Inside Soundtrack’s Roll-Up Strategy: Building a Global Leader in Background Music with Ola Sars

This episode is sponsored by Deal Room, the M and A platform purpose built for buyer led M and A. If you're in corporate development, you know how chaotic things can get. Juggling Excel trackers, email threads, shared drives and four different tools just to get basic updates. Deal Room puts you back in control. It's an end to end platform designed specifically for buyers. You get one place to manage pipeline diligence and integration with built in project management, real time commenting and automatic stakeholder notifications. You can templatize your rooms, run bulk permission updates across deals, and even use AI powered contract analysis to spot risks like change of control clauses in minutes instead of hours. With Deal Room, you're not just chasing people or reconciling data across tools. You're actually running a repeatable scalable M and A process the way a buyer should on your terms. Go to dealroom.net or click the link in the description to learn more. Let's get back to the episode. On June 4th, I'm excited to be speaking at the Corporate Dealmakers Forum in New York City hosted by imn, an informa business. I'll be joining execs from ge, Pfizer Johnson Controls and more to tackle the big topics. AI powered diligence, faster execution, portfolio strategy, antitrust moves, what's actually getting deals done in 2025? I'll be sharing real world insights from the buyer led M and A front lines. Not just ideas but strategies you can actually use. Register now using the link in the episode description. That's informaconnect.com imn-corporate dealmakers. Come join me in New York and let's keep moving deal making forward. I'm Kisam 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. Foreign welcome to the M and A Science Podcast. This podcast is part of a mission to rethink how M and A is done. The old school Settle that approach. It's dead buyer led. M and A is all about strategy, alignment and efficiency, putting value creation at the center of every deal. And let's be real. It's not just about closing the deal, it's about. It's about making it successful. We uncover what truly works in M and A by learning directly from the best. I'm your host Kisam Patel, Founder and CEO at Deal Room and Chief Scientist here at M and A Science. Joining me today is Ola Sars, veterinarian, music tech entrepreneur and the founder, CEO and chairman of Soundtrack Technologies, the world's leading B2B music streaming platform. For businesses with a 20 year career focused on transforming the global audio and music industry. Ola's launched multiple startups including co founding Beats Music, later acquired by Apple and partnering with Spotify to build Soundtrack. He's currently executing a bold programmatic M and a strategy to consolidate the fragmented legacy background music market into this modern streaming platform. Today we're going to dive into lessons from his exits, including the Beats Music sale to Apple and how he's embracing a Biolet M and a approach to accelerate soundtracks growth and reshape an outdated industry. Ola, how you doing today?

I'm good, Kyson, how are you?

Thanks for joining me. You're in Sweden, I'm in New York.

I'm over here in dark and cold Stockholm, but I'm often over there in your beautiful city, so kind of a second home to me.

Hey, when summer hit Stockholm, I gotta tell you, I went there two years ago and was blown away. I've never seen a city that just had so much energy and then the sun comes in the other direction, it's sunlight all day.

Yeah, we put everything into one and a half month per year. That's why you saw all that energy.

It might be one of the best places to be around that summertime.

I'm raised and born and I'm back here again. So there's something in the water for sure.

Absolutely. Can we kick things off a little bit about your background?

I'm a specialized operator who found a macro or a market 20 years ago that I found very appealing, both from a kind of emotional perspective, loving music, being a music fan, and music playing a huge role in my life and my upbringing. But also from a rational perspective where 20 years ago something started happening in this huge global music industry, which was digitization. So we saw digitization coming to music production at the same time, to music distribution and to music consumption through smartphones, all happening at the same time. And kind of a whole new reality was born. So called tectonic shift in a massive global market, which the music market represents. And I used the other side of my brain to figure out how to make a living and build companies in that space. And I've been doing that since then.

What does that look like from the businesses that you started? And Beats Music, everybody's familiar with, but with others before that.

It started with a thesis, basically the same thesis that I've been working through in all my startups, which is Five companies now in this space. And the thesis was in a world of abundance, meaning in a global market where all the music in the world will be available anywhere, anytime. That was my thesis. That's what the music industry would look like. Remember we were moving from CDs and vinyl to a totally digitized value chain in that market, reality technologies or companies that would help solve for the distribution of the right music to the right place and the right time would be valuable assets in that digital market. So I started building technology and companies around that thesis, mainly obviously serving the distribution challenge. And the distribution challenge in music is sometimes referred to as curation, meaning choosing the right music for the right person if it's a consumer market, or choosing the right music for the right brand if it's a B2B market. I built my first company which was called Tony and Pacemaker. We built hardware, the world's first pocket sized DJ system. Crazy idea. We were on center page of Wired magazine. We were four prizes at ces. It was basically full DJ set at the size of a peanut butter jelly sandwich where we would invite consumers to be creative with music and we would connect to the DJs of the world because we wanted to extract training data basically to train the first music recommendation engine. Because we thought that early, this is 16, 17 years ago, that AI would be a core component in the music industry, or ML if you may, or machines helping to sort out in the music and the vast numbers of music tracks and then redistributing them to broader consumer market. So I started building on that thesis to build AI or music intelligence platforms if you like. So the first iteration product was called Pacemaker. The company was called Tonium. Then I pivoted out to a platform called let's Mix, which was the world's first DJ driven music distribution platform. And that took off quite significantly. And then I sold let's Mix to Beats Electronics and started Beats Music. The Beats music ambition, which was Beats was initially a hardware company where Jimmy Iovine and Dr. Dre started with a thesis of being the mainstream music brand in the us. So they started off with hardware, but obviously in the strategy. Music platform was a central component which I then was tasked to build after they acquired my company. And then that pivoted into Apple Music post the acquisition of the Beats Electronic. And then from there I moved back home to Sweden and founded Spotify Business, which it was initially called together with Spotify, which then transformed into Soundtrack. It was always an independent ambition, but then we morphed it into an independent Component and product and moved away from home, from Spotify, so to speak, which was my founding partner for Soundtrack and then Spotify business product became Soundtrack and we rolled out worldwide. That's a very short kind of version of my last 18, 20 years in the digitized music industry.

The Pocket DJ, did that have a happy ending?

Yes and no. The hardware that we fell in love with and started spending all our time with, we funded the company with $20 million, which was a lot of money back then for a music startup. Then the second iteration of the product, we were able to fund the second iteration. The third, it became too tough to fund hardware. So we sold the hardware business to our odm, our independent manufacturer in Southeast Asia. And then I pivoted out the software business to let's Mix and the distribution platform.

So, yes, and I got you to the next step.

This has all been a stepping stone exercise, which it usually is, but same thesis, same industry. I'm still here, I'm paying the rent.

You spent 20 years building, building around one thesis. This whole vision of where things are going on, digital transformation and music, what keeps you committed to that? I feel like this is something that I struggle with so much early in my career. It's like every six months I want to do something different.

Back to that statement. It all started actually on the island of Ibiza in the Mediterranean. I was always there with my best friends, summertime, renting a house. Most of them were in the music industry. And the funny thing is they were there making money, having fun. I was there spending money, having fun. I was working with completely different things previously, where I was becoming more and more cynical and miserable. To be honest, on a personal level, it was kind of an emotional drive to see, okay, I need to work with something like they are doing, like it's money and a fun. But at the same time, I saw what was going on from my business perspective that the music market was about to change significantly. We had Pirate Bay and Limewire and very close to where I was. And I was close to music producers, seeing them go completely digital, basically producing on their laptops. Answering your question, I started thinking about could I really make a living by moving all my focus into the music industry? And I had no experience from the music industry from a professional perspective previously. What moved me in that direction, has kept me in that direction is the fact that the music industry is worldwide, it's growing, it's bigger than ever before in terms of consumption. Like more music is being listened to than ever before given through digital distribution, developing Economies. Music streaming is penetrating those markets as well. And the consumption is massive. It's global and it's 70% of the global population are listening to music. So the general addressable opportunity in terms of usage to it can't be bigger. So that's obviously a good starting point. And then the other one was what I referred to previously was very clear moment where the whole value chain was transforming at the same time in terms of a classical disruptive digitization of everything. The thesis was that would provide opportunity. The thesis was all the music available anywhere, anytime and lo and behold, here.

We are huge TAM and certainty on the disruption that was going to be significant. It's not like an incremental change.

Once again, I've iterated a couple of times. So I've iterated in the consumer space. So I'm not claiming I'm a genius or anything. Anyone can figure out what I figured out. It's all about learning and becoming better. Every time you execute and you operate, you become a specialist in a very complex industry because it is more complex than one would think. It's an IP driven industry. You need to create a synergy in between music creators, rights holders and the consumer or the business buyer through technology. You need to monetize that interrelationship in a smart way. Lots of complexity, but also a market that is highly dysfunctional, which I didn't understand in the beginning. Business logic doesn't always apply in the music industry. I've learned that the hard way. But that also provides opportunity. Once you understand what moves this market, you just dig a deeper and deeper moat. I've become better on execution every time I iterated my companies. It's fun, right? It's I get up in the morning, I get to work with something that I love. So that's probably one reason why I'm staying. And then the other one is the opportunity is still as big as before and my thesis is just becoming more and more clear and true. So I'm still right in the middle of the digitization of the music industry and it's merely just begun.

Wow. You sold the hardware component of the business and you extracted the software and that's what became let's mix.

Yep.

How'd that go? Did you have to raise money for that business before you ended up selling it?

Actually, I had just spent five years working day, night, flying around the world raising money to fund the old Tony and pacemaker exercise, which we did successfully this time. I just decided do it with a solid P and L and a profitable Business, which we did from day one, that was a solid music distribution platform. Small team, small cost base, but global reach. So that was a profitable business.

And then you built that up to a point where you ended up selling it.

The funny thing about that was when we were around the world with the hardware distributing it, that was in conjunction to where Pizza by Dre was distributing their first hardware iterations. So we were meeting Jimmy and Dre and the team on different trade shows in the same media. Our products were being exposed. So they actually tried to come and acquire Tony and Pacemaker as a hardware component in the Beats brand because it was a very suitable product for them. A music created product, creativity product, and it fitted right in. But we weren't able, I wasn't able to facilitate that deal in between them and my investors. My investors probably didn't understand how powerful they were, so I wasn't able to transact on that one. But then the second iteration around, after we had sold the hardware business to our ODM and I bought out the software business, we were able to re engage. But then that was based on the fact that Beats needed kind of a core product in their ecosystem, which was the music streaming platform. And I was building that. And it was very different to Spotify, which are my neighbors here in Stockholm. Spotify was more or less just building a kind of a robot or a digital distribution engine. Jimmy's and Dre's idea was to build more of an editorial driven music streaming service, which was pretty much what I was building. So they acquired let's Mix and that then transformed into Beats Music. Actually they were going to call it something else. They were going to call it Daisy, named after one of the guys, dogs in the office over there. And I was like, you guys are crazy. You have a great brand. We should call it Beats Music. I registered the company in the domain and from there we pushed into building a competitive product to Spotify.

How was that experience? It's interesting now. It's like an iconic brand that they built, but you're in the early stages of it. How was it selling your business? What were the key takeaways? Cause you had a business that you were trying to put together a deal. It didn't pan out. It sounded like the investors weren't ready for it. Then you ended up making it happen. Like at that early stage, what were some of the things that you learned?

Drivers are different depending on where you are in your maturity as an entrepreneur and your maturity as a business. Very, very different context. If you're running A hardware business that's running out of money, you're not in a great position to transact with anyone. But when I was able to buy out the software and really the kind of music intelligence platform and I created a sustainable business where we weren't forced to do anything, I could more or less engage with anyone on my terms. And that ended up with us joining forces with Beats and basically just flipping. Let's mix into becoming Beats Music.

Time was your leverage.

Time was my leverage and knowledge. And that team had no idea how to build a streaming service. They were basically sourcing odming the hardware manufacturing of their headphones. They were great at building brand and they understood the music industry, but they didn't understand anything about technology or specifically not building streaming technology, which I knew. So then I was able to use my position to obviously flip a small, relative small startup into becoming the challenger in the global market for music streaming. That was a different game. It was crazy. I was on the plane 200 days a year and it was exhausting. We transacted with Apple and that was a bigger deal. Obviously, I wasn't the core driver of that. It was driven by the full Beats team and previous relationships between Apple and Beats. Apple had lagged behind due to the fact that itunes. Steve Jobs, when he was still managing the company, he didn't believe in the streaming model. So that gave Daniel and Martin, my buddies here from Stockholm, this free window to build out a global leader in music streaming with Spotify. And the reason why was because he didn't want to cannibalize itunes. He didn't believe in the fact that streaming would be the model. He believed in downloads. And that was the core component in the Apple ecosystem at that time. So that gave Spotify three to five years head start, which provided them with a position that they didn't lose. They're still the global leader, but actually, after Steve Jobs passed away, the strategy changed overnight. We got a call, we were in London and we had to go meet them. And then the transaction was a go.

That happened fast. You went through basically integration twice, because that's a big thing. People talk about where things can go good or more often than not go awry. You went through this transaction when you sold it to Beats, but it sounds like there wasn't anything there. So it wasn't much to like.

It was a very small team, very simple, and they had enough. That one was, it worked out really well. We funded the project. I got to recruit the team that I wanted to recruit because obviously we had to increase our capacity very quickly. And then we actually acquired a US streaming platform out of San Francisco called mog and we moved the whole operation over to San Francisco from Stockholm. The rest is history.

So mog, similar streaming business.

It was a streaming service that didn't really take off, but it was a good backend infrastructure. And we realized that the US would be our launch market. And we were sitting in Stockholm, so we acquired them, moved the whole team over, moved our product over to their backend service. And then that helped us accelerate the launch plan of beats in the US which we launched together with AT&T as a bundle. We used an M and A there also to accelerate our capacity in the US market.

Was that easy? Did that come together nice and smooth?

Nothing is easy. It was not. I'm just so used to it that nothing shocks me anymore. It was, you know, a power battle and that team versus our team. And it was part of my English, but it was a complete shit show. But it all due to a couple of people who worked really hard. We were able to get the product out. And yeah, REST is history.

A big part of IRL ED is setting a deal for success, which is like basically plan as much integration as you possibly can. You think that would have made a difference if, hey, here's what the plan is and how these teams are going to come together, who's going to be in charge of what and things like that. Because it sounds like that wasn't clear.

No, not at all. Remember, once again, the music industry isn't exactly the most professional environment. This was not corporate level kind of M and A planning. It was like, oh, let's get this platform. We can accelerate and you just work it out. Ola. That was different to what I'm doing now, which is with Soundtrack. We're now pursuing something that we. I don't know if it's an expression. You're the expert here. Programmatic M and A where we're trying to just consolidate market by smaller systemized acquisitions. That's completely different than this. That's everything is fleshed out in that model. This was totally ad hoc.

I want to get to that, but I got to ask, what was it like working with Jimmy Levine and Dr. Jerry?

It was just like you would imagine music industry, big meetings, fancy hotels, private jets, but like extremely competent people, but had no experience in building major technology platforms. Once I just got the comment from Jimmy that why don't you just get me a Spotify and we'll slap our brand on it. I'm Like Spotify is this like 3,000 engineers, dude. It's like the real deal building these platforms. It doesn't come overnight. So there's this huge discrepancy and delta of understanding of complexity of technology and what it is. But yeah, that's the industry I chose. I got to deal with that reality every.

Everybody, my industry's got the same answer. How is it then you did the deal with Apple and they obviously bring everything together under that roof, which is now you're talking huge worldwide. What was that experience like to stick around through that transition?

I wasn't really a part of the integration work. I checked out at that time. I had been able to take the dream of creating a. As Jimmy framed a New York Times for music or like a really human driven music streaming service into the consumer, I was burnt out, more or less. I was completely exhausted. But I had this idea also in my head, which is what I did with soundtrack. The idea of soundtrack came from when I was at Beats and we would go out and Jimmy would send me to meet like brands for some reason to find distribution synergies in the US market or something. And everyone would ask me the same question, like, how do we relate to music streaming? How do we get music into our stores, our restaurants or into our cars? And that kind of describes how broad the music application is. It's everywhere. And I just realized there's this whole untouched market outside of the consumer's headphone that's going to digitize as well. And for me that was appealing because the B2B market, there's this natural tendency that a consumer business kind of transforms into B2B business or augments into a B2B business or the other way around. And that was very clear that there would be a B2B play for music streaming. And I said, that's business that I want to build and own. I moved back home, Stockholm, Sweden and went over to my buddies on the enemy side, previously Daniel and Martin. But here in Stockholm, it's a small town and everyone knows each other and founders of Spotify. And I presented the idea, hey, there's a B2B play. Music streaming. I want to do it. You guys want to join forces? We did and we set up soundtrack together. I invested in Spotify ab, which is the holding company out of Stockholm, invested and we were off to races to build a B2B SaaS product for music, which was then called Spotify Business initially and then Spotify Enterprise and then morphed into Soundtrack.

How'd that work? Like Working with Spotify, like, what were the details around that relationship and how do you come up with terms to work together?

The idea was very simple. It was like, hey, music streaming probably has an expansion path into the B2B market. And I started looking at what was referred to as background music, which is what the music industry calls the music playing in your local restaurant or retailer. And that market was the segment of the music market that God forgot about. It was the most unsexy, untouched area. And I like that as a starting point because that provides opportunity to me. My thesis that I presented to Spotify was, look, the whole logic of music distribution through streaming is the same at Beats. We built our own music backend, which is the backend service that serves hundreds of millions of tracks in real time to hundreds of millions of consumers. Super complex engine that takes 20, 30 million dollars to build and two years to build. I said, like, why don't I use your music backend? And I focus on the idea of building kind of the SaaS layer, the software layer for the business use case we check it out and see if there's a B2B market here. So we agreed on that and they thought it was cool with some parallel innovation. They obviously were intrigued to pick someone from the enemy side as well. Fellow Swede. We set up shop and we started building the first kind of iterations of what a music service for business looks like, which, by the way, is completely different than what we're consuming as consumers. The centralized distribution system rather than an endpoint. We iterated quickly and got a couple of products out here in the Nordics, which is Sweden, Finland and Norway, to test it out. And we very quickly got a commercial proof of concept that, lo and behold, businesses want to buy music streaming. They want to play the right music at the right place at the right time to sell more coffee. And they want to digitize their retail experience. And we fulfilled both of those. On top of that, the music industry, not so much back then, but now, are looking for an incremental opportunity on top of the consumer markets. So that fits very well into kind of synergizing the music industry's search for new markets and the retail and hospitality industries search for new technology to drive customer experience. So I put those two together with Soundtrack and Off to the Races Again.

What was the terms of the deal? Was it structured like kind of like a joint venture? Like, what did that ultimately look like?

It wasn't actually technically a joint venture. It was a new CO that we set up. I invested privately into it And Spotify AB invested. But the governing structure was different than a joint venture. I actually controlled the company. They had levers, of course, and governing principles. But I was always clear with Daniel Martin, I want to build my own company. This is probably something big enough to be its own brand. But let's start off like this. It was a trade off. They added the music back end. They did the initial licensing which meant that the product product had to be called Spotify Business initially. And I recruited the team, funded the project and built the initial technology product. That was the setup. Very quickly we got signal, meaning clearly we were able to sell subscriptions to business at a rate of 5x on retail price than consumer. And then realizing that background music was everywhere worldwide, we took the decision to pivot into independence. And that took me three years because I had to do licensing and build infrastructure technology before we could kind of move away from the Spotify platform.

You've raised over a hundred million dollars and closed over 13,000 licensing deal. What were some of the biggest operational or strategic hurdles in building a platform on that scale?

Once again, back to my, the story of my life, which is a story of stepping stones, as you all know, preaching to the choir. It's hard to raise money. It's super difficult. People think that music streaming is quite easy. It's extremely complex technology to build. It's very front loaded. You need to raise a bunch of money and it takes a long while before you see kind of monetization of the software. So the biggest challenge was to get investors to believe in the thesis and stay with me long enough to build this heavy front loaded technology build. And the three years it took me to go fly around the world again and do licensing deals with the world's biggest music companies, meaning Universal Music, Warning Music, Sony Music, both on the label and the publishing side. That takes time and getting to point rolling out the first market and showing the first kind of monetization outside of the test markets here up in the Nordics. Just summarizing, the biggest challenge was funding the whole build based on the thesis that it would be big in five, six years.

How'd you do that?

Once again you appreciate how simple the idea is. Hey, music streaming seems to be the next distribution model for music. Music streaming seems to be relevant both for consumer markets and B2B markets. I have built one of the leading technologies on the consumer markets before in the world. I'm now looking for this incremental opportunity to build a leading technology platform for the business markets. And no one else is Doing it. So I'm first out. I have a great team, I have a first iteration of a product. We have signal that it works. But it's going to take a bunch of money and it's going to take three, four years before we start seeing some return. But there are a couple of others like I had been able to build a company, sell it to Apple. I had been able to incorporate together with Spotify pretty clear signals that I had some proof points that I was legit in combination with a very big addressable market. Of course what all investors look for.

Was M and A part of that plan.

At that point there was no M and A. At that point I was just doing what I do best like operating product and technology and just building a team and just zooming in on a typical kind of ICP or typical customer building solution for that customer for her worldwide. So that was just like heads down product then by the way, we had little interesting period with COVID which I was just through funding stage. We were near death experience again. I was able to close around. This was in beginning of 2020. Literally looked up from my desk closing the round. I had to reshuffle my board. I looked down on the street and it's like what's going on? It's empty. We had two years of COVID where basically my whole market shut down because it's restaurants and hospitality. That was a nice little extra twist to the challenge. But coming out of that getting the organic growth model going, which is leads us to the subject of today, which is at least what you want to address is like when you built scalable functioning organic business. We're doing really well right now on the organic. But the growth trajectory of the organic plan that we see right now doesn't capture as meaningful part of the addressable market as I would want it to do in the time frame. That's when I started thinking are there inorganic options to accelerate growth in terms of market share and in our specific market and instance is the fact that I did not Invent background music. 95% of businesses use music, but they're using legacy platforms like CD radio or clunky streaming services that are linear streaming services. So there's a massive global legacy market background music. I am the digital new platform provider. The thesis of my inorganic M and a driven path here is adding incremental growth to the platform, meaning acquiring legacy providers in mass and moving them to my platform. I view it as a incremental growth engine to becoming the global leader in background music.

It sounds like more messy integration?

No, because this time I control the process and I'm in no rush. I have a profitable, nicely growing market leader in a massive market and I have just closed a significant funding round. So I have time on my side and patience. So I can really architect what this would look like in terms of target mapping, target identification, evaluation, and then applying the programmatic meaning, the same process every time, which is pay you a premium for your business when that business is migrated or transitioned onto our platform. So we could run three or four parallel processes here with four targets. We're not doing it. I'm just, in theory that we're just like, okay, let's just say there's a player in Germany that has 10,000 subscriptions. We'll set a price for the 10,000 subscriptions based on the quality of the customer base, the financial quality and the cohort quality of those customers. And then we would say we would pay you. X fully migrated, that team will start migrating. And when they've migrated 100%, they've received 100% of the consideration. So it's kind of more of a customer acquisition M and a model rather than we don't buy any technology assets. We might acquire some of the team on the local market for customer success or sales. But no technology, only customers.

Oh, wow. So this is actually really interesting because now you can make this repeatable playbook, even though the business model might be different, but you have a way to migrate them essentially to your platform. They have a hardware component. You're saying, hey, it's not part of the deal. That probably ends up getting sunset, I take it.

Yes. And I'm very clear up front. And this is also to the playbook, me being very clear on what I want and being humble about the fact that not all people want to sell to me according to my rules of engagement. And being upfront with, I'm only looking at this asset based on the customers that you've achieved in your local market. You've done a great job. You have a sound business. I totally understand if you're not interested, but if you would choose to transact with us, you have the option of a premium. And there's not too many buyers in this market either. That's the upside. Like you would think. That entrepreneur is thinking, okay, here comes the big technology platform. Probably they're going to build their own team in my market. If I sell now, I'll get paid. If I wait three years, I risk losing it. There's a little bit of a carrot and a Stick dynamic in me approaching them saying, look, I'm going to invest in Germany. You can be part of us or you can go against us. And I totally accept you doing that and respect that. But here's an option for you to join and you could roll into cash, but you could also roll into component equity which also provides you with the future upside of supposedly global leader platform. At this point, it's a good blend of opportunity for the potential seller. Then it's a tough job to migrate the customers and only get paid for the customers. Migrate.

Do you feel like you're convincing these people to sell?

I'm just in the beginning of this process. I'm not going to call it a success yet, just to be clear, but I am getting strong signals. We're currently processing four of these at the same time to see if we can close. We closed one so far, but no, I'm not forcing anyone to do anything. I'm presenting them with an opportunity and an option.

You got the interesting narrative of hey, here's this transformation. It goes back to your original thesis of the broad industry and here's either you're going to be part of it or you're going to be against it. Hey, if you're part of it, you could take cash or come along for the ride and be part of the growth. That sounds like a good pitch. Right?

The good news is it's my perception, of course, but I'm very transparent. I have no hidden agenda. That's what I'm telling them. You've done a great job, you've built an amazing customer base here and probably you could do that for the next five, 10 years. But I don't really see an alternative exit market for these family style businesses. So if you're interested in actually capturing an exit opportunity in this market, I'm probably the only option. I know how these companies are. Few companies that transact in this legacy market how they're priced. I can be competitive on pricing and kind of show them the comps on that and then I offer them an opportunity. Cash and equity or whatever you want. Choose. And in some instances I'm honest and saying, look, I really think your team is good and I want to keep on a couple of people in this because you have local relevance. But I'm also very clear I'm only interested in your customers and I'm willing to pay a premium for it.

Interesting. And that's what I was referencing, like convincing isn't necessarily force, but it's like, are you reaching out to companies or just for sale. You happen to catch them at the right time, they've been thinking about selling versus you're giving them a proposition that gets them to think about selling.

It's back to your whole like this podcast thesis is being proactive. What does that encompass? I am by no means an M and A expert. On the contrary, I've been just accidentally ended up in a couple of M&A's in my life. But this is truly trying to market the thesis to everyone. So I want everyone to know about my thesis and say, hey, I'm buying, I'm the buyer here. It's a pretty fair deal. You can choose how to do it according to your preferences. But the market will change. And I've invested a hundred million dollars to put behind that. And I've been around and I'm telling you, you're not going to be able to conduct business as smoothly as you're doing today in three to five years. Because that's just the reality of it. It's going to be tougher to do licensing. We're just going to keep investing in our technology and at the end of the day that's how we're schooled up here in Sweden. We have no domestic market, we got to build product. And I will keep investing in product and we will the leading platform.

Yeah, actually I was really curious about like these license deals that you mentioned. You know, you think about just even everything is some form of sales at the end of the day when you describe M and A, it's like literally a sales. Like you build a pipeline and you start, you know, qualifying folks and then you pitch them. I was almost curious about how did your experience from doing license deals transfer over to M and A Just because it sounded like it kind of had that kind of lockdown pitch because of that.

Yeah, I mean now when I think about it, every day I'm on some call at night with some rights holder negotiate five days a week. Maybe that's trained my mind to think about game theory approach to these things systematically. Like what's a win win and when, when are we getting to the lose lose and kind of how do you walk away or how do you turn a lose lose into win win? Because deal making is in my world at least finding synergy in the win win. Probably because I'm so clear on what I can take when I walk in, what I'm. What I'm going to accept and not accept.

I think so you might be early in the M journey but like the pitch sound very Mature. And I was like, it's got to be from that experience.

When negotiating from zero leverage, which is my reality. You're a small DSP digital service provider. Negotiating with the world's biggest music companies basically tell you to bug off. That's been quite challenging. But at the end of the day, even they look for incremental revenue. And I'm incremental revenue for them on a IP asset that they're sitting on anyway.

So, yeah, why not monetize free money? How do you determine if a company is a good fit to be acquired versus not?

The Playbook is pretty simple. We sell background music subscriptions, so the target needs to have an interesting amount of background music subscriptions. And some of these companies have background music subscriptions and they have a bunch of other ancillary services. And God knows what they're doing. They're selling TV screens for cafes and digital signage and things like that. That's not a clean buy for me because I'm only interested in the background. So a clean background music subscription customer base is the starting point. There could be some white noise with some additional services. But truly what I'm looking for is the background music customer base. Second step is what's the quality of that customer base. And that quality is obviously based on an analysis, but shortly put what price have they been able to extract on a subscription basis? That kind of proves how good they are in providing a service. So if the price is 20 bucks per subscription versus somebody who's been able to extract 40 bucks, that translates into better margin for me down the line. So the customer base with $40 per subscription is more valuable to me. We operate on a subscription base gross margin. So that's the second step. And then the third step is technology migration feasibility. So some of them have clunky, really weird technology. Some of them have more digital platforms that they built themselves. The latter is easier to migrate. So if the migration project will be easy, we're willing to pay a bit more for it because it's faster. We can just move it over to our platform. Then there might be some assets in terms of competence that we could price. Also a sales team or a good customer success team. That's an easy exercise. But it does start with what's the quality of the customer base? And would you be willing to engage through my model. No other model.

That's so interesting. And then you have your own hardware.

We have hardware and software like we're platform agnostic, so we can swap out hardware. We can integrate software on their current Hardware. If they have a hardware player, if they're running on software, that's easy. But the U.S. for example, you guys have satellite technology and some distribution platforms like SiriusXM for example. That is a tougher migration path. If it's a satellite receiver that's not IP based, that's probably a no go for us.

Long time ago I used to own a salon and I remember that we had this like DMX box. I'm looking at this profusion. They used to like send you a CD every month or so and you had to like update it that way.

You've been there.

I was trying to source leads for you. I'm going to tell them for that Transition is using as an example. You're basically coming in. You acknowledge that hey, they've got X amount of salons or whatever businesses. That's a customer base. That's where most of your diligence on is knowing what's the quality of customers. Does this fit into our thesis of where we're trying to grow and then that actual plan, you're just upfront, this is what we're going to do is we're accelerating this digital transformation for these customer experience and then working with that team, they would essentially move that product out. They would work with those customers, tell them like, hey, we're now part of something bigger. With that we're going to be changing, updating your equipment and then you work with our CS team if that makes sense to transition all that out.

Exactly. And be very open about it. And some people want to exit, some people want to join in, be part of our growth story. And that's also an option if it's the right team. We're having that discussion with one European market where we have no presence and it's a great team. So people absorb the whole team. Another interesting perspective to it is how do we price that. For me it's more of a customer acquisition relative pricing exercise where I know where my CAC is on my organic business and what would I pay then for a subscription in my inorganic growth path, meaning acquiring customer bases. I'm never going to get to the same low level or efficient level or CAC that I get from my organic business when I'm buying because there's a premium of the security of acquiring an actual customer and contract. Or it's roughly like we would be paying XX on our cac. That's how we view it for velocity to revenue. All right, I'm growing at 35% of my organic business. I buy this business I'm going to come out of this year at 50%. The arbitrage on that, on my enterprise value of moving my growth from 30 to 50 is significant. So I justify the premium on customer acquisition costs on the arbitrage that I take home on the enterprise value effect on my business growing faster. That's how I think about the incremental opportunity from acquiring growth alongside my organic path.

This is interesting because when we were talking through this I was in my head I'm the software business. And some of these companies I look at are legacy providers. Been around 20 years outdated software. And that's sometimes the thesis is that it's like hey, why don't we sunset their product, move the customers over. And that's the same lens that you're talking about. And I've always struggled on how do you evaluate that? Because you're right. Here's what we know is our customer acquisition costs and in that perspective. But then it's. You're never going to get it for that low for them. They're always looking at the typical valuation metrics. They want multiple. Everybody in software these days want multiplied revenue. If you were to walk through that, I wanted to try to get a better understanding of how would I take a business. Let's say we found a software business doing I don't know, let's make a simple math like 10 million revenue. But I would look at the each individual acquisition cost of a customer which let's say $150. But is it just off of that of what the acquisition cost is and saying hey, I'm just kind of.

You're completely right. It's the same for us like the enterprise value of the company received by the entrepreneur based on what she or he is trying to understand from Mark. The transactions that are in the market are usually a multiple of EBITDA in this market or multiple or revenue or air depending on where you are. The good news for me and then my CAC is times their subscription amount is obviously much, much lower as a starting point sum but it's somewhere in between. We both find like a meeting point where we find like the compromise because in my case this is a legacy market. There's really no one buying. So the multiple that they might have been able to extract somewhere which by the way is very low in my market because it's legacy business and there's no transaction. So I'm starting from a good point in the perception or expectation on value. And I explained to them how I view it. I see it as a customer acquisition. But I'm willing to pay you a premium. And in my world, usually the delta is not massive, it's maybe 2x and we can meet one and a half in between that equation. So it really depends on industry. I would assume for you it's completely difficult. You're in software where multiples are way more aggressive, even if it's legacy. And once again, the profile of the business are small family businesses that run P and L. They're probably never going to transact if they don't transact with me. So their option is, okay, I'm just going to grind another 10 years and I'll get a sailboat or I get the sailboat now and I'll take half off and I'll put half in, I'll join. So there's a flexibility premium of when I'm coming to the table as well. For them, that kind of will make them move their price expectation. They can also obviously invest in the future by rolling into the joint venture or into Soundtrack and be part of the next five years equity development of Soundtrack with half of the money and then take half off the table. You know, it's just like deal making and psychology. But it's exactly what you said. The value delta between operational CAC math and financial enterprise value math is significant.

I just feel like I'm dealing with a bigger big ass spread than you are.

Depends on who you're talking with. The good news is I'm so clear on what I'm willing to pay from day one that it's easy to flush out people who are ready for or not. And it's totally fine to no, we're just going to keep going. And that's good for you.

You know, the problem is I got the news every time any software company at all gets sold for 20x multiplier or something crazy. And it's a reference point for like every software company out there.

Nobody reads about software companies going out of business.

That's what I mean. I'm like, your revenues are going down. There's a huge difference here. But it's a really good point once again.

I mean it's like kind of fishing broad. You got to get the message out. And then it's timing, it's sliding doors. One year you, they sit in the room and it's do we really want to do this? Another three years? Like that guy, that weird Swedish guy who was here talking last year about acquiring our business. Shouldn't we just give him a call? And that's what I'm hoping out there marketing the opportunity right now, maybe we'll get some fish.

It is so true. I've had one point from I think it was a person done a ton of deals, but it's like an average around one year of relationship building. And then I've talked to folks that had it over 10 years where they finally got the deal. So you're right, you have to play long on it now that you're pursuing a buyer led M and A strategy. How does this shift your mindset when approaching deals compared to the past?

It's a shift because I am now approaching deals proactively like it's a part of my business. I've. I brought in someone who's better than I am on this and systemizing the process and operationalizing it as a workflow at Soundtrack, out there talking to and expanding the list of potential targets, keeping them up to speed on where we are and how we're transacting what the opportunity looks like over time. So it's really a systemized, operationalized M and a process very different to not having anything like being reactive. We have had multiple incoming inquiries of acquiring Soundtrack, so it's not like we haven't been in M and A discussions throughout this process. When you were running out of money and you were like close to death, of course you need to look at options, which we've been through like every startup multiple times. So we've been discussing sale of the company many times and I've been able to just fight it off. A couple of times it was cutthroat, but that's part of the game. That's always the case. Like I've never seen it not end up like that. Now I got money in the bank. I have additional funding from a potential revolver to do these things on top of what I have on my balance sheet. And I'm a profitable, growing company. So I've set myself up for a long, organized, systematic approach. And if my thesis on the macros like more and more pressure is going to come from rights holders, meaning music rights holders, that they want to move all of this business onto the digital value chain. So I also have a macro moving in my favor and maybe there's a couple of lawsuits to spice it up a little bit to players out there not complying to the rules of engagement.

Yeah, a lot of interesting things ahead which what's next for Soundtrack? How do you see M and A playing a role in your vision over the next few years?

Once again, I want to be clear. I have not proven out this beautiful theoretical model I've outlined here. So most likely it's going to blow up somehow and my beautiful logic is going to prove not to work. We'll see. Or the opposite. Like maybe the thesis is we can roll up 10, 20, 20 customer bases and build a very nice complimentary growth stream to our organic and that then obviously customer gets customers and volume and market kind of creates a network effect. Then we probably have a better product in terms of expansion business. So once they're on our platform we can probably extract more value on a cohort basis than we're paying for it. That's the thesis. But there is a next step and that is can I also play big a big game? Can I do bigger deals? There are a couple of bigger companies out there that could potentially not just be part of a programmatic, it could be like a game changing move. So I'm seeing if I can educate myself on those opportunities as well. But for an operator, a simple operator like myself, there's always this question at night, finishing a long day and like excited about the theories that you've been discussing and you're like wait a minute, am I going to pay $100 million for this? What could I do with my organic business with a hundred million as an example? I'm just putting an example. That's not actually discussion I'm having. But that's what we did at Beats. That's what I know a lot of tech companies do. We have an opportunity to acquire but hey, why don't we just take half of that and just invest it in our organic business because it's more scalable. It like we'll outcompete them and we'll get them for 10% of the price later down the line.

That's a whole other conversation my friend, of that balance between your organic and inorganic which is something I ponder on too as an earlier stage business.

It's opportunity investment or opportunity cost for investment or opportunity return for different like organic versus inorganic. But that's what you as an operator learning to engage in M and A need to think about.

We'll revisit this in three years.

Yeah, we'll see. Let's see what happens with my amazing theory here.

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

I can tell you the story. When I realized that we were going to sell to Apple late at night and I didn't know about it because I didn't think the deal was going to fall through And I actually just sold my equity and Beats at a good price before the deal. I was two months away from transacting all the equity of my holding in Beats into the Apple transaction. That was an interesting dynamic situation. It was me and another guy and we were like, he just pinged me three o' clock at night, middle of night. To me, he's like, have you seen. He sent this, like, transaction closed, 3.2 billion. And he's, I'll see you at the bridge. Which is a big bridge here in Stockholm where people jump and we're like, let's go. But, you know, it was more of a joke. That's my craziest experience of missing out. But I made good on that deal, so I'm fine. And I was able to reinvest in the right direction. I haven't seen any major crazy, but I have read some reports which I was reading up a little bit when you reached out to me. Okay. I haven't thought about more than the stuff I'm doing. What's the updates on M and A? It doesn't seem to be like a lot of M and A's come out with really impressive value creation. I was reading some McKinsey report and some year they write about how great it is and some year they write about how bad it is. But my perception, big M and A transactions, like maybe 2 out of 10 seem to come out with some true value creation.

Yeah, that's what they say. But for me it's always, what is the definition of it being accretive versus not? The companies always miss the mark on the timeframe. And some of this stuff will pan out over time because it's just integration is always harder than they expect. But then you're right, there's like deals that you totally missed the mark on.

Which tells you how hard it is. And to your point, I find it interesting. Like the buyer LED makes so much more sense when you have a thought of how you want to do it and you have a process and you have all that planning that we were lacking at Beats, but that I now believe I have a soundtrack that's pretty.

Crazy because that's how unpredictable M and A is. You never know. I appreciate taking this time for this conversation a lot. I've learned a lot. I really enjoyed listening to your story. You've helped me become a better M and A scientist.

Great vibe and thanks so much for listening to my stories from my little niche here in the music industry.

Fellow M and A scientists. Hopefully some music industry fans that are tuned in this far. You're a true M and a scientist. I really appreciate you taking the time. Always welcome connecting with folks in the industry. Probably best to connect with on LinkedIn. Give me feedback. Let me know what you think of this other people I should be talking to. Topic, ideas, criticism as usual. I'll take the criticism because that's how I get better at doing this. Till next time, here's to the deal. Thank you for taking the time to explore the world of M and A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you 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@mascience.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.

Foreign.

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