Bottoms Up Deal Origination Model

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A Science where leading M and A practitioners share lessons learned from their experience. If you're interested in keeping up with the latest from M and a science, visit mascience.com subscribe to our free newsletter Every week we share highlights from our interviews and invitations to events as we build the greatest community of forward thinking M and A practitioners. Again, that's mascience.com I'm your host Kisam Patel, CEO and founder of M and A Science. Joining me today is Ben Ortlieb, Vice President and Head of corporate development at LinkedIn. LinkedIn is the go to platform for professional networking and career development. They were acquired for 26 billion in 2016 by Microsoft. Today we're going to talk about LinkedIn's bottoms up deal origination model. Ben, how are you doing today?

Living the dream. How are you? Kisan?

That's good to hear. Can we kick things off with a little bit of your background?

Took me a while to actually go to corp dev, even though LinkedIn has been telling me since 2009 that corp dev is my number one skill. So got a mix of experiences effectively between strategy and finance which I think explain where I'm at. Being a consultant for BCG for many years. Prior to that I've been a banker and I've also worked a little bit in telecom. Being a telecom engineer Myself, I joined LinkedIn in 2014 in business operations where I was more involved in product and product strategy and transitioned over to Corporate Development four years ago at LinkedIn and took the head of team role a couple of years ago.

Prior to that, where you originated, what caught my attention was you started with a telecom engineering degree.

Yes, back in France. So I'm originally French and engineering is one of those paths that lead to anything in France, but if you're good at math and science, that's what you do first. And so I did my engineering degree knowing that I probably wouldn't be an engineer for long, which turned out to be true because I became a consultant for marketing and strategy in the telco industry pretty quickly, but still helpful to have that background. And I can also claim that I was coding neural networks in 98 before it was a thing. Of course, I don't remember a single thing, but it's still a good story.

We look for themes in this podcast, so I gotta identify that if it's some kind of engineering upbringing, that's part of it. You had a mix between the consulting side, strategy side, got into operational roles, went between the two. Now you're heading corporate development for LinkedIn. What does M&A strategy look like at LinkedIn?

So in terms of theme, I think the theme is the interest, the cross interest of. In finance and strategy, actually that sort of led me into corp dev again. It took more time than maybe it should, but in banking I was always the one thinking more about strategy. In consulting, I did a bunch of more heavy finance and M and A types of projects, integrations. And so I've always been in between not putting my finger into the fact that doing both was actually what corp dev is about.

That's a good way to put it, blending together, doing deals, but also the operational side, you have to own it.

In the results, which I think it leads to part of our conversation about LinkedIn, a little bit different structure and approach to M and A in general.

Yeah. Tell me more about it. Like what is the bottoms up deal origination model look like?

So first of all, I think it's much more of a horizontal approach. If you think about most traditional corp dev teams, they come in later into the strategy conversation about a deal, start engaging the targets, negotiate term sheet, run the diligence process and oftentimes hand off integration teams. At that stage, LinkedIn and other tech companies around us, and probably other companies, have a little bit of a different approach where we're much more end to end. If you think about the deal lifecycle, we are in charge of what we call market intelligence. So Every week we publish a newsletter internally with every news about companies that are interesting in the various sort of marketplaces in which LinkedIn is playing. That also includes we track 20 companies earnings and write up quarterly earning reports, et cetera. That's the deal intelligence. Just know what's going on in the landscape. The second step is to work closely with our product and R and D leaders to be an input into strategy, but also to be very aligned as to what their priorities are so we can actually go out and source ideas within those specific spaces and work alongside them as we engage with companies, get into sort of pre term sheet diligence, then of course the traditional sort of negotiate term sheet, run due diligence and coordinate more than anything else with all the cross functional partners that it requires. And then finally, while the deal ownership in terms of integration rests with the line of business owner and cross functional owners, we're still very active in tracking and reporting on how integrations are doing and get also involved when there are strategy conversations to maybe reframe or reprioritize some of the goals for acquisitions. So it's a much more full lifecycle view. And so it leads to a little bit of a different team organization and maybe a little bit slightly different team profiles or mix of profiles profiles rather than what I've seen more traditional approaches be.

So I got from the beginning market intelligence, tracking industry trends, even specific companies. We mentioned the earnings reports and then partnering with your R and D leaders, the core corporate development activity. We're all familiar with running the deal, getting the loi diligence to close and then integration, sticking around and taking accountability and delivering the progress on the integration. I want to take these apart. I want to get a sense of what does your corp dev team look like and the different business lines. Like how many different business lines are you covering?

We think about it in three marketplaces plus infrastructure that we also work closely with. And then within that some businesses are different. So LinkedIn is what we call our talent marketplace, which is our recruiting and learning business. That's one sub team if you will. We have what we call product and services marketplace which is the marketing and sales tools for LinkedIn. That's also a slightly separate team or at least I have different team leaders. Then we have what we call flagship, which is the B2C experience, everything that happens on the app and related sort of surfaces. And then finally we also engage on a regular basis with our teams in AI and infrastructure because given LinkedIn size at this point you get potentially good leverage from Improvements in AI or infrastructure.

Okay, when we go to market intelligence, can you give me a little bit more like what does that actually entail? You talked about it in terms of tracking it, but is that your core function? Are you at that point working with different people in the business unit?

That piece is first, mostly. So first is scanning the environment, which that we do on our own more or less every morning my team will share news that are relevant that they've seen. So we scour a number of sources that we screen to see if there's anything interesting and relevant in terms of space and minimum size so that it's worth for folks in those lines of business. Knowing that feeds into a weekly newsletter that I sent Friday around noon with all the relevant news to the different lines of business or to the different marketplaces across LinkedIn. And it can be anything from, oh, interesting company raised around. Of course there's been some earnings announcements, some sort of product release changes, and less fortunate in current environment, if people are announcing layoffs or things like that.

It'S all stuff that's related. Hey, this is your line of business. This is within our peripheral.

If you work in our talent business, you've probably seen a good portion of it. But here's a summary of what happened in public news that's relevant. That's usually a four to five minute read and we start with an interesting or funny quote or LinkedIn post or tweet. Also just to make it a little bit more light because it's Friday, so we start with that. The other piece in intelligence is also we follow a number of companies and how their headcounts or other related metrics are progressing. That also gives us a good signal as to what companies can have traction. Talk to a lot of VCs, talk to a lot of bankers, so that we're trying to be as aware as possible as to what's going on in our markets across LinkedIn. And then the other element which we talked about is more detailed public companies tracking which trackers about earnings meet, beat or miss, what's the consensus going forward, et cetera. So that's also giving us a good health signal as to the different marketplaces we play in.

I like this idea a lot. This makes a lot of sense. And how do you stay top of mind with all these different business units that could encounter opportunities, know where you fit in and so forth.

Sometimes when we see we do live updates, so we see an interesting company instead of waiting for Friday, which we do anyways to send to the whole company if say a company announces a raise that we think is noteworthy, we can send it to also a limited group on the spot and engage on a side thread as to whether it's interesting, whether we should reach out and those type of things.

How do you think of this, the market intelligence piece and then just general strategy, because you even made a point a lot of times Corp dev comes in, there's already a strategy and you're just acting against it with M and A activity, how do you think through that?

It's a bit more distributed at LinkedIn on that standpoint. It's both the role of the R and D teams and those sales teams, but also business development. Corporate development are also very active in the scanning of the landscape. It's been part of the flow of information, I think.

So is that something you're just trying to absorb as much of that and then I'm just wondering if that even links to this market intelligence part of it as well.

It links to awareness that brings into being better armed for strategy conversations.

Okay. And then you obviously get stuff to talk about with all the intelligence that you put out there and share and.

It helps us identify what are companies that we should keep an eye on for future explorations, et cetera.

Do you see leads coming directly out of it where you get a reply? Does it go to you? And it's like, hey Ben, can we talk about this company?

Not that directly, but sometimes people then surface an idea to their managers or something like that comes to me. And we've had times where we say we see an interesting sort of company raising in a space that's interesting to us. And we reach, we. We talk with our R and D leaders and decide to reach out and have a first conversation with the founders and start a relationship.

Then can we talk about the R and D leaders? What does that look like when you're working with them? What type of conversation frequencies are you having?

So there's a bit of a method to the madness which the organizing principle is really. We have a monthly meeting with each one like each line of business, where the topics of discussion depending on the month, but generally the topics gravitate around making sure we're aligned in terms of priorities, what corp dev is looking into versus where has there been any changes in the business priorities or in the business strategy. Oftentimes we will have conversations about landscapes that we've been focusing on. So say you have a topic about making it up, but something about recruiting a space in the recruiting landscape that we're looking into. Then After a while, my team comes back and presents a view that looks like a market map. A little bit of what are the different components of a particular space? What are some of the players, big or small, that could be interesting. And then from there share learnings and decide whether or not we want to engage with some of those companies. What's interesting is the engagement with the companies is actually not focused on M and A. First we go in with this sort of approach of we also invest and so and we reach out to companies to strike up relationships, evaluate partnerships, potentially investments, and some of those ultimately, sometimes years later, become more M and A conversations. But those explorations on strategy are not necessarily with a single focus towards M and A can be much more broadly about engaging with the right companies in the landscape more than anything else.

Is that all within your group, this venture activity?

The investments are. Yes, also managed by my team in conjunction with the R and D leaders.

Okay, so it's all really blended together and it sounds like you're focused on the strategy, how they're thinking through, any changes there and then some of their ideas, you're supporting it. Going back to that philosophy and the market intelligence that you can use some of the data you have access to and come back with, hey, here's what we've learned or here's our view on.

Yeah, I think the number one goal, it's impossible to quantify, but mentally for my team, we're aligned that our goal is to make sure LinkedIn has the right conversation with the right landscape players, whether that leads to, oh, we've stroked up a good conversation, we've learned something, we've exchanged note with an interesting company partner, Invest M and A. That all comes later. But the first thing is we're bringing in conversations that are qualified and relevant to what our teams are focused on and not too many of them. So we need to qualify it. But at the same time, the goal is not just to be driving M and A first. It's really this idea of bringing the right conversations.

You're like a dating coach.

I never thought about it this way, but sure.

I published a book in 2019 called Agile M and A and I used a marriage reference in there for hey, there's so much after the weddings done.

There'S so much before.

It's like you should talk to so and so. You should get to know as many prospects as possible and you're putting some of the thinking around that of who should they be talking to in general, not so much. It's gotta be for M and A, it could be anything. Then when there's the core activities, was the other leg, which I don't know, is there anything special or things that you do if it does turn into an M and A direction and then you go through the typical steps of getting your information and put a value on it, come up with an LOI and diligence to close.

There's the very classic sort of valuation elements with different sort of views of value, but very classic there. The other point which is consistent with this sort of horizontal approach is making sure we have geo alignment between across LinkedIn and so specifically corp dev and the R and D teams are working with the executive team to make sure we're all clear on the strategy even before talking about valuation. And the view being often when the strategy is right, the valuation often follows. Let's first spend a lot of cycles on the strategy, making sure the company's a good fit and then the rest sometimes is tight but will work out okay.

A lot of it is having this strategy really fleshed out, how it aligns with it, because that helps guide the value for this company.

Yes, but we wouldn't buy something just because it's cheap. We don't even really ask that question until we have a sense the corp dev team thinks about it, of course, but as a company we are going to think about does it really accelerate LinkedIn's mission, vision, our growth before. Oh, is it a good opportunity just purely from a valuation standpoint? We're not going to buy something if it's cheap, if it's not really what we want. We want to be focused on our priorities and then we'll figure out what accelerates that.

You don't like garage sales? No. Fire sales or fix and flips or anything like that.

Some situations may be more fire sales, but they first have to be aligned with the strategy. Yes.

Okay, so discipline against the strategy. Are you hunting for deals like I'm thinking of corp dev, especially for us. We were with a bunch of rollups and they're just doing that. They're hunting, they're prospecting, they're getting those conversations, they're talking to CEOs. It sounds like so much of what you've explained to me is around supporting your business leaders R and D team, understanding their strategy, letting them lead those conversations with opportunities, see where it goes. It doesn't sound like you're hard charging trying to talk to a bunch of CEOs, nurture those relationships to the point they're ready to sell, convincing them to Sell interesting.

We have all those conversations and we have all those relationships and then when it's time for them to sell, they call us. When you've got a good alignment, those conversations will come up naturally. So I wouldn't see it as we have to press hard. I think at some point, to your point in terms of dating, there's a time where you're like, oh, thinking a little bit more about we're having the right dates and so you want to take the next step.

Okay, so you let it happen more naturally.

We also get a ton of inbounds and bankers and VCs and so we process all of those and sometimes that makes opportunities be less long term before we tie the knot, if you will. But there still is the discipline around.

The strategy first when you get those opportunities coming inbound. And I don't know, I'm just thinking if you're any bit like me, you want to do deals. Well, that's the whole thrill of doing this. How do you make sure there's alignment with strategy? How do you start working with either as a business leaders directly and then they pull in the R and D folks.

That's where my team, some of them have specialization around those lines of business. So they're actually quite well aware of how to look at companies, what companies we've looked at before in the sort of same vein. And so what happens is generally we will share the opportunities with our R and D counterparts, but with a, with a stated point of view. We think it's interesting, we don't think it's interesting. So then they can decide, agree, disagree, and then we can decide to take a first meeting. That's where all the alignment and market awareness is super helpful for us to in some ways shield the R and D leaders to not have to process 10 inbounds a day or something like that.

Okay, so you act as essentially a filter for all these inbounds. Get a sense of what would actually make sense.

Yeah, we always check our point of view, but I want us to share something with a point of view.

Then you get the feedback. Can you clarify R and D leader just because industries and companies are so different. Yeah.

LinkedIn basically means product and engineering. LinkedIn is organized by lines of business, if you will, but the org works functionally. And so when we call R and D and R and D leaders are product and engineering leaders who take a very active role in managing the lines of business effectively.

Okay, yeah, I was curious. Sounds like there's more of an emphasis with those roles as Opposed to the.

Business unit leader historically? Well, the business unit leaders are the R and D leaders and the sales lead. That's who we see as our business unit leaders. There's not one GM concept.

Okay. That's unique. Okay, so you are talking to the business unit leader.

Yeah. Effectively. What's close to being the business leaders from a strategy standpoint and a product standpoint.

Engineering led business here.

Hey, it's a tech company.

Yeah, that's good. Okay, so we get the idea. Or the inbound comes in, looks good, initial pass, bring it up to the business leader, R and D leader, and they get a head nod and saying, hey, this makes sense. And is that it? You just pick it up from there and we'll go out and execute.

Oh, they're involved all the way. We have the concept of a deal lead from who will be sort of our main person. So that coordinating views on strategy, on strength of the tech or the team, whatever we're focusing on for a particular diligence. And so they are actively involved, at least the deal leads. And oftentimes it leads into more people on the R and D side as we're progressing those conversations with the company. So what would happen typically is we identify a company or we get an inbound. We have the first meeting, say with the founders of that business and two or three folks from R&D and one or two folks from corp Dev. And then if the conversations evolve, there's more and more people involved over time from both sides.

Okay, that makes sense. And then typical process, you move to an loi. How is it on those inbounds that tend to be more competitive, do you find your process to be drastically different as opposed to something that bubbled up from the business?

It's the same sometimes with tighter timelines.

Okay. Just more to do, faster.

Yes. But we have the process, even for investments, even for acquire, follows more or less the same gates at the same time. And so then it's a question of depending on size of deals, who needs to weigh in and things like that, and how fast you need to run through the process.

What stands out is you have a really strong, tight emphasis relationship with the R and D leaders.

Right.

Can you talk to me about that more? And what I'm trying to understand is tech. I'm in tech too. It's just fast moving. And we talk about strategy shifting. I want to get a sense of how do you keep up with that, but also the prioritization, how do you think that through? If you have different business lines, different strategies and just prioritizing it overall as it changes.

There are folks on my team who are much more focused by line of business and they're. They have a relationship with one line of business, so they stay close with their partners. And our key partners are going to be the R and D and sales and marketing. But we are very focused with knowing where the strategy is and what the priorities are. We report on what we are working on in terms of priorities to make sure they're aligned both with the lines of business and the executive team. And it's part of that monthly meeting, but also ongoing conversations, is to make sure my team is aware. In some ways, it's almost a relationship manager role from that standpoint, which is know your customers. And here the customer in many ways is R and D. Knowing what they're thinking about and what their priorities are is how we are going to make introductions and find companies that are interesting.

Yeah. Good coverage from your team. How big is your corp dev team?

We're probably 12 right now.

Okay. So they cover the different business units, their strategy, keep shaping the priorities, keep an eye on the market, put these intelligence reports together. What do you do?

I tried to coordinate all of that. Make sure it's working. Make sure we continue leveling up our capabilities and adding more ideas. In some ways, I think about some of it as a product and are there things that we should try to add more value?

It's interesting is how you have this model and it when you think of the customer, it's supporting your R and D leaders. Like I'm trying to get an understanding of the metric that you drive your team around.

So not deals.

That's not right. You're supposed to be revenues at the end of the year. I tally it up and then we add it to your LinkedIn profile.

Well, that could be an interesting metric for sure.

But that's how I judge VPs of corp dev. I go on LinkedIn and list of deals.

Yeah. So I think there's a report on the pipeline and how many active conversations we have. There's no metric around this, but people, it's very visible. I send that weekly to the executive team so people know how busy or not we are. But it goes back to this point. Are we well integrated with the teams and are the leaders in these lines of business or the executive team getting the leverage they need from us from a landscape understanding and then from deals?

How do you know when that's not working or there's some gaps?

Oh, I hear it. Don't worry.

When it goes back to reporting up to the executives. You mentioned the activity, which I think is interesting, sounds like the key metric is the number of conversations you're having. Is there any other details you're providing? Like here's some general summaries of what those conversations look like. Or is it just at what.

Sorry, at what stage?

Just for reporting up general progress with your executive team.

So at the very top of the funnel, it's just name and sort of general awareness. And then as we move into deals, we provide more and more details on companies in the pipeline. So I. When I send my pipeline deck, there's at least a slide on every company that is somewhat active. And then we have gates with varying depth of information and some questions and topics that are being added. Towards the end, of course, we're starting to talk about integration, integration approach, integration strategy. At the very top, as will not be surprising to you, are the views of how does that help our strategy? Where does something like that fit in our priorities and sort of anything in between, of course, valuations at some point.

This is monthly or weekly that you send these updates.

Weekly.

Okay, weekly. So you'll send this up to the top executive suite and it's comprehensive of everything it's covering. Here's the top funnel activity with general conversations, stuff we got running through diligence, what that looks like, and then even your integration stuff. You're all reporting in.

Yeah. Basically there's a summary table with the four or five step in our process and a list of full M and A potential acquirers and investments.

See those engineering things coming back.

It might be more my consulting background, but maybe it's a blend of both.

The combination of the two. Yeah, absolutely. Should be teaching a class on this. You know, we run a school. Happy to hit you to walk through a model of how do you put this stuff together for a lot of M and A folks would appreciate it.

It's very simple.

We talk through it. We'll piecemeal it together and try to get some diagrams for you.

Sounds good.

When these opportunities come in, I'm thinking about like that first conversation. It sounds like if it's coming through the business, the R and D leader identifies it. You're really encouraging them to go talk to them. Or you're mentioning and saying, hey, here's some companies you should go out and talk to. And then you have the inbounds, which you'll take the first touch on. Foster that whether it's coming through bank or not. When you mentioned other just general CEOs are you actively out talking directly to some of those company leaders?

Yeah, it's part of our job to keep some of the relationships going. It's part of also some of the R and D leaders, they found companies that they were curious about. There are companies that we keep closely in touch with. Some we are actually investors. Even easier to be in touch. But there are folks that I have a relationship with that I keep chatting with. It's always good to get a pulse of the market and see how various industries develop. So it is part of our relationships and that includes VCs, actually, both for deal sourcing, but also general sharing notes of what's going on in specific sectors.

Do you have a good motion for getting to know companies that you don't have a relationship with?

I look them up on LinkedIn and then I reach out on LinkedIn the Cold outreach.

So I do the same thing. I do a lot of cold outreach on LinkedIn. In fact, I take a bet almost 80% of the speakers on M and A Science are sourced through LinkedIn. It was cold message and yeah, cold message. You want to be on my podcast? How do you do it? What does that message look like when you reach out to somebody?

It goes back to our approach being strategy focused. So what we offer is not a conversation with corp dev. What we offer is a conversation with our product and R and D folks and get to share notes on what they're building, what we're building and see if something bigger develops.

When you're reaching out, you're trying to set up a conversation with other colleagues from your business side.

Yeah, when I reach out to a company I've already done outside in work and share that with my R and D counterparts to agree that it'd be worth a conversation and then we reach out and so at that point we're ready to have a product general market conversation with the right folks from our side, not just corp dev. Sometimes there's a first meeting with corp dev, but generally we try to not make it corp dev centric from the get go.

Anything special that you do to facilitate that meeting?

Well, LinkedIn has good info even on the in the public domain about companies and what's their sort of headcount breakdowns and things like that. So we always have a little bit of key facts. Right. So there's what the company does, of course, a little bit of headcount and things like that. You again, free from LinkedIn and then how much money they've raised, anything like that, who are significant investors and then it's just then it's a product conversation. Yeah.

When we talk about the target company, who are you talking to? Obviously you start with the CEO, but what does that conversation expand? Because it sounds like you're very collaborative. You get the R and D leaders involved early. You want to get that conversation going on that side. How does it expand on that target company's end? Thinking through from the beginning to loi.

Starts with the founders, CEO, head of product, head of engineering. And that's usually where the conversation stays for a while. And so as there are more questions, maybe some experts from the company and from our side get brought in. Of course, privacy is a super important topic. Huge for LinkedIn. And so depending on the type of company we're talking to, if that might be an issue, we start diving deep into understanding their practices, how that fares compared to our standards, et cetera. Pretty early on to even figure out if we're interested in this company. Is there a way to make it work within the framework that LinkedIn members have come to expect of us? So that would be an example where we do a deep dive. Oftentimes try to understand some of the technology problems they've solved. Not the secret sauce, but understanding if there are products or tech that are going to be valuable for us, that's usually where it's centered around.

That makes sense. And then you can do a lot of People diligence on LinkedIn. You only have so many people involved, I guess essentially from their side because they want to keep the deal confidential, but you just essentially got to explore beyond that from your own diligence.

But we don't have any secret data in the background of LinkedIn that wouldn't be available. No, it makes sense, unfortunately, I guess, but we don't.

Yeah, you got the secret algorithm running so that you can just come up with a score of people score.

Exactly, exactly.

That's a new feature idea right there. Just little AI. Should you hire based on someone's background and the company's orgs they've been to, what's their score and like the niche, you should hire them. You probably get sued for some bias.

Well, it's a very clear, bright line at LinkedIn. We don't do shadow profiles, so we don't have information about you that isn't public. And so we can't start computing scores about people or making inferences about people that are not declared on the web on the site, which is what members declare themselves.

So we'll go back to this deal.

So I can check what the engineer's background is for example, but I don't have a magic number that tells me, oh, those three are very likely to be the top ones unfortunately. Maybe, but good for the trust in LinkedIn.

Do you have like certain red flags on the people side that you would because of the big emphasis around culture fit and things like that? Is there anything there from your perspective that you're looking for or is it your corp dev team to identify that? In the R and D team it's.

In the dynamics of the conversations, but we don't explicitly look for. There's no red flag or sort of bucket list of things we have to check. It's more organic how conversations unfold and the idea of culture fit, but also culture adding. We've been lucky at LinkedIn where a number of founders that have been acquired across the years have actually stayed on, taken leadership roles and that's something that we recognize as a good thing. And so it's not just about fit, it's really about can some of those people grow into leaders that really bring challenges or fresh views into LinkedIn as well?

I always look for common connections, how many followers they got and then look at the recent posts. People diligence, but it's more for hiring though not so much for.

Yeah, oftentimes try to talk to their VCs also.

Yeah, that's a good way to do it. It's like doing the backdoor reference.

It can be front door but I think it's a good thing.

Fair enough. When you get to the point we got this opportunity, we got good strong buy in. We're putting thinking through of a drafting an LLI to present. What does governance look like around this? You just got blank check signing authority to a certain amount and then it's got to go up to the board. How do you get approval to actually put an offer on the table?

So we usually run what we call pre term sheet diligence, which is again most focused on R and D, so not all the legal and all the cross functional things that can happen afterwards, but making sure we're quite buttoned up on the strategy on our end, on the tech, on the people. So there shouldn't be really a surprise there when it comes diligence post term sheets so that ideally those deals get smoothly from that standpoint. And yeah, we have internal approvals, strategy approval to negotiate, which is effectively the valuation exercise. And so we break down what are the value drivers for LinkedIn from their Derive a range of valuation. And that's fairly classic at this Point Corp Dev worked very closely with my M and A legal counterparts in negotiating a term sheet that is within the realm of the terms we usually look for. And then given specific deal dynamics, it.

Sounds like you have a few different stages of approval to get the deal all the way through.

Yes. So we have the first sort of conversations originally when we're going to spend time. Strategy approval and approval to negotiates are oftentimes one in the same, but they're two different topics. Then we sign a term sheet and then we have a final sort of go, no go meeting to share findings of diligence and confirm that we're ready to pull the trigger.

Okay, so here's initial. We're going to go ahead and commit to pursuing this deal. Then you get to the term sheet, which is probably having that number that you're presenting. How does that look like internally? Is it you come up with here's a range, I think we should pay for this company and then you get the head nod from the board and then you have that scope or is it, here's our pure single number, what does that look like?

Your approval levels vary depending on size of the number. With both within LinkedIn and at Microsoft, many was acting as our board. From there we put together a term sheet.

I forgot that the whole time this conversation we have a whole extra layer of complexity for the trillion plus dollar umbrella organization that LinkedIn's part of. Yeah, but it sounds like this whole conversation is you operate very independent of.

The parent itself from that standpoint. We follow the same process actually as any sort of business unit of Microsoft.

Okay.

We're not as integrated, we're not in the Microsoft offices, but otherwise. Yeah, our process is very similar to anyone at Microsoft.

From the governance side, you could essentially execute deals up until a certain point just within that business line.

Yeah, usually with the right approvals or the right heads up to folks. Yes.

Okay. And then after that, when it is something like, all right, we're cutting huge check here, you'd probably connect with the broader parent corporate development team and let them know this is what we're up.

To, we're coordinated with them, we talk at least every other week, etc. However, we operate independently, so we're cross aware, but we don't report into each other.

Okay. We have this checkoff of presenting an offer for the LOI on that range part. Is it something of this is just a limit or is it a target range that you're presenting? What does that look like to get that final approval to present on the company.

We come in with a proposal and guidelines as to what we'd be willing to negotiate.

Okay, so a lot of the back and forth you're going to manage directly, you're not constantly going back and saying, all right, what's my next move?

Oh, no, no, no. Cool.

And then once you get that done, then you had one more leg of approvals.

We go into diligence and effectively have a diligence findings and final go, no go.

So you go through conformatory diligence and lawyers do their work and it's basically everything's ready to sign. At that point, you make a go or no go, because you basically need all your final reporting a week or.

Two ago before the close date. Effectively, we already have all the diligence findings. We have a lot of the integration planning done. We have a good plan for what the first, the announcement, the comms, the first hundred days of the new employees will look like. And there might still be things to be negotiated in a definitive agreement. And we're basically saying as long as it stays within the norms of what we've done and we're able to resolve these issues, we will be ready to move on with the deal.

You're comfortable, everyone agrees and moves forward. Do you get any disputes at this stage where some folks are like, we shouldn't do this and you get the no go decision.

Those come along the way. It's very rare that it happens at the last minute.

Okay. So if it is something major finding it would come up early, get addressed. And if it is something that would lead to.

Yeah, if there's a confirmatory diligence issue that usually tends to be a flag and becomes a red flag pretty quickly.

In diligence, then you get through this, you close.

Yeah. You put in place remediation if there needs to be and things like that.

And I was thinking about like deal fever and stuff, but it sounds like you have such tight alignment on the front end with the whole strategy of this that there is a lot of checks and balances that you're not running around on your own solo with a blank checkbook.

No. And deal fever is the one thing I don't want to be accused of at LinkedIn or is not the only thing I don't want to be accused of, but it's clearly not my mandate.

What's the benchmark? I heard there's a saying, basically a year later, you don't want anybody asking you about that deal you did last year. The good deals, nobody talk about, they only talk about the bad deals you do.

We have deals that a few years later people are still talking about it as a great success. So I think that's the benchmark. It's not just delivered, it's really it over delivered.

Fair enough.

And that's the benchmark, to be honest. That's why there's so much alignment. If we do something that is a little bit random, yeah, it can go by the wayside. If it's really on point with priorities, unless something happens the technology or the team can't deliver, it should be a success.

How do you treat those failures? Does that get talked about or does it?

Oh yeah, I get reminded we haven't had outrageous failures, but there's things that have gone more or less and it's fine. There's also a ton of learnings in there for us to take in terms of our process and our approach.

That's what I was trying to get a sense of in terms of the professional development of your corp dev team and those experiences which really matter whether.

It'S a success or not. We conduct at various points after a deal what we call a postmortem. We've announced a couple of deals in the last three, four months and we're going through postmortems for both at this point to just figure out did the process work for all cross functional teams. Do we need to update the playbooks, do we need to update the questionnaires? We think about those type of things.

That'd be a great podcast. If I can just sit in with a microphone and just listen to postmortem.

I think maybe the highlight.

Yeah, we'll have to see if we get somebody ambitious enough that wants to try to create a new M and A science format. Here we just walk through postmortems on your last three deals and see what lessons we can pick up from it.

An example, without going into sort of details that are private or anything, we announced an acquisition in Israel a couple, three months back. LinkedIn does not have an office in Israel. And so you effectively have to both do DM and A, but also set up the legal entities and set up LinkedIn with that company, with that team all at once. And so there was a bunch of learnings in terms of things that need to be done in addition to the regular process to make sure there's a legal entity or to make sure people get their laptops in Hebrew and all those types of things. There's always a bunch of learnings, even for deals that outside of that dimension Fairly straightforward.

You have a good way to capture it and reference it down the road.

I have a person dedicated to integration management purely from for that which is we take what's in the postmortem and then that influences when we update cross functional playbook we maintain with all learnings from previous diligences and all learnings from previous integrations. Those are about to become available to folks across LinkedIn on an internal wiki so that people can just go and review all of that.

Wow, cool. What are any other big lessons learned? Just help me out, make sure I do a better job. My M and A deals when we get around to doing them.

Yeah, I think that one thing we haven't talked about is with this approach the slightly different profile of people maybe, but it's fun and interesting. Obviously I'm an ex banker, ex consultant and my team is a bit of a split of ex bankers, XP and ex consultants, ex business operations folks and it makes for a good mix. And in many ways the people I look for is if they come more from the finance background where I really test a little bit is their appetite to learn strategy. Not necessarily to have it from the get go but their appetite to learn and explore. And so the case we give the conversation end up going more about strategy and the opposite with more of the consultants which is can they pick up the financial skillset. But I think that makes for a mix of folks that is interesting and so that's where also you bring in multiple points of views when we review those news, those earnings, et cetera, people will naturally have one lens versus the other. So I think it helps having deeper views on companies and more interesting complete conversations. So not just about the numbers or not just about the strategy.

Yeah, they have different focus areas but then you look for the expendability into other areas to see adaptive or how quick they can learn.

Yes.

What's the craziest thing you've seen in M and a?

The 11th hour is effectively the CEO of a company had forgotten to share that someone had some options. And so all of a sudden literally the deal was signing at 7am and it's midnight the night before. And then there's this, oh, we forgot the options of this and that early employees that were not really documented, they had signed papers but it didn't really show up in any legal papers or any diligence. And so all of a sudden having to redo the waterfall between midnight and 7am and still make it right before we could go ahead and sign the deal. That's memorable, especially since basically we didn't sleep that night.

That's pretty material too. You can't get the deal done until it's adjusted.

Yeah, it turns out it was small numbers, but still you have to get it right.

The 12 hour surprises and this has been great. I appreciate taking the time to chat with me, help me become a better M and A scientist.

Pleasure's been mine. It's fun.

Cheers. Here's to the deal.

Foreign.

Thank you for taking the time to explore the world of M and A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M and A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email Kisan K I S o n a science.com or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter. Again, that's mascience.com here's to the deal. Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.