versus just picking the phone, calling people, or a combination of work best? Yeah. I think when it's a cold outreach, obviously, you said warm is, you know, warm is best. But when it's a cold outreach, I find that email is best. And that's where the the company databases that we're using often have good contact information in there, directly a direct line to the CEO or the CFO. So those have actually been, they've been pretty good in that regard. LinkedIn, probably second. And then, you know, third would be, you know, hunting someone down at a trade show. And that's actually where you know, something where these, these platforms have gotten very good. You know, Grata, in particular, will will actually point out, you know, what companies are at what conferences. And so, you know, you identify a company you think looks very interesting. Oh, they're gonna be at such and such a place, you know, next month. And, oh, by the way, there's, you know, three other companies there that look really interesting. You know, let's let's make a point to go there. And so, you know, then you can you sort of chase people down face to face. But, but, you know, it's it's generally email or LinkedIn. And, again, that personalized approach and, you know, just a little bit of insight into why are you reaching out and why are you interested in them and why should they be interested in you. So I try to offer a little bit of information about, you you know, in my case now, a call phone upfront, you know, hey. Here's what we do and here's kind of our our mission and, you know, why we're you know, why we think this could be an interesting conversation to have. And I keep it pretty open. You know, we don't wanna use the acquisition word, right off the bat, and frankly, we don't even know if it's a good acquisition target yet. So it's really just about, we wanna learn more about you. You know, we, you know, we think you might wanna learn more about us. Let's see if there's any basis for collaboration and just have an introductory conversation. And at the very least, if we you know, if there's not a good fit there, maybe we can share some insights about what we're both seeing in the market. So pretty broad framing starting off with more of a you focus. Hey. You're doing some interesting things that caught our attention. Yeah. We'd like to explore strategic opportunities. I hope that's the best, you know, quoting word to use. But then tell me a little bit about your firm and then just using that as a a basis to get an introductory phone call. Yeah. Yeah. And a lot of times, you know, we just we get that introductory phone call. We spend half an hour or an hour just sharing insights about each other. And then, you know, maybe there's something there, maybe there's not. And if it's not, that's okay. You know, again, you wanna be upfront about that. But again, maybe you learned something about the market or a customer or whatever. That's just an interesting piece of information or vice versa. And so, you know, there's usually some benefit to that interaction even if it's not the right fit. That's super helpful. I get a lot of inbound, terrible pitches, so it's nice to yeah. Hopefully, good one sounds like. So, yeah, let's talk about navigating the acquisition. Like, you know, you've you've found a target. You've done the dance. You've built the relationship. You're actually getting into brass tacks now. You know, what does that look like, and how how do we adapt that a little bit for, you know, founder led m and a? So, yeah, as we know, all acquisitions are a long winding road. I think the goal here is to stay on the road, and, you know, that's, be flexible, but, you know, maintain your focus as well. That's, I think that's very key on these types of deals. So, you know, early on, I typically will show, a potential target. You know, they might be curious about, hey. What does your process look like? What does this all mean? Right? And so I'll show them a process chart that's not too dissimilar from this. And, and they often find it very helpful, you know, just to see, you know, this is how things flow. And I usually tell them, look. This is our process flow. It's meant to be helpful. It's meant to provide clarity. We can put some timelines around some of these things. But if this doesn't work, we'll throw it out the window. Right? We we can adapt. We can we can alter some of these things, and we can take some of these things a little bit out of order, not everything. But, you know, we wanna we wanna show them that we have a process, but we're also flexible. And so, you know, every, every acquisition, you know, from a procedural standpoint, it kinda starts with an NDA. And I find that, you know, in most cases, founders do wanna they do wanna execute an NDA pretty early on because we're all talking about confidential things, and we wanna make sure that's a two way NDA because we're gonna share a lot of we're both gonna share a lot of information. And, you know, we just wanna be sensitive on the timing of that and when to introduce that, but I actually found that a lot of founders wanna wanna do that early so that they feel protected. And then as we move into, you know, this discovery phase, this is where we have, you know, hey. We can provide we need a baseline of information to sort of figure out if this is a good fit, to figure out what we think the business might be worth. We have some checklists around what that information needs to look like. Again, we offer it up to be helpful, but we also remain adaptable, and we can prioritize and and reshuffle some of those requests, like, as needed on the fly. So it's a very, you know, the pacing can vary from deal to deal. But, ultimately, what we tell, you know, founders, once once we actually are talking about an acquisition, we're both on the same page there that, you know, hey. We wanna get to you an indication of what this transaction might look like. And so we need this we need a baseline of information to do that. When we talk about getting to a term sheet, some founders might like a very formal term sheet. We might like legal documents. Maybe they don't or maybe they don't want a legal document. So we can be adaptable there. I've done a lot of transactions where the first step is actually just a PowerPoint laying out, you know, hey. Here's what we've learned up to this point. Here's why we think you're a good strategic fit, and here's, you know, here's where we think the business is going from a forecast perspective. And all of this leads us to the this set of deal terms. You know, here's the purchase price. We we're recommending an earn out. The earn out maybe looks like this where we talk about retention as well. We talk about the role of the management team fairly early on. We talk about some integration also, overarching integration principles in that, you know, term sheet, if you will. Although, it's probably it's often not a legal document that day. It's not the same type of IOI that we might send over in an auction process. And I find that's very helpful, you know, it can be a very helpful way to kinda kick things off and it and there's often this is one of the long calls in the process. Right? It's they're going back and forth of, you know, hey. Well, you know, I disagree with you on the forecast. I think we're gonna do this instead of that. You know? So there's a lot of back and forth that you might expect in negotiating around the terms, but we can all get to the same place eventually. Then we can move towards, you know, additional diligence and an LOI. And, in our case, you know, I I know everyone has probably, you know, a little bit different, perspectives on on the nature and the staging and the format of an LOI. But for us, it's a very document, a very serious intent. We don't we don't issue LOIs until we have pretty strong conviction, that that we wanna try to move forward here. And for so from our perspective, our LOI is really a blueprint for the purchase agreement. We try to include as many important terms in there as possible. We don't wanna kick the can down the road on things that are tricky or sensitive. So, we do that for the benefit of the sellers as well. And then, you know, diligence overall, whether it's kind of early diligence or later stage confirmatory diligence, we try to streamline that. We try to stay focused. You know, small company, private company is not gonna need to answer questions about SOX compliance. You know, there's some obvious things, obvious areas where you can really streamline your due diligence checklist, to conform to the type of target that you're working with, and that's, like, where you can prioritize certain requests. You know? Hey. These are must haves. These are sort of nice to haves. So we do that a lot to help help stage the diligence and just manage the workload for the sellers because they're trying to run a business at the same time. When we get to the purchase agreement, we try to streamline that as well. Right? There's time and a place for a 200 page purchase agreement, and there's a time and a place for a 30 or 40 page purchase agreement, and it can be done. And so, you know, working with our we have some great attorneys who understand this and are big advocates of this. They're not trying to push a 100 page document on anyone. So, you know, you know, get attorneys in place that are on the same page as you on this topic, and, you know, put together a purchase agreement that is appropriate for the size and complexity of the deal that's at hand. Limit the surprises that are in there. Again, you know, you should address address important things in LOI. Ancillary agreements. I mean, this is where, like, things start to go off the rails sometimes. Employment agreements, side letters, disclosure schedules to the purchase agreement. So all of that you know, just lay that all out early, to the seller and give them as much guidance as as possible on what's gonna be needed to get all those agreements in place. And, you know, particularly in, with a founder employee owned company and they're gonna be staying on or key members of their team are gonna be staying on, we try to, you know, start to tackle some of those employment terms pretty early as well because we don't wanna have $11 negotiations or one person in the management team instead of holding the deal hostage, you know, at the finish line. So we wanna get that out of the way early as well. Integration planning, you know, even though integration planning is showing up sort of at the end of the process here, it's starting early and it's it is throughout the deal, and it is collaborative. And as we as we approach get closer and closer to the finish line, it's much more tactical and much more brass tacks around who's doing what and when. Lastly, signing and closing. You know, again, do give as much advance guidance and preparation to the sellers as to what's involved with signing and closing. You know, if if there's a delay between signing and closing, be very clear about what has to happen between those two milestones and what are the closing deliverables and, you know, who's in charge of each of those things. And even just simple things like, you know, is it a virtual I've had founders ask me here. Are we closing virtually? Are we getting together and closing and signing documents in person? Right? They've never been through this before. So, you know, just overcommunicate those details early on and and make sure they understand how how everything is gonna go down. And then don't forget to celebrate. Right? It's a win. It's a win win. So make room for that, in the process as well. So I think we're on our last, segment here, and it looks like we've got about ten minutes to go, so maybe we have a couple minutes. We can save a couple minutes for questions. Tips and best practices. So I think we covered the first one already. You know, encourage encourage the seller to get professional advice, particularly tax and legal and anything else that might be germane to the to the, situation at hand. Identify those thorny issues early and tackle them, you know, early and often. You know, it could be something completely unique to the deal. It could be something fairly typical, like structuring the earn out. All the details around that, those are really that can get really thorny. You know, the sooner we can start to define that and put the right language around it, I think, the better. Over communicate throughout the process, again, you know, don't assume that the seller, especially if they've never been to this before, that they know what certain acronyms are or, you know, that they know what a disclosure schedule is or, you know, just over communicate every step of the way. Be firm when you need to. Right? You know, we I talk a lot about being flexible, being adaptable, being empathetic throughout this process, but also, sometimes we need to be firm. We need to tow the line, and we don't want the process, you know, going off the rails. Couple areas where I think it's important to be very clear upfront about expectations, what's required, who's doing what, when is it due. Disclosure schedules, that is the one area where I've seen time and time again, you know, sellers, particularly if they've never been through this process, they don't know what these schedules are. They don't know what they're for. They don't know who prepares them. You know, they're just in the dark. And so I think the earlier you can explain to them, you know, what this is, that it's in their court initially to to to prepare these and what the purpose of them is, you know, the more we can overcommunicate that, the better. And the more we can get ahead of it because this tends to be the long pole in the tent between signing and closing, or I I would I should say up to signing. Getting contract consents, help you know, helping them work through that, notifying any other, you know, creditors or key parties. There might be diligence issues that need to be addressed as we've talked about contract terms, for example, pre closing. And another kind of tricky area, notifying employees. Right? When is the right time to notify employees, especially if you're doing a simultaneous signing and closing? You probably don't wanna tell everybody on that day, hey. We're getting acquired. You know, especially if a lot of those folks are gonna be maybe their compensation and their benefits are shifting around a little bit or their roles are shifting around. So there is, it's a delicate balance finding the right time to notify employees. But on the day of closing is usually not a good time when it if it's a very family like culture and if it's a smaller company. So we try to help the, you know, the sellers work through the timing and messaging around that. And then lastly, I think for yeah. I think this is true for, really any acquisition, but especially, especially employer and deal where customer relationships and and, and employee relationships are are super important. It's a very high touch integration plan. Reach out to all the top customers on the, you know, on the day of closing. You might even talk to a couple of them before closing, depending on the circumstances. Again, just very high touch, with with everybody, with all the stakeholder holders involved in the acquisition, as you as you work through that integration phase. So, hopefully, that's helpful. Certainly not exhaustive, but, you know, trying to put together here at least some of the, some of the things we've run into over and over again and, some of the tactics that have worked in, helping get to the finish line and get to a successful transaction. So much more we can dive into. Yeah. I know. I think one of the few things I was curious about, Christina, was when you present your offer, and it just reminds me, like, you know, something you worked on that. We had, like, old school fax machine, and you're sending your offer through a fax machine. But you don't do that. You actually built a presentation and and sort of walk them. Can you give me a little bit more context of sort of what are the key things that you you present when you're putting your your presentation on offer? Yeah. So, you know, well, first of all, we'll present, you know, some of the more qualitative, squishy things like, you know, here's here's what we really like about the business. Here's some areas we may need to work through. We'll present, you know, hey. Here's what you gave us in terms of your financial information historically, and here's what we found. And sometimes that's very regulatory. You know, they haven't really looked at their business objectively that way. And if there are things present like, you know, lumpiness in the revenues, lumpiness in margins, you know, maybe some customer concentration, you know, typical things that will give a buyer a little bit of pause and make us a little bit cautious in some of the outlook, You know, we'll just we wanna be upfront about that. Hey. This is what you showed us. You guys have built a great business. You've had some you've had some bumps in the road here. You, you know, you've got an over reliance on your largest customer. So we just wanna be clear that that's, you know, that creates a little bit of a discount to how we're looking at things, and and then we lay out the forecast. So all of that said on the historicals, here's what we think the business can do going forward. And so we we will share we will share the forecast or a version of our forecast with, you know, with the sellers. And we we might have multiple versions, right, based on multiple earn out scenarios, but we wanna show them sort of a, you know, most realistic case sort of going forward of how we think the business is gonna perform and, you know, down to EBITDA and cash flow. And we're very clear with that. We're very cash flow driven buyers and, you know, and that's that's really what's driving our evaluation. We're also a long term hold. We're not going to we're not gonna exit. We're not gonna sell off the business. The only way for us to ever earn a return on this investment, as a long term strategic buyer is to generate cash flow from the business. There's just no other way because we're not gonna flip it. That's not our intention. So we need to show a path to cash flow as we're very clear about that, and we're very clear about how that drives a net present value. And then and so we'll we'll lay that all out as, as backup, if you will, for what the what the closing payment is, essentially. And then, you know, when we get into the earn out, we'll say, well, here's what we think. You know, he that was sort of a conservative view, what we think the business is gonna do. Here's what we think the business could potentially do. Going forward, we might show them an earn out scenario or two that shows the art of the possible. What if these synergies actually come to bear? This you know, we do hypercharge the growth. What if that act you know, what if that works out? And so we'll lay out, you know, how the earn out is gonna work and how the earn out is very tied to the performance of the business, and so they can see that. And we in some cases, we've even provided worksheet to the seller that they can play with some of the assumptions. Right? Hey. You don't like our assumptions? That's fine. Put your own assumptions in here, and you can see what the payout looks like. And so we've actually done that in some cases to help them sort of work through, how the earnout might work in practice. So, yeah, it's a lot more analysis. But, you know, I always say my my my overarching sort of golden rule of negotiating is if you can't explain it, don't ask for it. You know, we're not here to make land grabs, just for the sake of land grabs. We're here to be thoughtful and be fair, and this has to work for both sides. So, that's really kind of the overarching ethos that we try to inject into the transaction. Great. Alright. No. I appreciate that. And it sounds like a lot of transparency is really key just in terms of your considerations of the offer and just being pretty upfront with the the sellers. I got some more questions here. Actually, one earn out. When implementing earn outs, how do you account for bonus and benefit differences? Do you retain their model until the earn out is over? Or do you transition those new incremental costs on earn out p and l? Yeah. I think it depends on the transaction. So, you know, I've worked I've done transactions in both cases where we've maintained their structure for a period of time and others work. We migrate them right away. I don't think it matters either one what you do. But if you are gonna change their structure, then I think the earn out the way you report the business going forward has to reflect that, and the valuation and earn out should reflect that as well. So, you know, if you have an urban EBITDA based earn out, let's just say that's let's just say that the company is generating $10,000,000 of EBITDA. We're gonna change all your benefits and salaries, and now you're gonna generate, you know, $11,000,000 of EBITDA or maybe it's 9. Right? One or the other. We better develop earn out measurements that reflect that. Right? We're not gonna, you know, we're not gonna base, performance on a model that's not here anymore. Right? So, so I think it but I think it can work both ways. It really depends on you know, sometimes it's just not practical or feasible to maintain their existing structure or maybe their existing structure has some potential risks around it. So it really it really depends, you know, that the part of that's an integration, approach sort of question. And then but for the earn out, the earn out really should be tied to how the business is going to report out post closing. The other question, we can adhere is how is this different from seller led m and a? Well, correct me if I'm wrong, Kison, but I think I think you and I would we'd be both to find seller led m and a as the seller decides, I'm gonna sell my company, and I'm gonna run the process. And, typically, that's hire a banker or an adviser or a broker and put together a book and put together a data room, and I'm gonna seek out the highest bid. Or maybe it's not necessarily the highest bid, but the best overall package, you know, for me. And so it's it's you know, that's more of a competitive process, more of an auction process, whereas this is we're really trying to we're really trying to head that off. That's the whole point of buyer led m and a's. Identify not wait for the targets to come in to us and then try to compete for them, but to try to identify what's the right acquisition for us and how do we go work out a one on one transaction with that, with that seller and try to head off that competitive process. So Great company. They're bought, not sold. Yeah. When should seller expect a term sheet binding or nonbinding? Yeah. So, you know, I try to tell so I'm very sensitive to I don't wanna waste people's time for too long. You know? These these discussions can be a huge distraction to someone who's trying to run their business. So what I told them is, hey. Here's the information I need to get you an offer. And the sooner you get me that information, the sooner I can run the analysis and share it with you and get you an offer. And that's typically, you know, twenty to thirty days. It could be longer. It could even be shorter if they have everything already ready to go. Sometimes sellers have already sort of been through this rodeo a little bit with someone else, and they might might even have a bit of a data room already put together. So it really depends on how prepared they are and, you know, the quality of the information. But I try to, I try to tell sellers that we can move really fast on the front end of this and help you figure out if this is, like if we're even in striking distance. Right? Because that's the first step here. If you're actually interested in talking about an acquisition, let's figure out if we're in the same ballpark, and we probably need about twenty, thirty days to do that pending information. And a stand alone business post close that retains its brand and systems, when do you see integration planning kickoff? Yeah. So, there's still you know, we've done a lot of acquisitions at Qualfon where we've maintained the brand and we've maintained the org structure. And then the systems are a little hit or miss, but there's always something being integrated. Right? And and even just the decision to retain the brand, that's an integration decision. So that's part of the integration planning. So integration as I said multiple times, integration planning starts with the very first conversation. This is why we like you guys, and this is how, you know, we think maybe we bring you under the umbrella. And that may morph as the process goes on, but integration planning kicks off really early. And even if you're gonna keep it separate, that's part of the integration planning is to keep it separate and how you know, and there's limitations to that. Right? So how are we gonna work through some of those limitations? Like, are we gonna keep the brand forever? Are we gonna sunset it after three years, five years? Is it gonna be such and such a company, a call phone company? You know, how's the logo gonna look? So there's always my new decisions that go into things even if you're keeping the company separate, that need to be worked out. And, of course, we're gonna need to we're gonna need insight into their financial systems. We're gonna need to consolidate ledgers, things like that. Especially a lot of small companies are on QuickBooks. We're gonna get them off you know? We might keep the company separate. What, hey. We're gonna get you off QuickBooks. Right? That's gonna you know, we're gonna integrate you into whatever. So there's always some level of integration and even just the decision to keep things separate or maintain things as is, that's a decision in the outcome itself. I'm trying to get one more in here. Can you talk about dealing with rumors in the industry when companies are for sale when you are under NDA? Rumors in the industry when companies are for sale when you're under NDA. I mean Rumors not for sale. No comment. Yeah. It's hard to Yeah. It's hard to comment on that. And I'm not sure, yeah, which way the rumors are flying here. But, yeah. I mean, look, if you're, if you're under NDA, you're under NDA. Right? You cannot talk about, having these types of discussions with with the company. And that's why I recommend a mutual NDA as well so that they can't talk about it as well. And, yeah, I mean, you know, that's always gonna be the case. You just gotta navigate that. I mean but I think your your confidential obligations, come first. You can certainly if you're hearing someone so is for sale or someone so is having conversations in from someone else and they're having you know, they're talking about you, you know, you can ask questions and try to get some insight, but, but, you know, don't breach your NDA. I I can't advocate for that. What's, you know, I I gotta ask you this when we wrap up. What's the leading cause for mergers to fail? You know, I I think it's I think it's two things. I see a lot of, I see a lot and and fail is a big word. Right? A lot of deal a lot of deals are not failures, but they didn't live up to what you thought. But they're still not failures. Right? Maybe you still created value. So how you define failure is really important. But, I think one area is people. You know, you're not able to retain key people and, particularly, leaders or seller you know, salespeople that have relationships, for example. So you lose lose a few key people and that can really create that can create a morale problem. It snowballs, and now you're suddenly way off your business case, and you've gotta sort of rebuild. So the people side of things, the cultural compatibility is a big one. The other area I see where at least a lot of failure is, incompatibility around the customer base and the approach to customers. So, you know, you think, hey. I'm buying this customer base, and I'm gonna retain it and grow it. But, that's easier said than done. And oftentimes, the way the company has been managing those customer relationships, you know, is maybe different and, different contract terms, different just different way of approach approaching quality reviews, whatever the case may be. And so when you change that relationship, it can upset the balance of things. And and it's it's not always easy to retain customers, post transaction. So people and customers and then, you know, all of that just leads to not realizing your synergies. Alright. This is actually on point and, really appreciate you taking the time, Christina. There's so much wealth of information we covered. So much more we can expand on. Feel like you're ready to, you know, get your own, university course on this topic. Well, thanks for having me, Kison. It's on. It's a lot of fun and, you know, I hope it was helpful for folks. Hey. The folks that joined live, really appreciate it. Thanks for the participation. The questions are really helpful. We'll try to get some follow ups in order to get to everyone's questions, but we'll have more of these live quest live seminars. So more opportunities to come. Till next time, here's to the deal. Thank you. Thanks everyone for joining.