Corporate Development Strategy: Notion's M&A Approach with Hilary Shirazi

We're back. The third annual M&A Science Fair October 16th in New York City.

And this is not your typical M and A conference.

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Instead, this is about collaboration.

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You bring your playbooks, your theories, your.

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October 16, New York City.

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See you at the science fair. Cheers.

Cheers. Fears.

The buyer led M and A Summit is back. October 30th. Hosting over 1000 corporate development, private equity, everybody on the buy side. You'll hear from the best in M and A from companies like Quadient, SBS, Commerce, iSalt, State Street. These are all leaders who have built repeatable scalable M and A strategies. You're gonna lear how to prioritize deals, execute diligence under pressure. Bring integration all the way to the front of your deal process so you can realize synergies faster. Did I mentioned we're going to do a live mascience podcast with Keith Crawford, the head of Corp Dev at State Street Capital. Whether you're new to the industry or a serial acquirer, this is an event you don't want to miss. Hope to see you there. Bye. Check it out yourself@healroom.net summit or look for a link in the descriptions. 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 MA deals. Hello and welcome to the M and A Science Podcast. This podcast is part of a mission to rethink how M and A has done the old school seller led approach. Instead, buyer led M and A is all about strategy, alignment and efficiency. Putting value creation at the center of every deal. And let's be real, it's not just about closing the deal. It's about making it successful. We uncover what truly works in M and A by learning directly from the best. I'm your host, Kisan Patel, founder and CEO of Deal Room, Chief Scientist at M and A Science. Joining me today is Hilary Shirazi, Head of Corporate development at Notion, the all in one connected workspace Reshaping how teams think, write, plan and organize. Before Notion, Hillary built her M and A and investing muscle at Pinterest, Zendesk and LinkedIn, helping shape acquisition strategies across early stage and late stage tech companies. At Notion, she's focused on tech and talent acquisitions that accelerate product and team growth during a critical stage of scale. Today we're going to talk about what it's really like to build an M and A motion inside a high growth tech company. Why integration without an IMO might actually be a better model for agile teams. Hillary, how you doing?

I'm great, thanks for having me.

Thanks for hosting me live here. This is headquarters.

Headquarters, Notion hq. Yeah, we just moved into this office downtown about three or four months ago.

That's a great space.

Thank you.

So we're here, Notion World Headquarters. I'd love to kick off with just a little bit about your background.

I've been in M and A now since about 2014. I didn't actually know that you could have a full time job at a company in M and A until right before starting. I had done M and A on the investment banking side of things. After that I was an investor and we ended up merging one of our portfolio companies with another one, Seamless and Grubhub. But it wasn't until one of our portfolio companies hired a head of Corp Dev that I realized you could move in house and kind of advise a company on the right way to do M and A in the long term. I started at LinkedIn in 2014, was there for four years through us getting acquired by Microsoft. So I can say that I've been on both sides of an M and A and as you said, have done corporate development now at private companies, at public companies. So LinkedIn, Zendesk, when it was still public and now it's private and Pinterest and now Notion, which is still private and it's been a ton of fun.

So I gotta ask you because I talked to a lot of business school students and I feel like the career path always like default go to investment banking. Then when you're investment banking, everybody wants to go on the buy side and you get in private equity and like you described, like, that's when you figure out like, oh, there's this corporate development thing. So a lot of times students aren't even exposed to what corporate development is and then you land in there. How would you contrast the difference between those three career areas?

It's funny because now folks from undergrad are actually reaching out and saying, I want to explore Corp Dev And I say, how did you even find out about this career path? I wish I had known about it earlier. I would say the most exciting thing about doing it in house is you just get closer and closer to the mission and the vision and frankly, the founders. Because when you're in investment banking, you're advising and it's more about the numbers, but you don't get to see the integration. When you're working with portfolio companies, you do get to see how it ends up, but you're still pretty far away. And then when you move into a company, you really get to see what is the strategy, how do you go about sourcing, how do you build relationships with the founders, how do you convince folks and stakeholders internally to go ahead with the acquisition? And then truly working hand in hand with the different functional partners is how the integration happens. And then you're really owning it for 1, 2, 3, 4 years after the fact before it really becomes embedded.

You got a lot deeper in strategy and you have to own the execution all the way through.

Yes.

Sounds like more work. So maybe it's more rewarding.

More rewarding. I was going to say.

I also got to ask, you've worked at some pretty prominent companies out here in the bay area, from LinkedIn, Pinterest, now at Notion. How has your perspective or view on M and A evolved when you've been able to see it in these different environments?

I would say, and this is my advice to a lot of folks breaking into corp dev, try to start somewhere that already has developed best practices, because it's a lot to figure out. A lot of folks again reaching out, saying, I want to get into corp dev as the first corp dev hire, which could be great. But I feel like having started at LinkedIn, they had already done about 20 deals, had already gone public and had all these best practices and this kind of set of principles for how they thought about M and A. And that's quality over quantity. Really leading with strategy, which we can get into kind of on the integration side of things, embedding integration throughout the process, being flexible and focusing on value creation and taking all that together in a playbook really helps you think about deals the right way. From the start. I would say in the evolution of corporate development, in my view, it's always starting with the principles and then really figuring out what are the differences in companies that you're joining and how do they think about M and A and who are their players and how can you craft the playbook to really fit in with whatever the vision and Mission of the company you're currently working at.

Is I like that just having the experience around what a mature machine looks like and not today. You're basically building it from scratch.

It's funny because a lot of the time people see a big public company like when I joined Pinterest, it was close to a $50 billion market cap company, but had only really done small M&A. Three to four folks, small tech acqui hires, even though they were really big, coming in and helping drive their first true acquisition was a whole new learning process and building a whole new muscle. So it's almost as if you can't necessarily classify a really big company as having done it in the past and having that muscle. It's like you have to get in and see, okay, what's the experience of the company, where should you start such that you can target the right companies and integrate them in the right way and work with all the cross functional partners.

It's interesting when you look at the current state because you've seen this as they're really mature. You get a sense of what it really takes to make these deals successful. How do you think about M and A when he's just kind of starting off building the function for an organization? We talk like bi led. You're going to hear me reference it because it's a framework that we published and one of the original pillars is the first pillar is really detailing out the strategy so you have this clear criteria which it sounds like that was already in place when you're working on more of a mature M and A platform. But then when you're standing it up sounds like there's some work to do.

Yeah, it's not always the case that everyone knows what to do internally and I think that's what I found to be One of the more fun things about corporate development is you come into a company and you think about all your partners, even the exec team. Everyone has a different degree of experience with M and A. So you could have some people who have been acquired, done acquisitions, you could have some people who maybe went through a terrible acquisition and have their own deep seated fears about doing deals. It's really about the people at the company and what are their biases or inclinations and really making sure that you're getting to know all of the individuals that will be involved in the process internally before you can feel really confident about going out and talking to founders and convincing them to sell because you want to make sure they're going to be set up for success. And you want to make sure that everyone internally understands what each step of the process means. A term sheet really means an engagement ring. It's like you're getting married. Even though most of the terms are non binding except for confidentiality and exclusivity, you want to make sure that your partners understand how the process works. And to do that, you really have to get to know them.

I chuckle because I did a podcast yesterday with Stephan over at Snowflake and we use the wedding analogy quite, quite a bit.

I'll pick a different one.

We can still use it. I feel like it's either home buying or the wedding.

Yes, that was going to be my other one.

They fall pretty well when it comes to M and A. I'm curious, because we actually talked about this as well, is when you think about the steps to stand up at MA function, I feel like what you describe is step one, get to know the organization leaders, understand, like, where their train of thought is. Can you kind of walk me through, like, what'd that journey look like for you? And Notion and standing it up.

At Notion, they had already done one acquisition before I joined, so I already knew that there was an appetite to do it, which isn't necessarily the case at every company I've been in or even heard about where they say, we want to do M and A. And then you get in and everyone's still saying that, but you run into brick walls when you try to bring something forward. It's really about, you know, getting to know and, oh, so why don't you want to do a deal? And then unpacking that here the executive team is experienced. Most of them have experienced M and A before. They do understand that it's a bit of an art, a bit of a science. There's no perfect time and you have to trust your partners and trust that there's that vision alignment. It's funny because even though Notion is a private company that's at a smaller scale than some of the public companies I've worked at, it feels a little more natural to lean into these processes and get all the folks working together to make sure that we're talking to the right founders and doing the right deals.

And then that's where you can start getting a sense of, like, strategy or how do you build an M and A strategy off of what these executives. And probably helps that they already got experience doing M and A, so they got some ideas. Was there effort to start organizing this stuff and really building a process? Notion, thousand people right now, I can imagine Even at that size, there's different areas where ideas Fremonate could bubble up.

Yep.

You like centralize it and yeah, this.

Is, I would say, a more formalized process over time. Where LinkedIn did a version of this and then worked on it more at Zendesk and then Pinterest really formalized it where everything needs to start with a deal thesis and a document that is created by someone I call the deal sponsor. One misconception is that corporate development is the sponsor, but really it's the person that's going to own that acquisition internally, which is usually someone in the engineering, product or design function. I coach those deal sponsors saying, you do a prd, you do a product requirements document for when you want to build something. So you should do the same thing when you want to buy something. You have to ask a lot of the same questions, which are what problem are you trying to solve and why? Now, where is this on your priority list? And if you start with that with a no names basis, you can do a lot more first principles thinking. Because a lot of the times people will come in with I want to buy this company or I heard about this hot startup, you're skipping ahead because you've ignored all the other potential targets in the space. Starting with that thesis document is super important. Even if someone wants to start with a target, say, back up on a no names basis, what are you trying to do?

This is the similar conundrum when you get the book from the banker and then you get excited about it and all of a sudden you're like building a business case. Go do this deal just because it came across your desk.

Exactly. You're back solving one.

It sounds like it's a good thing that people actually want to do M and A. I've heard the other way around. People don't want to do it. They have some phobia of it. So that's good. But then you have the opposite where you got to dial them back and say, all right, this is how we do it. We want to crystallize the why. And then we can search the market and make sure we're finding the best asset for answering that why.

Yeah. And it's also helpful to your point. There's a lot of people. I love when people are excited about pitching ideas, but if they aren't the one that's going to own it, I coach them to say, I can't own this. So you should go find the person that's going to own this and work with them on the document and they can then be a part of the deal, but they're not going to be the one that drives it. It helps with alignment and it also helps reduce thrash for good ideas that maybe don't have an owner. That makes sense.

Now this is interesting. You were creating this deal thesis before. You have an identified target.

That is my perfect world. It does not always work that way.

Can you walk me through what's included in the deal thesis?

It's a pretty simple list of questions. What are you trying to solve in your roadmap? Why now? Where does this sit on your list of priorities? What is the level of investment you believe we need here? And that is really important because if it's, hey, we need two engineers to build this, okay, well we could find a really small company, but it's harder to find those itty bitty startups. So maybe if we see an inbound aqua hire, that might make sense, but that really helps scope the scale. After that I ask what is the build path if we don't acquire a partner? What would success look like if we did buy something here? What is success in 6 months, 12 months, 2 years? And then what are you actually interested in? Is it talent, is it tech? Or is it reach within a certain audience, customers? And finally, this one I leave as optional. But are there examples or templates of success we can learn from? Oh, company X bought company Y. And that is really exciting to me. It's almost like the more specificity you can pull out of a deal sponsor, the better. And once we have that clear vision, we can go do that market map. But until I can actually use kind of an example where I was at a company and they said we want to go buy a company in the video space. And that's really broad. And so you could say there's a 5,000 video companies. What do you mean by that? Is it video creation, video editing and helping them hone it down and hone it down and hone it down by showing all of these different landscapes of video companies. You would like for your partner to immediately have that crystal clear thesis. But sometimes it is corporate development's job to help refine it by doing a little bit of boiling the ocean, showing them what's available and then letting it click, oh no, this click down a specificity and then this one and then this one and finally you end up with three companies that fit that criteria and you go out and you talk to three of them and you pick one and that's how it ends up.

Got to have a funnel.

Yeah, yeah.

So I want to make sure I got these steps right for your deal thesis. One is clarifying what that roadmap currently looks like and then where does this sit in your order of priorities? Then the investment. What are we looking at spending on this opportunity? Then there's this sort of build versus buy thinking that comes in.

What would you do if we couldn't buy something here? What's the batna?

I guess got it. So it's oh, we're going to hire five engineers, it's going to take us three years to get this to market. And then what success looks like if we do acquire this ultimately what's that going to mean? And then the value drivers of the defining why what is a specific thing that the people, the technology, that part the template examples is really good. It's like, okay, give me examples of others that have done this or that you can model around and then once you get that crystallized then that you can do the market mapping exercise.

That's when we go out and we try to use this criteria to pull in that list of call it 30 companies that you then hone down based on even more refined.

I want to clarify who's are these like purely product managers that are going through this exercise? Like who in the organization would.

It depends on who is set up to be kind of that deal sponsor. Super tactically rule of thumb, who will the CEO of the acquired company report to? So if it's an engineer CEO, usually there would be an engineering sponsor or if it's a product CEO, it'd be someone in product design. Kind of similar thing. That doesn't always have to be the case, but it's at least in my experience at tech companies it's almost always someone who's in the engineering or product side of the world. And Notion's a very design driven company. So there's even the possibility that we could have a designer sponsor.

Oh wow. You'll have some engineers even go through this exercise.

Yeah, some of my best sponsors have been engineers actually.

I can imagine. I've done a lot of these podcasts and I've always. The engineers stand out.

I think people think it's either execs or product folks, but it can be anyone who has clarity of thought and conviction and can pound the table.

Yes, that's true. Those are the two parts to it, the engineering or the actual execution. I guess we'll talk a little bit more about that. So we get the deal thesis and then from there you build a market map and that allows you to find these opportunities, I'd love to hear a little bit about how you evaluate them. They feel like that's the one challenge you start looking at the companies can blur together, especially in their competitive space. What are some of the indicators that what's going to be the best fit? Obviously it's like really the product and tech, but then we always talk about team and culture. What are your sort of indicators that this company is going to be a better fit than the other ones in your pipeline?

Yeah, it depends on what is the culture of the company where you are. At LinkedIn we were very focused on building the economic graph. So could you see from the outset that companies you were looking to acquire were also focused on helping people get jobs and making that process easier? Again, at Notion we're very design driven. Is there web website thoughtful and beautiful. So there's kind of high level things that you can do. Does their tagline on their website align to some extent? With our vision, you can get a lot just from what a company puts out there about themselves. You can tell what they care about. But I think it's not until you bring the founders in and figure out are they saying the same things that our founders say. Do they focus on the things that we focus on. And frankly, once we introduce them to our founders, how do they get along and do they really see eye to eye? There are a number of signals that companies put out there that just over time being in corporate development for a while at a company, you already start to say, oh, for instance, all companies have that little footer that says copyright year. And if the year is out of date, you can kind of already tell, oh, they don't have that attention to detail that I know they're going to get dinged on here. So even little things like that, Hillary's.

Red flags, if your copyright's up to.

Date, still a recovering banker, or if.

You'Re really savvy, you got an engineer that actually codes it to automatically update.

There you go.

Thankful for in our teams. It's interesting because you said here's this sort of common thinking around the mission vision that the founders jive together. That's a good indicator when you look even past that of and maybe it's just there. But people always think that we know that integration makes or breaks the deal ultimately is there things as you progress that are like indicators for you early on that company may be easier to integrate or more likely to integrate well versus not.

What we try to do at notion is if we have that really clear Thesis document. Then we do a lot of the collaboration and early pitching as front loaded as possible. What that means is we explain to the founders why we want to bring them on board and what we're excited about and we start with that high level pitch. And I'm always surprised when I talk to founders, not in the context of notion, but just giving advice to founders who are, oh, I'm in a process. And I said, why are they interested in you? And they, a lot of the times can't even describe it. And I said, well, that's your first problem is you have to figure out why does the company want to acquire you and have they explained that? So once we get aligned on that, then we ask the founders, we give them a couple days and say, come back and pitch to us what your roadmap is going to be. So in six months, what are you going to want to have happen? In 12 months, what are you going to want to launch?

This is after Loi, though.

This can be before Loi.

Oh, interesting.

Yeah.

So you're challenging to think about what things are going to look like if a deal gets done.

Yeah. And I would say this is also tough is the more you can do before loi, the better because there's that alignment. If you're going to get engaged, you're going to want to know that it's the right fit. That's what I say is if you don't fully understand why we're bringing you on board and what we want to build together, do you even want to come here? I try to turn it around on founders who maybe don't want to give more information upfront. We pitch our vision, they pitch it back to us with more detail. And if you have that kind of just down the checklist. Yes, yes, yes. You know that it's going to be something successful when you have that, oh, I, you know, that timeline is too long or that isn't exactly what we wanted to ship. That's when you start questioning, is this the right fit? But when you have that melding of the minds and that early phase, pre loi joint vision, it makes everything else easier because on our side they're really excited about getting these folks on board and on their side they're really excited about making it happen and the rest of the details fall into place.

I like this a lot. Firelight M and A is about synchronizing, diligence, integration. This is such a prime example to even do this before Loi. How would you frame it to the company? It's like, hey, I kind of gave you of where our vision is but now I want you to expand on it. How do you frame that so it doesn't come off like who the hell are these people think they are?

We also try to front load bringing our founders in. So our CEO, our technical co founder.

They'Re in there pretty early.

Our head of product, yes, they are in there early. We show, hey, we have our highest folks are focused on this and care about this. So it's not just something. It's not a homework assignment we're asking you to do. We're truly want to hear from you what you want to do here. And it's not pitched as prove it to us. It's more you're setting up yourself for success. So we will sign off on these plans and then you'll know exactly what you're going to do here. Day one, that helps founders imagine themselves creating this value together and getting them really excited about joining up and frankly accelerating whatever they've been building on already.

What does that look like? Once you sign loi, you move into confirmatory diligence. Are the founders, are they literally creating an integration plan now or.

Oh, our founders are there.

The target.

Oh, the target. No. So we think about their plan as.

It'S almost like an integration. We say integration thesis.

Yeah, you can move goal posts. So they're goal posts and you don't have to have everything figured out but you want to know, okay, we're marching in this direction and so there's not a ton more detail that we require on that. What are we going to ship when at that point we know what we need to go do the diligence. Because for instance, if they say in order to accomplish our 12 month roadmap, we actually think we want to pause building our current product and focus all our attention on building this integrated product. We wouldn't go do a ton of diligence on helping merge infrastructures, for instance. We would really focus on what is that future vision. It really informs our diligence plan so that we know, okay, how much attention do we need to pay to all of the different aspects of a deal and just focus on the ones where we know that we're going to have them build towards on day one.

I guess I was curious about what that looks like when you're going through this process. Confirmatory diligence and just almost like the synchronization between those founders looking to work through that and then your team as well. Is that sort of collaborative?

Yeah, we Try to minimize the number of people from our side that they're talking to. I was on one deal at a public company where the team we were acquiring was less than 50 and by the end we had 75 people internally just working on the M and A. We had more people internally than at the company we were actually acquiring. And that can get overwhelming.

That happens. Isn't that how you blow up startups? You just put more people?

This was across all functions, accounting and IT and workplace and all that stuff. We don't want the founders that we're acquiring to see any of that because it's just all details. It's like we have a specialized person for every different work stream and they're a startup so they have one person that does 20 of the things. So Corp dev really tries to limit the number of people that founders have to coordinate with. That's in a best case scenario. And then you're funneling all of the requests, you're making sure that all the internal questions are getting compiled on the back end and then you're going through and figuring out what actually needs to be asked. I was working on one where we had a bet, a great benefits team, kudos to them. But they were really focused on figuring out what the gym membership of the target startup was so that we could maintain parity of benefits. And we just finally said, enough. They don't have a gym membership plan because they're a startup. And so, you know, we can kind of just ignore that. So we try to not push back on our own side, but make sure that the right questions are getting filtered. So quarterbacking that process is integration.

What does that look like structurally in your company? Is it a team? Is it within Corp Dev?

Most of the places I've worked don't have a completely separate integration function. So at LinkedIn we had one person on the people side who was fully dedicated to M and A integration. People's the most important thing. But otherwise corporate development also acted as internal integration. So that meant the people who worked on the deal pivoted to then own integration after the fact. And there was actually no transition because we had developed the integration plan prior to term sheet. And we do that at notion as well. We can just follow through. And then the kind of integration function at the company are different, cross functional leaders who have been identified as people who can really help guide the process internally. And what that's looked like at larger companies is it becomes this role that's a rotational program where you're, you know, a full time Technical accounting person. But if an M and A comes up, you then pivot to work on that technical accounting piece. And after mastering that, you get promoted. So it's pitched as if you can carve out time in your cross functional role to help with the integration. That's a step up. That's one way to get people to help with integration internally.

Get them to do the dirty work.

Yeah, the fun stuff.

Maybe if you're like really type A. I look at some of these and there's no way, not for me. The integration plan, it's interesting that you have a version of it at term sheet. How detailed is it? Because you kind of mentioned like the founder comes in. It's just like what is. How detailed is that?

Actually it's as detailed as we can make it without assigning too much process. So you always want to be flexible, but it goes back to that having goalposts. So a lot of the time, if we're not sure how we want something to end up, we say by this period of time we want to run these A B tests to figure out what we actually want to do here. But we know what we want to figure out. We don't have to have it figured out, but we know what we want to do by what period of time. So we can march towards that. So for instance, when I was at LinkedIn and we acquired Lynda.com, we didn't necessarily know how we wanted to divide the consumer business from the sales business and what parts we wanted to integrate. We ran really lightweight A B tests to see what do we want to change. So before we made any big decisions, we had that informed data and we could bring that to the execs. We did periodic check ins and said, here's what we found, here's what we're going to do. And then would have it sign off. You don't know everything from the start, but you time box. Okay, when are we going to have this figured out? When are we going to have this figured out? And you kind of keep it flexible.

There's a point where you have a timeline of at least some ideas of where we want to get. Yeah.

So for instance, you can say in a year we want to have this product shipped with Cron, which became Notion Calendar. We had a rough idea of we want to keep their product running. It's a beautiful product. It had users, but we need to integrate it into Notion to get that beautiful collaborative workspace benefit. We said, okay, this time period, let's do a rebrand and let's make sure it gets rolled out to all the Notion users. And so you pick that as your North Star. So everyone's really working towards that.

I like that example. So Cron was a Calendar app.

Yep.

And then you acquired this business. They already had a customer base.

Yep.

Did you just day one, we're now part of Notion.

No. So we did announce that they were part of Notion. Right. Right after the exist, we didn't rebrand it. So we kept the Cron logo, we kept the Cron domain and then about a year after acquisition, we flipped a switch, we rebranded to Notion Calendar and we did a big push across our entire user base saying now you can use this Notion Calendar. For a lot of people it was new. There's always the users that said, oh, I use Notion Calendar back when it was Cron. So they know that there was that period.

Then it became part of the platform. Because you really did a actual integration.

Yep. So now we have a Notion Calendar team that's been expanded since we. It was three employees when we acquired them and now the Calendar team is. It's much bigger.

What's like the go to market thinking? Because that's always a interesting one. When you know this obviously product was sold as a standalone, then you bring it as a platform. Is it some part of the suite? Does it become an add on?

Yeah. That's another thing we think about the go to market plan. It might be a good time to talk about the kind of four different types of M and A. The go to market plan differs across those four. So it's something we call the four T's, which is talent, tech traction and terrain. And those four T's represent a different kind of acquisition. Talent is the smallest, so you're only bringing on the folks. That's what people talk about when they talk about Aqua Hire. So then you're not even bringing the product on, you're just bringing on a team that builds whatever they've been building on your platform and then it's tech and that's when you're acquiring the IP or a product that really helps you get accelerate time to market. So Calendar was a really good example of that. Where we knew we wanted to offer a Calendar product and buying a Calendar company, keeping it running and then rebranding it was an immediate way to do that. At that point you do want to think about are we going to directly monetize to your point, how are you thinking about bringing it to market? Is it an add on? Is it for retention across all Companies, that's part of the integration plan, part of what is success. Is it bringing new users in the door? Is it a new sku? Generally for tech, it's a product feature that you're adding so you're not expecting some sort of new monetary value. The third T, traction is where I see new go to market strategies come into play. And traction in my mind is basically acquiring customers or revenue that open up a strategic adjacency. That's where you're not, you're bringing in the whole company, not just the tech, not just the product, but you're keeping it running. Maybe you're adding it to your sales team, maybe you're putting it on your pricing page. But traction deals are really where you're saying okay, this is something I want to monetize. And I would say we're not doing that yet here. And we did some math when I was at LinkedIn on when is the right time to start doing traction deals. And we basically saw, and again this was 10 years ago, but we saw that when a company reached or had line of sight to a billion of core ARR, didn't have to be at a billion of ARR but a billion of core ARR, that's when you should start doing those bigger traction deals. When you hear traction, that's to use an old school example, Google buying YouTube, YouTube had traction. Facebook buying Instagram, like Instagram had traction. So what are you bringing on and you're going to leave independent. So like LinkedIn's example is LinkedIn buying Linda. We kept it as a standalone business and kept selling it. That is when you're really thinking about what is our revenue targets for this. And then the final T is terrain, which is something only the really large companies do, which is like a 10 year bet. So again old school example. But Facebook buying Oculus, like what is a place that we know we want to be in 10 years and only pretty big companies can really be thinking about that and spending tons of money in that category. So talent, tech, traction, terrain, each one of those has a different set of, I would say like diligence questions, success metrics and smaller companies or even bigger companies that are just starting out should acquire in that order to build the muscle of how do we make M and a successful and work their way up.

Yeah, I love the way of thinking about this. So talent is basically people only. Tech is IP or product traction. You're thinking of a new go to market and really think of revenue synergies. And then your terrain is basically A new platform and you're really getting away from the core.

Exactly.

Awesome. When you have that fit, then that sort of shapes how you approach the deal. Then you can clarify that with the team. This is why we're doing the deal. This is what that means. And then you start answering those questions.

Right.

I want to go back on the integration IMO and Integration Management Office. Traditionally a lot of big corps around here. The Valley will have an IMO set up and they will hand off the integration responsibilities. Corp Dev will hand it off to IMO and they'll run it. They'll execute 100 day plan or depending on the deal. Right. It could be a big one and then it takes longer and then they eventually hand it off to the business. You don't do that.

No. I do wonder if part of that is just being at a kind of always smaller company. I'll put in quotes. When I joined LinkedIn it was about 3,000 people. By the time I left it was about 13,000, 14,000 if you don't count Microsoft. You can still manage without an IMO if you're doing four to five acquisitions a year that are not super complex and traction heavy, as it were. I also think the reason that a lot of integration fails is either the plan wasn't right the first time or it's not understood and followed properly on the back end. The more connective tissue you can have between the people that worked on the deal thesis and brought it to life can also then shepherd it into fruition and reality on the back end. What that has looked like in the integration functions where I've been is the deal lead will literally pivot to making the deal a success, which I think is the same thing a lot of integration teams do. But it's just that person that worked on the deal is then also pivoting their set of skills. I think a lot of the times Corp Dev folks and I'll screen for this are like, I just want to do the glamorous deals and the deal work and then ignore what comes next. But I'll do that. Unglamorous going around with a clipboard. I remember one we went around to all the acquired engineers and said, what kind of Mac do you want? Super tactical stuff just to make sure that people are landing and feeling like this is my home, I want to work here, I want to make it successful. Because they haven't had that discourse like the founders have. So you really want to go and make sure that every single person to the extent possible. And again, this is why? Maybe bigger companies doing bigger deals need a whole integration team to make that a reality. But we did that kind of all on our own at LinkedIn. At Pinterest, I did hire a head of integration. She reported to me. She was sitting in the room with the deal lead from day one getting to know the founders developing that integration plan. So even though it had a separate name, they weren't separate from the team at all. And they were shoulder to shoulder and they were someone who had come from within the company. They knew how all the people functions, work and could make that really clean transition from here's why we're doing the deal to here's how to make the success. Because I know exactly how this company runs. I can seamlessly bring it together.

They're along for the ride with everything, diligence.

I'm a little bit biased in having integration just be hand in hand with corp dev, if not the same. But then again once you get to those super duper large acquisitions, that process probably breaks and you need to. So no shade on no.

Yeah, that's fair. That's fair. I had a good conversation with a friend who was an integration leader about this because he did both. He did it with an imo without the imo. It was much better without the IMO because it just. You didn't have unnecessary handoffs straight to the business in this sense. It's like you have corp dev that sort of takes more of that accountability around orchestrating the integration. But then the business is really in there involved to exactly pick things up and get it done. Yeah, pretty cool. Anybody that's in IMO want to debate this, feel free to reach out. Hillary and I will hop on a live.

That's a good idea for our next one.

Absolutely. I gotta ask you, when you see integrations go off track?

Oh yeah.

Why?

I would say integrations go off track for a few reasons. Sometimes there is no plan. You would be surprised at how many times the plan is super high level and hand wavy. I've seen this firsthand. I've heard horror stories. But someone is really pounding the table and they have a specific reason that they want the deal to go through and they're willing to ignore the other questions in order to accomplish this one thing. What happens is you ignore all the downsides and risks that might mean that you can't even accomplish that one thing once you buy the company. Not having a plan is definitely the number one way for an integration to fail. Surprising that it happens, but it does. Another is no clear deal Sponsor. So if it's unclear on who's going to own it after the fact, because you really want that person to pound the table for this kind of external organism that you're absorbing, it's not smooth. You need someone internally who's respected, who's stable, who has the trust of the exec team to just manage that company through the process. I've seen also where a deal sponsor happens to leave after the fact, they lose that. I've seen deals where the strategy changes after the acquisition happens. So you can have the clearest strategy in the world, but sometimes there's turnover at the top and that changes and then the company is there and they pivot and it can still be fine. I've also seen a horror story where the acquired company was on AWS and everyone hands over all their credentials. But then we wanted to change the credit card on the AWS account and the person that had the login details from our side had not added it to one password and was on some leave where we couldn't reach out to them. So we tried to add the new credit card and we couldn't because we didn't have the admin password. And so literally the acquired company site went down for three days. We were like, we want to give you the payment method. And they're like, you're not the administrator. So that was probably one of the. Luckily, in the end, everything was okay, but that was definitely an integration gone wrong. So now I'm very on top of all of the credentials, which, again, not glamorous, but one of those. One of those details that you really need to manage.

Make sure someone's paying electric bill.

Yeah, exactly. Is there a working credit card on all the accounts?

Wow. These are great examples of what goes wrong. We talked through most of the life cycle. We kind of talked about the strategy, how it shapes due diligence, but really put integration thinking in the forefront and get to execution, get the team members involved and collaborating directly. Tech is a big piece. There's a lot of people out there still using Excel. I gotta ask. As unbiased way as possible. As a founder of a tech company that supports executing M and A, I know you use Notion, which I'm a big fan of. Dogfooding. I agree. I'd love to hear about the value add. I feel like just having a place to collaborate, single source of truth. And I feel like you've achieved it. Love it. To hear about, like, how do you use notion to do M and A?

Yeah.

And I can tell you we use Notion in our company.

Amazing.

Uses Notion. It supports a lot of it. It reminds me, actually to update my little CEO Corner section in there. I'll do that after the interview.

That's great to hear. I will say, being at Notion and using Notion to run corp dev, it's very meta. But it's amazing because the thing I struggled with most across all of the corp dev teams that I've worked on is we use so many different tools. There's a prospecting tool, you use a CRM, there's a deal checklist, you have to build alignment documents. And because you can do all those things in Notion, you can use it as a CRM, you can use it as your team work hub, present your deal thesis, you can use it as a project management tool, you can do all of the work in one place. The way we have it set up is we have our internal CRM in Notion and each company we talk to has a card, a page, basically, and everything gets built off of that. So every company has its own status. And then every time we have a meeting, we put the notes right there. And then once you actually start getting active, we can drop in templates that we've created for a template for the team, a template for the process, a template for the Thesis document. We've basically built up a template for everything that we need to do, and we can hone it inside the card to keep everything organized and also manage permissions. So it's pretty neat to have all of that. I kind of laugh because I'm part of a corporate development Slack group where someone said, hey, what's your tech stack? What do you use? And everyone had 12 different pieces of software. And I was like, we use. We use Notion.

We use it for everything, for pipeline diligence, integration.

What we don't use it for is data, company data. If you think about Crunchbase or pitchbook, obviously we don't have company data, but for any tools, kind of like software tools, that's been replaced with Notion.

But if you do Your search in PitchBook or any of those products and shortlist it, would you put that shortlist in.

In Notion?

Yeah. Okay, so you'll do that. Everybody does that. Use some database for the private company data and then get safe.

Yeah.

And then the counterparty, you'll go back and forth in diligence with them and.

We will use wherever they like to upload their docs. If they want to email to us, we'll do a shared notion. If they email them, we'll drop them in that or we can do a shared notion outside the Notion workspace. It's actually nice to see you can tell now what founders are aligned, where they'll send us an email and in the footer it'll say sent with Notion mail. So you can tell who uses Notion on a day to day basis and that's a good sign that there'll be a fit. Same with Notion Calendar. And if we say, hey, what's your pitch? We talked about building that day 06 month, 12 month plan. Now most founders do it in Notion and they'll send it to us in the shared Notion doc. With the seamless kind of collaboration experience.

I've seen it firsthand, the flexibility, the templating I've seen. I was actually impressed because I went just poke around the marketing team does. So I didn't realize this podcast, the whole back end of it is on Notion. Everything, every step of the production, the guests that we're hunting down, everything's all a notion.

That's awesome. That's awesome to hear. And actually I've demoed my corp dev setup for other corp dev teams because speaking of startups, a lot of startups use Notion so when they get acquired, their acquirer will usually try to get them to cut software. And a lot of the times they'll kick and scream and say, I don't want to give up my notion. And so I'll say, well, if you want use it, here's how I use it and try to pitch COR dev teams to adopt it internally to help create the case, to keep it instead of having them spin up on another tool.

So for the old school people out there on Excel, what's the pitch and the value of having everything in one place?

You don't have to search for anything and it's all there. And maybe we can get into AI, but with everything in one place, I literally just go ask AI. For instance, someone came to me internally and said, hey, what mobile companies have we talked to? We might be interested in mobile. I went into Notion AI and I said, what mobile companies have I talked to? And it literally pulled up the seven recent conversations I'd had with companies. And that's not just in the name. It searched my notes, it searched the website, it said, hey, here's five companies you know that are mobile. And these two might be because you said this in the notes, it's just there. You don't have to tag it necessarily the way you used to have to tag things. And having it all in one place makes that part seamless and just everything in one place. The notes, the pitch docs, the project plan, it all links back together. You do have to spend some time setting it up. I think the reason a lot of people try Notion and give up is it seems too complicated. So it takes some effort. But then once you set it up in the right way, it can really make the deal process a lot easier.

Yes. A lot of efficiency, it sounds like.

But definitely Pitch M and A science too.

I know that's a whole contact Sales. They might reach out to you. That's usually how it works. A couple of months after you're on the podcast, somebody at dealroom Sales will reach out.

I'd love to see it. Maybe give me more ideas for ways to set up Notion better.

It's interesting when you work with a really large corp dev team and their different functions have standardized on different project management tools.

Oh, yeah.

I feel like that's like. We're really good at connecting, diligence, integration, but at a high level. But then when it turns into a plan that actually expands, okay, we gotta migrate HubSpot to Salesforce, then turns into like 50 other tasks. Then it makes sense to like plug it right into Notion.

And we're building those plugins, so hopefully you can still. People can use different tools.

And that's what we do. We'll plug it. We'll plug them in and get involved together. Yeah, the data room environment and then boom.

Yeah, we'll do a partnership.

There you go. This started right here, the AI.

Yeah.

I was really impressed with how fast Notion adopted AI. It was insane. Just because I know the organization isn't like super small. We're a small company. We're 50 people and for us to do stuff, it's, oh, cool. Literally they don't have a choice because I'm barking at them. But for Notion to do it at scale and just. It's matured really quickly. I'm curious about that part of, hey, here's a company to move at speed to keep up with AI. But then as you think about the M and A and I'm struggling with it, just an AI for M& A. There's literally a hundred companies right now that are trying to automate every little piece, use AI and be honest, a lot of them are struggling with traction. Just because you need a lot of data to really make some progress here. How do you sort of look at it both organically and inorganically?

It's nice that you're pushing it top down at your company. It's similar to Notion. Our founders had a early view of GPT 3.5 I believe is the one that got released in November 2022 and the entire company was on a retreat in Cancun and they saw the pre release, locked themselves in a hotel room and spent the next five days jamming on what can Notion be with AI?

Wow.

We were I would say one of the first at scale SaaS companies to launch a product in GA. It was February of 2023 and started charging for it and it was mostly individual users picking it up and trying it since we've shifted to more enterprises using it. But it was that kind of top down understanding of what AI can do for the company, much less corp dev but for the product. We've since launched a bunch of different AI. We have AI writer, database autofill like search across different connectors as we were talking about and we have an AI agent that has been silently released. We're doing a big push on that in a few weeks. That's kind of the next iteration of how can I have AI use Notion to do my work for me. So it's not necessarily SaaS is going away. It's we're taking a piece out of that labor. Like we're having AI do the work for you in your software that already exists. And we're fortunate to be in a position where we're not these research labs competing for the bleeding edge AI researchers. As you've seen hundred million dollar packages. Thankfully we're building on top of all of these great models like OpenAI and Anthropic and iterating super quickly where something we tried six months ago that didn't work now works today with kind of the newest iteration of name your model. That's been really exciting. Pivoting to corporate development. We've tried to automate as much as possible with AI and that's allowed us to stay small. We're a team of two. And corporate development. In addition to sourcing deals, we also do what I'll call competitive intelligence. Just tracking what's in the news. We use AI for that. Summarize it every week. Quarterly earnings of companies that we look up to or consider competitors. We'll just drop the earnings reports into Notion AI and it knows how we want to divide it up and puts it in a report and we can just ship that to the company. It's been really exciting to see how AI is also shaping how you can do more as a corporate development person at your company.

I like that they're using AI to track the market.

Yeah.

The way you keep tabs on all these AI companies. You use AI to keep tabs on all the different AI companies.

Yes, it's very recursive. It was also thinking back to that time AI is coming out, do we need to go buy a bunch of AI companies to be at the forefront? Our recent Aqua hires have all been in the AI space. Every single founder that we've acquired has been put against our AI efforts. And it's been amazing because they iterate so quickly and have that scrappy founder mindset which you need in this world of models changing every two minutes. That has also been helpful for us. Even though Notion wasn't originally thought of as an AI company. We're one of three AI companies on the Forbes AI 50 list that are not AI native, quote unquote. They're founded pre what I'll call the AI generation and now we're seeing it become a huge part of our product.

You've done talent acquisitions for AI? Yes, I was going to say because tech is freaking expensive if they've raised it 2050 x multiplier.

Yeah, it was definitely tough for a while when the initial funding wave came out and no one was interested in selling. And I think two things, valuations were so high that a lot of companies didn't find that traction. And then also we've proven ourselves as an AI company. Our brand in the space is stronger now as a place. Folks who want to build AI for an at scale user base can do that. And the way that our product is architected as building blocks, that's how we talk about notion, as Lego blocks. It's all code and AI uses code and so you can literally use AI to do soon, almost anything.

Looking forward to it. It's like moving fast. So we gotta hang on, keep up. I don't know if it's hang on. It's like you gotta run faster to keep up.

All of the above.

Any parting advice for corp dev leaders that are looking to scale an M and A function in a growth environment?

Yeah, I would say if you already know the basics of M and A and know how to run a process, it's truly about getting to know your counterparts at the company, the key stakeholders, what are their fears? What are their concerns? Or maybe they're too eager and you have to talk them back. But get to know each person and what makes them tick so that you can best position yourself as an acquirer and as a home for that acquired company to be successful. It's funny People say it's all about the people. It's about the people that you acquire and it's about the people internally.

I was just thinking about that. It's like both sides and it's like really understanding the psychology and on both ends. It's tricky. Yeah, it is tricky.

And knowing who's the best engineering leader to go do the technical diligence because not everyone has that same level of depth that they need to get to. And some people know the right questions to ask. You have to know enough to be dangerous as a Corp dev person. But then you go find the people that can do the deep technical diligence that you need. Other advice. Try to keep it small. Going back to this AI piece. See how much you can do with AI that's not necessarily trying all the tools, although definitely if anyone has. Maybe leave it in the comments. If anyone has really good AI tools they're using to source or to even do deals.

One of the things that I found fascinating is that you're really active with the corporate development community. You helped organize different initiatives out here in the Bay Area and other things. Can you tell me a little bit more about that?

Yeah. I organize what is now a Slack channel called Corp Dev Breakfast, which is kind of a funny name, but it all started back in 2016 when I was again at LinkedIn. I was taking a friend from Uber Corp Dev to breakfast at at the office and ran into one of my colleagues who was taking his friend from Uber Corp Dev to breakfast. We joined forces and just talked about on a high level basis what were we seeing, what were we struggling with. And we walked away from that breakfast thinking that was so helpful. I wish we did this more. There's no community for Corp dev folks to share best practices. So every quarter we started organizing breakfasts for people to get together. And it kind of grew organically to the point where about a month before COVID hit, one of my friends at Google Corp Dev hosted the group and it was just too big. It was like 50 people showed up and we realized this is not going to work. And then Covid hit and we didn't have the breakfast anymore. And someone said, I really miss this community. How can we keep it going? That's when we spun up the Slack group. Now it's about 250 people and it's global because it's not limited just to the Bay Area tech companies, which is really nice. And the only requirements are that you do you have Corp Dev in your, in your bio and you use a work Email. So people will pose questions in the general channel. They'll post jobs that they're hiring for. They'll post resumes of folks that are looking for jobs in Corp dev. It's a nice, safe place for people to feel like they have a community amongst the different companies who some of them may be competitors, but it's like we're all trying to help each other out.

So all the people that reach out to me looking for jobs or hiring, I should just.

Yeah, I'll post it.

I'm gonna send them to YouTube. Yeah, yeah, yeah. That's really good. I love hearing about it. Cause it's something that I've noticed even with this podcast that there's a community. Maybe we gotta collaborate on an event. Actually. Yeah, the friends at Snowflake, they got a great space over there that we could use.

Hey, I'll call em up.

We like doing it having just a peer group. I think even as an early CEO founder, I used to do this in Chicago. We had these fintech CEO roundtable. That's where I got the idea for the format that we currently do. Just six to ten on the table around. Do intros the next time around. What's the biggest challenge you currently face? And everybody weighs in on it. So now we just do that at scale. We get 50 people. We break them in little pods of six or seven folks and just do the same format.

That's awesome.

Yeah, but that's the same thing. It's like the most valuable thing is just getting that peer network. And then you just got friends. Like, hey, I need your help.

Yeah. Off the record.

Yeah. Let me tell you about the situation. Or I got this weird thing I'm trying to negotiate. And then I tell you even really early of what we're trying to look at in terms of thinking about M and A for a small company. It's so helpful.

The universe of problems is actually, at the end of the day, quite small. And if enough people are in the room, they've all seen the same problem and can empathize or at least provide guidance.

Best thing to do for your career is listen to this podcast and get involved with a group of your peers. So I got to ask you, what's the craziest thing you've seen in M and A?

One of the craziest things that I saw was when a CEO didn't come along with the company and it turned out after the fact that they had convinced everyone to sign and join by just making up imaginary outcomes for the employees, which required a lot of footwork on the back end. But this goes back to your question earlier. When have you seen integration go wrong? Go off the rails is when you don't bring on that leader because you don't know what the leader then told the team to get them to come.

On board, they had to sign retention letters or offer letters kind of like.

Oh, you'll have pots of golden rainbows. And if you do this and because the person you're talking to is generally the founder, you don't have insight into what they're telling their team. So that was pretty crazy. That was a crazy thing in M and A that I personally experienced.

That is pretty wild because yeah, you're on your way out. That's not good. That's so shady.

Yeah, I've seen some funny stuff on Twitter. Not that I've been a part of, but founders going off on their process on Twitter. So if I find any good threads, I'll share those.

We got to start our own like M and A lunatics thread on Reddit.

I like that. I have some good ones.

That'd be good. Yeah, put it all. Anonymous Hilary, this has been great. I really appreciate taking a break from doing deals to have a conversation with me and helping me become a better M and A scientist.

Yeah, it's great to talk about it and it was great to have you here at Notion and hopefully we can do it again. Thank you so much.

If you are listening to this all the way to the end of the podcast, I salute you fellow M and A brothers and sisters out there. It takes some real dedication to listen to long form content like this. I'd love to hear from you. Connect with me on LinkedIn. Love getting the feedback, different ideas for topics we haven't covered and the criticism. I'm used to that so I'll take it and learn from it. Till next time. Here's to the deal. 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 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.