Like entering into a romantic relationship, an M&A deal is a lot about finding “the right fit.” That’s something Jeremie Bacon has learned from his years of experience in both investment banking and building SaaS companies. He is currently the co-founder and CEO of Synap Software Labs in Chicago.
“I think one of he biggest lessons that I’ve learned over time is that when you do due diligence, it’s more than just reviewing the business on paper. I think what’s even more important, is to review the business itself from multiple perspectives, and that could start months, potentially even years, before you even think about acquiring a company.”
Bacon says, it comes down to doing constant research on your space, your sector, the players that are tangential to you, and the ones that are competitive with you. He adds, that while it’s important to involve executive stakeholders, the reality is that the executive viewpoint is always different from the operational—the ground-level employee and teammate perspective. “You’ve got to find a way to bridge that and come to a deeper understanding of what’s actually going on at the company.”
Bacon acknowledges that as the acquirer, privacy and secrecy often keep you from speaking to employees, and you don’t want to “spook the troops.” But, he notes, effective research can be done in other ways. Look at the products the company is developing, assess their marketing to see if it’s complimentary to yours, participate in the same events, get to know them on LinkedIn, do all you can to really get to know the business.
LISTEN TO THE PODCAST
And, early on, seek an opportunity to simply walk through the business you are looking to acquire or the one seeking to acquire you.
Bacon says you can learn a lot from just observing how employees are situated, what they’re doing, how they’re talking and interacting, what they’re working on, all the way down to what their kitchen is like. He says to ask yourself, “Is it clear by hanging around the water cooler that these people and your people could be buddies, right? It’s important.”
Bacon says he’s walked away from deals where he was turned off by how the executive staff treated the support staff. He could clearly tell that the culture was not going to be a good fit, and integration wouldn’t have been successful.
He notes that he wouldn’t kill a deal based on behavioral things that could be altered by training, but he would recommend paying particular attention to culture and personality. In the situations where he’s been denied the opportunity to do a walk-through… Bacon says, he’s walked away. Because that in and of itself showed a different mentality that wouldn’t have been the right fit.
Subscribe to the podcast here.
DealRoom is a secure, cloud-based M&A due diligence management platform that replaces overpriced data rooms, email clutter and manual spreadsheet trackers.