M&A in scaling SaaS companies is on a gradual incline. It's become a great way for SaaS companies to expand their reach into TAM, grow their share of wallet, or expand into new geographies. There is also a large pool of companies available to acquire. The challenge is the M&A function in scaling SaaS companies is often put at risk by hiring an inexperienced leader, not having any clear owner, or not setting the function up for success.

In this episode, Christian Hassold, host of the In/Organic Podcast provides a detailed understanding of the M&A opportunity for SaaS companies, the common obstacles for setting up the function, what to expect from a corporate development leader, and the role a leadership team can play in M&A success. This episode is a must-listen for founders, CEO's, and CFO's who are considering establishing a corporate development function in a scaling SaaS company.

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Episode Highlights

0:00 Intro

1:58 Reasons for Inorganic Scaling in SaaS

5:12 M&A: Large Corporations vs. Scaling SaaS

7:42 Why M&A in Scaling SaaS is Harder to Build

9:31 Common M&A Obstacles in Growth-Stage SaaS

14:46 Role of SaaS Corp Dev Leaders

19:35 Example RACI for Scaling SaaS Corp Dev

24:43 Common M&A Hiring Mistakes

27:04 Takeaways

Connect with Christian & In/organic Podcast

Christian's LinkedIn: https://linkedin.com/in/hassold

Visit In/Inorganic: https://inorganicpodcast.co

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This episode was recorded at Deloitte University in Westlake, Texas during the Deloitte M&A Executive Forum on March 7 & 8, 2024. I was joined by my friend and colleague Kim Baird, Principal at M&A Maximizer, a boutique integration consulting firm based in California. 

In this episode, Kim and I took a break from the rich sessions we enjoyed at the Executive Forum to share our key learnings and insights from a series of panel sessions that included dealmakers and leaders from Deloitte's M&A practice, Bank of America, DLA Piper,  and Generac Power Systems. Our discussion covers the key takeaways from the forum on the future of deal-making in 2024, the macro and micro-economic factors that will influence deal-making in the SaaS ecosystem.

Big thank you to Dan Helfrich, Chair and CEO of Deloitte Consulting for inviting us to the Deloitte Campus and for a great discussion on M&A!

Episode Highlights

00:00 Introduction 

00:29 Setting Up

01:59 Deloitte's CEO: Market Optimism for 2024 

03:14 Deloitte's Chief Economist: Economic Outlook 

04:28 Potential Instability of Relations with China

05:51 Cross-Border Investment Patterns

8:10 Macroeconomics' Impact on SaaS Valuations

10:15 Generative AI in M&A 

11:19 Utilizing Copilot

13:04 Mining Customer Data 

15:11 Session on Gen AI: Takeaway

15:48 Closing 

Connect with Christian & In/organic Podcast

Christian's LinkedIn: https://www.linkedin.com/in/hassold/

In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast

In/organic on the web: 

https://www.inorganicpodcast.co/

Connect with Kimberly Baird on LinkedIn

https://www.linkedin.com/in/kimberlybaird1/

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It’s a tough decision to exit a business, but it says a lot about a leader who can make a call on when it's the right time and gets it done. The alternative is kicking the can forward and risking the possibility that you lose control of your destiny. When selling a SaaS business, you optimize for 3 things; 1) best outcome for investors, 2) doing right by your people, 3) doing right by your customers. The trade-offs are never easy and it’s hard to 100% optimize for each. 

In this episode of In/organic, I sat down with Jon Gregg, former President & CEO of Sellpoints which sold to Syndigo, a PE-backed SaaS company, in 2019. In this episode, Jon shares his experience of running a do-it-yourself sale process for his company. He discusses the decision-making process, the goals of the process, and the importance of building a strong team. Jon also explains the different phases of the process and the criteria for finding the right acquirer. He highlights the significance of trust and cultural alignment in the deal and reflects on the signing and closing day. Finally, he shares some lessons learned and offers advice for others considering a DIY sale process.

Chapters

00:00 Introduction and Background

03:57 Making the Decision to Sell

09:20 Goals of the Process

11:21 Reading In Customers

12:40 Building the Team

15:16 Reading In Non-Executives

20:05 Phases of the Sale Process

26:28 Criteria for Identifying Acquirers

30:09 Example Terms for Post-Deal Performance

35:06 Signing and Closing Experience

37:25 Lessons Learned

Connect with Christian & In/organic Podcast

Christian's LinkedIn: https://www.linkedin.com/in/hassold/

In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast

In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured

Connect with Jon Gregg on LinkedIn

https://www.linkedin.com/in/jongregg/

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Summary

Successful integrations are required to achieve the full value of any acquisition. Most know that the odds are stacked against the acquirer from the start - so how does one move the odds in their favor? How should a SaaS leadership team plan and execute an integration process with an acquired team of less than 100 people and the acquirer is less than 1,000 (roughly)? This is a large company buying a much smaller company and the assumption is the buyer is a first-time acquier. Deal economics certainly impact acquired founder and employee sentiment, but how the actual people integration is run has an outsized impact on realizing the full value of M&A.

In this episode of In/organic, we welcome Mohammed M. Baloch, Head of Integrations at Gainsight, a SaaS company backed by Vista Private Equity. During the discussion, Mohammed describes the key elements of a successful integration plan. He also lays out the key players, roles, and profiles of talent who can support an integration, even if they have never done the work before. We also discuss the role of an integration consultant (which is a must) and how to contemplate their role in the integration process.

Takeaways

• People integration is a critical aspect of post-merger integration and should be given equal importance as the economic goals of the acquisition.
• When selecting an integration lead, look for someone who is well-networked, has a strategic mindset, and possesses strong project management skills.
• Consider outsourcing integration if you don't have a dedicated integration team, and look for a partner who is flexible, experienced, and familiar with your industry.
• Start integration planning as soon as the LOI is signed, and define a clear North Star that outlines the goals and criteria for success in the acquisition.
• Clear communication and a formal onboarding process are vital for successful people integration.
• Consider having acquired employees interview for their jobs to ensure cultural fit and mutual alignment.

Highlights

00:00 Introduction

02:22 Mohammed Baloch's Background and Gainsight

04:01 Setting the Stage

06:08 Key Players in the Integration Process

9:56 Selecting an Integration Lead

11:40 Considerations for Outsourcing Integration

16:15 Defining the North Star

18:40 Enabling Sales Teams for Cross-Selling

19:49 Debate on Tiger Team vs. Full-Team Format

25:36 Ensuring Success in People Integration 

29:52 Interviewing Acquired Employees for Their Jobs

31:22 Advice: Don't Wait, Start Integration Planning

Connect with Christian & In/organic Podcast

Christian's LinkedIn: https://www.linkedin.com/in/hassold/

In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast

In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured

Connect with Mohammad Baloch on LinkedIn

https://www.linkedin.com/in/mmbaloch/

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Building a multi-product company inorganically is no easy feat. It requires a strong product team, tight alignment among executive leadership, and a solid M&A function to identify and pursue the targets of interest. This is a fairly common strategy, but how does it work?

On this episode of In/Organic, we are joined by Chris Barnes, former SVP of Corporate Development at Syndigo, a SaaS and services business backed by Summit Partners and The Jordan Company. Syndigo was scaled to hundreds of millions in revenue through a sophisticated roll-up strategy. Under Chris's leadership, the company acquired twelve companies over 5 years. In this episode, we will discuss how Chris and the team at Syndigo ran their process with a lean team.

Takeaways

- Multiple acquisitions can be a strategic approach for SaaS CEOs to solve specific problems or drive platform expansion.

- Identifying and prioritizing acquisition targets requires thorough research and consideration of factors such as market size, growth potential, and cultural fit.

- Successful integration of acquired companies requires a focus on culture, process alignment, and a great customer experience.

- Investor partners can provide valuable resources and expertise in valuation, pricing strategy, and customer / market feedback.

Highlights

00:00 Introduction

01:23 Chris Barnes’ Background

04:53 Syndigo's Acquisition Model

07:21 Key Players on the M&A Team

09:08 Identifying Acquisition Targets

10:55 Prioritizing Acquisitions

12:18 Qualifying Potential Targets

14:03 Managing Multiple Acquisition Outreaches

17:43 Running Plays to Assess Targets

19:24 The Role of the Acquisition Team

22:38 Evaluating Business Growth Potential

25:17 Valuing an Acquisition

27:10 Involvement of Investor Partners

33:02 Lessons Learned

33:45 Limitations and Risks of Multiple Acquisitions

34:52 Key Takeaways

Connect with Christian & In/organic Podcast

Christian's LinkedIn: https://www.linkedin.com/in/hassold/

In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast

In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured

Connect with Chris Barnes on LinkedIn

https://www.linkedin.com/in/chris-barnes-a0a7022/

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In this episode, our host Christian Hassold is joined by Laurent Gout, VP of Corporate Development at Auctane, a Thoma Bravo-backed SaaS company that powers shipping businesses all over the globe. In this episode, Christian and Loran walk through building an M&A function from scratch with a SaaS company. Topics they cover in this episode include who should run the M&A function, what kind of support will they require, what is the leaderships role in the M&A process, how to inform M&A strategy, and working with financial sponsors. Laurent shares valuable insights and lessons learned from his 10-year career in corporate development.

Discussion Topics

• Building an M&A function in a company requires a team that includes an M&A lead and a project manager.
• When selecting an M&A lead, look for someone with intellectual curiosity, an open mind, and the ability to communicate effectively with the rest of the C-suite.
• When deciding whether to build, buy, or partner, consider the market landscape, the cost and complexity of building internally, and the potential value of partnerships or acquisitions.
• Utilize the resources of financial sponsors, such as their financial modeling expertise and access to expert networks.
• Avoid insular thinking by engaging with customers, attending industry events, and seeking input from external sources.
• Use tools like Gong and Chorus to gather data and insights from customer calls and internal meetings.
• Be aware of potential pitfalls, such as lack of pre-planning for M&A integration, not conducting red team/green team exercises, and not celebrating the work done even if a deal falls through.

Highlights

[00:00] Introduction

[02:12] How Loran Started His Career in M&A

[06:40] Building the Inorganic Strategy Team

[08:44] Traits of an M&A Lead

[12:11] Deciding to Build, Buy, or Partner

[17:10] Using Expert Networks and Tools

[18:18] Testing Buy and Partner Scenarios

[20:51] Avoiding Insular Thinking

[23:41] Utilizing Gong and Chorus

[26:06] Using Financial Sponsors' Resources

[32:07] Pitfalls to Avoid

Connect with Christian & In/organic Podcast

Christian's LinkedIn: https://www.linkedin.com/in/hassold/

In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast

In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured

Connect with Loran Gutt on LinkedIn

https://www.linkedin.com/in/loran-gutt/

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In this episode, we discuss the prediction that M&A activity among fast-growing SaaS companies will rise substantially in 2024. In support of this prediction, we share both data and reasoning for this prediction, including startup acquisition activity, shutdown and funding trends, and a broader market view of M&A activity. We also offer advice to founders considering M&A in 2024, emphasizing the importance of preparation and developing decision-making criteria in advance of contemplating M&A.

Discussion Topics

• M&A activity among SaaS companies is predicted to increase in 2024.
• Startup acquisitions have been observed to increase since 2019, but there was a slight decrease in 2023 and why 2024 could be different.
• How startup shutdown activity and cash runway inform the prediction of heightened M&A activity.
• It can take founders & CEO’s several months to reach the conclusion to shut down a SaaS business, the faster one reaches that conclusion, the better when it comes to exploring acquisition options.
• A broader view on M&A activity in the market based on data recently shared by Pitchbook. Hint B2B M&A is stable!
• How SaaS companies that may be considering M&A should contemplate and prepare for possible M&A.

Highlights

[00:00] Introduction to M&A activity prediction in 2024

[03:09] Startup M&A activity since 2019

[04:59] Significant increase in startup shutdowns and timing

[06:27] 57% of Startups will run out of cash in less than 18 months

[09:29] Cash is defensibility: don’t wait until the last minute to decide to sell or shutdown

[11:57] M&A activity more broadly with insights from Pitchbook

[15:21] Advice for startup founders and CEOs considering M&A in 2024

Connect with Christian & In/organic Podcast

Christian's LinkedIn: https://www.linkedin.com/in/hassold/

In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast

In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured

Data Referenced in this Episode

Clouded Judgement: https://cloudedjudgement.substack.com/p/clouded-judgement-12123-net-new-arr

Pitchbook: https://files.pitchbook.com/website/files/pdf/Q4_2023_PitchBook_Analyst_Note_Increased_Antitrust_Scrutiny_and_Complexity_for_MA.pdf

Carta/Peter Walker: https://www.linkedin.com/posts/peterjameswalker_cartadata-startups-founders-activity-7112949181815656448-06cy/ (Carta)

SaaStr: https://www.saastr.com/pilot-57-of-venture-startups-will-need-to-raise-more-in-2024/

Carta: https://carta.com/blog/mergers-acquisitions-outlook-2024/ 

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Startup shutdowns are at an all-time high in 2023. According to Carta, hundreds have shut down or gone bankrupt in 2023. Amid the gloom of these shutdowns is a positive trend, startups buying other startups, giving those short on cash a second chance at an exit. In a market where cash preservation is critical and borrowing costs are high, stock-heavy deals are more and more common. But, how do they work and what are the key considerations founders should consider before starting a process?

In this episode, Christian Hassold, host of the In/organic Podcast sat down with Lesley Adamo, Partner & Vice Chair, Tax and Meredith Beuchaw, Partner, Emerging Companies at Lowenstein Sandler, a full-service law firm with a large emerging companies venture capital practice that has extensive experience with fundraising and M&A in early stage companies. In this episode, Lesley and Meredith provide rich insights into what kinds of structures and strategies are getting deals done and how to avoid killing these kinds of deals.

Key Takeaways:

• Stock-based deals are increasingly popular in the current market as a way to acquire startups.
• The mix of cash and stock in deals varies but is heavily weighted on common stock versus preferred, with buyers preferring to use cash only when necessary to get a deal done.
• Valuation differences between buyers and sellers can be resolved by agreeing on a mutually acceptable value or using a multiple that applies to both parties.
• Proper deal structuring and tax advice are crucial to avoid tax issues and ensure a successful transaction.
• Complexity and broken term sheets can be deal killers, and deals are taking longer to negotiate and close in the current market.

Highlights

[00:00] Introduction and Background

[04:09] Different structuring options for M&A (asset vs. stock deals)

[08:47] How little cash can an acquirer get away with (reasons why you need cash at close)

[13:51] Relevance of valuation of stock deals and the significance of 409A’s

[18.48] When in the process of getting tax advice and why

[23:34] Impact of stock consideration and form types for employees

[31:30] How to solve valuation differences in stock-based deals (esp in the current environment where most companies are below pre-money from 2-3 years ago.

[35:21] Common Deal Killers

[36:21] Success Rate of Deals

[37:56] Wrap Up

Connect with Lesley and Meredith on LinkedIn:

https://www.linkedin.com/in/lesley-adamo-44481436/

https://www.linkedin.com/in/meredith-beuchaw-31305b37/

Learn more about Lowenstein Sandler practice: https://www.lowenstein.com

Connect with Christian & In/organic Podcast

Christian's LinkedIn: https://www.linkedin.com/in/hassold/

In/organic on LinkedIn: https://www.linkedin.com/company/inorganic-podcast

In/organic on YouTube: https://www.youtube.com/@InorganicPodcast/featured

Articles References in this show:

https://news.crunchbase.com/startups/venture-backed-mergers-acquisitions-exits/

https://www.vccafe.com/2023/09/28/startup-death-rates-spike-as-we-approach-q4-2023/

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The business development function in early-stage SaaS companies tends to be a ‘catch all’ for partnerships, competitive intelligence, and increasingly, identifying potential acquisition targets. In a world where 90% of startups fail and of those that succeed, 90% exit to a strategic versus going public, every successful startup should know what potential acquisitions (of any size) can do to accelerate the business. But, where to start?

In this first edition of Ask the Expert, Alyshah Walji was kind enough to come on the pod and take on some burning questions on his mind as an up-and-coming business development leader. His questions span both how to think about the role as well as how to approach partnerships tactically, including how to begin building the M&A funnel early on. Alyshah is the Director of Partnerships at Vividly, a very active member of the Canadian startup community, and a passionate supporter of social causes related to youth, education, and gender. 

Tune in to Episode 5 of In/organic Podcast, and discover new ways of cultivating partnerships to align short-term objectives with long-term vision. 

In This Episode, You Will Learn:

[2:14] Background on Alyshah and his company Vividly

[7:00] How to think about the business development role & function

[9:11] Should you build or buy - assessing what to do and not do to

[16:10] The importance of aligning the leadership team with the company's strategy

[19:50] Prioritization and timing. How to balance short-term revenue goals with long-term strategic partnerships

[22:30] Prioritization of partnerships in a noisy ecosystem

[27:00] Developing partner & M&A pipeline is similar to running an enterprise sales process, here is how

[32:56] Where to go to get M&A advice and resources

Connect with Alyshah:

• LinkedIn
• Twitter

Connect with Christian & In/organic Podcast

• Christian's LinkedIn
• In/organic on LinkedIn
• In/organic on YouTube

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There are plenty of playbooks for developing an M&A strategy, but the kind of strategy that is best for one SaaS company versus another is less clear. For example, should one only buy tech they can integrate behind the scenes, or should you add new products that stand alone? How far outside your product focus should you expand, especially when pre-IPO? People are an important element of M&A success, how best to approach people integration?

In this episode, Rob Gonzalez, co-founder and CMO of Salsify, a category-defining SaaS company that helps brands win the e-commerce game joins us to share how Salsify approaches their M&A. Drawing on experiences from four acquisitions, including one cross-border acquisition of Paris-based Alkemics, one can gain some great insight into what M&A should and should not be about, according to Rob.

In this episode, Rob joins us to share his opinion on what kind of M&A makes sense for a company that seeks to provide a single consistent experience for its customers. During the discussion, Rob provided examples of how each of Salsify’s four acquisitions added value to the company, customers, and partners. 

Throughout this episode, you'll learn about Rob's thoughts on using acquisitions to integrate third-party tools into a platform's core experience and using strategic partnerships with complementary services to create a competitive advantage. Rob also shares his own opinion on how to approach integrating talent from acquired companies and cultural integrations in cross-border transactions, and much more. 

Tune in to Episode 4 of In/organic Podcast, and discover the best way of aligning your growth and M&A strategies with your product, culture, and talent. 

In This Episode, You Will Learn:

• Rob's background and past experiences (1:20)
• Pairing M&A and growth strategy (5:30)
• How to prioritize the core business in M&A (8:10)
• Betting on the ecosystem vs. owning every piece of the puzzle (12:00)
• The role of talent in M&A (17:30)
• How to approach cross-border deals (21:20)

Connect with Rob:

• LinkedIn
• Twitter

Let's connect: 

• LinkedIn
• Website

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