Live SaaStr Workshop Wednesday: 10 Things No One Tells You About Getting Acquired for $1.5B

Wednesday. We're so excited you could be here with us today. I'm just going to pin myself so you guys can see me. Hello. Thanks for joining everyone. As always, we're here every Wednesday with another SaaS expert speaker. Today, we're going to be talking about acquisitions. Super excited. Steve, I know you've got a quick intro in your slides. So I will let you take it away from here. And then just to our audience, as a reminder, As Steve gets into his presentation or as he goes along, if you have any questions for him, please drop them into the chat if you're on the Zoom or chat anywhere if you're on the live stream. Um, and we'll do questions interactively at the end. So without further ado, thanks for being here, Steve, and I'll let you take it away.

Amelia, thanks so much and hello everyone. It's, uh, wonderful to be here. I am Steve Mützenmacher and today I'm excited to share with you the 10 things no one ever tells you about getting acquired. For $1 or $1.5 billion. You know, over the years, I've led corporate development for multiple public technology companies sitting on both sides of the M&A table, primarily as an acquirer, but more recently as the acquiree. Throughout these experiences, I've learned some really hard-hitting lessons, insights that you won't typically find, you know, in the M&A playbook. And so today, I'm going to share the realities of getting acquired, the things that can make or break your deal, the hidden challenges no one talks about, and how to set yourself up for success. So let's go ahead and dive in. So before we get into the lessons, a little bit about my own career journey. I've been working across hardware, software, and cloud businesses over the last 25 years, typically in companies of anywhere between 2,000 and 10,000 employees. I've led M&A transactions as a buyer, negotiating deals, managing due diligence, and handling post-acquisition integration. And most recently, I got to experience, like I said, the other side of the table when Salesforce acquired the data protection provider Own Company for over $2 billion. That experience gave me a whole new perspective on what really happens behind the scenes for both the buyers and the sellers. In the months and sometimes years that can lead up to a deal and after a deal. So my goal today is to share these lessons so you can be better prepared, whether you're considering selling your company now or just want to continue building with an acquisition as a potential future exit for your company. Also note that I've been very happy to have been affiliated with SaaStr from the very beginning. This is a photo of Jason M. Lemkin and me all the way back at the first SaaStr Social. Held all the way back in, in 2013. Some of you might not have been born then, you know, knowing how fast the industry moves, but it's been an amazing—

I mean, I look the same, maybe 3 years older. Wait a second, I might look younger. It's hard to say.

You definitely don't want to look at the back of my head though, because that's been brutal on the— I see the transition. So, so moving on, let's take a moment to talk about the odds of actually closing a deal. The reality is exits are are very rare. There's a bunch of coverage about this last week. Bloomberg ran an article about the 1,200 zombie corns, which is, you know, a new addition to the corn suffix, a little less glamorous use of it. You know, in the 2021 class of 350 unicorns, there have only been 15 total exits realized. Even worse, there's like 1,200 total unicorns still waiting for an exit. Along with that is some data that was published by Carta. Jason, I think you had highlighted this on, on some of your recent coverage. The vast majority of startups will never see an acquisition offer. And even among those that do, many of those deals will fall apart before the finish line. Why is that? Because M&A isn't just about having a great company. It's about being at the right place at the right time and then being able to successfully navigate an incredibly complex process where the buyer's motivations, internal dynamics, and constraints matter just as much as you and your company and what you've built. So many founders and executives assume that once an offer is on the table, it's just a matter of, you know, finishing some paperwork. But the truth is, deals collapse all the time on the inside due to misalignments on valuation, surprises in diligence, or just the shifting priorities that can happen within the acquiring company. That's why it's crucial to really understand how the buyers think, what drives their decisions, and how to proactively manage the process. You often only get one shot in an acquisition, so you can't afford to be unprepared or assume that things will just work out. Everything from how you position your company to how you navigate diligence and the negotiations can make the difference between that life-changing exit and a missed opportunity. So what I hope to cover over the next few slides is, you know, to help share, you know, how you can beat the odds and maximize the chances of a successful acquisition.

Hey Steve, before we get into it, I could probably— I'll probably have to refrain from peppering you with too many questions so we're not going— but one interesting, because you've been on both sides of it, you have been on the buyer side for folks, corporate development. These guys are in charge of a bunch of things, but it's really buying startups, which we can talk about. But you've done it at public companies and now you've been a target, right? You've been on the other side at Own, bought for almost $2 billion, which is fun. On the odds question, here's the weird thing. And tell me how my, my limited— I've been acquired twice as a founder, but when I was at Adobe on the other side, okay, the surprising thing to me was the list. And what I mean is, yes, the odds statistically are very low, right? But they're actually both worse and better than it looks in this experience. And what I mean was, when I was there, there were 3 business units and everyone had an M&A list. Okay? And there were like big ones, the billion-dollar-plus deals and tuck-ins. Okay? And the VP, the SVPs, the EVPs made their list. And I'll tell you, the thing was, they were weird. Like, I knew the document space really well and I was like, what about Dropbox, guys? Those guys seem to be doing well. But they had a very strong opinion in the space of a list. List could be argued and debated, but what I mean is if you're on the list, your odds are higher. If you're off the list, even if you're the best idea in the world for Salesforce, right? Or whomever, you may not ever even have a conversation, even if you make more sense than someone on the list. That's a totally weird thing about the odds. Is that consistent with your experience that there's, there's folks on and off the list, uh, uh, when the list could be almost infinitely long?

Yeah, no, I think that's absolutely right. And, you know, there's the, you know, there are many, you know, analogies or phrases you can use from like beauty's in the eye of the beholder to the old thing about opinions are like blank, everybody has one and the other guy stinks. So you're right. I mean, those viewpoints can be, you know, we, you sort of do the best that you can with the visibility that you have. But, you know, I've been in organizations where, you know, I was a corp dev team of one or maybe I was lucky and I was a corp dev team of 4 or 5 for these organizations. But it's all about that, you know, how much visibility you have, how much you can really do those sweeps. And then once you do, yeah, you have these individuals that have these, you know, formed points of view, right or wrong, to manage around. And so, you know, you on the outside, you know, it's, it's, it's sort of like the unfortunate thing that happens when you're trying to get hired, right? Like, you might think you're the best candidate in the world. But some company might not ever find you, or even if they did find you, there's a whole bunch of other candidates out there that they might just determine.

So many candidates, right? So, and I remember when I bought—

I know I would—

when I brought up Dropbox as an idea, I mean, it was too late. It was too big, right? They wanted to buy a Dropbox competitor, an adjacent player, right? And interestingly, why do they want to buy them? Well, one reason was the CEO had been a VP there, and it wasn't just the obvious reasons. It was trust. It was familiarity, right? We knew him, right? And like, maybe that's a safer play, bringing someone back into the fold than some random thing we don't understand, right? Relationship, you'll get into it, but relationship, the way they work, it's really quirky though, right?

It's really quirky, right?

But they're so important in M&A. They're so important just for nothing else to de-risk things.

Yeah, we'll talk about that more, but it is not just a technology play or a product play. There are so many other factors that can go in, whether it's the finance side, the people side. You're right. It's, it's a multi-pronged beast.

Alright, keep going. I just wanted to share this list thing people don't get. I didn't get as a founder that there are these lists, right? And in some ways, if you really want to get acquired, if you're not on the list, it's harder.

And we'll talk about that. We'll talk about that.

How do you optimize?

Yeah.

How do you optimize your chance to get on the list? Alright.

Great. So, so let's talk now about what doesn't often get openly discussed, which is all part of what, you know, Jason's been diving into, which is what really happens behind the scenes for a buyer in an acquisition. So if you've never been through an M&A process, it's easy to assume that everything is rational and structured and driven by pure business logic. But the truth is, as Jason suggested, it can be very messy, political, and filled with unspoken agendas. First, you know, it's important to understand that inside the acquiring company, there's many different stakeholders. There is the Corp Dev team, but there's the corporate teams, HR, finance, legal. There's the CEO and his direct staff, business unit leaders, product and sales team members, sometimes even board members getting involved. Each one of them will have very different opinions and incentives on your deal. Yes, there will primarily be, you know, one person championing your deal alongside Corp Dev. We call it the business sponsor. But truly, that person doesn't have final say, and internal debates about valuation, strategic fit, or timing completely can completely derail a deal, even when everything looks good on paper. M&A decisions aren't always about the acquiring company needing your business. It might be a defensive play to keep you out of competitors' hands. You know, other times they're making a bet on very long-term potential rather than immediate value. So really understanding the hidden drivers behind the rationale for your deal can be incredibly powerful information to have for you to navigate the negotiations more effectively at each stage of the process. You know, it's like trying to play poker, but if you've never picked up your cards, sometimes people try to do it. It's a hard way to win the game. You know, third and perhaps most importantly, emotions and egos can play a bigger role than you'd think. Senior executives have careers and reputations on the line with every deal. A CEO may want your company because they personally resonate with the vision. A business unit leader might hate the deal because they see you as a threat to their own power. These personal dynamics can influence everything from deal structure to post-acquisition integration. So what does that mean for you? If you want to close your deal, you need to get behind the numbers, behind the diligence checklist and really understand the politics at play. Understanding and identifying your real champions inside the acquirer, understanding who has influence, who might be a roadblock, and most importantly, never assume that logic alone will get your deal across the finish line. You know, in M&A, the game behind the game often matters more as much as the deal itself. And, you know, that's what we call it, you know, the inside baseball. For, you know, how the buyer is driving the transaction. So we're going to talk now in terms of the lessons. I've kind of carved them up, you know, in classic rule of 3, even though it was 10 things. You know, I'll kind of move through 3 stages of a deal, you know, from the Chevron chart you just saw and, you know, then close with 1 bonus to hit our 10. But let's start with that pre-LOI phase, the time before you've ever received a letter of intent and might not even know you are on the list. And this stage is critical because it could set the foundation for everything that follows. So number 1, be prepared. Acquisitions don't happen overnight. Companies that get acquired successfully aren't scrambling to clean up their financials when the offers arrive. They've been ready for months, even years. So even though you— I always tell people you don't run your company just to sell it. You want to ensure that if given the opportunity, you're not starting from scratch. So this is really about good housekeeping, keeping, you know, good financial records, your contracts organized, you having kind of clarity around how you operate your business so that if and when an acquirer comes knocking, you're ready. You know, some deals fall apart just because this company wasn't, you know, prepared to move fast enough when a company was on a very fast timeline. And, you know, even though you might have been number 1 on the list, we're always talking to number 1 and number 2 and number 3 at the same time. And, you know, that might drop you from behind if you can't be ready. Next up is this concept of lines, not dots. You know, one of the biggest myths in M&A is that the M&A buyer will suddenly appear out of nowhere knocking on your door. And in reality, you know, my job was to track companies for years. I had my own proprietary little instance of Salesforce that we managed just like you would, like a prospect pipeline. We tracked thousands of companies over many years in terms of understanding their progress, their traction, you know, how the leadership team has evolved. And we'll really want to understand that before we ever make a move as, you know, a corp dev buyer. So it's why the relationships matter. I say, you know, you never want the first time you talk to a potential acquirer when you're ready to sell. And similarly, part of my job as a corp dev leader was never to have the first call I made into the CEO of a company be when I was, you know, wanting to buy them. So building relationships early, attending the same conferences, participating in industry discussions, staying on the radar of key players, is a really important job, you know, for you to do as a CEO. So, you know, corp dev leaders and founders, you should be thinking of the same way about building that long-term trust and familiarity through that relationship. So that long-term approach can be crucial when you engage in challenging acquisition discussions. You know, and I'll tell you, many relationships I developed over the years were among, you know, you know, what might be viewed as potential competitors based on that philosophy. And I know, Jason, you know, you've written about this, you know, with multiple different blog posts about, you know, kind of encouraging folks, even if it might feel like tire kicking, you know, or your example with Adobe and Ecosign. I don't know if you want to make any comments on that one.

Yeah, there's always, I say always, always take one call a week. If for some, like, it just, and you always learn something, right? From corporate development. I think you always learn something no matter what you don't. Um, I, I get there are some fishing expeditions for like private equity firms can be exhausting, like the analyst at the PE firms at the, because their job is to talk to every single player in the universe. I'm not saying you have to take the junior analyst at the PE firm call, but if someone from corp dev from Salesforce or Informatica wants to talk to you, even if they're one year outta school, take the call. Just end it at 30 minutes and don't do any follow-up. You don't have to do any follow-up. You don't have to send them any data. You don't have to do anything. You can just be kind and just say, Steve, I love the call. I'm sorry, I'm too overloaded to send that follow-up or do another call, but let's, let's talk down the road. Just be nice. You'll learn something. And you can always— my learning is when you get that person on the call, you can always, if you share 20 minutes or 15 minutes, you can have an ask back. So Steve, how is Adobe thinking about the space? How— what do you— what have you learned? What is Informatica thinking? What is Own thinking? You're always going to get a nugget if you just ask the Columbo question. You don't have to be— you just— what, how are you thinking about the space? Right? You may just hear the thing, build, buy, or partner. Then you know they want to do something fast. You may hear, honestly, my boss— like, we're just getting to know the space, right? And that's— there's like a lot of truth in that, right?

You'll get—

even at bare minimum, you'll learn— that's your job is to know these things, right?

Yeah, that's great. And so the last one is very clearly question mark, trust the process, you know, with a question mark. M&A is messy. Yes, there is a process, but it's never as straightforward as it looks on my, like on my little Chevron chart. So there'll be unexpected delays, shifting priorities, and moments where you feel like it's slipping away. And, you know, the truth is, while Corp Dev will have that structured playbook, you need to understand that process just as well. You need to know when to push. You need to know when to hold firm. And when to walk away if the deal or the timeline isn't meeting your needs. So, you know, your ability to navigate and help kind of manage and control the uncertainty and stay disciplined through the ups and downs of the process, you know, can determine whether the deal gets done on the right terms or will fall apart entirely. So that's, you know, before the LOI. Now let's move on to that exciting time of you've received an LOI and you're in the thick of it. So, you know, this period while you're, you know, first received the offer, going through the detailed due diligence and ultimately negotiating the definitive agreement is where deals can really gain momentum or potentially fall apart. So first up, it's a two-way street. So while it's easy to feel like the acquirer holds all the power in an M&A deal, that's not really the case, right? Like, you know, we are subject my job as the corp dev leader is to land this thing. And I have to make sure, you know, you're, you're a willing participant in that process. So the buyer is just as dependent as you are on them. And due diligence is a two-way process. So, you know, yes, you are being evaluated, but you should also be evaluating them. What's their track record with acquisitions? How do they handle integration? What's their culture really like? And especially if there's a significant amount of the deal consideration that involves stock, you know, you're not just selling your company, you're trading it for a piece of theirs. And you know what the investment of your future time will actually turn into. So understanding what you're getting into beyond the financials is really critical during this stage. Next up, manage expectations. So deals always take longer than expected. Your team, you know, as it grows, of who's involved in the process, will have lots of questions. Externally, the acquirer, you know, will raise our concerns. Surprises will come up. So the most important thing about keeping a deal on track is being clear, consistent, honest in communications. Overpromising, creating false expectations just kills trust and can absolutely kill a deal. So being transparent about risks, integration challenges, realistic projections that you're signing up to. So, you know, we don't expect perfection as the acquirer, but we really value and expect honesty. So if there's one thing that can kill a deal, it's a big surprise in diligence. And so the more proactively you manage expectations, communicate clearly and honestly, the smoother your deal will go. And the last one is leverage the last mile. So I think again, back to that point earlier about two-way street, the closer you get to the final parts of the agreement, you actually have massive leverage if you know how to use it. So again, we start to get back to the poker analogy, pretty pot committed as an organization in those final stages. And so, you know, being very strategic about how you negotiate some of the critical terms in a deal, retention bonuses for employees, integration commitments, or deal structure optimizations, you know, being very strategic about finding the timing to do that and working with your advisors. And the rest to do that, you know, is where you can really, you know, kind of turn the tide on a deal being favorable for you. So you do have to be very informed, strategic. You can't push too hard because, you know, again, no deal is guaranteed. And as pot committed as we might be, you know, you always run the risk of derailing it, you know, if you miscalculate, if you miscalculate. But you don't want to leave value on the table. So understanding the buyer's priorities and constraints at that stage, you know, can be, as I said, really critical to securing the best possible outcome.

Let me ask you a question on this, Steve, based on all your experience, and I can share some of mine after, but it's less than yours. How much can you push back on price and how many times, how many rounds can you push back on price?

So what I would say is headline price at those final stages? Like none. You know, none at the real estate. Yeah, none at the final stage.

I mean, what about pre-LOI? What about pre-LOI?

Yeah, so pre-LOI, look, there's realistically a lot of room, like, you know, that, that, that, you know, not to give it all away and, you know, depending on, you know, what kind of deal it is and the rest. But, you know, what I can guarantee you is the first offer that you get in that first draft of the LOI that you get is never the top end of the number.

Never.

That I've never, you know, gone out to, you know, to, you know, my approval committee for that hunting license, you know, to go explore a deal. Now, whether it's, you know, a 30% premium to that, a 50% premium, 100% premium to that, You know, there are a lot of factors that will determine, you know, my strategy around what my first offer is versus what my walkaway number will end up being. But yeah, you can pretty much guarantee that that first number is never what anybody really expects as the final. Now, again, there are going to be a lot of parts that move back and forth depending on how much upfront, how much is held back, how much is cash, how much is stock, right? There's a lot of different levers that could swing, how much room there is. Yeah. You know, but like any good negotiator, there's not an infinite number of turns and there's probably not, you know, more than, you know, somewhere between 3 and 5 depending on— Well, that's more than I would have guessed.

3 and 5. Yeah.

Yeah. Yeah. Oh, for sure. And price. Yeah. I mean, again, you know, typically it's I'll put it out an offer, they'll give a counter, I'll give a counter back. That's what I'm counting as 3. Um, and then the question— yeah, the second, the second counter. You're not going to usually get to a third back-and-forth counter if you're that far apart. You know, again, something probably pretty meaningful. And the question of, you know, after that second counter, I'm calling, you know, contestant number 2, um, and getting a feel for, you know, what will we have to trade off to go to our number 2 target versus the price I could I think I can get them for.

Yeah, I find founders just especially first-time founders, that dynamic, it's something they don't read properly. Steve calls you up, you have a conversation, they offer you $100 million for your startup. You know, there's certain Machiavellian founders that it's all a game, right? And more power to them, I wish. But a lot of folks take it very literally. I find they're like, well, Steve said $100 million, I'm not— I'm out. I literally had this conversation a couple of weeks ago with some founders who were just out from an offer, and I'm like, I don't know, man. You're pretty good company. We don't— I get a couple of takeaways. One, I know you wouldn't use these terms, but for corporate development, their job's a weird one. On the one hand, they're playing a bit of a price game. It's part of their job. It's part of their job to be a buffer from the operating executive sometimes. So the CEO or the—

It's not a part. It is basically the job.

Be the buffer. Be the buffer so that— Realize, keep them clean.

That's— I mean, I use that line all the time. I'm here to keep you clean.

Realize that. Keep you clean.

Yeah. Yeah.

But on the other hand, Corp Dev's weird, so they'll feel like they're beating you up on price. But then if the deal doesn't close, they don't— they don't— they get an L, right?

Yeah.

It's a weird— so they're both— they feel when you're talking with these executives in the beginning, it's really nice. The first discovery call, I find. And then when you get close, it can feel frustrating because you feel beat down on price. And I'll share a couple of stories. I don't have the answers, but just realize they also want to get the deal done at the same time. So just listen, right? And be nice. Related question. Okay. So you said 5 go-rounds max, but really that means I think founders, roughly speaking, can negotiate price twice, right? That's the maximum they can. That's my experience. Like if it's truly a lowball because it's a game, I say almost ignore it, be nice, but say, listen, 100. But Steve, we're at $80 million growing 100%.

I'm not like, I appreciate you, but that, you know, let me start by saying I really screwed up if I drop that $100 in front of you and I haven't done some bit of like socialization. So I know before I drop that thing in front of you, I got to know I'm like within spitting distance. I'm in a ballpark, you know, that we're not wasting time. So, so, you know, me, my team, we've done enough of that work. To, you know, hopefully have, you know, a, a degree of freedom of landing zone where we think, you know, will be appropriate. You know, that, that will be part of the exercise. And that's usually good signaling for you to start, you know, getting serious and getting ready when you start getting some of those questions. Now, hopefully my job— I haven't done it so obviously that I've kind of, you know, again, through those multiple meetings over a period of time, kind of teased it out of you, you know, So that to some extent, by the time we've called and said, we're ready to deliver this to you, it is, you know, still a bit of a surprise. It's not been totally, because again, if, if I've given you too much time that way, you've gone out and shopped it to my 3 other competitors. And, um, you know, sometimes I've given you too much time.

So not all founders are shoppers, but sometimes they are, right? Um, let me ask you 2 follow-up questions. Um, the last round as an anchor, um, I, I watched an investment go through a very interesting M&A process recently, which is This company is cash flow positive. It's growing at triple-digit rates. Okay. It's a really good one. It may not be world famous, but listen, it's top 1%. Okay. And they have infinite runway, right? Infinite capital. A big tech company came in and offered them a price about 10% higher than the last round. And it's not even that great a price. What's going— like, why? I mean, that's— I mean, listen, if you're struggling, that could be the best deal on the planet Earth. If you're the Pinpan, the Humane Pinpan or something. Right. But what's going on in that dynamic? What's your guess? If you had to guess that dynamic? Will those— do you really? Because corporate development guys want the deals to clear, don't they?

Yeah. I mean, I'll make the joke and say they probably need to hire a new corp dev leader. If that person has, you know, misread the situation that badly. Yeah, it's hard to know. But, you know, I've, you know, you've certainly seen those dynamics where just, you know, unsophisticated tech buyer, you know, gets kind of spun up with some bad advice. Yeah, I mean, they might think they have some inside scoop or, or, you know, about that. That's just very misinformed. Okay.

You know, let me ask you a question more.

How—

when you, when you're there, how do you— if a company is doing well and then if it's not doing well, how do you think of the last round price as an anchor for, for, for valuation?

I mean, there's a lot of variables that will play into that in terms of like where the market is, where that company is, where you are. But yeah, I mean, I'll be very honest, usually it's a pretty big anchor. You know, we know that, that unless there are material extenuating circumstances where, you know, the entity is hobbled, kneecapped in some way, that, you know, all that money that's in that player, you know, assuming it's smart money, that they're not going to do anything dumb. And if they see that performance of that business, and they paid what they paid at that time. Now, again, we've had some— we have had some of those weird discontinuities, right? When, when you go from a world where everybody's willing to, you know, fund things at 30 times, and then you have this massive correction that takes it down to 8 times, like, there's a lot of discontinuity through the system that has to still work its way through to adjust to that. And like, that might be the example, right? Like, these sophisticated buyers might just be feeling like, hey, that discontinuity, if they haven't internalized it, that that's just the new reality. And too bad that you raised all that money at that grossly inflated price. 10% is better, is like what current market is the best you can do.

Yeah.

And those kind of things happen. But again, you would have thought that they would have at least communicated that message in a way that that didn't leave it so shocking for how you were trying to grok where that big mismatch on value was being placed.

Look, it's good. It summarizes— the good reminder is that even today, if a company is doing well, the last round is a floor. It's an anchor. And you have to be— corporate dev wants the deal to close, right? And you can offer anything you want, but it is a real point, right? If you're doing well and the last round isn't an insane price, it's gone. If the investors don't make a profit, it's tough to get them on board, right? If there's no reason to do the deal, right?

Again, unless you're at the, like, we are running out of cash and there is no way to raise additional money, then those investors are going to assume that they are there to make a profit.

Let me ask you two other questions on this because I have you, right? And then I will let you go on and then I'll ask you more. A weird— something that's changed for me in M&A that I've watched, and granted, this is with companies that aren't absolute S tier, right? But I am watching deals happen where the absolute bare minimum number of shareholders approve the deal. The bear. And when we grew up, when I grew up, I was taught back in the day, listen, no matter what the documents say, no matter what the certificate says, no matter what the— like almost every acquirer wants close to 100% approval to avoid liabilities and headaches. I've seen two deals recently that were, you know, I mean, overall, I think I'm a good investor, but two recently that were modest deals, I wasn't— and I had a material ownership. I wasn't even asked for consent. Right. And I watched another one where the founders made a lot and the investors didn't. That happens. This isn't a criticism, right? But it was interesting because it was a big acquirer. They needed like, you know, 80.1% approval and that's all they got. And it took a month. It wasn't even a day. It took forever. They had to track down the last angel investor in the Antarctica base. To get to 80.1%. And they took— my point is they took the risk in these deals, right? Is that more common? Can you get away if you're a founder trying to do— do I no longer need a, you know, 98% or 100% approval? Can I get away with the absolute bare minimum today?

Yeah, I think so. I think that's just, you know, it's sort of the unfortunate aspect of how the world has changed in terms of the scope of who is investing and how many investors are participating as the private market has evolved over the last 20 years and this class of prosumer investors has emerged beyond. I mean, back in the day, you just didn't have the crazy cap tables that you have nowadays to deal with.

So you, so when you think, so just for my learning, because this is a newer one to me from a Corp Dev perspective, Getting 100%, you just, you're a lot of deals. You think Corp Dev folks are fine if you get the minimum required to approve the deal, that's enough. They don't care. They just don't care anymore.

Yeah. I mean, look, at the end of the day, a lot of that risk, you know, we, I mean, it's shared risk, so we share it, but, you know, again, if it's viewed as a more material concern, it might get included in the scope of the escrow that it might not have before. You know, you might end up in those more unique situations.

But still close. But interestingly, forget about the escrow, which is an important point, but still close. It's not going to be a gating item anymore to not having high 90% shareholder approval like the old days, right?

Yeah. Again, like I said, it's just the shareholder, you know, the way it's evolved makes that, make that just, you know, you can't wait. It's like waiting for Godot. You know, you're not going to wait forever to hit those thresholds.

Okay. One last one. I could, I could ask you 50, then I'll let you finish and then I might ask you more. But on the two-way street and the rounds of negotiation, if you're, if you're nice about it, if you're respectful, if you're polite, if you are grateful, how big a deal is it walking away from that second offer if it's not good enough? How big a deal is— obviously it's an issue, right? It's an issue. But in terms of process, if the offer just isn't good enough, right, is it and you walk away kindly, does that kill the deal? Does it not kill the deal? Not what you're, what you're learning on all of this stuff from walking away kindly.

It's a, it's a, it's a very strong it depends. But again, you have, you have to know that, like, back to your point before about like my job is to get the deals done. Like, yeah, I don't ever go in without some form of contingencies. So Um, and you know, I'll take— again, if I've, if I, if I've, if I've created for myself the situation of you only have one option and I kind of miscommunicated things so badly in terms of what I read from you of like where a clearing price realistically could be and what I was able to convince management of, hey, if you really like this one and you can't help me build a better contingency plan of an option to, or a partnership you know, like, like me and that business leader, we're sort of in the boat together.

Yeah.

But so again, the, the risk you run and you've— I could like quote things that you've written about this is like once you walk, just remember you might never get a second call.

Absolutely.

Me or from anybody else. And then you're back to the 2% odd games from the first slide that I showed. Yeah. So, you know, that's the internal risk that, you know, you as the founder take in terms of like, you know, am I going to take it personal? And, you know, you know, is there bad blood? No. I mean, it's all fair in business. But again, it comes back to the, you know, what is the ultimate endgame for you? And just know that likely if I have let you walk away and again, I've bungled things so badly that I've misread it and I haven't been able to close the gap, I let you walk away. It's because we have a fallback for us at least, which means you'll probably lose us. And I guess we— unless we screw something up down the road. And I've had some of those examples where we thought we had the backup plan and, you know, eventually you might have to come back, you know, with your tail between your legs and pay a little bit more. You know, I'm not proud of any of those stories, you know, amongst the things that we've done. Um, but again, the window of the likelihood that you walk away that second time, you couldn't get me closer to something that's acceptable to you, and some set of circumstances come together where I'm going to be coming knocking on your door, begging at your price in 3 months. Pretty— I would like, again, back to single-digit likelihoods.

That's a good summary. Thank you. Yeah. All right. I got— I could ask you more, but let's keep going on the presentation so we have more time. But that's a good— if your point is, if you do walk away, And I find sometimes you have to at some level, right? But if you had to summarize all years of experience, your odds probably drop to single digit that that deal still happens if you truly walk away, right? It's just the reality.

At that stage, yeah. Yeah.

Good, good, good summary. Thank you.

Okay. So we're now in kind of the home stretch, you know, the definitive agreement to close. But remember, just because you've signed the definitive agreement doesn't mean that it's over. And, you know, the time between DA and closing, um, can be just as tricky as the, the, the prior stages. So first, deals aren't won at the press release. This is one of my favorite, um, little, uh, quotes. Um, you know, signing the deal might feel like crossing the finish line, but in reality, you know, it's like just the starting point of some of the really hard work. Um, so to many, uh, founders who celebrate too early, Um, uh, you know, they think their work is done once you've done that signature. But, you know, the hardest part isn't about getting acquired. It's what comes next, the integration. And as a corp dev leader, I, um, am very involved in the integration process and will tell you that like M&A graveyard are filled with deals that looked great on, um, the, the, the hunting license presentation or the press release announcing it, but then totally crumbled in execution. So, you know, culture clashes, leadership misalignment, integration missteps can turn, you know, multi-hundred million dollar, billion dollar deals into the cautionary tale. So if you want your company to thrive post-acquisition, you know, you can't check out after the announcement. You need to stay engaged, drive alignment, ensure the integration is handled with care. You know, at the end of the day, I think for a lot of us, you know, what doesn't matter is the buying and selling of the company. It's making sure that the company continues to succeed after the deal is done. And, you know, it's one of my, like, like, at every, you know, announcement, little celebration that I've been a part of, it's like my classic line is like, great, now the real work starts. You know, for a deal. Now, even though I say, you know, that integration, you know, is kind of this moment at the— that you really get serious about at the DA, integration should have really started long ago during due diligence. And I think it's one of the biggest mistakes that gets made in M&A is, you know, you treat due diligence as just this kind of, you know, legal and financial exercise. You know, really, it's the first steps of integration planning where, you know, as you understand the business, what you're really thinking about is how are these, you know, functions going to work together once the deal closes. So you got to look beyond the, you know, you want to feel like your acquiring company is looking beyond just, you know, the spreadsheets and the code reviews and understanding how the teams will merge. What kind of operational roadblocks will exist to work through, ensuring that the cultural alignment, you know, you can happen as soon as the close happens. So, you know, when done right, early integration planning minimizes disruptions. It will retain the key talent and really accelerate the value of the deal. And then, you know, the last thing I'll say during this phase, you know, as, as kind of founders and leaders is, you know, the importance of protecting your people. You know, M&A isn't just about, you know, code and, you know, revenue numbers. It's about the people. Prioritizing your employees during the transition. You know, they're what made your company valuable in the first place. And the honest thing is that, you know, employees, you know, might not assume when they read the press release that it's a great thing that they've been acquired. You know, they're going to start to wonder, what does it mean for me? And fear, uncertainty, and lack of clarity. And, you know, to be honest, you know, even though I kind of, you know, thought that and understood it on one side of the deal, having done, you know, 20-plus years of being a buyer, I really realized that being on the inside and owned—

very different—

when I was one of those people saying, what does this mean for me and what changes and what changes the same? And, you know, what does this mean? To my career. So, you know, I think, you know, as you, you know, are, you know, working through the deal process, you know, being very mindful, thinking about some of those other points like leveraging the last mile, but how to, you know, think about, you know, your people during that stage of the process, you know, really important.

It's probably the most helpful thing, for what it's worth, that I do with founders in M&A process is this protect the people. They don't get it. Right, right. There's some things that you can do later, but the best time is to do things that don't really impact total consideration before the term sheet, right? For a lot of deals I've done recently, I've done special carve-outs for the employees that were not astronomical, right, but were material, and the target in essence paid for them, right?

Exactly.

If you're nice about it, you're not going to get a lot of argument, except it's for jerks. But you could make your team saves so much more money, right? If you do it, it's one example, but there are ways to do things that won't create huge drama, right? But man, when the LOI is signed, it gets rigid, doesn't it?

Oh yeah. I mean, it is, it is truly locked. And back to what I was saying earlier, you know, about how to think about these things. If I've done my job right, I've already built a lot of that into the deal economics that I've positioned is what I would call that all-in number. So the money's there for the taking and it's just being, again, kind of strategic about, you know, how much you let accrue directly to your investors, how much you find a way to kind of cleave back for your people amongst that mix.

You'll just find— and I want to finish, tend to ask you a couple of questions. I think even the best acquirers don't always know who the special people on your team are.

For sure we don't.

Absolutely.

We might know some of the headlines and we have to do that trust of working with you to dig under the covers and understand from you. And I'll usually position it like, hey, you're like, you're digging your own grave here to some extent. So help me, help me help you. You tell me who your real difference makers are, who your 10xers are, so that we can be really smart about deploying, you know, to them the dollars that will help you be really successful, you know, optimize the chance for success, especially in that like runway period of where we get you to self-sufficiency and take off on your own. So who over the first 18 months, 2 years can we throw a lot at to keep them really focused on your success?

Yeah, I find most acquirers will definitely try to figure out who the top 5 to 7 engineers are, right? That's on every checklist. Okay, who's the most important folks on the dev team? But the other folks that are the glue of your company, They might have— you have to, you have to be their champions and you got to do it before the LOI sign. There's always ways to take care. Everyone's going to get it. Like if you raise your hand and say, Steve, I got to do something about Amelia, Saastr can't run without her. Here's some ideas. You're going to get a good audience, right? And unless they're a total jerk and they're—

yeah, and they're hidden, you know, there might be this like operations person that is that glue person. Yeah, they're not on the dev team. But they're the ones that make sure that customer success works and billing and collections work. And, you know, finding those people or I can think of like another example of like somebody we ended up finding like after we lost them, they're like, oh my gosh, they were the CEO whisperer. Like, yeah, everyone's got a CEO whisperer that helped like really manage that really quirky CEO that once we've lost that individual now managing, you know, this person that seemed super manageable, you know, up until that point, now is a vacuum.

All right, let's finish. And I'll hit you with a few more questions.

So now, bonus, you know, in my— Dave Kellogg, who I know, you know, taught me early in my career about the important rule of 3. So I struggled with a list of 10, how to fit, you know, Dave Kellogg's rule of 3. So then I had a bonus, you know, after the close, the most important thing to realize is, all right, it gets real. The honeymoon is over. So for all the optimism that exists when the acquisition process has kind of started and gotten to those major milestones, when you are deep in integration, you know, once the press release is, you know, long an afterthought and the executive quotes that were full of excitement, you know, have kind of drifted off, reality sets in. And that's when, as a part of the organization, you get, you know, it's kind of like every, everything gets very real again about the competing priorities, the operational challenges, the culture clashes that will, you know, start to emerge. So the truth is post-acquisition integration is really hard, really unglamorous, unsexy work. Cultures don't merge overnight. A lot of the people will resist the change. You'll find where business units have very different and misaligned incentives. So the key to surviving this phase is, you know, finding ways to get to alignment and having massive adaptability to ensure that both sides are committed to working through the friction instead of fighting against it.

Yeah.

So, you know, investing in communication and collaboration, I really recommend, and sometimes as the buyer, you have to be the one to recommend it, but like How do we get through, you know, integration hurdles around, you know, cross-functional alignment? How do we, you know, figure out all the pains in onboarding and leadership engagement? You know, what can be the kind of, you know, team building events and things like that to really give kind of clarity and purpose to post-close roles? That can make a difference between success and failure. So, you know, I would caution you, expect bumps in the road. No integration is perfect. But, you know, building those relationships and, you know, having that understanding can really help to make things work. So, look, thank you. That wraps up my content. We have a bit of time left over for questions. I hope this stuff was helpful and insightful as you think about your own M&A journey, whether it's just something you think about in the long term, or maybe you've gotten a few of those calls that lead you to think an M&A process might be imminent. I do a bunch of advisory and some fractional corp dev work. So if anybody's interested in continuing the conversation, ping me. Would love to continue the conversation. Thank you so much to Jason and Amelia for hosting me. This has been a lot of fun and yeah, happy to take any other questions.

Yeah, I think if you've got any other ones that I haven't hit, I'll do them, but otherwise I'll consume the last 4 minutes. One thing I do want to say to folks, Steve, if you do have time, if you're consulting now, right, and we should have caught up, right? Honestly, guys, if you have, especially if you're in any M&A offer north of 9 figures, I mean, maybe it's true for 1 figures too, but, and someone like Steve's available, hit him up. Like I would hire Steve tomorrow to help me. You don't know this stuff. You need an ally. You need someone dispassionate. You may need a banker too, a different topic, right? Which I don't think you're providing those services, right? You may need a banker as a buffer, just like Corp Dev is a buffer on one side. Even if a banker does nothing for you, sometimes having a buffer can save your sanity as a founder. But you just, you need this help. And I find especially first-time founders, second-time founders get pretty good at this, but first-time founders, they just make draw the wrong conclusions. They don't get that it is a process. Your whole point is it's a process, and founders aren't used to that. We're straightforward. Steve, do you really want to do the deal? What's it going to take? Be honest. And it's— you can't avoid the steps, and they drive founders nuts. Couple of questions, but I want to— the last one you said about how tough it is after the deal, right? It's tough, right? It's harder. And I want to— I had another portfolio company that recently got a very good M&A offer. Okay. Life-changing. Life-changing. And they didn't do it because they just didn't want to work there. I couldn't argue with them. I couldn't argue. Like, and there's nothing wrong with it. They just couldn't. They're like, I'm like, do you realize, like, you know what the trade-off you're making? They're like, we realize. We're like, you know, we're too far into this and I intellectually, I don't know if I agreed with their decision, right? It's not my company, but I got, but I couldn't argue, right? I mean, they're seeing too much that it is, it's just so different, right? On the other side. Right. But my, my meta takeaway, and then I do wanna ask you a question, but my meta takeaway, I curious your thoughts, thought about this so much and I handled the post-acquisition process relatively poorly myself. Uh, and attempting to do it well, actually by trying to be very ethical, I actually screwed it up. Right. What I've realized, and this is what I say to founders now, it took me years to figure this out. If you sell your company, It's not a, it's about the team first and, and maybe about the customers. When you're a startup founder, found customers come first.

Okay.

Customers, you can't lose if you're the customers, but when Salesforce buys you, you can only do so much cuz it's their customers, right? It really is their customers. And they, they can, they can enhance your product, they can shut it down. They, what it's not, but your team is your team and don't forget about them. Don't forget about them when you walk away with all that money, even if they did too. And I don't know why, but founders forget about their team a little bit, right? It's so emotional. There's so much going on. And my advice now is stay another year for the team. Don't worry about anything else. Don't even worry about if you miss the number unless it's for them. Don't even worry about the integration. Be nice, be kind, be respectful, but do it for Steve. Do it for Amelia. Do it for Tim. Do it for— don't. And if you approach it that way, you get a lot more zen about this post, this, this deal. It's about them who worked for you for 2 years, 7 years, 20 years.

Yeah. No, I think that's right. And look, as a buyer, like what I always accept and I have to counsel the people that I work with, you know, oftentimes I've worked with business unit leaders that it's their first time buying a company and they don't know what they don't know.

They don't know. They think it's simple. Yeah.

And, and what I always remind them is like, hey, it's your— you know, I'm a— I'm a— like I said, I've worked for 25 years at companies with, you know, average, you know, 5,000 to 10,000 people. Like, for me, the thought of going and being 3 guys, a gal, and a dog in a, you know, you know, slaving away from ground zero is this like impossible thing. And if you're one of those people and, you know, you were one of those people that built that foundation into the 200-person, 300-person thing that I'm now writing you a check for $80 million for or $150 million for, like how many of those people want to check in every day at a 10,000-person shop? Like, and so you're right, protecting that group of people, helping figure out, because probably not a lot of them are going to stay there for 10 years. But especially if you're in that boat where this is your first one, but you want to have your second and third. Yeah, a bunch of those people will probably be the core of the lieutenants because you've done it all together. And there's nothing that somebody likes to write a check into as a VC, right? Then, hey, here were these 3 or 4 people that just had this great exit, like, you get— yeah, everybody wants to write a check into that team. And so helping that group, and then when that next check is formed for that 3 or 4 team, the next 20 or 30 people you're going to call all came from that 20, you know, that 200 to 300. So you're right, I think being there, helping be that buffer— at the end of the day, you have the most knowledge of who you sold to, you have the most knowledge of how that place works and what, you know, will and will not likely lead to success for your entity. And you're right, like, at the end of the day, it's back to a little bit of like buyer beware. Like, hey, you wanted my customers and my product, you got my customer and my products. To some extent, you have my people. But like, the one thing that, you know, still exists in this country, right, is you can't really buy people and own them. So you can, you can own my people, or sorry, you can own my products, you can own my the customer relationships. You don't own those people. And I'm going to be a buffer to those relationships.

You got to be right. Okay. Now let me ask you before we went— we've already run out of time officially before we get to the top of the hour. Just a couple of quick ones to be helpful to folks, right? Of all the deals you've worked on over the years, from the founder perspective, from the founder perspective, how often was it an email or call out of the blue when there was already interest like that random email, the rant? I want— hey, Jason wanted to catch up on the space. How many deals from the founder perspective were out of the blue, would you say?

You mean I had like no contact with that?

Yeah, like, like, like, like you said, you might have been on the list and the folks might have been talking about it, but there was no relationship with Amelia or Jason or Jill or Jake. How often does it seem seemingly out of the blue from the target's perspective?

Never.

I never—

I would— I— if like from my seat, If I ever went to my leadership and said, I want to go put in an offer to this thing, and I have never met them, we've never seen a demo, we've never had, you know, an architectural review, and like we were really ready to move, then, then yeah, I, I never, I, I probably get fired. So I mean, look, I mean, never say never about other things, but you're kind of like back to the point I was making about like sophisticated buyer, like, yeah, you know, a CEO would, would, would be loath to authorize me to go show that level of interest to something we knew that little about.

Okay, maybe last one because we're out of time, although I have a few other— last one because this is one that happens all the time, right?

If—

right. I've got 5 months of cash, Steve. My board says to go sell the company. Does it work? Can you even do that? Even forget about price. What's that dynamic like when a company is, you know, let's say it's 2 months of cash. Okay. What's that dynamic like on the other side when you get out, you get— they reach out to the acquirer because we're running out of cash. Does it even work at all? Yeah.

Yeah. And I would say, you know, I mean, back to if you want to play the odds game, Yeah, that one's at least— I mean, again, you have to be, you have to like be somewhere on the list, you know, of like, like moderate, you know, certainly the space has to be on the list. And hopefully you've been smart enough to build enough connectivity that you're somewhere on the list or at least a pretty known entity. But yeah, depending on like, you know, the pennies on the dollar, how interested we are in the space, that one's at least— that could be like a 10%er. You know, I'm not going to say it's an 80% or I'm not going to say, but materially, it's like, so do that.

If you have the relationship, send the email.

Oh, you got to, right? You absolutely have to.

Sometimes I say bracket.

Yeah. And I mean, again, it's going to be a salvage. It's going to be a sell. It might be an asset deal.

Yeah.

And we might not take any of your people or, you know, but, you know, if you're at that stage and it's that or like you're going into, yeah, you know, liquidators or, you know, kind of true default, You got to at least make that call and maybe just to wrap it up, run with it. Because if we like at the end of the day for something that was on our list and if we think we can get it like for pennies on the dollar, yeah, that might make sense.

Maybe that is a good— that's enough of a learning. Maybe the wrap-up learning is on the corp dev side. There is a mode for that. There's a mode. A deal comes in. Is it in our general area? Okay, they're distressed. They're not going to get another round. We get it. But okay, so we've got a quick look, right? You don't have a year to build this. You got it. But, but there is a moat. There is a moat. And if it's roughly in the list or the space, it'll get a look.

Yeah. And then the ultimate issue becomes like if you've played it so close that it's like, hey, I have, you know, that 45 days of cash and it's like, hey, realistically, like, you know, can you at least get a bridge or something like that? But there have been times where like even we've been the ones to float the bridge.

It does happen, right? Yeah, yeah, yeah.

And like, okay, we'll figure out we're going to get you, you know, 90 days of cash and it's going to come out of the— it's going to come right out of the purchase price and the rest.

So be it.

But yeah, we want to keep you on life support.

Okay. That's a good— that's one in today's world. Sometimes I wonder if it's still worth it. But your answer is, yeah, it's a process. It's not a negative if it's on the space and it's a great deal. Corporate development and the team's motivated, right, to take a look at the deal. Right. So.

All right.

Great.

Yeah. Yeah.

All right. Thanks, Steve. Do we have everything, Amelia? I know we're, I know we're beyond the top of the hour. Okay. This was great. Again, to folks, let's wrap up. Every Workshop Wednesday is great, but I really think of Steve as a free agent now after the almost $2 billion, when he now became a target at OWN. That'll be his next, next talk. He only teased at it. But if you are going through a deal, I trust Steve and I would reach in a heartbeat. You need this. You need help. You need your, your investors are great. Your co-founder is great. If I had to summarize a whole bunch of things in MA, you need, even if you think you know, you know it, even if the CEO of the biggest company reaches out to you, CEO to CEO level, which is a special type of M&A we didn't get into, you have to be very careful when the CEO— there's a lot of trust when everyone's bypassing it. There you almost need help even more in the background because you can't break the relationship. So email Steve, get his help. Uh, I'm, I'm, uh, I'm all— I'm, I'm like, I couldn't recommend anybody more in the ecosystem. So thanks again for the time, man.

This was awesome stuff. Thank you, everyone.

Talk to you soon.