SaaS Acquisition Stories w/ Dirk Sahlmer - M&A Manager at saas.group

Foreign.

I'm here with Dirk from SAS Group. I'm super excited for this one. One of my favorite private equity firms in the space. So Dirk, with that said, thanks for joining me.

Yeah, thanks for having me.

So first question for those listening, could you give an overview of SAS Group, what you guys do? Just any sort of background on the firm?

Yeah, for sure. So, yeah, SAS Group has been founded about four years ago by three German serial entrepreneurs. And the idea back then was so they were doing angel investing in parallel and stumbled across so many Bootstrap SaaS founders that were looking for an exit or looking to take some chips off the table. And back then there were not many options for them because often these businesses are too small for, or were too small for strategic acquirers or traditional private equity firms. And they said, hey there, there must be a solution for this. And with their, with their previous experiences with their previous firms, they thought they have enough entrepreneurial experience to help these people and to provide a good new home for their businesses once they are looking for an exit. And yeah, that's how they actually started up with SAS Group.

So how did you get involved in SAS Group?

More or less by accident, I have to admit. So as you may have seen, I have an engineering background and was involved more into hardware rather than software, so studied mechanical engineering, worked in the automotive industry, and then came to start my own business during my master's degree, which failed because of a lot of reasons. And yeah, I wanted to learn how to do it right the next time. And that's how I came to, to join SAS Group.

Nice. Well, you definitely learned a lot through earlier and I can say that from personal experience. Yeah, that's quite the resume, man. Hardware, worked on cars, now you're, now you're in private equity acquiring companies. That's impressive to say the least. How many startups has SAS Group acquired, if I can ask?

So in the meantime, we've acquired seven businesses. Yeah.

Nice. And then in terms of, let's say, you know, your, your sweet spot and what SAS Groups looks to acquire. What, what does that look like in terms of like size? Industry.

Yeah, so, so our focus is on, on businesses between 1 to 10 million ARR. So that's our revenue sweet spot. Apart from that we are looking for more horizontal businesses rather than vertical niche businesses. But apart from that we are very open to different kind of products and, and companies whether they are growing, declining, profitable, or barely break even. So yeah, nice. So.

If you could describe like the perfect acquisition target for SAS Group for maybe founders Listening. Let's say, you know, a deal comes across your desk, like what are like three things where you're like, yes, yes, yes.

Like I think what? Yeah, sorry, that's, that's a hard question.

But I, I'd love to hear if you have any.

Yeah, I think what's important to us is that the founder in the end feels comfortable handing over the business to us. So I think that's our ultimate goal and yeah, that's what we are working towards to. Right. So the perfect target is, I mean we prefer if founders stay on board at least for a certain period post transaction. So the perfect target would probably be a founder that is still ambitious but identified some bottlenecks or yeah, sees that his or her skill set is somewhat limited, but he, he still is ambitious or she and wants to grow the business to the next level. And that's where we can come in and, and provide the resources needed and the expertise needed to, to bring this to the next level. So I think this is the perfect scenario. But apart from that, we are also open to full acquisitions where the founders walk away. So we are pretty flexible.

Nice. And so last year we had a pretty crazy year with acquisition activity in terms of just total M and a volume. For founders looking to exit this year, what would be some advice you give them? Like maybe as they're preparing for an acquisition or things they should know about going through an acquisition process. Specifically with SaaS Group, like what's like two tips you'd give founders.

Yeah, so. So first I think they should listen to themselves, what exit option they would prefer. Because for example, with us they have all of the flexibility so they can decide whether they want to sell 100% or maybe a majority first and the rest down the road. So we, yeah, we structured the deal as it fits best for the founder's life situation and preferences. But there are other buyers that are, maybe have, have deeper pockets or anything. So I think the founders should first listen to themselves, what they are looking for. So are they looking to sell the whole business to start something new or take some time off or are there other problems that are just holding them back from growing or. Yeah, that make them feel uncomfortable in the current situation, but that could maybe be solved with. Yeah, with a partnership with a buyer like us. Because I mean we are not only acquiring companies, we can also help you find the right role within your company. Which means, I mean I talk to a lot of very tech oriented founders and they usually don't feel comfortable managing people taking care of operational stuff. So maybe you can relate personally and that's what we can also help. So people can get rid of all the annoying stuff and can go back to their laptop and continue coding and go back to the things they are passionate about. And I think, yeah, I think founders should listen to themselves and think about what they are looking for and then go out, find a suitable buyer.

That's, that's great advice. I, I definitely recommend that just, you know, really understanding or having an idea of what your ideal outcome looks like. Like, do you want to sell the whole business? Do you want to, you know, maybe find a strategic partner like a firm like yours. So that's, that's really great feedback. My next question, and this is also a hard one, but do you have like a favorite acquisition story that you can share? I know it's one of those questions like they're all probably your favorite, but is there one that kind of stands out?

Yeah, so I mean my, my main job at SaaS Group is to go out and find new potential targets that fit our portfolio and to talk to a lot of founders. And I try to engage with founders early on. So maybe if an exit is, is still far away in the future and I really like it, if, if I start conversation then maybe it's not a fit at that time. But yeah, we continue the conversation, maybe have some follow up jets and at some point, maybe one year down the road or one and a half, they come back and say, okay, we think now it's time, let's, let's dig a bit deeper and see whether we can collaborate. I think these are the best deals and that happened with quite a few we already acquired. I mean the latest one is for example, rewardful. I really like the two founders and it was one of my first conversations I had when I started my job at SAS Group and we acquired them one and a half years later. And yeah, at the beginning it was not a fit for different kind of reasons. But yeah, in the meantime we are working together also with Githauer. I think this was the only founder I met in person because when I started my job the pandemic hit us. So all of the companies we acquired in the meantime were over Zoom. And yeah, also like the Tower deal because I could met the founder in person before.

Nice. I really like that how you know it. It's also important for founders to realize it can take time to sell their company. So building those relationships in advance.

Yeah.

Can be crucial. So I really like that. So yeah, just final questions, you know, with 20202022 coming up. Do you have any sort of like, you know, predictions that you, you'd expect to see within acquisitions for this year? Like maybe it's going to be a bigger year, it's going to be a smaller year, we're going to see a lot more people acquiring xyz. There's anything at all that's kind of on your mind?

Yeah, so I mean in regard to micro acquisitions in general, I think the space is still in its infancies. So I think there's still a great future ahead. And platforms like yours are lowering the barrier for founders to find a suitable buyer or also for buyers to maybe buy a small business or a bigger business. So this lowers the barrier for entrepreneurship and also acquisition entrepreneurship and to, to sell your business for a decent price. And it's also great that you're, you're, I mean, I also like the educational aspect of your platform. So more and more people know what an ally is and how they approach buyers, what they need to prepare, how an M and A process works. And I mean there are more and more no code, low code tools popping up which also makes it easier for people to start their own business even if it's just a side business and earn some money on the side and then maybe grow it over time. So I think we will see even more of these micro acquisitions in the future and even more entrepreneurs that are, are starting businesses in this space.

Yeah, I, I, I, I couldn't agree more just with how, you know, you could argue, you know, building a startup has almost been democratized. You don't need to be technical as much anymore. There's no code tools. You can get to a certain place where, you know, no code turns into custom code as you want to build out more functionality to serve a different customer set. So yeah, pretty good time to be a founder. I got, I got three more questions I didn't tell you about because I don't want you to know them in advance. But if you had to say who's your favorite entrepreneur? Um, who would it be?

Um, yeah, I mean I, I watched your previous episode so the question was coming so I'm prepared. I mean it's, it's no joke and it's an honest answer to that question. I really admire all of the founders that are, that are bold enough to, to start their own business. So it's not like that specific person like Elon Musk or Bill Gates or yeah, whoever. So I think every founder that is getting the day to day job to start an own Business or is building something on the side deserves respect. So. And if you want me to drop a name, it's probably my boss. It's probably Tim, because he's a very successful entrepreneur, but he's not going out and telling everyone that he's a great entrepreneur, and I really like that. So he's very down to earth. And as you may have seen, he also raised a climate tech VC fund in parallel now. So he's involved in a lot of projects because the topic is very important to him, and that's what I really like.

Yeah, I also admire Tim, and I love your response, too.

Just.

Yeah. Anyone just taking a risk, you know, and chasing their dreams. I admire all those entrepreneurs, too. So the second question, I'm guessing, you.

Know, favorite book, Getting Acquired by Andrew.

Okay, now we got a second favorite book.

The book I currently started reading is Getting to a yes, which is a negotiation book. Apart from that, the book that helped me a lot to understand the SaaS group model in the beginning is Buy Then Build from Walker Dibel. I don't know if you've read it, but I can completely recommend it for people that are looking to acquire a business or to understand the space from a buyer's perspective. So, yeah, I think these are the books I would recommend.

Yeah, that's actually in my top 10, I would say, in terms of acquisition books. Well, this has been super helpful, Dirk. I really appreciate you taking the time if, you know, founders are, you know, listening to this and they want to reach out to SAS Group to see if maybe they're a fit for an acquisition. What's the best way to get a hold of you, your team? Where should founders go?

Yeah, so, I mean, the best way is to reach me via email, I think. So you could just send me an email to Dirk at SaaS Group. There's also a contact form on our website, and you can also reach me over other channels like, like LinkedIn or Twitter. Cool.

So I'll put those in the show notes. And so anyone interested in learning more about SAS Group, which I highly recommend, definitely check it out.

We'll be happy to have a chat.

Yeah. And Dirk, thanks so much for taking the time. I've heard just so much good stuff about you guys and really appreciate you making the time.

Yeah, thanks for having me. Appreciate it. Yeah.

And pleasure. All right, Cheers, Eric.

Cheers.