Effective Deal Sourcing Through Market Mapping

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It's going good. How are you doing?

Well, can we kick things off with a little bit about your background?

Yeah, absolutely. I guess I've gotten well now eight plus years of corporate experience. I got my start in corporate development actually on the software side and then eventually transitioned to a few different companies but stayed mostly in the technology space. Done about 12 deals now, both domestic and international, various sizes, but mostly in the lower middle market. Throughout all the companies that I've worked with, I've had a chance to work with some really talented people, learn from a lot of folks, I'm excited to today to talk about market mapping. And I'll say this just to kick things off. There's probably a lot of different ways to do this. But I'm just going to share today what my approach has been and hopefully we'll answer some questions from folks as well.

I'm looking forward to it. I know you previously hosted courses on M and A Science Academy, so this is nothing new for you. Yeah, but I think it's a fun topic that doesn't get talked about a lot. How do you actually develop a market map? Let's jump into it. How do you create a market map?

The process for creating a market map really starts first with a couple of conversations and it depends on the industry that you're in obviously as well. My background is obviously in software. So today I think what I want to do is share a couple slides that talks a little bit about why you would really build a market map to begin with and how that drives your M and A strategy. Market mapping or ecosystem mapping really is a pretty useful exercise I think for M and A. It kind of works hand in hand with corporate strategy. Before you dive into a market mapping exercise, you got to understand first of all at a company wide level, what is the corporate strategy? Hopefully there are some corporate strategy folks internally that will help determine what that looks like. In the background to all of this obviously is your buy versus build decision making process. That kind of touches everything here that we're going to talk about today. But really the objective of a market mapping size is to increase relevance within the served industry through strategic acquisitions. And the software company that I worked at previously, we had three or four different verticals with obviously it was ERP software. And so that's the example what I'm going to run through today. And each industry, each vertical would have a unique market map. And it literally is a map. The approach there really is you want to identify companies that are wallet share stakeholders within the customer base. You want to group and categorize companies by segment and by primary function. You want to stack rank them. And it's really an ongoing conversation that you have with business unit leaders or with the corporate strategy team or all of the above. And the result of an exercise like this is that you're able to document an ecosystem with all the key constituents defined. You can really narrow down and focus in on your M and A priorities so you're not wasting time and you get a deeper alignment with the business units on what your M and A strategy is going to Be because a lot of the times your business unit leaders might say great, we need to acquire a company, they might have an idea of one or two companies that they want to pursue. But this is a really great way for the corp dev team to be on the same page with those business unit leaders in terms of what makes an attractive target. Why are we targeting them? It facilitates a lot of those conversations and obviously you want to identify any overlap between your various industries and verticals. And again, the benefit of all of this is you increase wallet share, you drive stickiness, you increase recurring revenue, or if you're in the software space, you can accelerate your ROI for market share expansion opportunities. And really again, it's more purposeful approach to M and A.

What I'm getting is learn the strategy, get aligned around it. Going through this exercise helps you define M and A priorities and also align with your various business unit leaders.

It facilitates honestly a lot of conversations. It's an ongoing process. So it's one that is not done in a silo where corporate dev isn't off building their own market map. And there's a lot of collaboration with the business unit leaders, with the product team, if it's applicable, with the corporate strategy team, if there is one. And you do this while you're building out the ecosystem map or the market map, and then also periodically afterwards. So every quarter you might have a re ranking, if you will, of some of these things based upon either your M and A activity or your competitor's M and A activity. Ideally the categories don't change, but maybe the types of targets you go after change. And obviously you have to be nimble enough to respond to market forces. So if competitors are really making headway in a certain space and you need to move in that direction quickly as well, then maybe you reprioritize temporarily to go after targets that maybe were a little bit lower down your priority list. So this isn't meant to be an exercises cassette in stone, it's more of a helpful guide.

What about C suite folks and the board? Are they involved with this?

They may not necessarily be deeply involved in the day to day of building out the ecosystem map, but certainly I think it facilitates a lot of those board level conversations. Certainly when you have your board asking you what's the game plan? Who are we targeting? As has been the case with me throughout my career, you're getting tons of decks and teasers from the board every so often and they're asking you what your thoughts are on this ac, on this potential acquisition target or that potential opportunity, a lot of those decks and teasers can be missing the mark or just not opportunities that are a priority. And so this is a useful exercise as well to get them to understand what types of companies are looking for and why, what the plan and the strategy is. And so it actually builds a lot of confidence, I think, with the board as well as the C suite, in terms of them being comfortable that you know what you're doing.

You should really define the strategy before going out and building a market map, not the other way around.

Yes, corporate strategy comes first. You have to figure out how you're going to grow organically versus inorganically, what the strategic priorities are for the company. And then when you start to talk about your M and A strategy, that's really where this starts to come in to play a lot more. At the same time, it's tough for me to say what, what came first, chicken or the egg? This is an activity that you do simultaneously when you're building out your M and A strategy or your corporate strategy. But first you have to have your high level corporate priorities set in stone. And then you can go ahead and say, okay, based upon our corporate strategy, we have an idea in terms of what our buy versus build strategy is in terms of features and functionality and things like that. We need to use M and A to plug some of the gaps that we have. Great. How do we go about doing that? This is where you start to build out your ecosystem.

How do you iterate on this? When you mentioned all these different stakeholders, you're creating this collaborative effort to get different folks involved. How do you keep that ongoing, where you get some of those ideas that can come from all different areas, Board member or product manager. But is this a tool to help facilitate some of those ideas to you? So you can say, yeah, it's in their market map, or give them the understanding of it, or use that as, hey, it doesn't currently fit in this market map, but we'll put it somewhere in a parking lot. How do you manage that?

This is a useful exercise to facilitate those conversations. When you have an opportunity that comes across your desk. Let's say it's something that is a low priority for you. The board is pushing you to do the deal, but now you have something in your hand that says, hey guys, appreciate you guys really want us to pursue this transaction. However, we've had a bunch of internal conversations with our business unit leaders or our product team, our C suite. We've identified what are strategic priorities for us. And this doesn't fit based upon this market map that we've created. Now, Dan, as I mentioned earlier, you have to be somewhat flexible, but I think it really helps to get other internal stakeholders on the same page so that you're all moving in the same direction and people are paddling in different directions.

I get the idea of how it can help with defining the criteria. If you do get stuff out of scope, it's falling back on this market map and the effort created for it. But then how about the other end, helping some of those get a sense of what the organization's looking for, even allow you to broaden your scope of potential identifying targets that fit with the market map. Do you find it as a tool to help communicate that and allow others to bring some of those opportunities to you?

Absolutely. Because as a corporate professional, you may think that you have an understanding of the landscape of what your competitors are doing, et cetera, but your product team, they're probably a lot closer to the customer base in terms of trends, in terms of what their demands are, what they're asking for. Your CTO or your corporate strategy team might have some other thought as well. This is an opportunity for each one of those internal stakeholders to influence the direction that the company is going to go in and the types of acquisitions that the company is going to choose to pursue. And as a result, maybe conversations that wouldn't normally be happening between, let's say the product team and the strategy team or the C suite for whatever reason. Now you've created an opportunity for those folks to talk and discuss. And obviously there's going to be naturally be some conflict and somebody has to at the end of the day own it and say, appreciate that, taking it all those things into consideration. But I'm making the call on this and I think this is a priority versus that. And that really varies by company because some companies corp dev is very tightly wound with the product team or the technology team. In other companies, it's a very finance driven organization or a very strategy driven organization. And ultimately, who's responsible for the market map? That's a question that I think varies a little bit depending on the organization that you're in. It could be a business unit leader or it could be corp dev, but corp dev is really the facilitator and driving the creation of the market map of populating all of the target lists and trying to see which one is it makes for an attractive acquisition opportunity versus which one does it. There may be a great company that does XYZ and it will be a Dream to, for, for your company to acquire them, but maybe they just took in money a couple months ago. They're not going to be available for sale for a while. You're not going to sit around and wait for them before you acquire the company. You're just going to, you're going to move on to the next opportunity. And there will always be a sort of a shifting of priorities a little bit back and forth depending on a number of factors. But this at least is like the equivalent of a roadmap when you talk about technology or product related items. It's a checklist of here are all the things that we want, here's the order that we're going to try to go in. And then as things come up, we'll, we'll reshuffle.

It's a good way to look at it, the roadmap. Build this vision of where the potential is for the company to grow into.

Let me just quickly run through the rest of these two other slides that I put together. This will look kind of a zoomed in version of the ecosystem map. So again, this is probably primarily applicable to software, but you could really use this for any industry. This particular map is for construction management software or I guess for that space. So the center of the map you have your kind of your core software or whatever your core solution is that kind of sits in the middle of the map. Within that main vertical there are two specializations that you're targeting. Maybe there's more or maybe there's just one. Whatever it is that kind of is the core of your software solution that you're selling to your customers. Surrounding that, there may be two or three or more general buckets. So in this case you've got a sales and service side, a back office side and an operations side. Within each one of those buckets are these sort of subcategories. Part of the ecosystem mapping process is saying, and again it's having these conversations with folks internally, the product team, strategy team, et cetera, and business unit leaders saying, what do we do today? And in this map what we do today is denoted by this little check mark, right? Those are solutions that we have currently. What are our priorities? What like. And you stack rank these things based upon a whole bunch of possible criteria. It could be based upon addressable market, it could be based upon your technological needs or the market's demands. Any number of things. You have these conversations. You stack rank the large categories. First of all, we have our core software. Let's just say you didn't have any Check marks outside of your course software. Well, in this case we decided that the very next thing that we need to add on that's most critical for us to retain customers is to add on a bunch of sales and service solutions. Then we focus on doing some operations type of solutions and then lastly back office stuff, which is probably not as important as the sales and service and operations piece. And the whole goal here again is to drive stickiness as much as possible and increase wallet share. Once you have those broad buckets stack ranked, then you go through individually and say, okay, within sales and service, lead gen and digital marketing is top priority, everybody needs this, everybody's dying for it. And then a CRM solution, et cetera. And then you go through this whole process and what you get in the end is a stacked rank, stack ranked list of potential areas for you to pursue acquisitions. And underneath all of this, and this is again Corp dev's responsibility is coming up with a list of potential acquisitions, right? This is a small sample of what your final work project might look like. You might have a list of companies on the left. I'll have usually lose an Excel file or a spreadsheet of some sort and I'll have a list of groups and then a group priority. And so these groups right here are directly tied to kind of these large buckets that we had identified here, the group priorities, again based upon the stack rank that we had assigned to them. And then within the subcategories of the smaller buckets, within the larger ones that we had identified, you would assign a subcategory priority. Lead gen and digital marketing would be a one because this was identified as number one most important thing within sales and service. Let's just say these are both legion solutions within that Corp dev will take a look at both of those companies and look at a series of ways to stack rank them in terms of how much funding have they had, how big are they, what's their technology platform look like, when was the last time they took on funding, things like that. And you would basically assign your own ranking based upon how actionable an acquisition might be. And then the team ranking is late in the process and I'll get back to this in a second. So you repeat this process, each one of these categories that you're in and in the end you get a stack ranked list of potential prospects. And then finally again, once you've built this out and you've collected some background data on these potential targets, you go back to the business unit or whoever is responsible for the prioritization of these acquisition targets and you say, hey, take a look at these prospects that I've put together. Which ones are most attractive to you? Which ones would you like to do immediately? And if you've done your job with ecosystem map or the market map, initially, there probably isn't too much reshuffling happening here, but the team may assign their own priority and then you start the process of reaching out. As a result, you may not follow the team ranking, you may be following your subcategory ranking, but you have an idea of how important something is or how important a particular company is based upon the team ranking at the end here. So this is my way, the way that I've done it before, before. I'm sure there's. There may be better ways of doing it, but this is something that worked for me pretty well.

And you can take this sort of detailed view and then you make it look pretty where you get the clusters, put all logos on there and get that to float around.

Correct? Yeah, this I've shown you the sausage being made. This is like you could do an Excel spreadsheet or Google sheets or Smartsheet or what have you, and you can even take an average score and stack right based upon that. There's a couple different ways of doing these things, but this would be your main repository for the data. And then you can make it look pretty with logos, things like that.

And talk to me about the research that you do for those companies when you've got these initial categories defined, time to go hunt and find targets.

So there's a lot of different ways of doing that. Industry events are a great way to get some intel and find out who's out there, who's in that space. White papers, publications Gartner puts out, research reports, things like that. Whatever you have access to is helpful. Obviously, nobody knows those lines of business as well as the business unit leader or the product leaders. And so you talk to them and you get an idea of potential prospects. And then you start the process of actually doing your homework in terms of finding out data points related to how actionable an opportunity might be. I just honestly start with a Google search. If you're in the software space or the technology space, you can use websites like softwareadvice.com, capterra.com, websites that help you figure out what are all the companies that are out there. And you just one by one start going through their websites and trying to collect as much data as possible. Perhaps you have a CRM solution for your Pipeline management. You just collect data around what's their pricing, like how many employees they have, where are they located, where are their customers located, what's their approximate revenue? There are a bunch of websites out there like Grojo and Owler and other ones that have varying levels of accuracy surrounding that. Crunchbase is another one as well. But you really just start the process of gathering as much data as you can and storing it and then making a decision about prioritization based on all those factors.

Check out the stuff that's right in front of you, the events, the conferences in the industry, back to the internal resources, bu business units, leaders, product leaders. Do your research. Yeah, now there's so many of those product comparison websites and there's a ton.

Of information that's even freely available. You'll sometimes read through press releases and news articles about a company from a couple years ago and it'll make some reference to what their revenue is expected to be or give you a range. When this article was published three years ago, they were around $100 million mark in revenue. It's been a couple of years since then. You make some assumptions around growth and say we're probably somewhere in the range of 150 million today. And then once you have the conversations with the companies, you get NDA signed, then you can really start to confirm your data points. Just try to read as much as you can on the Internet about those companies. Then there's a ton of information out there.

You're not big on the third party databases. You're not paying for whatever smp, factset, any of the pitchbook.

No, I'm not because I've used those before. And when I started my career I came from a cold calling background. I used to be a stockbroker and we use like the Dun and Bradstreet leads with the revenue ranges and stuff like that. And I think that those have varying levels of accuracy. And when you're dealing with private companies, that sort of data is really difficult to get. Companies like PitchBook and Cap IQ will have some numbers and they've got research teams behind them that try to try to give accurate information around those figures. But a lot of that information is available freely. Why pay for it if you can get it for free?

Very much. It depends on, on your industry.

Correct.

Maybe they cover it and gives you some unique data points that you wouldn't find online. It sounds like you're doing really well. I actually did a search for a client not too long ago on LinkedIn, used good old sales Navigator Found a nice comprehensive list of potential companies for them.

It varies really by industry and there's a ton of resources you can try. Whatever works for you. We've historically tried to use certain networks that maybe weren't geared towards prospecting but were geared towards like fundraising and things like that. We didn't have a lot of success with the data there. I did use it for a period of data.com as another kind of reference point when I couldn't find any Data on revenue. Data.com had a Salesforce integration. I don't know if they still do, certainly some years back. And it was just very easy for me to look up the company on data.com and then import that directly into my CRM and have that ready to go again. It was powered by Dun and Bradstreet data and sometimes it would show me a huge company and it would say, oh, their revenue is 30,000. No, it's not. Maybe that particular branch revenue is 30,000. But the company as a whole isn't $30,000 a year. It could be hundreds of millions of dollars a year. So you have varying levels again of accuracy and you just got to take that with a grain of salt.

We've been using Zoom info for contact information. Find C suite folks, corporate folks like yourself, that's how we find you.

Another great tool is Rocket Reach. I've used that a lot, especially when I'm prospecting. I'm trying to cold email somebody. Every company has a predictable methodology for how they structure their emails. But you can either try different ones and see which one goes through and which one bounces back, or you sign up for something like Rocket Reach and find their LinkedIn and it'll give you a whole bunch of email addresses, personal as well as work related. And then you can.

We're biased towards some info they were nice enough to contribute to M and A Science.

Fair enough, Fair enough.

Give back. Let's talk about the funnel. What does the overall funnel look like?

This varies by industry. If you're in the software industry, your funnel could be huge. But if you're in a very niche space or you're in a new industry where there's not a ton of people playing in that space car sharing, ride sharing type of industry. Your universe is much smaller. I'd like to use a CRM to keep track of that sort of thing. You can certainly do that in Excel as well. Just keep track of kind of all the opportunities that come my way, who they came from. A brief description around what they are and that way you get over time you build up a pretty good data set of where your opportunities are coming from and you can focus on those efforts rather than continuing to waste time with the potential origination vehicles that just aren't delivering any sort of return.

So you're loading up prospective companies, getting a general idea. A lot of that is based on number of companies you're going to end up looking at. And then you start identifying where those sources who identified it, where the opportunity came from. What's your view on proactive versus reactive opportunities?

I'm a strong believer in proactive M and A. I think there's obviously people out there and companies out there that are fortunately have a very reactive view to M and A. M and A I think has to be a part of your company's growth strategy. And the business unit leaders or the C suite or whatever the case may be, they need to understand that if they are looking to do acquisitions, it is another tool in their tool belt. You can't approach things on a one off basis. Hey, one of our competitors or some other company suddenly decided they're going out to market and we're going to look at possibly doing that acquisition. I think it's very easy to get distracted that way. Do bad deals and tie up resources internally that end up scuttling any potential acquisition. If you want to do M and A and you want it to be successful, which I think everybody does, then you've got to be proactive. You've got to identify your needs. And just as you would hire more salespeople and target a particular geography or whatever, or build a go to market strategy and focus on organic growth. Inorganic growth has to be happening at the same time and with the same amount of effort.

Okay, you're not sitting around waiting for bankers to bring you deals. You're out beating the street looking for opportunities.

If you end up waiting for bankers to come to you with opportunities, you may end up participating in auction processes. They can end up paying a lot more for a company than you really have to. You're proactive if you're in the lower middle market anyways. Maybe you get to a business owner who hadn't really thought about selling this company, but now that you've approached him is considering taking some chips off the table. And now you've got a direct line with the owner, you've got a deal that you can move on for hopefully less than you would in an auction process where you're competing with other financials and strategics in terms of trying to woo the CEO. So I'm a big proponent of proactive M and A. I feel like there's.

Other benefits, too, that there's more consideration that you're putting in because now you can manage the timeline. So it's beneficial for both sides and you just can really think things through, do proper diligence, make sure there's a good culture fit. Where my experience with the auction process is, you tend to, like, skip half your step at the best, and then you throw in the dice and getting the deal and then figuring out what to do with it afterwards.

Exactly. And sometimes, like, you get an opportunity. Let's just say, for example, a competitor is up for sale. Maybe that presents a really exciting opportunity for you to consolidate in the market. And you think, we're going to do this deal. Great. Now you've done this deal, this transaction. You're on an expedited timeline to complete the deal. You did it. You've given some thought, sure. To cultural fit. But you think, no problem. We're just going to go ahead and sunset a platform. Platform or consolidated the customer base. But you haven't given a lot of thought, a lot of deep thought to the cultural fit, which is really important when you're talking about M and A. What's it going to be like for the customer experience? What's it going to be like for the employee experience? So, absolutely, I think you hit that right on the head. I think you have a lot more time to sort through all those issues when you're proactive.

Tell me how you get the conversations going. We're going to go out, we're going to hunt. We did our research. We found the opportunities. Now we want to get the dialogue going.

Yeah.

See if there's an opportunity to acquire this business. How do we do that?

When you're doing your research and you're trying to find contact information for who the right person is to speak to at this company, is it the CEO or is it they have somebody in Corp Dev or do they have somebody at the cfo? Like, who is the right person? You make a judgment call on that based upon the size of the company and other criteria, and then you. I like to just craft out a cold email. They can be a little bit longer. I've had a lot of success with this, which is you break it out three or four main paragraphs. And the first paragraph is introducing yourself, who you are, why you're reaching out. Second paragraph might be, this is how we think. This is what we've learned about you guys and why we Think this could be a good fit? Maybe the last paragraph is something along the lines of hey, let's find some time to chat. Even if you're not ready for an acquisition right now, no problem. Let's just at least get to know each other and build a relationship and maybe at some point when you are ready to pursue an acquisition and hopefully it'll be top of mind for you and you'll reach out to us. That sort of approach is very different, I think from the approach of a lot of VCs that will reach out into a lot of these companies and ping them. Analysts are pumping out 30, 40, 50 of these emails a day and they're short emails trying to be very to the point, like hey, your business is interesting, we'd like to acquire it. Let's have a discussion. When you take the time to articulate what your thesis is and why you think a business would be a good fit for for you, what that would mean for the market and you articulate that in the email. We found that business owners are a lot more appreciative of it. We've had a number of them actually tell us that they really liked our approach and the only reason they responded to us was because we obviously had done some research and we put some thought behind the email and it's more than likely led to an acquisition because of our approach to those cold emails.

You detail your thesis, your transparent on.

Your thinking, very transparent. We're very upfront about it and we said even if it's not an opportunity for us to acquire you guys, maybe it's an opportunity for us to partner on something. Let's just talk and see where it goes. And folks are responsive to that. You're not trying to hide anything from them, you're not trying to be non committal. You're saying up front, here's who we are, here's what we understand about you guys, here's how we think that the two of us could be a good fit together and how we could tackle the market. We think it makes sense. Are you interested in a deal or not? And if you're not, let's just chat anyways and see where it goes.

So we've had a handful of inquiries the past year for potential acquired. It was a typical PE pitch. This is why we're so grand. Here's our track record, here's other companies we've dealt with in the space, whatever it is. The thing that was a big turnoff was there was no time or effort into understanding what our goals are in terms of, hey, do you understand where we're at in terms of our maturity and what we're trying to do? I felt like that wasn't there. It was the me focus. And to me I'm like, hey, it sounds like you got a lot of or even if it's a portfolio company that's looking to acquire, you got a lot of pressure from your PE firm to grow. That's why you're reaching out. Is there an element there that you frame to really emphasize what the CEO of that company or what does that narrative look like in terms of their near and long term goals?

Yeah, absolutely. That's built into the paragraph. When you're talking about why you think that the two companies would be a good fit together in terms of tackling the market, you definitely include a sentence or two in there around not sure what your plans are for the business or what you were thinking or even ready to sell. But we just figured it was worth reaching out to you and talk to you and get to know you a little bit. So that leaves the door open. It says, hey, I don't know you, but here's why I think specifically our two businesses could do very well together and why we should consider this. Your circumstances may be different and maybe a reason why you don't want to pursue this right now. And that's fine. Let's just get to know each other, right? This is a relationship business. The reality of Corp Dev is it's driven by relationships and you have that rapport with the business owner. You get to know them, you understand them. I've had CEOs tell me about their family situation right out of the gate on the very first call, hey, I've got a son who wants to take over the business. Or yeah, I've been thinking about retiring. Or, oh, a family member passed away when I inherited this business. So you learn a lot about the owner and their motivations in that first phone call by leaving yourself open to that.

Let's get to email the phone call. So you send an email. Crickets. You get no response. Then what do you do?

So I have a three strike. I'll send the initial email. I'll wait a week. If I don't hear back, I'll send a second email, obviously shorter than the first one. My longest one second will be like, hey, not sure if my email got buried in your inbox, but just wanted to ping you and see if you were interested in having a conversation again. Just to reiterate, we think it would make sense for us to talk for XYZ reason for whatever's going on with you. We'd still love to at least have a quick 15, 20 minute chat just to get to know you. Let me know what works for you. Let's say you get crickets again. Then I'll do one last email and if I get no response then either maybe I'll wait six months before I pay them again. But for the time being, if I sent you three emails and you haven't responded to any of them and they're each one of them is a week apart, then I'm going to put you on the back burner, I'm going to move on to the next one on my list.

You don't start calling them.

No, that is an approach, not my approach. The reality is people do read their emails. No matter how swamped they get, they'll at least look and look at the subject line. They'll know what the email is generally about and if they weren't motivated to, to answer or even just say, hey, yeah, let's chat. I don't think a phone call is going to go over well, I'd call them. That's fair. Different approaches, I guess. Like I said, I was a stockbroker. I used to cold call 500 + on average calls a day. I've done the hard sell. You get different types of customers that way. But again, I'm not looking to pressure anybody into a deal. When you're talking about an acquisition strategy and you're talking about acquiring somebody, I don't think that's something that you should be pushing someone to have that conversation. If they're not ready for it, there's a chance that they might get irritated and say, stop calling me, stop emailing me, I don't want to talk to you. Maybe it's just because they're stressed out, it's just a bad time for them and I don't want to blow up a relationship before it even begins. I'll email and then I'll get enough responses and it works. You get enough responses that like it doesn't make sense for you to sit there and cold call every single person. Because on average, again, depending on how proactive you're being, it's I'm not sending out like one or two emails a week. I'm sending out 10, 15 emails. I'm targeting the top 10 or top 15 companies on my list every week and I'm saying, look, who's ready to have a conversation and who's not. It's an ongoing process.

There's some factors there where if it was, hey, this is the one or two that I really need to get after. You may be even taking it up a notch.

So what I like to do actually, rather than pick up the phone is then if I'm really, really desperate to do a deal or to get in touch with somebody and they're just not answering my emails, then I'll go to our board or I'll see if we have some mutual contacts and I'll see if I can get a warm introduction rather than picking up the phone and cold calling the guy out of the blue. My goal is to try to get in somehow.

Would you want to do that first, try to get the deduction before cold outreach?

In some situations, yes. In other situations, I don't want to go to my board every week and say, introduce me to this person or that person. I want to do my own effort first. And then if there are like a couple of hard nuts to crack that I've tried reaching out to a couple of times and I just can't get a hold of them, then I'll say to the board, hey, do you guys know XYZ at this company? Can you introduce me?

Approach changes based on volume, what you're trying to accomplish, because again, big number may not make sense to do it, but if it is pretty defined targets.

You've got a board that's more active, that's constantly asking you what deal you want to do and things like that. Maybe they're more receptive to setting up those interests for you. So it just. It depends on the situation.

We get the response. Basically, I'll grab a call. Here's the date and time. Yeah, you know, ring, ring, first conversation. How's that framing go?

30 minutes. You basically let them talk. You've said your spiel in your email. There's really not much you should be adding there. And you just say, hey, thanks for responding. Maybe take five or 10 minutes to quickly recap who you are, answering questions that they might have. Maybe go into a little bit more detail and then say. Then turn it over to them and say, you tell me you answered the email. What's going on with you? Where are you with your business? What are you thinking? What are your plans for the business? Fill me in on what I'm missing. And that's when they go and they tell you a ton. Even without an NDA, you'd be surprised. There's a lot of folks that will. And maybe they won't give you Exact dollar ranges for revenue. But they'll tell you, hey, I've got X number of customers, we're growing at X percent every year or I was at a million bucks two, three years ago type of a deal. And you treat those conversations as confidential even though you don't have an NDA in place. You know, I'm not going around reselling that data to other companies. I'm just noting those things down for my own records. And they'll get an NDA in place afterwards and we'll get into the details. I'll ask for the P and L after I get the NDA, have a.

Conversation, let them talk, really understand their plans and narrative. Is there angles or consideration about maybe timing right isn't directly to approach about M and A, but a partnership might be in the horizons. Is there things like that that get framed around it? And I guess it depends on your organization if that goes down a different.

Yeah, it depends on the organization and it also depends on the company, the industry, your company, what the appetite is for partnerships and things like that. Who handles partnerships? Is that something that corp Dev handles? Is that something that somebody else handles? Maybe they say, hey, we're growing gangbusters, don't need any cash. Appreciated the phone call. We wanted to get to know you guys, but we're just not ready to do a deal and we don't see ourselves doing a deal. If you really want to work with that company, maybe they have a really exciting product or feature that you need that you're lacking or it addresses a gap in your offering. You said, okay, well, would you at least be open to discussion about a partnership? Usually if it's not an acquisition, then yeah, happy to talk about a partnership and see if it's like a revenue share type of opportunity or something like that that you can set up in a technical integration or something like that.

You ever get aggressive where it's no, you're not interested in selling right now. Nothing's on the market. Everything's got a price. There was a figure that would make something happen. You have an idea what that would be, you know, is there some framing around that you actually push to do?

Rarely, but sometimes it depends on how the conversation is going. Some folks right out of the gate, they are not interested in doing a deal. They are fine. There's no number you can give them. They're young, they're just having a good time. But then there are some folks that you talk to that are maybe older. Maybe it's a family owned business, maybe they're in their 50s and they still got another 10 years before they want to retire. And you tell them, hey, again, depending on what your thesis is, the approach that we always have past companies was, hey, we always love smart people, even if we were to pursue an acquisition. But that doesn't necessarily mean that you would have to walk away from this business. We know it's your baby. We'd certainly let you stay on and run this business post acquisition. But this is a way for you to take some chips off the table. Maybe there's certain things that you want to do with your career or with your life in general, and this is a good way for you to address that. Where you don't have as much of your capital tied up in this business, you can sell the business to us, you can take that money and do with it what you will. And at the same time, you can stay on and help grow this business even more. Because who knows this business better than you? For a lot of business owners, that's an exciting prospect. They not only get a chance to make some money off of their investment, but at the same time continue to stay involved in the business and grow it.

A good way to look at it, keep the options open.

That's right. It varies. Really depends. It depends on the conversation.

Do you ever get somebody that's halfway where they almost want to test you to see what kind of price that they could get for the company and they're not serious about selling? How do you sense that out? How do you respond to it?

You can sense it out. I don't know how to quantify that or say definitively. If someone gives you this signal, you get a feel for it. But the reality is that once you put a number out there for folks, they start counting the money in their head. So usually when they're halfway and you're putting out a valuation, my approach to valuation is, look, I'm going to put a number out there. It's a number I'm going to stand behind. It's not a number that I'm going to put out there and then retrade later on and say, oh, we said too much and this makes more sense. I'll look at the business, I'll say, look, honestly, like, we need some data from you, we need your P and L, we need churn data, et cetera. I'll come up with evaluation and based upon synergies and all that stuff. And I'll say, this is a number that we believe in that we think that we can hit, provided there's nothing material that we uncover in diligence. This is a strong valuation based upon market comps, based upon what's out there right now. And more often than not, those folks that are on the fence all of a sudden, they get a lot more interested in talking about a deal.

You're not giving them a ballpark range, you'd move to preliminary diligence. So if they get to a point where like, hey, we generally aren't interested, what does that look like? How do you stage it to start doing your preliminary diligence to come up with an offer?

There's a bunch of different approaches to this, but I have a list of 10 items that I'll get an NDA in place and I'll say here are the 10 things that I need from you before we do any work in real diligence. Here are 10 things that I need. They might be P and L trail report, org charts, cap table, new hires, any sort of other financial or data that I need to be able to come up with a number based upon my own research. And then there's any product specific data that I need, what tech platform, et cetera. I'll get all of that data and I'll put together a model and I'll come up with evaluation and I'll say here's what we're thinking and if it's not a flat out dollar figure, maybe I'll give them a range and I'll say somewhere between Y. At that point, after I've done some research, we. I'm not in the business of giving people comp information. Oh, well, you know, Your company does $50 million in revenue and based upon what the market is saying, it's worth 2x revenue. No, that's not my bag. I'm there to give you a well thought out valuation on what your business specifically is worth to me and what I'm willing to pay for it. And it's a number that I believe in, it's a number that I stand behind. And now the seller as well knows that you've put in work and you've given a number that's real or a range that's real. And so that helps address a lot of those folks that are on the fence.

You ever do preliminary diligence and come to the conclusion this company isn't as good as we thought it was one to walk from?

Usually you can figure some of that stuff out in your introductory call with the owner. If there are certain things about their pace, their growth, etc. You're like, this just isn't it for me. Then that's the point where you walk away. There's been one transaction that we were involved with that we actually. We didn't walk away from it. You probably should have, given what we learned about it, but we did. It was a business owned by a guy who used to be in sales. Started his own business, mom and pop type of a thing, family affair. His wife was doing the books and she's not an accountant. His daughter was doing some of the CRM management. And none of this on the back end. None of the systems were talking to each other. CRM didn't talk to billing, which didn't talk to the product. Everything was a manual process. And so the data was bad. That should have been the point for us to say, listen, there's something just doesn't smell right. This doesn't seem like a deal we want to do. Well, we got desperate. We did the deal based upon our own rationale, which was flawed, and it came back to burn us right in the end. We ended up selling the business back to the owner a couple years down the road for a dollar. So that was one that hurt. I think all the deals that I've closed. Anyways, when we get to the point where we're actually in diligence, we've had enough conversations and done enough diligence that we're pretty comfortable at that point of pushing through to closing. Unless again, there's something material that we're funding and diligence that says don't do it.

Any other tips? Advice on building a market map in general?

Different companies have different approaches and some of them may have already done a lot of this legwork previously. Don't make the mistake of walking and thinking, okay, I'm their first corp dev hire or their second corp dev hire, and they haven't really done this. And I'm going to go out and reinvent the wheel. Just talk to people. You'll find a lot of the times they will have done some of this work already, or if it's not exactly in this format, they'll have some idea about the where they want to go. And then you basically build that map on your own and you start to fill it in. It's an ongoing conversation with those folks. It's never something that where you just hand off to somebody and say, I've done all this work. Here you go, here's what our plan is. It's more of here's what I did based upon what you told me. Let's talk about it. What do you think? And just listen to what they're telling you because they're closer to the business than you are.

What's the craziest thing you've seen in.

M and a craziest thing that I've seen in M and A? I had a deal that I worked on and it was during the pandemic. The seller was so terrified of sharing information with our business team that they basically refused to let our, our own internal lawyers or general counsel look at contracts online. And so they, they literally wanted to take the contracts in hand, paper contracts in hand, hop on a plane, fly out to a conference room, show them to us in the room and not let us take notes and then take them back. And so we would have no chance to actually sit down and go through and understand the commercial implications of those things. And that was so unheard of and so ridiculous that we basically shut that down very quickly and said we pushed and pushed and pushed and had a lot of conversations with a banker and the seller and we're like, listen, if we want to get a deal done, you got to get over this, hang up. We're not doing a deal without having our lawyers look at the contracts. We ended up negotiating a compromise, but it was crazy. Up until signing they wouldn't let anybody on the business side look at those contracts. And even then they only it would only give them a sample of 10 of like the top 10 contracts. So outside counsel, third party council, they were comfortable with anybody within the umbrella of the company that I was at, they wouldn't let anywhere near those things. Even I had trouble working corp dev. I have no connection to the business side. I don't talk to them on a day to day basis or anything. I'm not dealing with customers but they had a lot of issues so I wouldn't literally read through the contracts three lines at a time.

It was obnoxious, but yes, y paranoia.

Yes, that was the worst.

V. Thanks so much for taking the time to chat with me. I really appreciate this walkthrough. Learned a lot about market maps.

Absolutely. I'm happy to. Thanks again.

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