How to Grow Purely on Acquisitions

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Welcome to M and A Science, where leading M and A practitioners share lessons learned from their experience. If you're interested in keeping up with the latest from M and a science, visit Masscience.com and subscribe to our free newsletter. Every Monday we share highlights from our interviews and invitations to events as we build the greatest community of forward thinking M and A practitioners. Again, that's mascience.com I'm your host, Kisan Patel, CEO and founder of M A Science. Joining me today is Austin Woody, Senior Vice President of M and A and Corporate Development at Upland Software. Upland Software provides a software library of cloud products and is NASDAQ traded under upld. Today we're going to talk about how to use acquisitions as a growth strategy. How are you doing Austin?

Good, thank you for having me. Excited to be here.

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

So I've been with Upland Software for about 10 years now and prior to starting at Upland Software, I worked at Deloitte on the audit side and the consulting side. And really I started at Upland as an intern coming out of graduate school, had very limited experience around M and A, but was excited or interested in the idea and started with Upland as an intern when we were coming up with the idea of growth through acquisition. Have grown with and scaled with the company since then over the past 10 years.

From what I understand, Upland Software started from basically zero revenue, now has a billion market cap. And you did all that through M and A?

That's exactly right, yeah. The thesis at the very beginning was to grow through acquisition and that the value of the whole is much greater than the sum of the parts. And in the world of enterprise software. We can create significant value together at scale versus a bunch of sub scale sub 25 million enterprise software companies that are trying to get in front of large enterprise customers.

What was it like going through that?

It was chaotic. It is chaotic, right? It's a chaotic and wild ride. As you all know, M and A can be just a very emotional and dramatic event. And we've built an enterprise software company that exposes ourselves to that chaos and to that drama every day. So it's exciting. There is never a boring or a dull moment in what we've experienced in our growth through acquisition through now 31 acquisitions date. But it's been awesome. I can't think of another way, I don't know of another way at this point to build and scale a company.

Would you look at your strategy as a rollup? Yeah, you're kind of entering different markets with your products.

It's easy to use the word as roll up or consolidator. They each kind of mean the same thing. The difference to your observation is that in a roll up or a consolidation, you're acquiring market share within an identified TAM and you're measuring your success from going from 7% ownership of a to 15% or 20%. Our growth through acquisition through the 31 we've done today has been fairly horizontal. I mean enterprise software is just such a wide landscape today. We built around seven different functional buying centers is where we focus our time and energy today. And now our M and A thesis is informed around consolidation around those seven functional buying centers. So we're not trying to consolidate all of enterprise software. As fun as that would be. I don't think many people have the capital to do that. But we focused on these seven buying centers where we have a strong presence today, great products and visibility to a continued growth pieces through acquisition within those seven. And so that's where our focus is today. And we could call it seven little rollups or seven consolidations within each of those stories.

Seven different business lines that you're adding onto.

Yeah, that's where our primary focus is today. And in those seven are it sales, marketing, document workflow, which also business operations. These different functional buying center supply chain is where our focus is, what it.

Looked like when you were shaping that strategy from the early days.

The buying centers that we have a presence in today are so much of it is almost reactive to the acquisitions that we've been able to find at least to the first few over time, over the 31 we've started to really come up with a Clear perspective of what buying centers we don't want to be in and which buying centers we like have a good dynamic, have a good position or alignment with how we would grow. So it's evolved over time. Our first couple acquisitions were around project management software, professional services, automation. So selling into an IT buying center or a financial buying center is where we first got started. And now those are almost the minority of our presence today as we've expanded beyond that.

It sounds like you started off with a pretty loose thesis and then it's tightened up over time.

Yeah, that's exactly right. I think the thesis at the beginning was we were tracking at that point in 2012 was the $20 billion of venture capital investment that had gone into enterprise software at that point and recognized that only about a third of that capital had exited or was returning on the investment of that growth velocity investment that those venture capital investors had hoped for. And our thesis was there's a lot of value in enterprise software within those, call it the seven or six portfolio companies that sit within a venture capital portfolio that are not the super high growth velocity winners of that fund, that will make or break that fund, nor are they on the other end of the spectrum, the kind of the non viable business model or the smoking craters, but those in the middle that have great products, great customers, great teams and their growth of call it 10, 15, 20%, while that's fantastic to us, was really not interesting or underwritten into that investment business for the vc. So our thesis at the beginning was agnostic to what type of vertical within enterprise software we would step into, but more macro. Looking at the capital that had gone into enterprise software at that point and what opportunities there would be to find value or create more value in doing that evolved over time as we've now the 20 billion. I don't know what the $20 billion market is today. It's gotta be trillions of venture capital investment that's gone into this market and continues to create and cultivate great acquisition candidates for us.

What does that look like when you go back and revisit your strategy? Is that something that's just hey, we're doing this on a quarterly annual basis or more of an as needed as we do deals, we reflect on things. What does that look like as it shapes over time?

Now as a public company, so much of our growth thesis continues to be growth, growth through acquisition. And so we have a commitment or our guidance to public investors is that we'll continue to grow through acquisition. We target about 40 to 50 million a year and acquired that will continue to grow and scale the upland pieces. And obviously we want to be focused on doing the right deals. And as you know, M and A is all about timing. And so it's hard to plan these deals perfectly. Where we can deliver on a cadence of one deal per quarter. Perfection would be if we could do one to two deals per quarter smoothed out evenly throughout the fiscal year. We tend to track about four to five closed acquisitions every year. We'll continue to do that and continue to close on bringing in about 40, 50 million in acquired revenue every year. Our Thesis so far has stayed disciplined to M and A opportunities that fit between kind of 10 and 25 million in revenue as our sweet spot. And what we're intentional about, at least so far, is not going to bet the company on a single transaction. We've all worked way too hard to get to where we are today. And the value that we've created to go try and make some big transformative bet debt on a multi $100 million type transaction that would be almost a merger of equals. Our M and A thesis is we're so programmatic and disciplined in our M and A program that it's really on these kind of singles and doubles from an M and A thesis versus trying to go hit a grand slam in the ninth inning.

How has your sourcing approach evolved from the early days to today?

I love talking to other M and A professionals or private equity professionals that are out closing transactions and sourcing to them doesn't seem to be a priority or they talk about it casually as if that's just very easy to them. And this is something that we just put so much time and effort in with respect to finding the right acquisitions. When we first got started in the Upland Thesis, it was extremely difficult to find our first deal. It took us a few years to find our first acquisition. And the challenge was while we had the capital and the commitment to go grow through acquisition, we lacked the credibility in the market as an enterprise software buyer. Our team had a fantastic experience of running roll up stories before in a professional services context. But we lacked the credibility from enterprise software. And it was a new vehicle, new name. No one recognized it. And so our sourcing, we spent a lot of time. You kiss a lot of frogs. So we spent a lot of time out there communicating to the market what it is that we're looking for, focusing on bankers, cold calling as many companies as we could that would take our call. It all started with our first deal and then right out of the gates after we closed our first one, we had a second one that closed and then we were really off to the races. And they've now delivered on this cadence of four to five acquisitions per year. Sometimes it's six, sometimes it's three. But we now have a nice flywheel of M and a volume that can come in to allow our team to process those deals in these sourcing. Today, because we've established ourselves as just a credible buyer in the enterprise software market, we still have to work hard to go get this deal flow. And the hardest work for us is continuing to prove our credibility and do exactly what we say that we're going to go do for these sellers. Because we respect that our reputation is so important in the market. Buyers can differentiate themselves with price. Sure. They want to know that they're finding the right home for the right business buyer that can deliver with speed and certainty. So we're still super responsive to that and spend a lot of time talking to bankers, talking directly to companies to go find those deals. I'd like to shift from more of our efforts to going directly to companies and being self sufficient, if you will, without having to rely on the banker network or market for deals. But they tend to be our greatest source today.

Opportunities multiply as they're seized.

Exactly. And deal flow begets more deal flow. That's the mantra that we have internally. You put out a press release with a recent acquisition and you get three or four credible M& A ideas that come off of that deal that you just announced. It's just amazing how that momentum, that flywheel, really piles upon itself. And we continue to accelerate everything that we're doing around M and A because of that.

What does your sourcing mix look like today? You have bankers. You mentioned you're doing some direct outreach.

Yeah.

Any other channels? What's the mix look like?

So we have sell side bankers, which represents probably the majority of our active deal flow. And our closed deals probably call that 60% plus of our deals come through sell side bankers. Then we supplement that with buy side activity where we'll have a buy side banker out there on retainer that's out there helping us find deals. And then we'll supplement that as well with our own internal efforts of sourcing deals. And we've spent a lot of time the last year investing internally in ourselves and building out our team to go out and source directly from deals, reducing our reliance on frankly buy side makers first and then sell side. But recognizing that Upland today has got a thousand plus employees in an extensive Network of enterprise software professionals all within the markets that we're trying to buy within. We've been actively communicating internally what our shopping list is, what is it that we want to go buy. Do you know anybody that works at one of these companies? And it's great that you have an army if you will. You've got a team of a thousand plus people that all have a pretty clear perspective of what your mandate is, of what we're all trying to go do and create value together and they can send us some ideas. So recently my inbox has become flooded in a great way with great ideas from our team, from our product teams, emails from our customer success teams and our account management teams who are talking to customers every day about what else is it that they need? Is there a product that they use alongside one of our existing products? And we love that because we want to, as we consolidate around these seven functional buying centers, we want to have just a greater presence within that existing buying center today. And what a great way to do that just to buy around that buyer's budget, if you will. They're buying email marketing software. They're probably also using SMS software and they're probably using a customer data platform underneath that to help organize and orchestrate all of that content. We can go pick off each of those little pieces around that and know that our brand, the Upland brand, provides value to that customer. They know what they're going to get from us as a vendor and we can sign enterprise wide agreements so that we can continue to sell and cross sell and expand more product within these large enterprise customers.

A real platform play.

Absolutely. That's the thesis focus at around 7 of the buying centers and go from there.

It sounds like you've really shifted from mainly participating in auction processes, supplementing it with buy side advisors now filling out the direct. I'm curious on the sell processes. They've been competitive as heck this year or so.

Yeah.

And we do the head of Corp Dev roundtable and we talk about it there. How do you manage that? We'll talk about it later. But I'm curious because you were the PE backed enterprise that turned into the public company.

You're right. The reason that we want to move to be more self sufficient in creating our own direct deal flow is in response to these auction processes and these the sell side mandates that come across that have just in recognition that software multiples have gone up so much especially in 2021 this year. 2022 is a little different. There's just a lot of crazy stuff happening out there. But we were still able to get several transactions done last year despite expanding multiple environment. When I look at the transactions that we've been most successful with, especially the ones that we completed last year, so much of them are companies that we've had conversations with over the past four or five years and that's where we're able to win these deals is that when a sell side banker brings us a teaser or a mandate. Hopefully this is not the first time we've heard of this company or that we've interacted with that company. If we're reading about a company and learning about it for the first time, as a banker is explaining it to us, we're three steps behind because of all of the private equity, all of the buying activity that's out there with strategics, every CEO is getting called four or five times a day or spammed four or five times a day with a different proposition for selling their company or raising capital. The recognition is boy, it's the long game. Very rarely deals drop out of the sky and we're able to win an auction process and close that deal within 30 or 60 days. It's a multi year process. Once we get active, we offer speed and certainty in our deals. So once we're active, we can close deals as fast as 30 days or 45 days. We can show a high commitment and credibility of a close rate that's much higher than most of the private equity buyers. We're proud of that. So once we are in the sell side process with the banker and they're bidding us against multiple other parties, we go out of our way to demonstrate not only are we going to be a great home for your product and for your employees, but you only want to go through this M and A auction process once. It is such a painful process. It's a bit of a proctology exam for these sellers where they have to go through telling the story over and over again. It distracts them from creating value in their own business and really trying to demonstrate that we're not going to come in and retrade. We're not going to renegotiate with you, provided there's not any crazy diligence issue. We're going to get this deal done on the same terms that we said that we would at the very beginning. Our reputation proves that out moving from.

Really focusing on bank resources to proprietary. I like the example of how you socialize this strategy internally to allow your team members to become the lead source. Can you walk me through that? Teach me how you did that.

Upland's a very remote organization and I know everybody has been remote the last couple years, but we've had the benefit of operating in a remote environment since the beginning. Just given our growth through acquisition, there's not one kind of single location where everybody's based. So we have a regular cadence of getting together in a virtual environment with the entire company and we'll do virtual all hands meetings. And after working with our with our team, I was given an opportunity to be on the mic with all thousand plus employees and just take them through the story. Here's what we're looking for. And the majority of our employees have given our growth through acquisition have come through acquisition themselves, meaning that they worked for a different company or a product that Upwind has acquired. So M and A is in a way happened to them. They're excited about the opportunity to be on the other side of the table to help inform, to help drive that thesis. And we really want to encourage or empower everyone on our team that no idea is a bad idea. Send me what you got. If you think buying Amazon is a good idea, put it in my inbox and like I'll register it. And what we've done is just really try to empower that, excite that when we have a successful close. We just announced our acquisition of BA a few weeks ago. That was an employee sourced idea. We've been talking to them since 2015. And so we will go out with the employee. We'll of course provide like a little fee or success fee or bonus to referral fee if you will for sending us a successful idea. But then we'll go tell everybody about it. We'll go tell the whole company like hey, this person sent us this idea five years ago. We just bought this company. This is how it goes from idea to execution and this is what success looks like. So we've loved that. I've had so many ideas. We have our CRM that we use to manage all of our M and A deals. And now under source, I've had to add a new category for our internal team so that we can tag all of our team members to make sure that I give credit where credit is due on sourcing his ideas.

This is awesome. I've talked to folks in your shoes that'll run and chase down product managers and have one on ones to accomplish what you instead get on a mic in front of the whole damn company and let them know who you are. Here's our strategy. This is why M and A is important to us. Let's talk about some of the recent deals we've done and the wins we've had. The ones you've closed and you've encouraged, literally the whole company to bring ideas to you. Is there anything I'm missing there? Is there anything else that you cover on that call?

Part of it, intentionally so, was kind of the great resignation and turnover. M and A, as I was saying earlier, is such a dramatic event. It's chaotic. Our team members, they get exposed to that a lot. We want it to be more of an ownership exercise where it doesn't feel like M and A is happening to them, but they're part of the discussion, they're part of the strategy, they're part of the thesis, and they're part of that success. We want them to send us the ideas, but we also want them to feel like this is not just like corporate or some M and A guy that sits in a hole over here that keeps throwing deals on top of the pile. These are informed stories, and they understand the strategy behind each of these deals so that we have, again, more ownership in this process. Because it's chaotic, it's tough, it's not easy, and oftentimes we're asking our team to do more than just their day job when a new acquisition comes on. And we need them to have ownership in that.

I like your approach. It's M and A inclusiveness.

Yeah. That is fair.

What does standing up your M and A team look like? What did that look like from the first acquisition? How'd that evolve over time?

The nice thing with Upland is core and fundamental to our thesis at the very beginning. So in a lot of ways, our entire organization is empowered and is part of that M and A team. Because at any moment, if we complete an acquisition within their product line or within their functional area, they're going to be called upon to help us in that acquisition, either in due diligence or in integration. So I joke that at the very beginning, it was just there was just two of us on the M and A team. It was very small. For a while, it was just myself. And we would joke that it was just kind of me and a tambourine that would go around, find these deals. We're a fairly lean organization, and it's always been like that. But I joke that when investors or employees ask, how many people do we have on the M and A team? I say to everybody, it's 1000/wide M& A team. Because we're all thinking about that every day. At least I hope that we are but dedicated to M and A. It's myself. I have one other deal maker on Our team, a VP of M& A who is sourcing, negotiating, executing against deals. And then we have a team of directors or managers, analysts underneath us that help support the due diligence that M and A function. We've stood that up over time. At the very beginning, the M and A team, which was myself, was responsible not just for the sourcing and the diligence negotiation of the deal, but also the financial modeling, financial analysis and the forecasting. And I'm happy that we now are at the size where we can separate those two. One to take me out of the spreadsheets because you don't want me trying to do sumif formulas in Excel. But you kind of need that red team, blue team exercise. We need someone that it now sits within our FPA function that is not incentivized to close acquisitions, but incentivized to make sure that the financial model fits within the greater picture. And so we've had opportunity. That's just an example of how we've been able to scale the team over time.

That's really great. So how big is it now?

We're expanding the team. Now it's about six. And as we look to build out more of our own internal sourcing, we want to add more to our, you know, BDR team, if you will, that can be out there smiling and dialing cold, calling prospects, helping us identify prospects and investing more of that capacity in house versus having to rely upon that to the bankers.

Sounds like a good move.

I don't mean to diss on the bankers here. We love bankers. I know that's your background, but I.

Don'T take it personal at all. I mean, the best deals I've ever found are the ones you went out and found yourself.

Exactly.

I want to talk about integration. We got a big audience of integration. At the end of the day, that's where value gets created.

Absolutely.

I want to get the thinking. It's not just a financial exercise for you guys to get the mass with the sums here. But can you walk me through what's the thinking around integration? I know prior we talked a little bit about sourcing, defining the integration strategy from that early. I'd like to get your thoughts on it.

Integration is really the fundamental part. It's where good deals can turn bad really fast and where bad deals can get salvaged and turn into great transactions. Through the 31 acquisitions that we've now completed, we've built, I think a fairly disciplined process, a good process that represents all of the sins of our past to improve upon our integration thesis and our philosophy. We have a good. We've made plenty of mistakes. We've got a good sense of what works and what doesn't. And that integration thesis or philosophy has informed our sourcing now as well. So through just the acquisitions that we've done, we know that companies that are in a high cash burn a growth at all cost mentality tend to not fit well with the upland thesis. And that was an output that came from the challenges that we experienced running integration in that period. Okay, let's take that full circle and put that into the filter at the very beginning to make sure that we're aware that those transactions will perform better or worse as we start to integrate them through. We have a fully dedicated integration team led by Ian Burke, who I know you've had an opportunity to meet and is the transaction closes the ownership, if you will, of the project of the deal. Every deal has an executive sponsor, whether that be a general manager within one of our seven different functional centers or an executive on our executive team. Every deal will have an executive sponsor that owns that deal from the point of LOI from the term sheet all the way through to 12 months post acquisition and forever after that. They'll have P and O ownership over that myself and Ian. So head of M and a head of integration will support underneath them throughout that process and have that handoff. We bring in integration very early in our conversations. Sometimes they'll be around there if it's a complex deal pre loi pre term sheet helping us think about that. What's the operational complexity and how do we scope that out with respect to integration budgets to make sure that informs purchase price. They're very active as we come in post LOI and drive a lot of our operational diligence to help inform the thesis. And as I mentioned earlier, I mean though the outputs of the pains and the scars in our back from integration, now we have a feedback loop that connects into our sourcing to make sure that we know what fits best with our model. What are the profiles of companies that we do well with and what are the profile companies that just don't align well with our thesis. That's how it's evolved over time.

Does Ian have a whole team or is it just him?

Ian wears so many hats these days. So he's got a team of dedicated employees plus contractors that again scales up to that thousand plus organization. Probably has about 6 to 10 dedicated within that organization that extremely capable operators. They each have a functional lead. For example, someone in marketing that isn't within the marketing department but is focused on solely on integration and acquisition. So that as each new acquisition comes across, this individual is there ready to run through what that marketing integration playbook is as we start to align that company with, put them onto our systems and processes and get them plugged in.

That's really interesting. Then when you come across deal, you have a good insight that this is going to be pretty complex integration. He'll bring Ian up early, even before loi. Hey, let's start thinking through this stuff. Other than that, you may bring it in right after loi.

The reason that I want to bring our integration team in early if it's a complex deal, goes back to the sourcing conversation that we had earlier about our credibility and just our dependability as a buyer. If I'm worried about something in a process, I want our integration team to raise a hand at the very beginning. We'll kill the deal at the very beginning if we think the integration is going to be too complicated. Because our reputation as being a credible, dependable buyer is so key to us. We do not want to be someone that comes in, signs an loi and then very quickly backs out. We do that too many times. It really hurts our reputation. Someone might call us a private equity firm who retrades all the time. That's not our story. The reason that we have our integration team in early on these deals is so that we can say with credibility we have a good perspective of how we're going to close this thing. That's helpful in our value proposition to sellers, that when they see an integration team that working on the deal, that they know how we're thinking about this. But also the reality of if it is going to be complex and too hard for us, let's pull that ripcord now. Let's just not waste anybody's time. We process so many deals every year. We got to be pretty disciplined with what deals we spend time on.

Has Ian helped you close deals?

Yeah, he's a closer. He's a closer by trade. He's always closing deals. He has got the discipline of he won't close a bad deal because he has to own and live with that challenge post acquisition through the integration. But he is a closer. He'll come in and I love being able to introduce him to Sellers because he's just got such a depth of operating expertise that he inspires confidence that we know what we're doing, which we definitely do after 31 acquisitions. But he just embodies that. Can see the scars on his back. And he can show you, here's what I've done and here's how we're going to be successful together post acquisition. So he totally helps me close. He sells well.

It's like bringing a sales engineer on one of your deals. You've got your integration lead.

That's totally what it is.

We can't not have the conversation without touching on culture for sure. What are your thoughts? I love when I get the old school thinking of culture. You just gotta put the companies together and they'll figure out their culture.

Culture is tough. It's an intangible, right? It's a qualitative thing that it's hard to measure. It's hard to have key. We love our key metrics and our financial metrics, and culture's a hard one to measure. But for Upland, Having grown through 31 acquisitions to date, we are a melting pot of 31 different cultures. We totally recognize that. We get it. We get that M and A is chaotic, it's dramatic, it's emotional. And we now have a melting pot of these 31 different cultures that creates. I actually think it's this kind of this beautiful creative tension, if you will, of all these great, different, very entrepreneurial teams. And each company has been about the same size, 10 to 25 million in revenue, and they all have a very much an entrepreneurial spirit to it. So there are parts of some cultures that the same exact culture of every deal does not continue post acquisition. That would just be impossible to do. But I think everybody aligns around a culture of just that entrepreneurial spirit around customer success. I mean, something that we love when we look at deals. Such a key part for Upland is just employees being so proud of their customer, being proud of the success that the customers have found on the products that they built. Like these are their children. And you can see it in diligence meetings and management meetings when they put up the obligatory wall of logos. And for some teams, it's just a wall of logos to them. And they don't really talk to these logos with any affectionate value. And for other teams, which this is what we look for and how Upland is, each logo is a story. There's a relationship there, and that's powerful. And I think Upland really aligns around that culture of customer success. And they're proud of the customers that they've won and they suffer, the customers that they've lost. And they're proud of the products that they've built. So how we manage culture is really that common alignment around. We all have come here through acquisition. We now want you to have ownership in that acquisition process. You were acquired because you built great products for great customers. And let's continue to do that and dive deep into that.

What happens when you don't get that warm fuzzy feeling with that level of customer focus?

Those deals fall apart. Like we don't close them. That's an example of how integration strategy has informed our criteria and our filter. We have the integration team, we have our executive sponsors in completing diligence. And we can see that there's a challenge there. I would love to say every one of those deals where they don't love their customers, we tend to not acquire. And that's because we can translate that back to key financial metrics. We can translate that back to renewal rates, we can translate back to expansion or just new bookings. And so we can see that really play itself out in the metrics and or key part of our diligence is customer diligence calls where we'll go talk to the top customers of every acquisition before we close that deal. And you get a sense of it when you talk to these customers, if they're talking about it. And it's almost like a very transactional relationship. They don't know anybody at the company and it's oh, yeah, hey, forgot, we use this product or we haven't spoken to them in a few years. Those are red flags for us that we'll pay very close attention to. We love it and we. It's almost a green flag, if you will, when you hear the customer giving specific employee names. This person on the support team, I love this person. Every time that Bob calls me or I call Bob on the support team, he's always super helpful to me. So we definitely pay attention to that.

What's your HR people do? Aren't they involved with any of this stuff?

Absolutely. I mean, they're super involved, but in the context of culture, that's not just the HR team, that's everybody, our people organization. They help us quite a bit in diligence just around employee agreements and contracts and making sure that the benefits programs that the company has pre acquisition, they align with our post acquisition. If they have some crazy awesome benefit package, we try and see how do we fit that into our plan post acquisition. So they're pretty active in that and just helping manage employee and people communication post acquisition. Because that communication part post close is so key. Everyone's reaction day one is okay, what happens to me or what's in it for me. It's such a natural response. Our marketing team aligns with our HR organization to help craft all of our day one communications, Day two communications. So to make sure we're trying to answer any and all and every question that we know we're going to get right out of the gate.

Were you started as a P backed and then went ipo?

Yeah, in a way. We started with capital from our founder Jack, who put in a sizable commitment and then with capital from Austin Ventures. And the thesis of it was venture capital and private equity investment from family offices. But the idea was kind of like a private equity fund. We're not totally different than that today. We just, we run it now as a public vehicle and we don't buy and sell. We buy and hold and create value forever together is now what our story is.

I was curious what it was like doing deals as a private company and then doing them as a public company.

I don't think it really changed our deal making too much private company versus public company. Obviously now as a public company, all of our financials are published when we announce the deal. So we'll announce the revenue, we'll announce the purchase price that we paid, the multiple, the ebitda. These are the same metrics that we were looking at pre ipo. So as a private company, I think the only thing that it changed for us is communication to the employee and making sure that we communicated day one to the employees all of these financial metrics because oftentimes and this was surprising to us, but sometimes this is like the first time employees of an acquired company have ever seen the financials from the company that they worked for. They didn't know that they were a 15 million revenue company. They thought that they were a $45 million revenue company. And so you have these really interesting conversations with employees where they just, they obviously they knew the products, they knew their teams really well, but they didn't know the financials. There is almost like an education component to that. And that's probably the biggest shift, if you will, doing deals as a private company versus a public company from a communication standpoint. So I think it's easier to do deals as a public company. We have credibility in the public market as just you can go access all of our finance. I love the transparency. It's got a love hate relationship because any seller can self qualify us because they can go look at here's what we paid for our last 20 acquisitions and we're not going to surprise them with some different valuation. But the transparency is great. So much of the M and A process is about building trust with the sellers and with the teams and being able to operate as a public company. You have that trust in that you could just be transparent about everything because that's just how you talk to our investors.

That's a good way to look at it. You definitely got the kimono open out there for a lot of folks in the company, analysts to look at and.

Pick at for sure.

What are like the biggest lessons that you learned over the years of doing these deals? And I know this is like a whole other interview in itself, but what are some of the key things?

Oh boy. So many different stories or lessons that I've learned along the way. Mostly good, some bad. I think I appreciate mostly just discipline to the process and trusting your gut. One of the great things about Upland is we have a well identified framework and profile of companies that we want to go acquire. And bankers again, not to throw bankers under the bus. They do a great job of telling a company's story that might be different than what the company's reality is and trusting your gut, knowing what your profile is that fits up and well and trying to cut through the bullshit of some of these stories and just make sure you know exactly what the reality is of that company is and being disciplined to that. Not letting someone that is incentivized to sell the company talk you past what a reality might be. Discipline, I think is just entrusting your instincts is probably the biggest lesson that I've learned that is informed both good decisions and is informed by having made bad decisions. Taking that really personally. Okay, we got to just learn to trust.

Stay true to your strategy and yourself.

Yeah, don't talk yourself past it. Often for us, the big metric that we always struggle with companies is their growth rate. And sometimes a banker might have you squint that. This company has historically been growing at 10%, but the last two years they've declined at 5% and that's only because they've lost these three customers. If you back out, those three customers look at the growth rate on a pro forma basis. It's actually still 10%. Okay, let's dig into that story a little bit more. That's just maybe an easy example of knowing that we can't buy boat anchors. We're not going to buy someone that has a declining growth rate. And let's not try and and squint and convince ourselves so that story is not anything different than it is never.

Ending supply of lipstick out there for every deal.

It's exactly right. We spend less time going through that. I've become a little cynical when you look at some of the stuff that comes across, but it helps us be pretty efficient in what we're looking forward to.

Austin, what's the craziest thing you've seen in M and A?

So I have three stories for you. The first one is the story of the number two employee that came out of left field and torpedoed a deal. The second story is about an actual skeleton in a closet. It's a morbid story. Pretty interesting. And the third is the three partners that we're negotiating against themselves. I'll let you decide what.

Man, you got a hard stop, man. I want all of them.

We've seen thousands of acquisitions at this point. Close 31. We had one deal, really exciting company that we had negotiated a great price on and felt really good. And we were in the final weeks of closing the deal. The CEO was nervous about communicating to his management team about the acquisition, but we were having a hard time completing our diligence without having exposure to the management team. That's just a key part of the deal, is getting to meet the management team. And so met the team. Number two employee finds out about the deal and is very upset with the fact that the company is being sold. In fact, that the price is. And so he goes onto Google that night and Google's term sheet downloads just a template term sheet and writes in his offer to buy the company without any financial backing, without any, like, capital, like, just not a real offer. But he. He put in a $150 million bid and then submitted it to the board and to the CEO. It blew us away because it was like, wow, I love this guy's passion for his company. No credibility to the offer. But because of the exclusivity provisions in our loi, we had to be informed about it. So he couldn't just dismiss it like they had to tell us. And then that just unraveled this whole story of how the number two employee had been promised that he would get to be CEO of this company and that if. And he put an ultimatum that if the company gets old, he's going to leave. And really, this number two was running the whole thing. And so it just totally torpedoed the whole deal because he googled term sheet and wrote in, you know, like a crazy offer.

Wow.

The other story that we had happened to us in diligence you use the metaphor of looking where the bodies are buried and the skeletons in the closet. And halfway through exclusivity, we get a call from a company from the CFO with a just a very kind of dark tone telling us like, hey, we found a body and we wanted to call and just tell you that we found the body. Working through the right authorities and everything. And we're confused with what are you talking about? And it turns out that in their office, someone had left the door open over the weekend and an individual had come into the office and perished in the office. Died in the office. And someone. Monday morning, the team shows up at the office, they walk in and they find this body in a closet in the office. And they had. Because they're in diligence, they had to call and tell us about it, go through police reports and investigations. It was just this bizarre. Like an actual body. It was not an employee. It was like an outside random person that had come in. But it was just a bizarre exercise, having to talk to like detectives and private investigators to make sure that was not related to the company in any way. It was just a total random flu. So that was crazy that happened.

Did it delay the deal?

It did a little bit. It was just bizarre. We didn't know how to react to it. The first reaction that we had was just the emotional well being of the team that had seen this and make sure that they were okay. Of the company that we're trying to buy. We just were like, God, that's. No one wants to see that.

That's quite a crazy story.

Yeah. Anyways, those are two. I can keep going, but those are two good ones.

We'll leave it at that. I'll save room so I can get a reason to invite you back on the podcast. Sound fair?

Exactly. Yeah. Hopefully I don't have any more crazy stories next time we talk, but those are two.

Thank you so much, Austin. I appreciate this conversation. Enjoyed learning a lot about what you guys are doing over there at Upland.

Thank you for having me. This is great. I love everything y' all are doing. So thank you for letting me tell the story.

Here's to the deal.

Cheers.

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