Learning from The Experts Part II: M&A Strategy Tips from Google, Intuit, RingCentral and Civic Technologies
1 August 2016
In an earlier post, I shared M&A best practices from our panel discussion, “The Journey of a Serial Entrepreneur: What Makes a Deal Successful?” We had panelists from leading corporate acquirers and serial entrepreneurs from Google, Intuit, RingCentral and Civic Technologies. Our panelists included:
- Dave Sobota, Director of Corporate Development at Google
- Kevin Jacques, Vice President of Corporate Development at Intuit
- Kira Makagon, Executive Vice President of Innovation at RingCentral
- Vinny Lingham, Co-Founder and CEO at Civic Technologies
Since our panel discussion was jam-packed with insights, here are just a few more tips and takeaways from the corporate acquirers and serial entrepreneurs.
Be open, ask questions
Meeting with corporate development executives at large corporations can be very daunting. Google's Sobota stressed, one should never be afraid to ask questions. The key to any sound business deal is openness. “If anything throughout the acquisition process makes you nervous, speak up. On the other side, if you are uncomfortable answering any question, feel free to say that as well. It is much better to be open and request to consult with your attorney before answering than to venture a guess,” explained Sobota. Often times those sitting on the corporate development side of the table at companies like Google are former entrepreneurs who have actually been through the process of selling a startup themselves. They understand and are aware of the hurdles and apprehensions.
Find the right fit
Although this is business, culture and personality play a huge role. Both sides of our panel, serial entrepreneur and corporate acquirer, stressed that a key component of the acquisition journey is ensuring a cultural fit. It is not only the numbers that need to line up.
CEO empowerment was something that both Lingham and Makagon found important since often the culture of a company is reflected through the CEO. Lingham encouraged early stage companies to "use smaller boards" for speed and nimbleness while also suggesting that entrepreneurs "get to know their VC before they put them on their board.”
“Never lose sight of the journey post-close,” expressed Makagon. As a serial entrepreneur you are handing over your “baby” to another company, so to speak. Are they going to raise your company and nurture it in the way you had envisioned? Furthermore, are your company’s employees going to find a home within the acquirer’s corporation? It is important to get a feel for these things in advance.
Jacques’ advice for corporate acquirers is to remember that the founder or CEO on the other side of the table has other options. While it’s important to sell the target on your company’s culture, there needs to be an authentic fit. Openness and honesty about post-acquisition events are key. Sobota adds, “Never lose sight of the fact that you are acting as an ambassador for your company. Be as open as you can, and remind founders that it is ok to ask questions.”
The startup acquisition approach
Once both sides align, the wheels of acquisition are put in motion and due diligence commences.
The panel agreed that diligence for a deal can be split into two phases: pre-term sheet and post term sheet diligence.
- Pre-term diligence is crucial as this is where the likes of Google and Intuit will look very carefully at the business, strategy, culture and assess synergies.
- Post term sheet diligence is the most painful because it typically implies a deluge of documents and the need to dot every “i” and cross every “t.”
Jacques surmised fittingly when he said that the pre-term sheet or letter of intent is about convincing us that we should buy you — this is where sales and product teams interact with the target. Post term sheet or letter of intent is about communicating the next steps.
When asked what would derail a deal, both Sobota Dave and Jacques agreed that any unethical practices uncovered during due diligence would quickly cause a deal to die.
Part art, part science
With capital markets under pressure (U.S. IPO activity so far this year is 61% below this time last year, according to Renaissance Capital data) and uncertainty rampant in the global landscape, entrepreneurs have even more incentive to build relationships with corporations.
Conversely, according to a study from Innosight, the average lifespan of a company in the S&P 500 has gone from 61 years in 1958 to just 18 years in 2015. At this rate, 75% of the current S&P 500 will be replaced by 2027. This promotes the need to constantly innovate and find new growth opportunities from partnerships and acquisitions.
At the end of the day it is somewhat of a symbiotic relationship: corporates need entrepreneurs and entrepreneurs need corporates. The challenge is successfully aligning all the pieces of a deal together — part art, part science.
For more tips, visit our 'Art of the Deal' M&A insights page.
As Intralinks’ vice president, product marketing, Matt Wells is a key member focused on the development and go-to-market strategy for Intralinks’ M&A business which includes our virtual data room and deal lifecycle solutions. Matt joined Intralinks in 2012 upon the acquisition of PE-Nexus, a company he co-founded in 2010 that pioneered the concept of online deal sourcing and buyer identification. Before PE-Nexus, he was a vice president at Cross Keys Capital, a boutique advisory firm, where he focused on middle-market M&A transactions.