How to Create a Positive Exit Experience in M&A

People are asking for more M and A Science. We're giving it to you. We're increasing our production from once a week to twice a week. Look out for more M and A Science interviews. This is a conversation with Swap Neil Shindy, CEO as Zenny. He's a serial entrepreneur with two exits under his belt. In this interview we talk about how to create a positive exit experience in M and A. We discuss I properly sell a business Managing diligence during the sales process, Role of sellers and integration planning Do's and don'ts of buying a company this episode is sponsored by our Business Lines. Take a minute to learn about them. It's the best way you can support this podcast. What's the difference between Deal Room and Firm Room? I get asked this all the time. I know if we could have made the branding any more confusing. So let me break it down for you. Dealroom is an M and A lifecycle management platform. It's perfect for any company that does two or more acquisitions a year. It manages your pipeline, diligence and integration, also divestitures. It automates pipeline reporting and follow ups so you stay focused on conversations with potential targets. And this is where it gets good. You can run full diligence for all parties involved, internal, external and counterparty in one workstream. Then create a parallel work stream for all the integration planning. This allows your team to start integration planning at the start of diligence and iteratively update the integration plan with incoming information. This is how you get integration done faster. Nobody in the world does this better than dealroom. I know that's a bold statement, but I will take bets on it now. Firm Room is a virtual data room that is as simple as it gets. Back in 2018, the team at Dealroom was noticed. Many boutique investment banks and law firms that cared about their customers were just looking for a simple data room solution that wasn't charging ridiculous per page billing fees. So we did something about it and carved out the data Room functionality in Dealroom and made it into a dead simple self service data room offering. If your deal isn't that complicated, then probably Simple Data Room is the way to go. You'll find the best value with Firm Room. Pricing starts at 500 bucks a month. So there you have it. Deal Room versus Firm Room Settled once and for all. You can check them out for yourself@dealroom.net and firmroom.com again. That's dealroom.net and firmroom.Com let's get to the interview. I'm Kisan Patel and You're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals. Hello M and A Scientists. Welcome to the M and A Science Podcast where we learn from the best in M and A. If you're interested in learning more about the solutions we develop to support world class M A teams or want to get involved with our community of forward thinking M and a practitioners, visit Masscience.com you get started by subscribing to our free weekly newsletter for the latest insight and events. Again, that's Masscience.com I'm your host Kisam Patel, CEO and founder of M&A Science. Joining me today is Schwabnil Shinde, CEO of Zenni. Zenni is a finance operations platform that helps companies from day to day, bookkeeping and fundraising support the timely investor reporting, helping to keep business compliance and more. Today we're going to talk about how to create a positive exit experience at M and A Swapnil. Thank you for hosting in your office here downtown Palo Alto, we got a nice sunny day. Some windows are open so we got some birds chirping around. Let's roll with it. Let's have fun with this conversation.

So this office is special because this is a historic building. I think it was built in 1850s and this office is next to the Apple store as you saw on the University Avenue. So this is a very prime real estate in Palo Alto and Facebook was born here and Google was born here and Stanford University is 10 minutes from here and you can see and feel the energy once you're down on the street. It's amazing. You will see founders around, you will see VCs walking around. So we feel that we are very fortunate and blessed to be here, especially in this building because it's historic. If you look from this window you will feel like as if it's from the Harry Potter movie. So we love being here, full of natural light. So we're lucky to have this office. And thanks for coming over.

I like it. Thanks. Can we kick things off a little bit about your background?

Hi guys, I'm Swapnil. This is my third startup, Zeny. I have done my Master's in computer science, Bachelor's in Computer Science, then started my first startup which was Dhingana, an Indian music streaming service that got acquired by rdo. Post that I started Mezhi, which was like an AI power travel as a service platform that got acquired by American Express and now we are building Zenny, which is an AI powered accounting and bookkeeping automation platform that manages and runs your finance department and we are offering this to technology startups.

I got two things I'm curious about. One is the CS background. I hate competing with engineers as other CEOs and especially from doing these podcast interviews, we see a lot of corporate M and A practitioners that have an engineering background and they have this problem solving ability that you can learn coming out of a undergrad program where somebody that comes from more of the deal side, I can't learn those skills. I find that an unfair advantage. I don't like competing with CEOs like you. There's that component and then the other component was with these two exits, how were they? Were they, hey, this business is not doing as well. We missed our marks and we're going to sell because of that. Or these were really successful exits delivering returns to investors. What was the situation between those? Maybe you can give us a little story around them.

First of all, let me address your first concern. Being a technical co founder has its advantages especially I think it gives you a bit of a superpower to create a product from scratch without needing help from anyone else. If you are really technical, you become a bit more dangerous if you also have product acumen. So if you're a technical product guy, you actually become far more lethal than just a technical person. Add to that some good business sense and ability to sell. You can pretty much differentiate yourself in the top 1% of founders. The more skills you add on those departments to your kitty, I think you can be more influential. Sorry for the technical background, but our investors love it when it comes to acquisitions. Our acquisitions kept getting better with each startup. You as an entrepreneur keep getting better with each startup that you execute on as well. Because there are so many mistakes you make as a first time entrepreneur that you won't in the second startup and a few mistakes that you make in the second startup that you won't report in the third startup. So I think it just keeps getting easier and easier. It becomes easier for you to build better teams, scale faster and grow faster. And the same is reflected in your acquisitions as well. The first startup we never were looking to sell. It started when we wanted to raise our Series C round and we started talking to some strategic partners and that is when the talk of acquisition started. And it so happened that we had three or four parties who were interested and I think a lot of interest came because 50% of our user base was from India Dhingana, which was like The Spotify for Indian music that time had 10 million unique listeners listening to music from 100 countries around the world with Bollywood music as our key focus. So everyone wanted to add Bollywood music and the entire user base that came with it to their own western music streaming services or wanted to enter India by acquiring Dhingana. So that's where these stocks started. We had a few offers from India from big companies in India and then few offers from outside India. Then we ended up picking rdo which was started by Skype co founders. And the reason why we picked RDIO was because we ourselves were fans of the product. It had a cult following. It was based out of San Francisco. When we met the executive team, the CEO, the president, the cpo, they all felt like extensions of us when it comes to their personality and the way they were thinking about the product. So we thought that we could learn a lot from them. And this can be a great home for Dingana. And it turned out to be exactly like that. We had one of the best times in our career working at RDO and launching a version of Dingana globally in 35 countries around the world. So it was amazing.

So that was a successful exit. They got an offer that was basically too good to refuse.

Yeah, overall the offer was really good. But the question for us was which offer do you pick? If you have multiple offers, that is where it can get a bit tricky. Do you sell to someone who understands the Indian market, is from India and can help you grow 10x because they understand the intricacies and the complexities of the India market? Or do you sell to someone who is outside the country and wants to enter the country based on what you have created? The ability for us to scale in India still remains our responsibility. The whole ball game there was like whom do you pick and why and what does the future look like with that particular company versus say someone who is local? The company that we had built had a lot of Silicon Valley blood and we wanted to help grow that particular aspect of the company than being a company that becomes completely India based company. So I think that was our motivation.

That's a good perspective on that. I think there's more questions I have, but I was curious about the other venture exit that you had.

So Mezzi was an EIPOWER travel assistant where we gave a travel assistant to every business traveler and it sits in your pocket, is available 24 by 7. You can plan and book your entire travel over simple messaging interface. So it makes you feel like a celebrity because you can just take out your phone and say, I'm going to New York. Can you just make sure all my hotel reservations are done, my flights and my hotels are done? And we will know your preferences. We will learn your preferences with every conversation and we'll get everything booked. And if you want to reschedule, you just send a message saying that, hey, can you push my flight by a few hours? And we'll take care of everything for you. It really took the complexity out of travel for all the business travelers, especially people who travel more frequently. And we had spent two years building this E app, our travel assisted platform. We actually licensed it to American Express and a few other companies. And the integration with Amex became so successful that it ended up being their most highly rated NPS product internally launched in the first six months. I think they saw the power that Mezzy could bring to their platinum concierge. And that is where the discussion started. And they just wanted to own it all and gave us an offer to acquire Mezzi after two years of starting Mezzi. But that was super fast.

Wow. And same thing. An African refuse.

It would be idiotic to refuse that the offer was really good. Again, the way we analyzed the offer, we sell at a price that is really good. Far more than we will be valued probably in the next five years. Or do we continue to build this company into something that we believe it can become? If we continue to build the company, where can we be in two years in terms of the traction that we can generate? And if you compare that to what traction Amex can bring to the table because they have the distribution with them, can we do it in one year instead of two years by going with Amex? And we saw that if we go with MX, we can actually scale the product further 5x faster than doing it ourselves, no matter what we do. Because they have the user base, all their card members are very travel savvy. A lot of people get Amex cards because they like traveling. And all the perks that Amex has is around travel. So if you add Mei to it, it becomes a very lethal combination. And that happened. I think we got acquired by Amex. We had served like a million travelers in the next 12 to 16 months. I think we had pushed the product to 10 million card members. Wow. And then it grew by tens of millions every six months. So it was insane. That skill you can't achieve just being independent. So now Mezi is so deeply ingrained in the MX ecosystem that it will keep running the concierge part or the travel concierge. Part of the business for years to come. If you open the MX app and click on the messaging icon, all you see is mezzy over there. So it was an amazing acquisition.

That's a great story. And then now you're building out Zenni, which we're a customer of. Yeah, we're looking forward to seeing the success in this story. You had some good things that you're bringing up, but I want to get a sense of when do you start thinking about exits? I feel like there's some schools of thought around this. Are you building a company with a dead focus on the mission you're achieving, or are you building to sell and is that the focus? How do you start thinking about that early on? What was your mindset?

You shouldn't build from a perspective of selling or building a big company and taking it public. I think thinking either way is a bit premature. What you should instead do is focus on solving the problem in a way that is highly differentiated. And depending upon what kind of company you're building, a few years into it, you will start seeing the shades that it's very attractive to some big players who cannot build it because their internal DNA is different and they would rather buy it instead of building it. Or the other cases that you have built something that is so unique that if you continue to do it, you can take the company public and own a certain vertical in the market. That feeling is something that founders can start having. Probably few years into the company, you can start having that gut feel based on your interactions with the external world. You will probably be asked such questions during the VC meetings that you take because VCs will typically not be interested in investing in something that looks like an acquisition. All of them want to invest in companies that can be multibillion dollar company, which is unfortunate because a lot of founders come up with ideas that can be features and not and as a result don't get VC funding. It's pretty easy to figure that out once you're into it for a few years. But to start the company, I don't think you should think of it that way.

When do you get to the point when you start thinking about it? It sounds like in this first situation you've got some inbound interest that came to you. A series of them and then the second one, you already had this partnership established. When do you actually start really putting some considerations there? Is it more of a reactive that someone inquired to you that we're interested in buying to the company and that's when you start thinking about it or do you start being proactive and start curating some of these relationships that you know may turn into an acquisition conversation?

I'm of the opinion that you should cultivate all relationships that can be helpful or influential to what you're doing, because you never know which relationship can help when. And in our case, the acquisition stocks have always started organically. I believe as a founder, you are in a better position if you are not selling but someone else is buying. That has happened with both startups. It was very unique with Mezhi because it was one of the partner that we had worked with and we had worked with them for more than six months. I had once dinner with the CEO of Amex that time, Ken Chinnal. It was top down, the interest was top down. So all the top people were highly interested in Mezzy, the presidents, the SVP's, which makes it extremely serious and exciting for the founders as well, because when you know that the interest is from the top, you know that they will take care of this particular acquisition and how serious they are about it. For Mezhi, we knew exactly whom we were dealing with. What was the quality of the talent over there, what was the quality of the execs over there? How were they looking at the problem? And there was a lot of alignment in the natural way in which we were trying to solve the problem and the way they were thinking about using us to solve the problem, which means that there will be almost no friction when it comes to executing together as team. I think that part was very, very important to us. Once we were part of mx, we could see that playing to our advantage because we had already built a relationship with all the key stakeholders as a part of our pilot that we were doing with mx. It didn't start after the acquisition talks. The relationship was already there. So the acquisition talk was more about how we can build something big together. Putting yourself in that situation is far more profitable, influential and comfortable than starting things from scratch. So building relationships on the way while you're on that journey is very important.

There's a lot of commonalities in who you would partner with. Going back to that situation where you had multiple interested parties, it sounded like you aligned with the party that you felt fit best with the long term vision for the company. Does that sound fair?

Yeah. At the end of the day, what do you want as a founder? You shouldn't just look at it in terms of the cash output that you're getting. You should also look at it from an employee retention perspective. The team goes with the product and where the product can be like two, three years down the line. I also believe that it's the legacy that you leave behind. So where do you want to leave the legacy behind? We would love to leave a legacy behind with a brand like American Express, which is respected and trusted around the world. So you become part of their books of history, which is pretty exciting.

Did you use any bankers?

No. For Mezzy, no for Dhingana. When we got the first acquisition offer, I think we had worked with bankers that time.

Did they set up an auction process or how'd that go down?

What basically bankers do is hopefully you already have an offer and then you want to talk to multiple parties. Either you have those relations or you don't. If you don't have more relations then you can get a banker and they can open certain doors. The other approach is like if multiple parties are interested and if you don't want to spend a lot of bandwidth managing all those relations till they become serious, you can get a banker and they can massage the relationships up to a certain level and help you execute on that process. But with Mezzy, we were super clear and transparent to MX because we had worked with them and we were like, we believe that we together can create something amazing. And I actually told this to them that we are not going to shop the deal around, but this is the price that we need and at this price it's a no brainer for us. And if that works for you, great. If that doesn't work for you, we can continue to build this company. And I was very transparent with them and I think honest with them that we have no interest in. First of all, we were not selling, you are buying. We don't want to spend energies in using a banker just so that we can hike the price. Why don't you just look at the price that we all will be interested in and try to make it work?

How do you come up with the price?

One way to look at the price is like, what was the valuation of your company when you did your last round? That's a simple math. If you're valued at 10 million and someone is trying to buy you at 15, the price is not exciting enough. At 20, probably no. But once at 50, it's a 5x return.

Yeah. Then you're like, that's saving a lot of years off your life right there.

Exactly. Then at 100 it's like insane. And anything more than a hundred, it's mind blowing.

You asked for some insane number, did you?

It was an all cash acquisition. Somewhere around 120 to 150 million. It was amazing and it was insane. Life changing event for a lot of folks at Mezzi. So I think the cost was amazing. But more importantly the value the platform was going to bring to Amex and the way it was going to be integrated again can say with confidence that we keep running for decades and that part is super exciting.

What about that competitive process? Do the bankers add any value?

There are two ways to work with bankers. One is do you want to work with big bankers or do you want to work with scrappy bankers? If you are a smaller company, I would recommend that you work with scrappy bankers because they will be as scrappy as you are and will be in touch with you pretty much on a daily basis. And it does help. They can open some doors. I think we got at least two acquisition offers through them as well. And depending upon how much bandwidth you have, they can take some load off your plate and do some discussions where you don't want to be involved. So it totally depends on the scenario you're in.

How about the lift on diligence? I'm curious about. I want to ask you first, what's the hardest part of selling a business?

That you're selling the business, it's like the baby was born, you are involved in the process and then it has grown up and now you're giving it away to someone and you know that you will be there with the baby, but probably not for more than two years. And we made sure our lock ins were never more than two years in all our acquisitions because we knew that we will end up doing something else. And the acquiring company knew that as well. And you have to be very transparent in that situation. But I think that's the hard part, that you are now taking a very different approach. And you're giving what you have created, you're putting it in someone else's lap and you don't know what will happen once you leave. So that's where the relationships that you have with that particular company, even before the acquisitions talk started, can be so influential and helpful. And I still remember meeting the president of amex had visited our Mezzi office in Sunnyvale. Most people don't know, but when you visit the Amex office in New York and you are actually meeting with the CXOs and the presidents, you first of all go to the penthouse, that's where their offices are, and you enter it and you will feel that it's a presidential suite. You will feel that you are walking in the White House. It's insane. And I had a meeting with the president over there. And after that he traveled to Mesi, which was like a nice small office in Sunnyvale downtown. Very different world. They are is in suits, etc. So we belong to a different world. I remember his words. He's like swapil, I know that this is your baby. We will take good care of it. And we are even okay to not change your email addresses because I know how passionate everyone is about Mezzy. So they said that we'll keep your email addresses the same. We will keep your brand the same. So even before we signed on the dotted line and started thinking about this acquisition, we had that assurance that Mezzi as a brand will remain till we are with the company. Those little things are very important because the moment you see those things vanishing just because they want to take the technology and integrate it as deeper as possible and forget about everything you have built, then it becomes painful. But if you handle it gracefully, I think it can be a great experience.

Yeah. When you go through the process itself, due diligence, I'm curious, how do you manage that? Because there is a nature of sensitivity. Who do you let know in your company and get involved?

Oh yeah.

How do you think through that? Maybe start with that. Because I'm curious about. You did one transaction with a bank and without a bank, how much value add? Because a lot of bankers promise the world about helping you through the process and supporting it versus when you did it yourself. What would the big differences were?

In both cases, you still have the challenge of managing the whole acquisition talks internally within your company. And to start with, unless they are serious, it's no point sharing it with a wider audience. You should probably only share it with those who can help you with that process. To help push the ball forward approach is to loop in a few trusted folks who can not only know what is going on, but help you execute on that particular deal. And then once it becomes serious and you have signed some kind of understanding, that is when you can share it with a bit bigger audience. But never share something prematurely because it can also disrupt your execution internally. Because your goal is that you need to keep winning while this acquisition is happening. And I think that balance is very important that you cannot stop running while the acquisition is happening. So you really need to have a small dedicated committee that is focused on this.

Did you get a big lift with the banks versus not having a bank?

No. The majority of the lift is on your side. Especially when you're dealing with companies like American Express, just the legal team from their side might be 50 legal folks. So it's a whole different ballgame. I don't think banks can do anything there.

How do you manage it? Isn't that distracting for the company? Because I've been on the buy side enough times. I know how much stuff we ask for, how many follow on questions we ask. And as pulling your team members and leads to doing other things.

That's why I said that you need to have an understanding with the acquirer that we want to make this as painless as possible and as fast as possible and put in a timeline on it that this particular process needs to be finished in two weeks or three weeks, not eight weeks. And once there is that understanding that we want to move super fast, I think people start taking it seriously. They move fast and the checklist don't need to be super big. They only need to include the must have items.

How do you negotiate that? Like a company like amex. And it's funny because ironically we've had their head of corp dev on the podcast. So you know this comes back in.

Good light when the interest is top down. A lot of things can be simplified. If the CXOs and the Presidents and the SVPs want to work on this deal and finish it as soon as possible and they have that mandate, people start running like hell. And I think that part is very important.

But who's prompting it, them or you?

It's us talking to them. It's in mutual interest of both this deal asap, because you don't want to lose this deal if you're amex and we want to complete it as fast as possible so that we are not being dragged.

So this is good as a seller, this is part of your leverage because you haven't signed anything yet and you're saying, hey, look, I understand your interest and we got a price. But beyond that, we're looking for a fast and painless deal. Anything else you do to frame that, because it sounds like that's one of your bartering chips. Give me some assurance that this is going to be fast and painless.

Yeah. And the best way to do that is put a deadline that this process ends in so and so weeks. And then if it's not ending, you can always get back to the one of these top contacts and have a call and you can push it through.

Just think of lessons learned of things that somebody me one day is going to go through this that I can take as a lesson learned from your experience.

I think the lesson Learned is not just for acquisition. I think even when you're raising VC funds, you go through a lot of due diligence. So one thing that I do diligently is manage your whole data bank as you're building the company. I have this folder in Google Drive where I have different folders under it and all that folder is for due diligence. So whenever we sign any contract with external partner, we just put the contract over there. Whenever we hire any employee, their offer letter goes in one of the folders. So as you're building the company, if you keep managing all these documents in one place, it becomes super easy for you to be ready for due diligence. Because major part of the due diligence or the pain point of due diligence is getting all the required data in one place. And if you keep maintaining that, then it becomes easy. Even if you keep maintaining it, I think at some point you will realize that 20% of the data is missing. But it's still as not as frightening and as time consuming.

This is a fair point because that's what bankers do. I did a number of sales side deals. First thing you do is prep the company and help them organize the data. So if you do that ahead of time, having in a Google Drive, we actually have some products that help with that as well, which amazing. We're going to start bartering for our services here. So next time when I'm late on my bill, you'll know why. So I agree that prep work is really important because that allows you to say, hey, I got you on the diligence. We already have this stuff ready to go. So you're enabling a fast process on your end as a seller. So that makes a lot of sense to make the diligence process smooth. Anything you look back of like ah, I really screwed that up and if I were to do my next deal, this is definitely something I wouldn't do again.

I think you should definitely have a legal team that you trust and you know that who can negotiate on your behalf for certain terms that are very legal in nature. A legal counsel who understands your personalities as founders and who might know what you might do in a certain scenario and negotiate on your behalf. And luckily we have been working with the same legal counsel across all three startups is David from omm and they are amazing. He has worked with us for so long that he knows exactly what we might want in certain scenarios, which clauses to accept, which to push back on. And having that chemistry with your legal team also helps you run faster in such scenarios.

So my lessons here is negotiate this sort of ease and timing of the process. Get that down with timeframes, have some prep ahead of time so that you can do a faster diligence process and get great legal counsel network. Figure out who's the best this type of transaction and make sure you get them on your team.

Most importantly, keep investing in relationships and building relationships with external companies and folks and partners.

How do you do that?

Networking. Everyone always gets an opportunity to network. There are few ways you can do it. Either you make connections at conferences, either you make connections at some of the VIP dinners that are happening, or some of these intimate events that are being managed. There are panel discussions, etc. The more you are out there, the more relationships you can build. Sometimes these relationships are built when you are raising around and someone is interested in what you are doing. So you carve out a small piece for them and let them invest in your rounds just so that you can be partners. Amex actually invested in one of our rounds through Amex Ventures. And that is where our relationship started. And other competitors of Amex were not investors. They were working with us as partners. When you have relationships that are deeper and more incentivized, it can lead to faster outcomes.

The thing I struggle with is I meet so many people, like any given year, hundreds of people through this channel and then end up talking to thousands of people. But how do you keep in touch and build the depth in those relationships?

It has to be outside the conference room. Having dinners and meeting over drinks and coffee is far more meaningful than meeting in offices and conference rooms because they are just professional interactions. But the moment you start building personal bonds, that is where you build real relationships. And I feel the same about the key people who work at Zenny. Like I spend a lot of my personal time with them in the evenings. Whenever we are at conferences, we spend the evenings together. And as friends, we hang out together in evenings or we go out for lunches. I think those things matter a lot more in building relationships. And the same applies to even external partners. Like I always tell my other founders or people that I have invested in that. Pick a VC with whom you can have drinks in a bar, with whom you can share some of your personal stuff because that relationship will really enhance your chemistry at the board level. Otherwise you're just working with someone who is professional and it will be a heartless interaction. And when things are bad, they will blame you versus if things are bad, they will want to help you without even you asking for Help. So it becomes a very different ballgame.

True. You need a personal touch to it and you do that outside of the boardroom. On the exit part you sold to larger entities. And the big realization I've had from doing number of these podcasts, it's all about integration. Integration is either make value or destroy value. Were you involved with integration planning process?

Oh yeah, absolutely.

Teach me, what were you doing?

First of all, depending upon what the companies like, if I take the example of American Express, there were so many stakeholders. We were acquired by the digital labs of American Express, but we had to integrate our technology into the MX app which is on iOS and Android. So the mobile team was very different then. We wanted to integrate our platform with MX platform. So their platform team was very different. We had this human angle, like the travel concierge, just like we have finance concierge at Zenny. So we had that team that needed to be integrated with their concierge, which was a whole different ballgame. And then there were different geographies. We had teams in us, we had teams in India. So the India team needed to be integrated with their India teams, US teams with the US teams, etc. And then the business needed to be across all countries. If you as a founder are leading this from the company's side and if you have top level support from the Amex side and if they open all the doors for you at the time and you go in and you start building relationships, a lot of these things can have positive outcomes, good leadership. Yeah. But you have to build those relationships with all key stakeholders on both sides.

Because you have your team and it's not, hey, you're waiting for Amex or other acquirer to guide the process. You're heavily involved. And then is those relationships, the people on the Amex side that you're really.

Getting involved with to help you will need involved. But as long as you as now, the owners of this particular acquisition, you have a deal team from their side and you have all the core execs from the Mezzi side, you are responsible for making this acquisition successful. And you should define goals and you should define those goals and you should follow those goals and you should measure where you stand at the end of every month and keep pushing it and know exactly which door needs to be opened for to make this whole outcome a success.

Who's key on the Amex side? Like is there an integration leader there?

You will always need one or two high level people who are championing in it, who can take actions when you escalate certain things to them that, okay, this is blocked for the last 10 days. Can you help me push this forward? So there should be someone, and there is typically someone who is owning their neck is on the line. So you will need such owners. And whenever you hold someone responsible and accountable, whether it's acquisition or not, they start creating magic.

You have that person, is there anybody else? So you got that space like a business unit leader, somebody that's an executive running a business unit. Is there like an integration lead there that's running the schedules, timelines and coordinating?

You will need someone to program manage all the integrations. So we had that particular person as well who was doing it from American Express side. There were too many other leaders for each of those verticals that I mentioned. But this person who owns it for us, it was Phil Norman, who was the VP at Digital Labs, who did a fantastic job in making sure that whenever there were escalations, whenever we felt something was stuck, he used to push it. And he himself had great relationships with other leaders internally, so that helped.

Why do these integrations get screwed up so often?

I don't know why and how others screw it, but this is the engineering.

Part where you get involved and start problem solving and doing stuff like that.

There might be several reasons that integrations can get screw up. First, that you never had a relationship to start with, in which case you now have to first build a relationship and then start integrating. And if you don't invest in a relationship first, you are two people with two different agendas trying to do your own thing. Their success is not tied to yours, your success is not tied to theirs. So they focus on their own roadmap. You are left in a jungle trying to figure out where to spend the night. And it can become very tricky. But as long as you build those relationships and champion that, this is one team trying to achieve this particular integration and we want to make it the best acquisition MX has. Then I think people start channeling their energies in that direction and start running in the direction this sounds like.

The secret sauce here is building those relationships early. Because when you hear about a lot of these deals that go south, it's always the integration team got involved too late, which probably means a lot of the thinking considerations for integration planning that happened too late. And the leadership alignment, those relationships between different leaderships that are going to make.

This successful leadership alignment is probably the number one thing that you should get.

How are like, are we pre loi game planning on what integration is going to look like? Oh, yes.

Yeah.

How many people are going to have involved between your team and their team actually planning integration?

If you really care about how your product is going to roll forward when you are acquired in the next two years, you will need to ask those tough questions. How will the first three months look? How will the first six months look? Where do you think we will be one year from now, two years from now? What's our goal? What are the key milestones? Then you should be the one who says that. Okay, let me talk to this stakeholder. Are they equally excited about this? If not, excite them. We spend so much time just meeting all the business leaders and getting them excited about Zeni to a point where I think I even spoke at their all hands, which was like, I don't know, 50, 60, 80,000 employees.

Wow.

So you really have to create that excitement internally.

This is before starting at loi.

No, this was after the loi. Okay, how about before?

How many people did you talk to?

So in our case, I think we were lucky because our pilot with MX meant that we had to integrate with them. So because of that, we already knew what integration teams look like. Integrations look like. Yeah. And then you take those relationships to the next level.

What's like the worst experience you've had in either exit situation?

We did something pretty stupid in our first startup. When Dhingana was acquired by rdo, me and Snehal had a discussion with the CEO. We had two products, Dhingana, which was streaming Indian music, and rdo, which was streaming Western music. Because we were going to merge, we wanted to create one product, rdo, that will now replace Dingana and will be pushed into the Indian market. The CEO asked us, you have your own engineering team running your product. Our engineering team is completely focused on our product. So either we take your engineering team and make them responsible for integrating your product with ours, or we keep running two products. And if we keep running two products, it means that we will spend licensing costs on both sides. We will spend engineering costs on both sides. So we were like, okay, let's shut down Dingana and we will basically focus these engineers on RDO and we will then launch in India as Dingana. And the mistake we did is we just shut down Dhingana overnight. What we should have done is we should have kept running Dingana and had a seamless transition from Dingana to RDO or probably getting more advice from more CXOs at RDO and see what we could have done. But I think we just made an abrupt call and it pissed off 10 million users overnight across 100 countries. And it was like the most stupid thing that we did.

It wasn't like so directly to the M and A. It was very much the strategy and integration strategy.

And no one knows that RDO is coming and when is coming.

But this goes a good example of how integration can go bad. If you flaw the game plan, that could really make it difficult. Any big lessons learned going through diligence or integration that we haven't talked about in terms of making those successful, especially the integration part. Let's make the money, let's create the value. Obviously, there's a lot of leadership involved with it.

If you really want to make the acquisition successful, you have to make it your goal for the next year or two years after you're getting acquired or after you are acquired. If you don't, then whatever you build will just fizzle out. If you really want to live back a legacy, then you have to spend every single month getting deeper into their ecosystem and make sure that they drive value from your product and your product, as a result of that, will live longer. And I think that's a real win.

What keeps you there? Like, what's your incentive?

The incentive is to make sure that you live by legacy. That's the only incentive that you can have.

There is no retention plan.

That there is a retention plan, obviously, and you should have a retention plan in place. We had really good retention plan for all employees for two years.

So you and the team, it's like, hey, we're going to get taken care of really well. Which is why we're not going to run away from this for the next shiny thing.

Oh, yeah, absolutely. If you craft a deal where the founders leave after six months, but the team is still there with incentives for two years, I don't think it's going to work. It will only work if you stay with the team and you make it past the thing.

So I'm looking at our first acquisition for our company. Small, and it's in my DNA. I got to do some deals. What should I be mindful of to provide a good experience as a buyer? And we're talking the corporate development folks listening in and they're interacting with CEOs and founders that have a company they want to buy. What would be advice that you'd give to me? Think, like, beginning, like the right approach of building that relationship. I don't want to waste your time either. I want to be candid about it. Maybe there's ways to explore for partnerships. Ultimately, I think there's a good opportunity for both of our companies to combine together. We got a great platform and your service offering would lend well to it and service our audience. That's growing and it's much larger. Similar to the story you had. Give me some do's and don'ts.

Are you buying or are they selling?

I'm on the buy side now, but I want your perspective because you're.

No, but are they. Do you want to buy them or they want to sell themselves to you?

Oh, I want to buy them even though they may not be thinking about selling.

So if you want to convince them to buy you, I would say there are a few things that come to mind. One is that you should pend them a future that is more powerful than they can paint for themselves in a shorter amount of time. So that is one. So you have leverage in defining their future. Second is you will unfortunately have to make sure that they get a great deal, or at least they perceive it as a great deal. And hopefully a great deal is something where you feel that you have won and they feel that they have won. And third, it's very important to buy the company if you want to make it successful. You cannot just buy the product or you cannot just buy the people. If you buy the entire company and make sure that they stick together as a company and from your side, do whatever you can to make them feel that they are still that one family within your company, I think it will drive a lot of amazing results because that chemistry that startup has is one of their secret weapons. They will continue to run faster for you.

We didn't talk a lot about that. Where it's like the culture fusion or combination culture is combining element. How did you think about that in the last situation? You had a partnership there. But what are your thoughts around that in terms of even going back to my buy side, of giving that impression that this is going to be a good thing for your people? How do you sort of get that assurance that there's going to be a good culture fit post close?

The culture fit is something that you should have an idea on pre close. If you don't have that idea, it's I think it's a dangerous ballgame.

Anything you do, do you ask specific questions or do you just.

So you have to spend quality time together. You cannot say that, hey, let's get married and then let's figure out if we are compatible. You have to spend quality time together to figure out if you are compatible. If your thought process matches, if your style matches, if your Vision for them and their vision with you is same. And if that's not happening or that has not already happened, you should spend quality time doing that. Hopefully meet outside the office. Meet over dinner. It was over dinner when Amex first told us that they would like to acquire us. And that dinner was at one of our favorite Thai restaurants in Mountain View. And that became a hit. Even after acquisition. When Amex folks used to travel, they all said that, okay, let's go to that restaurant. Because that is where it happened. The approach that you have towards that particular team matters a lot. And start building that chemistry and those relations beforehand. Because if you can't do that before acquisition, I doubt if you will spend time after acquisition.

What about the parts though of the ways of working in an organization? I'm thinking of like the fable top down management versus bottoms up management. Do you get that through those informal conversations or is there more of a formal way of understanding how they truly operate? Especially like a big company versus a startup.

Yeah. If you have that authentic relationship with them, they will actually tell you what are the good things and what are the bad things. And then your goal as partners is to maneuver the bad things with their help and then capitalize on the good things so that you can distribute yourself faster.

Going back to like the timing of these events, you know, for a founder, I feel like there's a right time to sell. Because if you hold on to a business and your growth curve tips over and all of a sudden you become stagnant, now valuation comes down big time.

Oh yeah, yeah.

And so you want to sell while you're in growth. But then I've seen the organizations where they sold pretty early in their growth.

Yeah.

And you've watched that thing bubble up next 50x and you're like, damn, you sold too early. You missed out on the. And then they're doing their next startup and things like that. How do you think about that? Like, when is that sweet spot? Because even like the situation Amex, it's six months, but like, hey, could have held it on longer, kind of grown things more organically and then pushed it out. How do you sort of judge that?

The best way to judge that is can you drive a value today that you might have X years down the line so that we are already capitalizing on the value and the return today for the next few years. And if in those few years, if you have multiplied even more, it's actually a good thing because first of all, you already got a value that is multiple times higher than where you were. So you have amazing returns and you should always be super happy about it. But after that, if it grows even more, that actually speaks to the quality of the product that you have built in the team that you have built, because it is actually flying high and it adds some credit to your kitty as well. Based on what you want to do later, if you want to start another company, this acquirer and all these stories will start circulating, it will basically start building a reputation for you. Whether it's investors, whether it's team members, every good thing that you do helps and it comes back and returns in multiples.

There's a network effect. The way you frame it, it sounds like you're willing to take on consideration at any point in time because you already have this vision of where you're taking the company and that anticipation of the growth curve, whether that holds truth or not. But you sort of have a target in mind. What you're striving for based on that. If that consideration offered to you is aligning that you're going to see that return, you're going to see that it makes sense because you're going to save a lot of time, you're going to get that realization a lot faster. And then still there's some incentives for you to be part of some of this growth and things like that.

One important rule here is you have to hit when the iron is hot. If the iron is cold and if you're trying to hit it, it's not going to work. So you should sell. When you are in an amazing phase in your company and you have built something that is attracting a lot of people in a certain amount of time, that phase might pass, but then another phase will come. So you should capitalize on that. So try to do things when something amazing is happening because all those you yourself will carry a certain energy if you know that your company is rock. If they meet your team members, they will all be in a different spirit when they are talking to a potential acquirer because people keep cross pollinating. So if everyone feels that they are doing an amazing job, it will show in the way they present themselves and the price will keep going high. Similarly, even from their side, the excitement will keep increasing and that will mean that the multiples that you are getting hopefully will keep increasing. This is another way you can negotiate.

This is really good advice for that founder. I feel like the challenge with selling a business is it's a once in a lifetime for most people event and it's a very fragmented thing. You learn through your Experience this ecosystem of investors, lawyers, bankers and people that do that one time, you don't learn that. Given that, what would be the advice you'd give to somebody that's going to go through their first exit?

First of all, don't believe that it's once in a lifetime. Just believe that it's an important milestone which will give you lot more credibility to do something in the future. I'm so thankful that we sold Dingana because if we didn't sell Dingana, Mezhi would not have happened. And Mezhi was such a lightning fast journey from zero to hundreds of millions of dollars in cash in 2.5 years. That's unheard of. And that too in the AI space which is now the hottest. If we didn't sell Mezhi, Zeni wouldn't have happened. And Zeny today is already multiple times bigger than Mezhi ever would have been. Growth trajectory keeps exploding with every startup that you do. So understand that, understand the network effects of every acquisition. I would say the size doesn't matter. Even a simple acquisition will give you credibility. It will open more doors than no acquisition. And if you keep repeating it, it's magical the way doors open up and the kind of people that you will start networking with. And it's true, the bigger the acquisitions, the bigger personalities you will interact with and you will suddenly find that it's easier to make friends who are millionaires and multimillionaires. So all that is really true. It will be easy for you to enter circles which are highly influential, which actually comes back because when you are connected to influential people, they open doors that are close to others. And when you go in, walk into those doors, you can create magic for what you're doing in your current startup, for your employees, for your investors, etc. To give you an example, like when we started Zenny, we we raised a $13 million series. Around zero customers, zero employees, no website. It was all based on the fact that we are starting our third company and the investors who believed in us wanted to be part of that dream. It doesn't matter what that dream is. Whether we are going to start a burger shop or whether we want to automate finances using AI doesn't really matter. I think that is where your credibility and your hard work for years plays in. Then we were raising our next round, Series B. It was a $34 million round. We closed it in 10 days. We didn't run any process. I had investor that I had a call with on Friday who said that let's meet on Sunday. I will give you a term sheet on Monday and let's close it. Amazing things can happen. No matter the size of the round, whether it's 10 million, 30 million, 40 million, amazing things can happen. If people look at the journey that you have had, people look at the team that you have had and and all the core people in our company today have been with us over all three startups. So a lot of our investors even know them personally and all those things help a lot. At the end of the day, team is what helps you execute and execution is what differentiates a winning startup from a losing one. It's not the ideas, it's not the VC you raised from, it's not even the amount of money you raise from. It all boils down to execution. And execution comes with team dynamics and the bonding between the team. And you will see I keep repeating these bonds and relationships between teams and partners and that's I think the winning mantra.

That's the mindset of a serial entrepreneur right there. How about the first time selling to make sure the process goes smooth and the exit successful. What advice you'd give for a first time seller?

I think create a checklist and be very structured about it. Create milestones and make sure that you and the acquirer are on the same page. Take an approach where you have a very important product release. It's make or break. So everyone is working day and night towards it. Just have the same philosophy and you will probably end up getting acquired 2x faster in the like the process will be 2x faster than. Because once you decide that and once you iterate it and you keep iterating it every single week, even legal people start running. I remember our legal team used to work like 4am in the morning, 5am in the morning. It was insane because when they see you are running at 500 miles an hour they are not going to walk at 10 miles an hour. They will at least run at 100 miles an hour and then suddenly things start happening sooner than later. Wow.

I like that. Being proactive, making that the tone of doing the deal. When you get to exit and you get a pretty sizable check, what do you actually do with the money?

I would recommend you not do anything with it. Just let it sink. I have heard stories where people start doing crazy things, buy big toys and end up spending a lot of that money on the wrong thing. So just I think let it sink in.

So you have it just sitting there in the bank account.

How much will you spend? You can do some funky things here and there. But importantly, I think ground yourself. Don't lose. If you're a humble person, hopefully don't lose that side of you. Try to surround yourself with friends and family members who will help you ground as well. Give yourself enough time before you start making big ticket item decisions.

What was the biggest thing you bought?

I bought many things. I bought this watch. This. I bought this watch because this psychologically reminds me of MX acquisition and I think this was important for me. But.

Yeah, you don't have a Lamborghini in the garage.

I bought a Lamborghini, but I don't think it was after the acquisition. It was, I think three years ago.

Oh, wow.

I think it was. I bought it when I was at Zeni. Then we moved to Los Altos from Sunnyvale. So that was a. Got a new house, a big change.

No yacht, no boats, no flying things.

I need to keep something around on my checklist after the Zeni journey is over to celebrate.

Awesome. That's cool. I have to borrow the Lambo so I can get out of my system.

Oh yeah, next time we'll go for a ride.

Stay humble here. What's the craziest thing you've seen in M and A?

A lot of things happen over the weekend. I believe that the most amazing things at startups happen over the weekend. Whether it's hiring, whether it's firing, whether it's acquisitions. Most of it happens outside the conference room, over breakfast, over lunches, over drinks.

So you pick up meetings on the weekends?

Oh, yeah, all the time. I have a crazy story, actually. You might have met Megan, our VP of sales. So we were introduced to her on a Friday morning and the introduction came like this from one of our investors. And they said that, hey, just introducing Megan, she already has four offers. She's joining a new company on Monday. Why don't you just exchange notes? And I met her. I loved her. On the first call I was like, this is the kind of revenue leader I want. Then I immediately scheduled a call with my co founder, Snehal. I immediately called my board member and I was like, you have to talk to her today. And then four or five calls happened in three to four hours. And then I get on a call with her in the evening and I was like, megan, you should come over to Palo to meet us in person. Then she flew down on a Sunday. We had lunch on Sunday at Itan, Post that we went for drinks at Nola's here in Palo Alto. And we shook hands, she flew back home, she signed the offer letter that day and on Monday she joined us. Imagine she was ready to join a company on Monday. So anything can happen. And weekends are the most powerful two days in a startup's life and a lot of magic can happen during them. So never shut them off. In fact, do all the amazing quality networking you can and explorations you can over the weekend. Because there is another advantage to it. You don't have a lot of other busy things going on in your mind. You are at peace. So if you have one thing to focus on, you will put 500% of your energy behind that. So do those strategic things over the weekend.

I've been told I'm a disease workaholic and I don't think the apple falls far from the tree here. I appreciate this time. This has been very helpful. You've helped me become a better M and a scientist.

See ya. Bye bye. Thanks for having me here.

Those of you still with us, thank you for sticking through. I hope you got some good insights out of this conversation. Until 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 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.