Lessons from 90+ Deals: Questex CEO, Paul Miller on Cultural Fit, Value Creation & Post-Close Audits

This episode is sponsored by Dealroom, the M& 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. If you're in corporate development, you know M and A isn't just about closing deals, it's about making them successful. That's why we built Deal Room, the market leading, buyer led M and A platform. It's designed for corporate M and A teams who need to execute deals efficiently, reduce integration timelines and free up cash flow faster. No more scattered spreadsheets, lost emails or clunky tools. That's why we just won Best Tech Provider at the M and A Atlas Awards, because we help teams move faster and make smarter decisions. But M and A isn't just about Buy side. That's why we're relaunching Firm Room, our sell side and fundraising platform with powerful new features. Imagine a virtual data room that's simple to use, but also has built in workflows to track requests, manage diligence and keep everything moving. Now add AI contract analysis to review customer, employee and vendor agreements, spotting key risks like change of control provisions or consent requirements in seconds instead of hours. Whether you're raising debt, equity or selling a business, you'll always be deal ready. Don't take my word for it. Visit firmroom.com and start your 14 day free trial, no credit card required, and compare it head to head with any M and A tools. See the difference for yourself. Here's to the deal. I'm Kisan Patel and you're listening to M and A Science, where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals. Hello scientists. 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 is done, said Fire led. M and A is all about strategy, alignment and efficiency, putting value creation at the center of every deal. Let's be real, it's not just about closing the deal, it's about making it successful. For episodes, resources and tools to elevate your M and a game, visit mascience.com follow us on LinkedIn if you find the content useful. Don't forget to leave us a review on your favorite podcast app so others can find us too. I'm your host Kisan Patel, CEO and Founder of M and A Science. Joining me today is Paul Miller, CEO of QuestX, a leading global business information and events company. Paul is highly experienced executive with a rich background in M and A, having played key roles in acquiring and integrating more than 90 businesses during his time at UBM. Now at QuestX, Paul leverages extensive M and A experience to build and scale the business with a focus on data driven decision making and cultural alignment. Today we're going to discuss everything from setting acquisition guidelines to auditing acquisition success, how to create a winning M and A strategy, and even what it takes to manage international acquisitions effectively. Paul, how are you doing today son?

I'm doing great. Nice to be here. Thank you.

Thanks for coming by my office suite.

You got it, gladly.

Sponsored by Valuation Research Corporation. Appreciate you taking the time from running a business and doing deals. Can we kick things off living by your background?

My background is I've always from the day I graduated have been involved in media and events pretty much all on the B2B side. Started my career, as you can probably tell from my accent in London, then was headhunted into a New York based family business that was fast growing. That moved me to New York. We actually had our first experience of M and A when we got bought and we got bought by a British company. Incredibly so I ended up working for UBM about 14 years where I did a lot of my M and A learning if you will. And you've already mentioned around 90 acquisitions as a business. From there I left and went into private equity for the first time and worked for Penton Private equity held company. We exited to Informa, another British conglomerate if you will. Left there to run questex six years ago. Also private equity held.

You've done a lot of deals in these different roles.

You've held a lot of deals, a lot of learning. Wish I could tell you I've got 100% hit rate, but I don't.

What are some of the biggest lessons learned throughout your experience?

What I've really learned is that the numbers aspect of acquisitions of MA often takes care of itself at its sort of broadest. You're either in the game or you're not in the game in terms of the valuation. Assuming that you are and you're able to work through the numbers, what really matters is a sort of a combination of culture, people, fit and the go forward plan post acquisition. When I first got into this, I would have said that the numbers were everything. It was everything that we were focused on, everything that I was hearing about. But the acquisitions that worked, we had great cultural fit. The ones that didn't were often down to people issues.

I would say culture, making sure there's a good fit with the people and teams, and then a go forward plan. How do you think of this? When you think of using a very proactive buyer led strategy to assess culture and ensure good integration, the sort of.

Holy grail, if you will, is to get acquisitions early, before they're even on the market. That's a lot of work, meeting with CEOs or founders from businesses that you think could be a good fit. You never know when you start out, but you've got a thesis, a hypothesis, could be in a good market, have good product, might be competitive, you've seen your customers really like, so you reach out and you say, hey, what's your plan? Where are you at? Do you have an exit plan? Are you thinking about your exit as an owner? And often what I found is that you're sort of early days, you're reaching people before they've even thought of it. And you're planting that seed. And almost like a marriage, you end up courting that particular target, that person for quite a while. And in doing so you find out a lot about who they are, what they're looking for, what culture of the business they're running, what's it like, how would they like to improve it? And over time you get really comfortable. Now, that time can be months or it could be years. It depends on just basically where that particular target is. I often find those ones are the ones where you get very comfortable before you enter into the formal process of M and A. The ones that are tricky are the ones that come across the trans image. Hey, here's a book from a bank. We think it's a good fit for you and you end up having to do a lot of work very quickly. Of course, everybody, when they're going to get married, puts on their best face, and you're often trying to find out what's it really. To stretch my analogy, what's it like when we're living together and there's underwear on the bathroom floor and you don't tidy away the food after you've eaten and all that kind of good stuff. And often in a formal process, the seller's trying to hide that. For me, the best way of doing this is to get to know your targets way before they're thinking of their own exit.

Okay, so get to know the targets before they go on market. I guess that goes either way. Ideally, you don't want a company just heard about coming from the banker. Ideally, if you do build a relationship, even if it goes to market, it still gives you a leg up.

It should do.

But is it better if it's proprietary? They don't go to market always. Always. Okay, let's break this down. This is really important. I want to get a sense of this approach and building these relationships. It's something I'm proactively doing right now. I did the market map exercise and filled out, okay, here's the segments, the 2, 3 we want to focus on and I start reaching out. What's your approach to reaching out to these companies?

I tend to use language that is, hey, let's grab a coffee. Be great to see if there's any way that us working together is going to make OnePlus One into three. It's not very direct. It's not a very, hey, I'm looking to buy you and are you ready to sell you? Because I find that in a lot of cases, people just like, whoa, that's way too quick to use my sort of courting analogy. It really is, hey, do you want to grab a cup of coffee? Do you want to grab lunch? Or indeed, I'll see them at an event. It could be an industry event, an industry gathering, and we'll just have a chat, compare notes. It's very much in the. And frankly, there's a reality to this. There's a real kind of authenticity around this. Often I find that even if you're not going to acquire a company, there are ways you can partner and one plus one can equal three. It's not all about, hey, we want to acquire you in two months time, so let's get to know each other really fast and then we'll do a deal. Often it's, hey, you've got something that's really interesting to us in a geography. Let's say the Middle east. And we don't have anything in the Middle east, but we have this great brand that we think could play there. Is there a way for us to work together on that? Now sometimes there is and sometimes there's not. But what it does is it opens the door for other conversations. Yeah, the Middle east thing doesn't work. But hey, we've also got this event in the US that seems to be adjacent to yours. Could we put them together and therefore we're already then holding hands. We're starting to work together.

Yeah, I like it. So one, you're not super direct. I'll give you an example. I do I reaching out to people and saying hey, we're working adjacent industries. Thought it'd be great to connect and compare notes.

Yeah.

Or sometimes I might say, hey, I'm working on a transaction in our space. Thought it'd be good to just connect and compare notes.

I think just to give a little. I think it's sort of a warming up and it gives them the chance to say hey, no, not interested or hey, we're at a different stage, whatever that might be. Or hey, we've just took some investment and therefore we're on our sort of five year growth plan. It has to be authentic. It can't be a bait and switch. Hey, I'm looking to partner you. Get in the room and say, hey, actually I'm looking to buy you. Because that is really off point.

Well, I like being more vague because like you mentioned, it's like just an exploration of strategic opportunities.

You don't know, you don't know. It looks like it makes sense from a distance. Let's get closer. And then if it does, things can start to happen in a good way.

You pushed for in person. It sounds like that's another key element for you.

70% of our revenue comes from in person gatherings. So it would be disingenuous of me to say that in person doesn't matter. But I think it does matter actually. You've got to get to know people and you've got to get comfortable with each other. And until that happens, I think everything is kind of theory.

I'm like an intro call first and then push her in person just because I'm trying to get the volume up.

I sometimes look for introductions. If it's so it's not just a introductions is a really blind kind of reach out that hey, Bill's introduced me to you. I've got a lot of respect for him. And that I think can get things Moving a bit faster.

Do you convince people to sell their business?

I probably like to think I do. In reality, they've got to be somewhere there. They've got to be thinking this is the time. Or it may be a little bit earlier than they were planning, but they were already starting to think, how does.

That come in the conversation where it's like, hey, have you thought about selling? Or I'm looking for a business like yours, like how does it come up?

I'm normally pretty forthright in. I will ask early on in the conversations, have you thought about your own exit strategy? You sometimes get a kind of a surprise, wow, that's a bit forward. But often you get actually I have and here's where I am in that particular journey. Once we've got to know each other a little bit and that's probably one or two meetings, it's what are you thinking here? Because I'm thinking it might make sense for us to actually be together as a company and just ask them where they are in their exit kind of strategy.

When you think about what gets people excited about doing a deal, what are those elements?

It depends on who you're doing the deal with. So it's a founder led business that they've invented the business from scratch, they've built it up. It's kind of part of that personality, it's part of their reason for being. You've got to be really in tune with the we are not going to mess up the thing that you've spent your life building. You've got to have a lot of respect for what they've put into that business, that it's sort of a quote, a family member almost. It's part of what they do. They put a lot of blood, sweat and tears into it. They want to make sure it's going to a nice owner, nice stewardship, that you're not going to just tear it apart and their legacy is ripped up. So for founders there's a lot of massaging, there's a lot of getting to know them, there's a lot of reassuring them that this is a great home, next home for their business. If somebody is big public company and they're carving out some assets that are, they think there's a better owner for, they don't fit. But that's a difference story that's more about can you get the deal done? Can we do it at velocity? Do you have the funding to do the deal? And it's less around the hey, are you going to look after our asset forever and Ever. It's more about you're a better owner, but can we get the deal done? So two ends of the spectrum, I think. And then there's stuff in between where people like, they might not be the founder owner, but they're the steward of the business, might be private equity held. And in that case, you're looking for a. A few other different aspects. Yes. How fast can the deal get done? Do you have the funding? Is this a good home? Are you going to look after my people? Is there a real growth strategy here? Am I part of that growth strategy or am I a quote, cost synergy? It depends. Is the.

Yeah, there's some variables there. It sounds like, though, founder led is definitely more of a real relationship and trust you have to build. Yeah, generally you have to. But I think so much of it's going to be on the legacy.

It's personal. It's really personal. Yeah.

Well, the other side sounds like it's more like and I RR calculation.

This looks good at the end of the day. Right?

At the end of the day because it's more institutional.

And then there are better owners in some cases. And you make that determination and you figure out which one is the better owner and off you go.

You want to figure out these incentives and drivers early when, early as you can.

Yeah. Does the founder want to stay around? Does he or she want to buy an island in the Caribbean? Is this retirement for them? And if so, how important are they to the business? And cause some questions, is in fact this the next stage and they want.

To stay around when you try to assess and learn about the culture of the companies? Because this is one I get stuck on already. I meet other CEOs, I get excited. We're just other executives, I guess. I saw you, I was excited to start chatting with you. You know, once in a while there's a CEO I don't get along with, and it's like, all right, you turned off. But we start going through diligence. I start bringing in people. I like to bring in my coo. I like to bring in my VP of engineering. If it's like a product deal and they start bringing up the culture stuff. And then I'm like, I want to learn from you. How do you assess it and kind know what's a real red flag versus like, I'm concerned. But it's like, well, obviously we're not the same culture. We're different cultures. Where do we get a sense of compatibility, that our two unique cultures are going to think international deals? Right.

Yeah. In the international side, which we'll probably touch on, you have to recognize there is a cultural element that is different to your culture. So that's beyond the company culture, that there's actually a geographic culture issue. To answer your question directly, there are many things we look at to assess culture. Okay, so we'll go on to LinkedIn. We'll assess what people are saying about the business. We'll go onto their website and we'll see what do they say about themselves, what cultural values do they say are the ones that they really value? You can learn a lot. Hey, we value growth at all costs. Nobody actually says that, but you soon dig into. Actually, this is not a business that is really focused on its people. For us, what's really important is that we don't, as a company, manufacture things. So for us, as a business services company, it's all about people. So we'll go on to Glassdoor, a very dangerous place to go, because normally people posting on Glassdoor are the ones that are not happy with what's happened at the companies. But you get a sense. You get a sense from Glassdoor reviews of, wow, there's a 90% rating of we can't stand the CEO. You think, hold on a minute, there's something going on here. We will look around the industry. We will meet some of their people. We will. Not directly as part of the process, but hey, we've both had an event. I'm sitting down next to somebody at a Target company, and I'll just ask them, hey, how's things? This is great. This is a great company to work at. Best company I've ever been at. Why? We get a lot of room to invent. We get a lot of room to innovate. We really do look at failure as a badge of courage, et cetera, et cetera, et cetera. There are ways to get there which are much more important than saying to the CEO, what's your culture like? Because most CEOs are going to say, oh, it's great. Let me tell you why. It's this and this, but there's independent sort of measurement of that. There's a little bit of work you can do by talking to people at certain gatherings, industry events, et cetera, and you get a feel for what this company's really like.

Is there anything you can probe in the CEO to help you get a real sense of culture, like decision making?

Yeah. So if you get into things like, give me an example of how the team collaborates to make a decision. Yeah, I like that, yeah, sometimes the CEO will say, we don't, I make the decision. And you're like, whoa, red flag. And again, in founder led companies, often you will find that hey, I make all the decisions. And by the way, when you buy my company, I'm leaving.

Right?

That's multiple red flags. Who's going to make the decisions when you're not here, et cetera, et cetera. There are many sort of questions you can ask. We're sometimes pretty direct. How important is culture? How much time do you spend on culture? Okay, great. How do you do that? How many town halls do you do? How do you communicate with your teams? How do you take feedback? Do you have any net promoter scores from your customers? And you'll start to get into a sort of a sense of hey, this is a really collaborative, fast moving, failure upfront type company that wants to make innovative decisions, wants to learn from them and move fast, but really respects its people. Then you can get in due diligence. What's your turnover rate? How many voluntary turnovers have you had? How many involuntary turnovers? Give us your employee engagement studies. But we don't do those. Paul, you don't do employee engagement. That's a bit of a red flag to me.

How important is it to retain the CEO particularly or just executives in general on these deals? Thinking of one deal where I don't want this, you don't want the CEO, I don't want the CEO.

Really good question. Again, it's a bit of a hedge answer, but it's the true answer is it depends. In certain cases the best companies have great benches. The best companies, you could see that if a executive leaves, there's somebody really ready to take their seat. Or indeed we can find that we might have people that are ready for the next level, that if in fact this person decides to leave or it doesn't work out, we've got somebody ready to take that role for us at the CEO level at least. So let's just say the C level, the C suite. Depending on who we're buying, it's really important to find out where they are in their own career journey. There are some CEOs that we are very clear that hey, if we buy you, we are not going to need your role. This is just going to tuck into a current business that we have. Depends on the size of the deal. If it's a larger deal where that person is really important, we want to really check out. Are they in because they're going to get a check. Are they really in or are they just going to coast a little bit because job done. It really depends on the company, the target, where they fit, size, what we've got internally that could take on some of those roles, what cost synergies we're already building in what revenue synergies we're already building. So it's not a very good.

Is it generally the anticipation that you want to retain this executive for a while.

There's always short term. In all cases.

In all cases. But you ever come across someone where it's like executive wants to leave right away?

Yeah.

And do you still do those deals?

Sometimes, yeah. Depends on how important they are. Again, reiterate the founder led, but if it's founder led and it's relatively early in the cycle, might have been doing it for three, four years. They've got an explosive product but they're still doing a lot of the work. We want them to be around for six months to a year. If they communicate, hey, look, I want to move on to the next thing. We'll say we want you to be around for this period of time to do A, B, C, D, E, F. Once they're achieved, we can definitely talk about you going to the next clear.

Milestones that tie the transition, tie them into transition success.

You can get into structured deals, earn outs, etc. That keep them engaged.

What's like the fastest you could get a CEO if you had the CEO that you wanted to get out because you knew you did a pre deal.

If you want, you can do it pre closing.

Could do a pre deal. Could do a pre deal.

Yeah. That's the fastest. Is that, hey, as part of this, this is what you're going to get, but we're not going to carry forward with you. That can be done pre deal and as long as they're cool with that, then you're off to the races. I'd say six months is what you really want to be looking for. If that C level executive is important to why you're buying the company in the first place.

I like it. Do you do customer diligence?

Yes. In our particular industry, there are a number of businesses that we can reach out to to do customer diligence.

Do you pre loi. Do you do customer diligence?

No. Our customer diligence will come post loi.

Part of me that's wondering about that.

Having said that, the informal customer diligence is going on. You're visiting their. In our case again, we're visiting their events.

Right.

Say we were buying Coachella just to Give a ridiculous example. We would go to Coachella and we would talk to people there. Why do you come here? What's exciting about this? Are you coming next year or is it just a once in a lifetime thing? So we'll do a little bit of that. And that's normally part of. I would say pre. Yeah, it could be pre loi. Part of the research. But post loi, we'd get into actually calling the customers.

And then you work with a third party to do that. Yeah, mainly that makes sense.

Yeah.

It's hard.

Too much on the team.

Yeah.

And also it sends. It's a bit of a weird environment. If a competitor is calling a competitor customer, it gets a bit weird. Third party's the way to go.

What do they do?

They do exactly what you would do yourself.

You would say a call and saying, hey.

They'd call and they'd say, hey, we see that you're a supporter, supporter of X. Can you tell us why would you continue to support them? What are the things you feel about them that if you pause. Too expensive. They don't care about the customer experience. They've got us as a hostage. There's nowhere else to go. So we have to do business with them, but we hate them. All of which when it comes back is, oh, that's red flag.

But you got loi signed already. And if you get a bad report that comes back, what are you going to do about it?

We're going to meet with that team and say, hey, listen, this is what we're seeing. What's your take on this? They'll often give you the reasons why. Yeah, we had a really bad issue here. An event, something happened, whatever it might be, and then you've got to start to make some pretty deep decisions on this. Looks like it's a serious long term problem which could cause long term decline. No value creation opportunity here. We're going to be managing. So I used to call them falling knives. Avoid those as much as you can because you end up with a lot of blood on the floor. Now you're not looking for perfection. Not every customer is happy. There are always things tactically that can go wrong.

We're saying something pretty material.

Material and widespread. Six or seven customers are saying the same things independently about this particular company.

Can't wait to cancel.

Yeah. At that point you're saying, hey, we got to get some answers for this. If the answers are extremely defensive or if the answer's a little bit dancy, you're starting to say this might not be One for us.

Okay. You bring this up to the management team and your options are either do nothing, walk away from the deal. What do you usually end up doing?

Walk away.

Oh, so you wouldn't want to renegotiate the price.

More recent history. I don't think we've renegotiated and got a deal done at all.

What drives you to walk away from a deal? What are the reasons?

Some of them we've touched on the.

Customer diligence comes back really bad in a way.

I think that's kind of obvious. Yeah. Is that you've done your customer diligence. There's a lot of negative. It's going to be too much work.

You're just feeling a lot of churn going to happen.

Yeah. Often it comes down to the seller is what we would call, this is my take, unrealistic and expectations. This is almost sort of pre loi is our price, is the offer, here's the structure. And they come back and say, actually, you're eight turns of multiple away from where I need to be. And we're like, we're out and we're really fast. We're really. One of the things that I have learned over the years is quick nos, quick yeses are way better than maybe if you could do this and this, we could get this and this. And you just end up wasting a lot of time. So really fast. This is what we think the business is worth. This is the loi. If you're accepting that. Now let's get on with the due diligence. In due diligence, the things that would cause you to walk away are some discoveries of stuff that culturally you're like, wow, there's a file, four lawsuits from employees against them. Or these customers are telling us that this really a falling knife situation. Or the executive team isn't aligned. You end up meeting the exec team and you're seeing they're sort of rolling their eyes when one of them speaking. All of these issues where you're thinking they're going to cause us way too much time to fix things rather than, hey, let's spend our time on how we create value.

So people, you could come in and find out this is not what you thought it was and people are not performing the way they should.

When you see a SIM or a sip, whichever phrase you want to use, when you see the memorandum, if it's on the market, you're seeing a target company at its very best. And that's fine. We all know it. Normally there's a Hockey stick. Yeah. The next 10 years are going to be the most explosive growth of any company in the world. So you discount that pretty quickly and then you say, look, this looks like an attractive business, but an offering, offers accepted. Then you get into the real world, or at least what I call phase one of the real work. Phase one would then go through to, yep, we're confirming the offer. We're going to buy the company. Phase two of the real work is now we've got to make it work and we bought the company and now we're going to make sure it's all going to happen.

Walking away from loi, there's no penalty other than what you spend for doing diligence.

Correct.

It's so hard to walk away from a deal.

It is. You better be pretty good when you're.

Putting an LOI at your personal time. And.

Yeah. Yeah.

The fact that you championed the deal.

All of the above. Yeah. And the opportunity cost, by the way, that you put into that, that you could have been doing on another deal. You got to be pretty clear if you're putting in an loi that this is something that you would take through to completion unless you discover something really catastrophic or something that you don't think is fixable. So you want to be pretty sure if you're at the LOI phase that you're ready to take this forward.

Help me click into the mindset here because again, it's. There's the let's just call it deal fever. But I feel like your early analysis should be the opposite. It should be building the business case, which is like, figure all the reasons why you shouldn't do the deal and then be able to justify it that beyond that there's still some compelling reasons to do the deal that point you bought in. But then it gets tough to still be the. Whatever the smoke through the clouds it does.

You got to remain very disciplined. We are private equity health, so there's a real discipline around M and A.

So you're going to have a pretty mature criteria. What does that criteria look like? Mine's still early stage. Mine's a gut feel criteria. Okay, so gut feel, teach me what a mature criteria looks like.

The gold standard is the value creation piece. One plus one can equal more than two.

Okay, so there's a strategic thesis on.

There's a strategic thesis, and that comes down to a lot of detail. At the end of the day, what's the customer set look like? Is the crossover in the customer set. Do we know them or is it a New customer set. Is this an adjacency to markets that we're currently in or is it a bolt on to markets that we're currently in? Is it a brand new market that not in, that's got its own sort of issues in terms of research. But let's say that it's an adjacency to the current market we're in. Let's say we're in hotel real estate investment and we're looking at student housing, real estate investment, adjacency, student housing, hotels, pretty similar, except one's full of students for four months a year. The other is renting out rooms by the day. But in essence, you're still investing in real estate. So what we'd want to know is do any of our current customers that are in hotel real estate investment jll, cbre, do they also have a practice for student housing? And the short answer is they do. So then we'll talk to them. Hey, cbre, you're a big customer of ours. What's your take on student housing? Oh, huge strategic initiative for us. We're putting a lot of effort into it for the following reasons. Student housing is going to take off because there's a shortage, whatever, whatever. This is very hypothetical. Then we'll say, okay, who do you talk to? Who do you use? Who do your student housing group use? Can we talk to your student housing group? And they'll say, oh, we go to this event, we deal with these particular companies, these are the leaders. So you're already starting to sort of eliminate or at least dampen some of the potential risks. We've got a top customer who's got another division who's focused on this particular area. And they've told us that this particular company that we're targeting is one they consider trustworthy, that they want to do business with or do do business with. So you're starting to get into that kind of phase of, hey, we're confirming now from third parties that we trust that there's something here. Once, then you get in front of the company, then you're starting to confirm. Okay, we've got some comfort that there is a commercial rationale here. The leader of our business would have constructed a paper, as we call it, a hypothesis. Hey, this is this company, this is what they do. This is what we found out about them. This is what we would do with them. So you're building out a combined P and L upfront. It's what a combined P and L would look like, what they currently look like. Here's what we would do. Here's where we think there are revenue synergies and here's where we think there might be costs. Sometimes there's both. Sometimes one is more important. We think we should bid for this business. Then there's a very disciplined meeting with my private equity folks. Hey, what do you think of this? Have you thought of that? Have you gone back to them and asked them this question? Have you visited them? Have you had a fireside chat comfortable with them? Why are they selling all those types of questions?

So you've had these early conversations. You get an NDA sign and saying, hey, we're going to officially get down to business, send us some stuff. NDA sign. I want to send us initial request list, a timeframe from getting that initial request list out to actually producing everything that you just told me.

Weeks.

Weeks. A couple weeks.

Yeah.

Okay. Couple weeks. We got a package.

Got a package. We're ready to have a meeting, a.

Business case on doing this deal and then we're presenting it the board in your case.

Present it to the board. It's an interesting meeting.

The board, Paul, looks like another winner. Let's stand for approval.

They've never seen a non winner, by the way, by default. But they'll start asking some really deep questions. Okay, have you cross examined, why are they selling? Why are they selling right now? Did you ask that question? You're like, actually no, I want to go back and ask them that question. You normally won't walk out of that meeting with a offers in, et cetera, et cetera. Normally there's some further questions to ask to get confirmation on. Get those questions answered, come back for the second board level meeting. Assuming everybody's lined up, you then agree on the loi.

How about the structure of the deal itself? I guess in my case, I don't want to keep all the cash I can. And then everything else is expensive. If you raise equity, it's expensive. You raise debt, it's expensive. Do you try to push as much as you can for the seller to take either financing or rollover equity?

Again, that's a depend situation. Sometimes for the smaller acquisitions, it's a cash deal, cash on hand for us.

Give them a swipe cash and then have a retention for the executives.

Correct. And that's the cleanest way of doing any kind of deal. Everybody is happy if you structure the deal where you say to them, here's some cash upfront, but we need to see performance over the next three years of X, Y and Z. That can be great for the buyer because you're getting some risk mitigation there. We're only going to give you a certain price. If you hit these numbers that you have given us puts them a little bit on the line. What I found is in practice when you do those is that it creates a lot of internal strife along the way. We could have hit these deals, but you took my CEO away from me and therefore I couldn't hit them. Therefore you're stopping me hitting the number. Therefore I can't get the earn out.

That I was pro get men and call lawyers and it's not good. Yeah.

At their worst, that's where they go. So we try to avoid those. But in some cases they're necessary because you want a little bit of proof that the hypothesis is correct.

Let's go back to the house. How do you set up your company for successful acquisitions?

Again, learning over the years of doing these. We have a few things in place. We have a playbook integration plan. Every aspect of our business, from tech to finance operations to go to market, is involved in the Playbook and what we're looking for and how we do things. With the checklist at its best, in my experience, after six months we would then audit how are we doing? And then we'd audit the seller company and say, how do you think we're doing? There was a sort of a red, amber, green kind of rating along a whole swath of issues. After another six months we do it again and then after 18 months we do it for a final time, which is basically the has this worked? And at ubm, what happened was, depending on how good your report card looked like after 18 months is that you were more than likely supported for further capital, for further investment. We've taken the best learning from that at QuestX. So we've got a very strong integration playbook across the board. We're actually quite centralized in a lot of our operations. So a lot of the scale of our business is taking in those central operations, embedding them very quickly and then go to market. Marketing, sales based content. We've let that sit in the market, at least for the short term. Sometimes we'll embed, sometimes we'll just leave it there. It's a separate unit. So for me the key is know what you're doing up front, have your checklist at regular intervals to make sure that you're on track and then audit. Did we do what we said we were going to do both from the seller and the buyer side, not just from my side.

I like that in that feedback loop. What about when you got a bunch of people that never did an M and A before?

Good way to learn.

That's the only way you can do it.

If that's a gating factor, you're not doing a lot of M and A because you're sort of saying only the people that have done it before can do it in the future. That does a few things. A M and A is very dynamic. There's no one size fits all. B, you want more people involved in this than fewer people. So I want my sales leaders in the market coming back to me saying, hey, I got a new competitor, they're really good and they're really hurting us. That to me then is an M and A target for me. Potentially. At the very least, it's a strategic discussion of why are they hurting us. Nothing better than learning by doing. That's how I learned we got bored. I had no idea what it was like to get bored. I remember getting acquired early in my career and being in a room full of people from the acquired company and one of them saying to me, hey, you need to be quiet and remember who bought whom. I still remember the phrase. And I sat there thinking, wow, that's how this is going to play. I'm a second class citizen because you bought us. That didn't last very long. Not a place I wanted to be. But that was their attitude.

I didn't choose to work for you.

Yeah, exactly, exactly. And interestingly, they were working for a public company. It wasn't their business.

Wow.

But they were very much on the we bought you and therefore we're cleverer than you. Whereas my take on it is that when you buy a company, you're trying to learn from them as much as they are trying to learn from you.

I want to talk more about that. How do you increase the success rate of your acquisitions? How does a buyer led approach ensure scalability and long term success?

A lot of it comes from a. I'd say the pre work. Have you thought this through? And have you thought it through from a perspective? And I know a lot of people say this, but we really try to implement it, that it's, this is your money. If you're buying a company for $10 million or $20 million and you've got 30 million in the bank, let's just say that's the number. Do you want to spend $20 million on this one company, Two thirds of your potential spend? And if the answer is yes, and here's why, and it's really Powerful. You're already more than halfway there. That this person is saying, even with my own money, I would make this bet. And often you'll find people say, if you're putting it that way, I have these concerns. Okay, fine, let's hammer those away. In my mind. A lot of this is the pre work. A lot of it time. A lot of it is getting to know the target as we talked about right at the beginning here. Have you done your homework? Do you know them? Have you got some insights into them? The more you can get comfortable with that, the better the outcome is going to be. Then if you have the check ins on how you do it, when you do it, is the audit in place? Did they do what they said they were going to do? What have you learned? Pour that into the data bank next time you do it. Hey, do you remember last time we did one here this size? That we really missed the tech due diligence. It turns out they had a huge technical debt and we spent a year trying to catch up to get them up to speed. Let's ask this target what their technical debt looks like. You sort of learn and it's iterative, and it's iterative and it's iterative and you get better at it. The ones I feel where you don't get very good at are the ones that I'm quite emotional. I like this. It's the best thing I've ever seen. We got to have it, got to have it. And you start ignoring some of the signals on the edge because you're so in love with this particular acquisition that you kind of lose a bit of discipline. It's boring and mundane, but discipline really matters. Have your checklist. Check the checklist. Check it again. Learn from what you've done before. Add that to your checklist next time. You're just improving your chance of success all the way.

Do the pre work and don't let the motions keep you from skipping steps. Basically hard.

It's hard. But yeah, keep the emotions in check.

It is hard. I got this issue where I find a company and I like it and it's profitable and it looks good. Finances make sense. We should do this deal. Little things creep up.

That's right.

And it's like one by one, this creeps up. This creeps up. And it's so hard to say.

It's hard to say no, particularly if something checks off a lot of boxes. On being exciting. It could transform you. It can add a. If you're growing at 12% and this is growing at 24%, you're seeing accretive growth. It's hard to look away from that and say, hold on a minute, but what's their organization look like? What's the skill set look like? What's the customer set look like? What does the tech stack look like? And these are boring. Yeah, I said, why? It's growing 24%. That's the exciting piece. And M and A can get exciting. It gets very unexciting. Six months in, if you've missed all of that stuff and you're finding yourself in a absolute nightmare integration scenario. All of our time is being spent trying to figure out what on earth. So it was exciting six months ago, it ain't very exciting now.

Yeah.

It also puts people off the next one.

Okay, so that's how to increase the success rate is do the pre work.

Do the pre work and do the detailed pre work, not just the surface level pre work.

How about buyer led approach to ensure scalability, long term success, you got to.

Have an executive team that is scouring the landscape and knows that this is one element of your value creation strategy. Organic growth is great, launches of products are great. But M and A is a leg of the stool that you've got to be focused on. So always be buying, always be looking, always be filling the funnel with prospects.

You have everybody the whole executive team is hunting.

I do, yeah. Including hr.

Interesting.

They may be at a conference, they may say, hey, I just heard this person speak. She's got a fantastic culture. We've got a lot we can learn from this particular company. Then I'll sometimes reach out to the CEO and say, hey, I've just heard about your award winning HR presentation. Can I buy your coffee? I'd love to learn a bit more. That could then lead into an M and A discussion. Might just lead into a better HR discussion. And if I can, I try to push it down even further. Sales leadership, marketing leadership. Who you seeing, who you're partnering with, who's helping you get your product to market faster. And they can sometimes lead into M and A. So on the buy side, always be looking, always be having the decision is can we build this or should we be buying this to move faster?

What's this like color code rating system that you guys use for the red amber green?

Yeah, that was on the audits at UPM that I've stolen best practices from. And UBM was a billion dollar plus company and they were an audit to be feared in some ways as the CEO that you were like, oh boy, I've made a mistake here because there's a whole swath of red that we said X. It's all come through rated red. We missed this in due diligence. We missed this in integration. We missed this on day one.

This is the M and A team that's getting rated. Yeah, we got a scorecard on the M and A team. Ooh.

But hey, why not? It's money, it's investment. If you're choosing to invest in M and A versus invest in your own organic growth, why not have the same scorecard?

It's always just, you get the deal done and maybe there's some success factors that get pretty vague and foggy after the deal is done, but to score a score of the process itself, yeah, that's actually pretty interesting.

Personally, it's a necessity. If not, you end up moving to the next one and the next one and the next one you're not learning from, hey, what did we get wrong last time? It's never perfect. It's not something to be afraid of, but it is definitely something that I think makes you better next time.

When you say data driven in M.

And A, what does that mean, all of these things? Actually, you're looking to get as much of that gut feel that you mentioned earlier out of the actual decision. Gut feel is still part of it, no matter what anybody says. There's still a little bit of my instinct tells me something smells wrong here, even though all of the data is telling me it looks good. So there's still a gut feel element and I think it'll be there forever. But increasingly there's more and more data. And it's not just the financials that's the easy part of data. It's employee engagement. It's what I mentioned earlier about. Are you seeing people leave the company at a rate that's above industry average? Why? What's wrong there? Is it a benefits issue? Is it a 401k match issue? Is it a actually, this is a terrible place to work issue? Data, data, data, data, data all the way along, including data around culture. And if people don't have it, then I think you've got a question mark in your mind. If you're not measuring culture, then how do I know that what you're telling me is actually right?

Yeah, that's a good point. But really get as many data points as possible to track it and be more systematic about how you approach deals.

And if somebody tells you I don't have the data, then have a huge question mark around what's the company.

So that's part of your evaluation process.

Yeah. We live in a world where data is. Data is all over the place. The real clever piece is how you're using the predict your business, et cetera. But that's for another conversation. But if you don't have the data in the first place, I'd have a lot of questions about are you running a company on gut feel when you.

Did the scoring for them in a team, what happens if they get a bunch of red marks?

We had to present to the board what we got wrong, why we got it wrong, what we're doing about it.

Confession.

Yeah. Colonoscopy, as somebody referred to it at one point in time. Let's say chore. Chore's the wrong word. A process that was. It was a pretty forthright, honest. Everything's on the table here and it wasn't personal. So if you had a swath of red and you were the leader of the business that actually made that acquisition, what did we get wrong? Why did we get it wrong? Did you get over excited? And what could you have asked and what would you ask next time? And it was all done for the purpose of let's get better at making acquisitions. Let's just get better at now. If you did three acquisitions and it was a swath of thread often, what would happen is that it'd be like, hey, we're actually going to place our money and our bets with another leader. Because you just haven't learned from making the same mistakes over and over again. It was a way to access capital, but there was no punishment unless you continue to make the same mistakes, which I don't think anybody did. Success rate on acquisitions actually grew pretty significantly.

So we were hitting some accountability.

Yeah, seven, eight out of ten were doing what they said they were going to do.

What's the hardest deal you've done?

There's some strange deals. Anything with an international flavor, particularly in an area of the world where you don't really understand fully all of the customs, no matter what books you've read. So the hardest one I did was actually in China, in Shanghai, China. And we did all of the above that I've been talking about throughout this podcast. All of the checks, all of the data. I had met the CEO a dozen times. He's a professor at a local university. It was a good business and we bought the business. Integration was hard. There was a lot of flying, a lot of schlepping to Shanghai at this point in time. And we did as good a Job as could be expected of a US based or North American based team to acquire this business. What we missed was some of the cultural elements of what the actual owner was expecting to do with the business. And I won't go into it all because it will get a little bit too personal. But it's a different culture for however capitalist or not China is, it's a different culture. And I wish I'd had somebody on the ground who could have given us a little bit more insight into what we were actually going to be looking at post acquisition.

That's interesting.

I'd say it worked. And it wasn't a complete failure. It worked, but the work we had to put in to make it work, it was intense.

Yeah. That goes back to the whole cultural peace. Would you say that's the most important factor to make a deal successful? Is it cultural integration?

I would. Cultural integration. People in general. Everybody says this, everybody says this.

It says it. But it's hard to. It's easier said than done.

It is. And it can be a bit of a throwaway line in some cases. You have, oh, yeah, it's all about the people.

But I met one executive, he says, oh, I go on site and I walk around the office and I can sense the culture from that. And that gives me a sense if I should do the deal or not.

That's extreme. If you get the opportunity to do it, I'd say do it every single time. You do get a feel. You do.

Okay, so I got to go on site, walk the office. Yeah.

Everybody's remote now, though, so that makes it harder.

Companies are pretty remote. We have a few people.

Which, by the way, gives you a lot of insight into how then do you communicate? Tell me how you communicate to yourself.

Some of your zoom calls.

That's unlikely, but you can ask, how many zoom calls are you doing? How many town halls are you doing? Can you share with me some of your communication? Give me a month. In the life of this company, how you communicate to your staff.

Yeah. The employee handbook. You think that's actually a good template from somewhere?

Yeah, it's part of it, but it doesn't give you the in between the lines stuff. Which is the most important culture.

That's what's tough. That's the thing I'm struggling with because.

It'S the most important and it's the.

Hardest because you don't have. You have such a slim window. You don't have access to enough people to really read culture. You have access to a handful of executives. What do you find online. What kind of surprises have you seen? Like cultural surprises that shocked you or threw you off or stuff to be aware about?

Yeah, there was just a few. There was one variant, one early in my career, I'm going back almost 20 years, where the actual work we did on Cultural Fit was probably as intense as any work I've done before. We spent time in their office and a lot of dinners with the executive team. We got to know them, bought the company, and turns out that the CEO was a bit of an ogre that we hadn't seen or even picked up from his direct reports. But when he got in the building, was literally throwing his weight around and barking at his team and our team to the point where our team just didn't want to work with him. They wanted to find workarounds. Frankly, it was a shock. And you don't get shocked often, but that one was like, wow, he put on a good act all the way through the whole diligence. But once in the seat was pretty tough to work with. So you get that kind of shock next time you really go deep on that and you start to figure out, hold on a minute, what's it like to work with this guy? You start asking a few different questions.

It's so true in the culture stuff because leadership is a huge part of it. And if you got the right leadership, a lot of these. Yeah, there's a lot of tactical details of integration, but the right leadership are going to get through that. They're going to problem solve, they're going to make decisions. That's it. Right.

Leadership teams are key. Leadership teams.

Right. Yeah. Leadership's aligned, they know how to lead, they drive by example, problem solve, make decisions. That's what's ultimately going to get things to be successful, get people aligned. This is where the AI to help you assess culture. Maybe. I don't know.

I'm a huge fan of the promise of AI and where and how it can help and what gets put into a data lake. But we're a little ways away from the real promise of M and A and AI.

Okay. So the international deal I'm working on, and there's a little bit of, why is this gotta be the first deal I work on? And that's one start at the hard end, Right. And then the devil's on the other side. And the devil's like, you're probably going to do a bunch of international deals, so why not just cut the wrist and get it going?

So what to look out for?

Yeah. The good thing is European country. We're speaking a common language. I think it's a good thing. The culture read is like me taking a flight and having a beer with the executive. Maybe I'll get the walk around the.

Office you should do if it's offered things like employee engagement surveys. If they've done any. Meeting the executive team, making sure you do a dinner with the executive team. I had an old boss who used to call the CEO up at like on a Sunday at 3 o' clock just to see do they answer the phone? Do they not answer the phone? If they do or do they answer their email or not answer their email. Get a sense of work life balance again, the glass doors, the linkedins, the referrals, all of that kind of stuff that sort of sits in a bit of an intangible below the iceberg, which is there. It's not hard, it's just a quick search. All relevant.

You've ever done a backdoor reference like you. So maybe they say here's three or four key executives. You ever like back channel reference?

I have not. You think I should Internationally, if you can. I don't think it would hurt. Or if you know somebody that works with that company, a client or a business. Doesn't hurt to say, hey, what do you think of X? And they'll tell you often they'll tell you a great person. What you see is what you get.

Run away.

Be careful there. This is the. You're the fourth person to ask me and I don't feel comfortable giving any kind of reference.

Yeah, that's so.

Yeah. I haven't done the formal background, but informally, yes. Informally, yes.

What's best advice to make this international deal successful?

You got to do the hard miles. Number one, you got to get on the flights and you got to get out there and you've got to do the dinners and the meetings.

How many flights are in person meetings before I get an LOI sign?

Depends how big the deal is.

Small deal, first deal.

Small deal. First deal, first deal.

Though I don't want to screw up the first deal.

I want to be in three different scenario meetings with the CEO and if possible the executive team as well.

Before loi.

If you can.

Okay.

If you can. Yeah. Ask for a fireside chat.

Fireside chat?

Just a fireside chat. No formal management presentation. Just hey, just you and me and your team just ask you a few questions. Sometimes they'll have a banker present. Depending on where they are, they probably limited.

They may pull in one or two other people in the team that's about it.

Yeah, but that's okay. Then you get to see three people. You get to see the CEO and a couple of others. You get to see are they aligned, are they finishing each other's sentences? Or is the CEO all over the two other executives in the room saying, oh, no, if you don't mind, let me tell you what the real story is. And the exec sitting there going, I was telling the real story. Now you're going to tell your version of the real story. You start to pick up the little signals of, actually, this is a CEO who doesn't surround himself or herself with people that are competent at their jobs because he or she is finishing their sentences or talking over the top of them. And for me, all of this is. It's all data.

That's a key thing. That's a key thing to know is like how dependent the business is on.

How strong is the management team. Yeah. If it's the CEO barking out all of the directions, then you don't have a very strong set of number twos. If the CEO leaves, then you're left high and dry. But you're only going to get that really from if you can, don't always do this pre loi, but if you can try to meet with the teams and certainly can meet with the CEO, and then you can always ask the CEO, hey, I'm going to be over in a couple of weeks. Would it be possible for you to have the CFO and the head of product?

There's going to be some back and forth.

He or she can always say, no, thanks, that's their call sign, an loi, and then we have that conversation. Fine. Nothing wrong with that. But if you can get on the plane, sit down with them at least two or three times, the CEO and then say, I'm comfortable with this person, I like this business, and I'm ready to put an offer in place. And then after the offer's accepted, got to go back again. And that's where you've really got to see the management team in action. How do they deal with each other? You find some wacky things in those meetings. I've seen CEOs talking and the CEO just rolling the eyes looking at this, going, there's an issue. I don't know if it's a big one or not yet, but I'm going to dig it.

Yeah, that's not good. In general, just making sure this first deal a successful. Same advice. Just spend the time with the people.

And really spend the time with the people. And if you can corroborate your feelings with what's going on out there. So, for instance, you're meeting the CEO, but their chief financial officer's talking at an event in New York City. Go and see him talk. See him and say, this guy. Yeah, they talk the same. This is something that makes me feel comfortable. So if you can just corroborate that the CEO to CEO with. I've got enough information around the outside here that can really help me get this deal done.

This is helpful.

Feel your gut. Feel, though, as well, a little bit of your gut.

Yeah. Good. Thanks. Thanks for not getting rid of it.

Not too much.

Thanks for not getting rid of all of it. You got me. Keep a little bit of it.

Yeah, you do, you do. It's why you're doing it in the first place, is if this seems good, it feels good.

Yeah. Just got to make it more programmatic and data driven.

Data driven.

What's the craziest thing you've seen in M and A?

There was a weird one in Covid because we're in the live event business. All live events were canceled in Covid. Various ways of dealing with that, which I won't bore you with, but one particular company that we'd been looking at for a while actually went into bankruptcy, Chapter seven and ended up selling quotes, the assets of the company in a paddle auction run by a court in Atlanta. And this was in Covid. So my team and I and another team that we were bidding against actually had a online Zoom auction for a company for a craziest thing I've ever been involved in. We actually ended up being the highest bidder.

Wow.

I won't bore you with all of the detail.

One company end of a Zoom auction.

In a bankruptcy auction on Zoom, run out of the Georgia courts out of Atlanta. Now, that was a company that we had on our radar for a while pre Covid. We were very pleased to get it. But I will say that you don't buy anything out of bankruptcy court that doesn't have warts and issues.

You have some work to do afterwards.

Yeah. But, you know, you walk into that knowing, I'm not paying X multiple. But it was a crazy experience. It truly was a crazy experience where you're sitting in your home office raising your paddle at X thousand dollars per time till the other side says, we're out and you've won the auction.

Wow, that's so funny.

Yeah, don't do that, is my advice.

I was thinking about starting a whole business, online business.

You might get a home run every now and again, but there's a reason you're in bankruptcy court. Okay, so that's the key, learning. But no, that was the craziest one for me personally.

Paul, this has been a great conversation. Thanks for taking the time helping me become a better M and A scientist.

Thank you. Thank you and good luck.

Hello M and A Scientist. You're listening this far. I love you. Appreciate you. Thank you so much for just giving all the attention. I'd love to hear from you. I always appreciate feedback, criticism, so I get better at this. Reach out to me on LinkedIn. Till next time. Here's to the deal. Thank you for taking the time to explore the world of MA with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M and A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email Kisan K I S o n a science.com or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter. Again, that's mascience.com here's to the deal. Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.