Palo Alto, CA – Aug 25, 2017 – At Woodside Capital Partners, we are often called upon to help Buyers augment their R&D teams through acquisition. As I was preparing some ideas for a buyside prospect, I was reminded of the Top Ten Tenets of Buyside that I developed over the years. Since I am a huge music fan, I thought you might be interested in the lyrical version instead of PowerPoint! So, with a nod to the lost 80’s art of creating a killer mix-tape, here’s my take on…
The Ten Tenets of Buyside Playlist
1. Sammy Hagar – I Can’t Drive 55: https://www.youtube.com/watch?v=RvV3nn_de2k
Fortune Favors The Fast. Yes, buyers must be diligent, but your number one tactical tool is speed. Put in the offer early, create deadlines, don’t give the seller a chance to shop your offer. If you have multiple targets, move on to the next target if they delay the process too much.
2. The Rembrandts – I’ll be there for you: https://www.youtube.com/watch?v=q-9kPks0IfE
Make Friends Early and Often. Talk to analysts, look for young upstarts focused on your market, offer OEM and marketing deals, watch your partners’ progress. Anecdotally, about 75% of the time the buyer knows of the seller before the transaction.
3. Phillip Phillips – Home: https://www.youtube.com/watch?v=HoRkntoHkIE
Put Culture First. The number one reason buyers lose valuable talent is a cultural mismatch in the acquisition. Make sure that you are focused on a team what will either feel right at home, or bring some new life to your existing team. For first time buyers, it’s often good to acquire near home too – pick a same coast expansion, or a nearby R&D team. It’s easier to integrate the team into your systems. Just change their commute.
4. Urgent – Foreigner: https://www.youtube.com/watch?v=JA6id4–BDg
Have an Urgent Care Team. Have a team ready, tasked explicitly, and measured on the completion, integration, and success of the transaction immediately, and again after 18-24 months. If buyside work is a part-time job, it will always be relegated to the bottom of the list of duties; important but not urgent.
5. American Authors – Go Big Or Go Home: https://www.youtube.com/watch?v=dUZoK20_KYQ
Bigger is Better. A small deal can often take more work than a large deal. At least $10M in revenue seems to be a magic threshold for maturing companies where the systems are in place to scale. However, I have seen small R&D-focused transactions change the trajectory of a buyer (YouTube, Instagram, etc).
6. Shawn Mendes – There’s Nothing Holdin’ Me Back: https://www.youtube.com/watch?v=dT2owtxkU8k
De-Risk Whatever Is Holding You Back. Calculate the odds, know your excess cash number, debt capacity, <20% of Equity Market Cap threshold for smaller acquisitions that might not necessitate a shareholder vote. Remove the obstacles to getting a deal done before you even start looking at targets. Get the Board on Board. Develop consensus at the board of directors’ level on goals for acquisitions, and the process for approvals, to avoid any last-minute surprises.
7. Flo Rida – My House: https://www.youtube.com/watch?v=uo35R9zQsAI
Get Your Own House in Order. Make sure your own financial and HR systems can handle the influx of information and people. What crossover plans need to be in place. Have a welcoming party ready with T-shirts. Make acquisitions a time for inclusion, welcome the new team to your house.
8. Jessie J – Price Tag ft. B.o.B: https://www.youtube.com/watch?v=qMxX-QOV9tI
Price Isn’t Everything. Don’t neglect terms such as indemnification, escrow, employee contracts. Look for opportunities to incent employees beyond the deal consideration. Sometimes it makes sense to choose milestone payments for success which go to employees over earnouts which go to shareholders. Be happy to pay if joint goals are achieved.
9. Andy Grammer – Honey, I’m Good.: https://www.youtube.com/watch?v=Go7gn6dugu0
It’s Okay To Say No. Sometimes a seller wants too much for their company. Or there is an auction and the bidding is going crazy. Honey, I’m good. Next?
10. Bruno Mars – Count on Me: https://www.youtube.com/watch?v=CKGA9RAmi4c
Now for the shameless plug (plus I just love Bruno Mars and this acoustic version). Utilize Professionals. M&A is a specialist area for attorneys, code review, accountants, and tax advisors. Certain acquisitions may also require regulatory review. Get the right people on the job. Woodside Capital Partners works with buyers to put the right processes in place to get the job done.
Tricia Salinero has completed 75+ technology mergers and acquisitions valued at nearly $4 billion over her 25-year banking career with deals ranging from $10 million to $2 billion. She has sold companies to industry leaders such as, Google, Oracle, Microsoft, Red Hat, Tibco, Autodesk, Softbank, and Blackbaud. You can find her on Twitter @Tisal