Conducting M&A without a Dedicated Team

As our regular listeners know, people, leadership and culture issues can make or break a deal. That's why I'm excited to be joining the HR M&A Roundtable's third annual conference. I'll be there alongside M and A giants like Ken Freeman, former CEO of Quest Diagnostics, Mark Cassidy of Vestigo Ventures, and Sally Larson of LPL Financial. This year's conference is optimized for virtual attendance and is the best way I know to learn practical, hands on tips, tips and techniques for managing the people, leadership and cultural issues. Visit mascience.comhr to learn more and get a discount code exclusively for MAScience listeners. Again, that's mascience.com HR I'm Kisan Patel and you're listening to M and A Science, where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals. Welcome to M and A Science Live, where leading M and A practitioners share lessons learned from their experience. When you use proven techniques in M and A, more value is created. If you're interested in keeping up with the latest from M and a science, visit mascience.com and subscribe to our newsletter. Again, that's mascience.com I'm your host Kisam Patel, CEO and founder of M and A Science and Deal Room. Joining me today is Alexi Veneri, Co Founder and CEO of Digital Airstrike Digital Airstrike, which provides ROI driven social media marketing, AI messaging, reputation management, lead response, customer engagement, and digital marketing technology solutions for over 5,000 businesses. Today we're going to talk about how to execute successful transactions without a dedicated M and A team. How are you doing today Alexi?

I'm great. How are you?

Excited to have this interview with you. Can we kick things off with a little bit about your background?

Many years ago I started with a startup out of Seattle and I was one of the original founding executive teams. We actually didn't do any M and A, but we did take that company to 75 million in MRR in four and a half years. So that was my first foray into tech. Really. Before that I worked for a Major League Baseball team, but then I was recruited specifically to join a company called DealerTrack out of New York because they wanted my help in marketing but also running investor relations. They had a very specific M and A plan. So it was to do a number of acquisitions pre IPO and then also continue down that path of acquisitions as well as certainly developing our own technology. But I was part of an M and A team and it was an internal team. And we did I think 11 transactions when I was there in just a couple of weeks. Very active company working with a bunch of fast New Yorkers, which I love. I think that set the stage for me to really have an appetite and to certainly learn. Especially when you're doing it for a publicly traded company, there's no room for error. You learn everything by the book. But we move pretty quickly. So that was my deepest M and A experience before I co founded Digital Airstrike. In the last 11 years we've been a part of six mergers or acquisitions.

That's really interesting how your initial exposure to M and A was through the IR lens.

Yes. And marketing, being part of the team and one of the things I wanted to talk about is so important with the people. Everyone says that, but with M and A they can make or break an acquisition to get those folks on board and to really understand what you're working with. It really is the first asset that I look at. Who is the team? What's the culture? That was my role on the MNA side. It was certainly to look at how we position an acquisition, branding and present it to the analysts. Also how do I embrace them? How do we become one culture, one team? That was my original background and it served me well. Understanding that out of the gate.

That's great. We're going to have a lot of conversation about people and culture to get into it. How do you effectively do deals without a dedicated team?

It's actually an advantage. It's more work for us. My team that works with me on it because they all have regular jobs, they. They're probably a little exhausted but it's a real advantage. I saw a little bit at DealerTrack. We had definitely had a dedicated M and A team. I was a member of the team but I had my other day to day marketing and IR responsibilities. Sometimes I think when there's a dedicated M and A group internal as well as working with a banker, they get your input as maybe someone in the company. They vet and float the idea. They want to make sure products align but off on its own courses and the day to day team that's going to inherit the acquisition is not really involved in it until it's basically a done deal. You're maybe doing a little bit of due diligence but it's not your baby and then suddenly it's dumped in your lap. And I think that's why for a lot of larger companies it takes them so long to monetize some acquisitions because that M and A team, hey, we've done the handoff, we've done the transition, we're going to go find your next deal and you're just given this adoptive baby, your whole family already you're trying to raise. I think it's just slower when there is that dedicated team and it's given to the in house team to then run with versus with our group. It's primarily myself, our COO and our CFO and our head of product strategy. We're in it from the beginning. We know from the beginning that if we're going to do this deal, it is our baby. We're like pregnant with it during the negotiation stage. So I think it helps us as the core team then that's going to have to execute once the deal's done already. Be so much further ahead. We are in the weeds. We know the financials, we know the products, we know the people because we've been the ones looking at the deal. It doesn't mean that we wouldn't like a bit more help, but I think it has made us very successful in the time of deal transaction to then monetizing it or being able to make an impact so we can realize the benefits faster.

What's interesting is the way you contrast between having a dedicated M and A team and not having a dedicated M and A team. Particularly you emphasized ownership that when you don't have the dedicated team, you have this view that you're going to own this deal from the very beginning, all the way throughout. And I think that lures to some of the people, culture things that you started off with and then also this end to end view and what that whole process looks like all the way through where you mentioned sometimes you have a dedicated team and it becomes a bit of a handoff.

That's right. They only let you see parts of it. Like depending on what your functional job is in the company, if you're the cfo, they only ask you to look at some of the finance parts or the coo, maybe they ask you to look at the operations side. But the fact that we're all in it from the beginning, we're all kind of betting deals. We're looking at what's out there and really agreeing to the fact that if we're going to do this, we're going to own it out of the gate before the deal's even done. Now sometimes that means you're disappointed. You get a lot of buy in with that internal team and then not every deal happens as we know. I just think it's gotten us further ahead faster because we have been really in it as a part of our full corporate strategy, not just, oh, what are those M and A guys doing over there? And what are they going to jump on our lap next? Or they only let you see a part of it when they're doing some due diligence, but you don't really have the full picture. Rightly so. Right. They're working however many deals because again, I've been a part of one of those bigger teams and I was given, like, my access. Hey, Lexi, look at this. This might happen, this might not. And then you think it's not going to happen. And boom, six months later, they somehow did the transaction and they give it to you. I've seen both sides, and as we continue to grow as a company, I'm sure we're going to add some resources. But I would say the other sort of not dedicated team we have is I've been pretty open with bankers. So we've got some folks either looking to go do your own M and A or you're looking for a transaction yourself. It's interesting. You get hit by bankers all the time, and I'm always thinking of them more like real estate agents. I might not be in the market right now to buy a house, but if you find a good deal and you're out there talking to folks and then you want to bring it to me, I'll pay you. You could be a part of that deal. But I'm not exclusively working with you because I think that also limits your options in terms of their lens and who they're connected to and what they're looking at.

That's a great way to look at it, especially for the sourcing activity. I take it in addition to having a network of the bankers, you're still looking at some of the proprietary deals and building the relationships with other CEOs that could be potential targets.

Yes, a hundred percent. I actually have two come across my desk today of the blue. So we've been pretty open. Even your show. Thank you. As people are looking at this and you're thinking, hey, let me go see what Digital Airstrike does. I've spoken at conferences, on panels, on podcasts, and I've just thrown out there, if you've got great technology that helps consumers do research or buy online that helps them in the CX space, maybe talk to us. And there could be something, either a partnership or actually a deal, whether it's now or down the road. So we've had folks that, in fact, one of our recent deals we were pitched from a banker who knew we were in the space a couple years prior. At the time, it didn't make sense for us. They didn't end up doing a deal. One of the founders remembered us and was no longer working with the banker and just reached out. We just kept in touch. And then when we maybe the timing was better for both of us, then we. A little bit like dating.

Yeah, yeah, absolutely.

You might like to date a few people for a while and then you can decide who you're getting married too. So that worked out for us. But there's been all sorts of ways that deals have come to us. I'm very open about it. I'm like, look, we built a lot of our own technology, we love our development team, but if we can get to a certain point faster, if there's really an asset that we couldn't just manufacture, it's relationships, it's the people, but allows us to maybe certainly build our own tech, but then get something else concurrently that's very cohesive and works with our strategy. I'm all about it and it's interesting. I don't think enough companies throw that out there. There's some secretive about it, and I'm not running around telling everybody, everyone we're talking to. I don't want to get in a bidding war with somebody, but I do think that when you're open to doing ma, you need to talk about it.

Yes, that's true. It sounds like you're taking the right approach where you're at the events, conferences, you're networking, you're keeping open about it with the board members. What about internally? Do product folks get engaged and know that, hey, this may help us bridge our roadmap or something like that?

They do. That's a great question. And I think our internal team is pretty excited about it. So if I see a company even approach us for a partnership, I'm always like, no promises. It's someone on the product side that's going to take a demo or take a. I'm always like, hey, just maybe see what size company they are, really what they're doing. In fact, one of our other transactions came across my desk. A total cold vendor outreach. Just somebody saying, hey, do you want to buy our solution? As in via their client. And I just checked out their website and I sent it over to some of the products. I said, you know, this is pretty cool. This is interesting. I have no idea the life cycle of this company. But as you start to take demos or you're looking at them, why don't you broach it? And that's literally how we got one deal. Didn't again happen overnight, but we just were very open to that. Especially, I find, when people come to you, once you're a certain size like we are, we're actually now 7,800 clients. And now that we're at a certain size, people think that they can come to us and get us to resell their services and products. I'm like, I didn't build this one company. We didn't build this company just to sell your product just because you haven't yet invested and built a sales team and accounting. But whenever I hear that someone's pitching us that way, I still take the call. But obviously they have a distribution challenge or they need something, they might have a great product. They've not yet really found a way to bring it to market. So that's also a trigger. I would say to them, look, exactly that. I'm not here to just help your sales. I want to build this company. But do you want to do it together? And that's been a really successful approach with some of the founders that maybe aren't so early stage, but they think they're a unicorn still, and they think everything's going to align. But five, six years, and they're still wearing all the hats. They're hr, their finance, they're still fundraising, they're doing all the things and they've gotten away from maybe what they got excited about in the beginning. And I almost think of it like a farmer's co op. Do you want to come in and take some money off the table now? Earn out more money with us? But you're a part of our larger structure, so you benefit from then our sales and marketing and account teams and our reputation. But then you get that bigger payday once we all get a bigger payday down the road. Again, I'm very open with everybody. I tell them that's how it is. I talk about my story and what I've done. So for the right company, that can be an exciting option for them because they're just not ready to fully sell out or their numbers wouldn't get them the multiple they want. But they're also a little overwhelmed wearing all the hats.

What's your thought process on strategy? Are you looking at these deals for the people, the product, the market? How do you assess that and figure out what's the most Important to you?

I actually like to find out early on what's broken. I kind of like to find a diamond in the rough, be very critical in a collaborative way where I'm not beating anybody up, because I've also seen how certain investors do that. But really, what is that problem that stopped you from going alone or limited your growth and be very much a partner in it? Out of the gate with the founder or the CEO, Ford, whoever, investor. Sometimes it's an investor that got stuck with something, then just collaborate a little bit together because again, it has to be a shared vision out of the field. You don't want skeletons in the closet popping up during due diligence. So I start there. I think that's also a really good way to see can you build rapport with these humans? You're going to work with them most of the time it's not just during the deal. There's an earn out, they join your company. Got to be able to work with them. And life is too short to work with people you don't like or that aren't going to be as open as I'd like them to be. That's a very good exercise to get to know the humans that you're going to be working with if you're going to do a deal. And then what is the culture like? Sometimes that's part of the problem. Maybe they just haven't focused on culture or maybe the benefits aren't great and they have a lot of turnover. Those things are fixable because I always look at it, once we're together, it's us. It's not us versus them. Once you do a deal, it is the team. And it's not always that. Digital Airstrike has all the right answers. I'm looking for those little nuggets that they can bring to the table as well. And together we build a great brand and a great company and a great culture. But I think starting those questions with those hard questions out of the gate, what keeps you up at night? How can we fix this? What's stopping you to go from here to there? Why isn't your EBITDA where it should be? Why don't you have more clients? I kind of like to get in there because I've got a story or an experience that I can relate. I'm not that young anymore, so I've got definitely an experience somewhere that I can not commiserate with but relate to.

I would say you're looking for opportunities to create value.

That's right. And honestly, when There is a problem that helps us because that's the upside. And I think that's what I also try to remind them of. If they weren't perfect, we probably couldn't afford them. What is the upside for us? It's how do we find a way to work together to fix some of those things? But always get that it's very. Everyone says one plus one equals three, but four or five, what does that look like? And I also don't ever come to it with me personally. Our team having all the answers. They have lived and breathed this business. They know what's going on and what they need. So the more we can learn from them, the better, even if they don't continue with the company post acquisition.

All right, this is where we're going to get a little interactive.

All right.

We're going to walk through the deal life cycle, which you're familiar with. And what I want to understand from you, Alexi, is you're running this deal life cycle without a dedicated M and a team. So I want to understand how you're getting people involved at what times throughout this life cycle and how you're utilizing the resources that you have, starting from the very beginning where you have some good conversations with a company. It seems interesting, but you're still, like you mentioned, you're assessing the people, the culture. You probably want to get understanding of their customers. So maybe if you walk me through, what does that timeline look like, and who are you bringing in internally and as you move into diligence.

Sure. I start with our CFO to the gate. He's a great guy. Just even today, I'm like, hey, do you want to sign this NDA? It always starts with the NDA. If they're in any sort of a process, Sometimes they're not. Sometimes it's just an introduction. But if there's an NDA that goes to our cfo, I let him handle it. He tracks the copies. He looks for anything weird he's got. He's worked with me for eight years, so he knows what we're looking for. It always starts there. And then the first conversation. It really depends on who we're talking to and who's approached me. If it's CEO to CEO, founder to founder, I will take anyone's call. I'm not going to relegate that down to somebody more junior. I do want to meet them. I do want to get to who they are and just get a sense of them. But I'm not saying I'm doing a lengthy call. It might be 15, 20 minutes where we. Just tell me what you're thinking. Usually though it would probably. One of the next steps is usually with our COO and our head of product strategy because we just want to see what they're doing and maybe there is a biz degree, maybe it's not a full on acquisition. Before we go any further, I just like to see what they're going to show us and that tells you a lot about the people. Do they launch into full sales pitch mode? Do they have a fully loan out IR deck like what the banker put together? What are they not saying? I'm like, what's on here? Why'd you leave this off? You're not talking about Churn at all. Is that a. What kind of a red flag is that? You can learn a lot about them and that's even pre or post mba. Sometimes folks just want to talk. Like I said, if it's a biz dev thing, the guys have a biz dev meeting and then we just start to think about it, what's the team like? And you just start to run the numbers. It doesn't usually happen right away. We put them on a spreadsheet and do get a sense of urgency from them. If there's desperation and they're following up too much and like something's wrong here, they're doing their own thing. We actually do like to track them for press releases and what they say online and social. How active are you? Even if they don't have a lot to say, if they're active, it shows they're still in it or are they totally checked out? It's the last time they posted on social three years ago. We try to then investigate a little bit about the backing. If they've not disclosed that, you've got to know who owns them and you have to know who the decision maker is. You can waste a lot of time talking to somebody that just joined the team. We definitely have. Our CO is great about an online sleuth and we check Eller and we look at different mediums and looking at a LinkedIn profile, how many people have come and gone from the company? When you go on LinkedIn you can see people that aren't there just now, but you look in the people tab and you can see how much turnover there is as well. So we tend to go probably a little quiet and do our own little, I don't know, investigative journalism, so to speak. And then at least monthly we're talking as a team about what's next, what are we seeing is there something complementary and then just seeing if there's any urgency to move faster on any one deal.

Okay, so we're in essentially preliminary diligence. You got your CFO on deck, your chief operating officer, product strategy person, getting the initial feel for the deal, see where it'll fit in your ecosystem, really observing how this company's presenting themselves, looking for some of the red flags, are they skipping some of these well known metrics that they should be comfortable talking about? Doing your own diligence online, checking out some of the LinkedIn, understanding what the people ecosystem looks like. There's, there's any major issues with Churn, probably Glassdoor and things like that, and then your internal folks are contributing, you're getting this level of comfortability, then where do you get to that point when it's like, hey, we wanna put an offer, what does that look like?

So you should have a matrix that works for us. Sometimes it has to do with the stage that we're in right now. Unless it was an amazing deal where there was some crazy reason to jump into another one like tomorrow, we're not rushing to do another one. We like to execute really well. So some of it's timing for us. If we actually think the companies, even if we're interested and we think it's early stage in their process and they don't really have to sell, but they're exploring some options, we would stay engaged with them and maybe there is some light partnership we could do, but we're not ready yet. There's not one size fits all in how we run a process or the timing. But we do like to keep an eye on it. We like to be aware and stay in touch. I would for example, have my CFO checking quarterly for updated financials. So it's not uncommon. We would be talking to a company over a couple quarters before, we might get serious and say, okay, let's talk about what a deal looks like. Usually if I've gotten enough information, I would just have a one on one talk with the founder or CEO and depending on again where they're at, talk about timing, what might make sense with the structure. They may not be familiar with the burnout. They may not be familiar with enough about what we're doing. If we're pitching part of the deal as equity in our company, they need to know about us. And I would tell them that we're going to now tell you a lot about us. So you see that we've got a lot of upside, which we do. And then You've got a bet as the founder, do you have more of an exit yourself going it alone? Are you going to be deluded by having to take on more investment if that's your next potential option? Or as a part of our group, can we get to where we want to go together faster? We actually even do. Depending on the size of the company, depending on their internal finance team, we'll actually build our own spreadsheet and give it to them. I know a lot of firms and VCs don't do that, but I believe. And look, this is what we're seeing. These are the metrics, but not just what we think we can do. And this is before an loi, but let's just run some numbers on a spreadsheet. But let's show you a couple scenarios for you. If you're going to come in, you're going to stay a part of the combined entity. How could you crush it? If there's an earn out, what could the stock look like? We can't promise, but if we're going to have an exit one day, let's run some numbers and then let them play around with a spreadsheet. And again, each deal is a little different, but that has been very helpful. And now that we've done a number of them, some of these tools that we have found that works, we have in place. So again, why can we do this? Three or four of us on the executive team, I think it's because of that, because we've seen how this goes and we don't always peg every deal the same way, but talking to the people that are involved that are running the other business day to day, that'll let you know where you go next. And sometimes we've done deals in a couple months, we can do due diligence pretty quickly because we've already done it. It's not that handoff from the dedicated M and A team that then has to find time on your calendar and then you almost restart that process. I found again, I've been part of one of those dedicated teams and when they've got so many deals they're working, they do all their stuff, then they try to turn it over to the internal team and almost have to do the whole dog and pony show again, which extends everything. So our due diligence, usually people find they're surprised we can get through it in 30 or 45 days when they're pegging, like three to four months. But we've already done a lot of the work ourselves.

All right. So as we near getting to offers, timing's key. Want to make sure that you're comfortable, that you got the right time for to do the deal that things are going to be. They're going to get the focus that they need and things like that so you're not busy with another deal that you just finished. The other part is get into sharing information about your company where you really open up and start sharing with them the inner workings of your organization so they get understanding what they're getting into, what the organization's like, what the upside potential is. And then at this point you start discussing general terms and even provide sort of the model in terms of your view of what the opportunity looks like and be able to really be transparent about that. Yes, that's interesting. It's like good steps to add in that focuses more on getting alignment than what I typically hear.

Yeah, and then it would be loi, so there's no big surprise. And then that's usually to circulate to investors, the board and whomever. I think it's important though, because the worst thing you can do is get an loi and then spend months on due diligence and then have things fall apart because you're not as transparent on the front end and they thought something was something else on either side. I've had that happen. I don't like to waste my time in that anymore. I'd rather do it on the front end. And again, maybe the timing is just not right. And that by I think being that open and collaborative, it also takes the fear factor out. Every single owner, investor, CEO, founder, you never know that the deal you're going to take is the right one. You just don't know. Sometimes you don't know for years post transaction if it's really going to transpire the way you think. So there is that fear. And I think the more transparent you are in collaborative, like I said, talk one on one, ask me anything. As long as you've got an NDA, let's go through some of those things. That's really important and it's been interesting. Even times when the founder decided to walk away or the timing wasn't right, or we could do a deal, we've remained in touch. There's not that hard feeling where I think with some investors and the way some folks do a process, it's just like breaking up with a boyfriend and you never talk to him. I'm like, hey, if it was worth my time to spend a little bit of time with him in the beginning I'm not going to get offended. I don't want them to get offended for either reason. We don't want to do the deal.

Absolutely. And it sounds like going through these steps, it allows you to be really comfortable from both sides. So when you do get a letter of intent, it's not any surprise things in there. Everybody's pretty aware of what's going to be in there, right? You go through internally, get the approval check marks from the board and whoever, then you move into conformatory diligence. How does that go down?

And that's when the real fun checklist comes out is you know what those look like. I warn them. Again, depending on the size of deal, I'm like, we gotta ask these things. Don't freak out. And because again, I think you have that rapport, it also alleviates some of the angst when they've got to really open up the kimono then, right? They've got to really share some things. Sometimes it tells you a lot about them. When you thought that, you asked those questions more informally. And it doesn't come out until they're legally obligated to disclose some of this stuff. Like, how did we not know there was an employee lawsuit out there? We talked about things like that. So sometimes those little hairy things pop up, but that too, just the fact that maybe they weren't as open in the front. And then when they actually have to show you the real deal, that may have us have some pause and we've got a comparison point to be like, oh, they pretty much told us, okay, we were expecting that, or wow, that is a 180 from what we were told. That to me speaks to the character of the individuals. And if again, I've got to work with these folks long term for that reason, we may stop the discussion. It's good to have that baseline informally. Ask a lot of questions, get to know them, go to dinner, know what's going on. And then once you really get into, okay, put it on paper. You gotta outline all these things you have to disclose. It's just very interesting to see if things change or not.

You don't have a dedicated corp dev person that you can just put in charge of this. Can you explain to me your involvement during conformatory diligence and what are you looking into?

We divide and conquer quite a bit. I do have a great executive team, like I said, and they kind of know that the boxes they're gonna have to check. We'll set up a data room. Oftentimes the companies we're talking to are not in the formal or if they are, they've got a data room. We know what to go look for. We though, always ask for disclosure though, even just in a word doc, even if you're supplying different documents. I just want to see down our list of pretty standard questions. For every deal we ask, I want that founder CEO to sign off on something. I want to know yet provided it's in the data room or never had that. That's what I look at. I really look at that. It's like a word doc, a summary doc. It's almost like an appendix. I want the clip notes. And then depending on what that tells me, I send our team off to go, okay, go in the data room or go hunt this down. Why are they delaying and getting us that document? We spend a lot of time at Air Traffic Controller looking at it from the top level. But then once our team tells me something, product is digging in on the platform and looking at their documentation on the technology or the tech stack or whatever, their vendor contracts. I'm very curious as to how they structure vendor contracts. There's a lot of things, there's certain kind of red flags I would ask them to bring to me, but I'm not the one in the data. We divide and conquer on that. And then once there is an issue, that's when I'm like, okay, let's go look at this together.

So your team has regular day jobs on top of working on deals. How do you prevent burnout?

They do, but I actually think we all think this is the. It's the work hard, play hard. This is the fun stuff. If a deal doesn't happen, sometimes we learn something. It's almost like ongoing executive education. You learn about how somebody else structured a vendor contract and like, that's a great idea. We need to do that. Or, wow, look at their benefit plan. We never thought of doing that. Let's maybe pick that up. Not that we're stealing information, but you're always learning, I think more than when you're doing that and you expose the executives to how other businesses are truly run. If you're in diligence, going to a conference, okay, what are we going to learn in an afternoon? We didn't go to them anymore. They're virtual retired. When you start to really understand how other companies work, that's where our team learns a lot as well. And even if the deal doesn't get done, we always pick up something that we can use again. We're not stealing information, but it's more of a process or an idea or wow. I never thought that we could leverage something in the way that another company did. So there's always some learning. I think it's actually really fun for our executive team. Our company as a whole gets excited. I get asked by all of our team members. We've got 165, and we'll do company meetings, like, when are we doing another acquisition? Is there anything up and coming? And we don't like to speak close everything. But it is fun to involve more of the team. And again, I think it's because it's not just this thing off in an island like a skunk works M and a group that's doing something behind closed doors. We really make it a part of our culture.

When you're going through conformatory diligence, how do you start thinking about integration?

Oh, day one, we start thinking about it. Before that. We really do try to think about even the folks that we may bring in to do more of the deeper dive, like a director of technology or someone, a product manager. We're pretty open. We're like, look, we're looking at this company. That's why I want you to look at this is we might buy them. Maybe there's a partnership opportunity, but we want them to be thinking about it right then. But we're thinking about it before then. We're just trying to see how the pieces fit. Sometimes, though, it's a grab bag and you think you know how it's going to work until you buy it. Sometimes it's good, sometimes it's not too good. You're thinking, oh, wow, they've got this one bolt on thing that would really work well with our platform and we don't have to build it. And you get in and no matter what question you ask, you're like, oh, that's not going to work. That code's messy. It's easier and cleaner for us to rebuild it. Or you just really didn't realize they had some partnership that they failed to tell you about that actually is meaningful down the road. We've had that happen. We didn't necessarily, at the time of acquisition, need it, but a couple months later, man, that came in handy because some partner changed some code or something that shifted and they already had a different backdoor to integrate with somebody that maybe we did. That's the fun stuff. I love always getting a gift with purchase. When you find something like that after.

There'S good surprises or bad surprises, it's always both.

But I think we have had more good than bad. For sure. Again, because I think we're so involved in the front end. You have a feeling, oh, they're saying this. We've looked at this. We looked at the code, but. And usually you're right, but it's okay. We expected that. We thought we'd have to rewrite that or we thought we'd have to redo that. But sometimes there's something they just literally didn't think was a big deal and they didn't realize it might be a big deal to us and then we get an upside later. Or talent. Oftentimes when you're talking to the companies, you're just talking to the senior level, they don't want the staff to know they're looking to sell. You don't want them to necessarily either because people get distracted. Are they going to look for jobs? Are they worried once they get sold? What's the new culture from day one? Something we do once a deal goes down, we make sure pre Covid, we would physically go to the location I would always go. But we've done a couple deals now during COVID we had to be on virtual FaceTime Zoom meetings. We made sure we had all of our executives on video call. We talked about our benefits at a day one, we all did individual calls with the team members divided and conquered on that. And that's where you sometimes get the biggest bonus because you just don't get a chance to talk to all of the humans. And once they're part of your team, you do. And I always like to incentivize them as well. Even if they're not owners, even if there's no stock, I want them to hit the ground running. And we always like to give them a near term like 90 day upside for them that if they help us with this transition, if we don't lose any customers due to churn in lockstep from day one, telling clients that this acquisition has gone down, that's been very beneficial for us every time. I can say without a doubt, we've always got excellent talent that we didn't know wasn't that we were surprised by it. We just didn't get a chance to talk to the broader team.

What about communication with customers, existing and acquiring customers? What does that look like?

Each deal is different, but we like to do it as quickly as possible. Again, I'm all about being transparent. So we want to out of the gate get to obviously the largest customers first. We've already been thinking about before deals done, what the message is what's the benefit? What's in it for them? So we're ready to go. And we ideally do it with a member of the acquired team that already has the relationship. If we don't know the customer or partner and show them out of the gate within 24 hours of a deal getting done, we're together on a call or in the past, we'd fly out to meet that customer. That's really important. You can't just let that simmer or sit. And then we would do press releases. We talk to the media. We let folks know that this has been done. We don't try to change too many things, especially if it's not broken. But what's interesting is when you offer, aside from that first initial outreach, we want to do meetings. Usually they've got a laundry list of things they wish that they could have had done. And so far we've always been acquiring smaller companies, which means that we've had more resources. So usually in those client or partner conversations, we might already have something already built that they were waiting for from the smaller entity and they're just thrilled. And we don't run out and raise rates out of the gate. Or we just. We look for and listen to them too. What has been your blocker? How can we now together do more for you? And that's really helpful. And just keep that open. Communication, listening.

I like it.

And then just give them something. What do they need right now? Get an early win. And then look to build if they need custom reporting or how it goes. Right. You gotta really support the individual that has the existing legacy relationship. But also you've got to pretty quickly make sure our broader team understands that this is now our combined client or partner. We've got to support them out of the gate.

Let's go back into the inside view of distributing or putting the resources in play. Because you started this deal pretty early with your executive team, pretty hands on looking at this deal for the whole life cycle. And then you start working with your internal resources as you go through conformatory diligence. Get the bird's eye view and try traffic control and really make sure those pieces are coming along and you're diving into the areas that need attention. And now you're getting into integration when this is the real meat of this stuff and things could get complex when.

The real work starts.

Yeah. How does that change and what does that look like when you're deploying your internal resources again without having dedicated teams or managers there?

So before we even do the deal, we have in mind what we're going to do in terms of some goals and even some compensation even for our internal team, because we know you still have your day job. But if we can together hit some goals, they might have some short term bonuses or things that we're letting them know. We do realize out of the gate might be putting in a few more hours, but we want everyone to win. We also have some values. We really live and breathe our values. So one of them is think like an owner. All of our employees have stock options. And we're pretty clear. We're like, I can't make guarantees, but the more we grow, the more we do successful acquisitions. At some point, as a stock owner, an option holder, your stock would be worth more because together we're bigger, we're better, we're growing faster. So we remind them of that. Too often. I think companies that have stock option plans never explain anything about stock options to their employees. We do a quarterly meeting with anybody that's new to the company or newly getting stock options and I talk about what they are. So I think that's important to get that buy in. And really our team gets excited, our sales team gets excited about can they sell something new because of an acquisition. Our product team, I'm always like, guys, does this mean we've got some new feature or partner? Can we reduce expense? Does that improve our margin? Like the puzzle, we're all together trying to figure out how it fits together. And again, I think it's because internally we do all this. It's not an us versus them with an M and A department. Oh, that M and A team's forcing this on us. Oh, M and A team made a bad decision, now we're stuck with it. There is no one to blame if we're doing it ourselves. Right? You can't just point fingers at the M and A guys. You actually, as a team, we all had a chance to bet these things. Now, of course, the one thing we're always also very careful of is you have to have confidentiality. So if a deal doesn't happen, but once that deal happens, we really want people to know about it. From day one, we invite the new team members on company calls. We will sometimes even retro something. I'll give you an example. On one of our recent acquisitions, the prior company never did like an annual president's club trip for their top salespeople. It just didn't have that. And we inherited some great people and they did great numbers or else that helped us want to buy the company. And they were still putting up great numbers. And even though the trip we recently took was for last year, and they weren't even part of our company, I was like, guys, let's bring them. I know we're rewarding them for revenue that the hire owner received, but I think this is awesome. And by taking those steps and bringing people into the fold and explaining why we're doing this, it really does help you move forward together faster and realize that combined benefit, which is the reason why you did the deal.

So you're driving accountability, ownership with the people and all the activities that need to get done in integration. The thing that stands out most to me is the way you align everyone around the company. Value.

Yeah.

Hey, everybody's got a piece of this. And we all need to work together to really do the right things to ultimately create organizational value.

That's right. Yeah. Our core values are think like an owner. Because we're all owners. We also have clients win. So suddenly, day one, our client base just grew. I think at the opening, you said we have over 5,000. Business is what we do. Because of some of our new acquisitions. We're over 7700 now. We got to think of everybody now, and that's our clients win. We also have a value called whatever it takes, and that goes to everybody. Day one, or if you've been here 10 years, we're always doing whatever it takes. There is no that's not my job. There is no stay in your box. We work together to do whatever it takes for each other and our clients so they have success. And then we really have another value called passion in action. We love what we do, so we don't always get everybody in the right seats on the bus day one. But even when bringing in that new team. What's your passion? What do you want to do? I know you're a customer service agent right now, but is there something else you want to do? And really, we try to get everybody really excited about what they're working on, and that's a big part of it as well.

Really great values. I like to think like an owner that really stands out.

Thank you. We actually put it on the wall just today from our graphics team on our new office we just recently acquired with the acquisitions. She's got graphics going up on the wall, and she showed it to me, and they're right there on the wall.

That's cool.

The other thing I look for is with that team you're bringing on, what's something new and fresh that's better. For them. So in pretty much every single case within about six months to a year, we get them a new office, we give them new benefits or we do something new. Just I don't want them thinking it's the same old and I just got another owner. We really talk to them and make them a part of the process in a new office. We just opened up in Tampa. We had the team that we acquired go look for office space. Where do you guys want to be? What do you need? And it made them really excited about it. And that's truly what we're all about. We're one team in it together.

You want that people experience to be an upgrade.

Yeah, exactly.

So let's look at the first half dozen deals you've done as a company. And I want to know what are the biggest lessons learned?

Sometimes you learn the most from the deals that you don't do. Early on in our NDAs we did not have a no solicit policy and we actually had somebody come after us to take our team once they learned a bit more about us. So that was interesting. That's a non negotiable. We think on both sides like we're not just taking meetings. Then go hire your people or vice versa. So that's a lesson I would say people need to think about when they're doing these meetings. What else did we learn? It's very hard if there isn't day to day management or the founder still involved. And if truly the process is being run only by the vc, that's challenge. No matter what they say, something's going on there. If there's no more leadership team in place and they're trying to still convince you it's a great deal. It's probably not. And it's interesting. I've learned how little they know. I know that sounds horrible. I'm sorry for any VCs or PE firms, but it was difficult. It took longer than it should have. We ended up not doing the deal. I think that would be something we've learned to avoid. That we really want to know we're going to be able to talk one on one. Just need to get in the deal consideration phase with somebody that's really running the business. So those would be a couple takeaways for sure. And then the devil's in the detail. Really know the numbers. Trust but verify sound like the kgb. I think that's their slogan. But you gotta really look at these things. Verify, make sure that there's no little shell game going on.

Any other red flags to look out for.

I would say again, see what they're doing online. Talk to customers if you can. You're under NDA. You can't always like go interview customers, but get a sense of the space. If you're looking at a company that's one of a couple players, go to some clients, key partners, key vendors, and say, who's really got it going on in the space? Who's got the best product?

You're diligence.

Yeah, even before you're in diligence. That's my big takeaway.

What's advice you'd give to a CEO that's pursuing their first acquisition?

I would tell you that and this is my own advice. I waited too long for us to do more of them. So we did one early on and then we spent a lot of time trying to do the integration. Is it perfect? And I wish we would have done a few more sooner. There's a lot of variables though. It depends on your ownership structure, what your board's comfortable with, whatever you're doing. But I do wish we would have done some more sooner. So that would be my advice. Don't be afraid. And certainly take meetings. I take calls bidirectional right now, folks come to us and say, hey, are you guys up for sale? And I'm like, no. But you never know. So I take a lot of calls, I talk to a lot of people and I think that's also the key. Don't shy away from something and assume. Like assumptions are horrible, but they do to make an ass out of you and me if you assume too much. So I just wouldn't assume. I would take more calls, I would talk to more people. And don't be afraid of it. Even if you're not quite ready to.

Do your own M and A, be open minded. And when you say go for that first deal sooner, is that essentially M and A is a learning curve and that sooner you start, the better you'll get at it over time? Or is there something else?

I think so. And I think that sometimes we'll get so wrapped up and I have to build my own. If you're a tech company, I have to build my own. Tech has to be mine. You can still be doing that while you're concurrently maybe buying some technology or looking for those other opportunities. I think you can do things in parallel paths. I really do. And sometimes we get so in the weeds, on our head down, doing our own thing, thinking we have the answers. I just think it helps broaden your perspective to be open Minded and to be a little more willing to do some of those deals sooner.

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

That's a hard question. I've seen a lot of things. Not with Digital Airstrike, but on a prior transaction. Just complete cluelessness as to the people that they're coming with the deal, like, literally had not talked culture did not know anything. I remember being on calls with a company and they were actually from California telling New Yorkers that they had to end a call because they had to go surfing. She just a total disconnect. And I'm like, have you guys even talked to each other? You're on different schedules. The whole thing was weird. I don't know if that's exactly crazy. I don't have any dirt to share, but that, to me is crazy because I'm like, how could you ever got into a deal stage and just be so out of sync with each other? It just blew my mind that they didn't even know the people that were coming with the deal and vice versa, how they were going to work together. That's crazy to me. I think that you really got again, starts and ends with people.

Yeah. If you don't look past the spreadsheet, you end up with those.

Right. I'm just like, how is this even a thing?

Awesome.

You didn't know you were getting surfers to run this company and that they don't work New York hours? How do you guys not know this? That kind of a thing. I've heard about other things where it wasn't a deal I was on, but through my peers at the company not understanding they're in different states at different policies about cannabis and they were like, letting people smoke weed in the office. And then they were shocked once the deal was done. I'm like, how do you not know this? You didn't look at the state or the HR policies, those kind of things. I'm sure they all work through all that, but for me, I'm just like, that, to me, is crazy. You've really got to know what you're getting and be comfortable with it. And sometimes, honestly, those different cultures could actually help your culture. There's something new they bring to the table, some new energy. Maybe they're really creative because they let them do that. I don't know. But I really do think that not knowing the people out of the gate before you even get to talking about an loi people first. Yep.

Alexi, thank you so much for your time today. I enjoyed this conversation and learned a lot.

Thank you. I love your questions. You're great.

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