What Blows Deals Apart: Common Mistakes in M&A with Thomas Smale

00:00:02:01 - 00:00:30:19

Ben Hillman

A powerful locomotive chugs along the tracks steadily and consistently. The train's efficiency is driven by its ability to add cars strategically, extending its reach and impact. More cars in the end means more passengers or freight. Adding another locomotive empowers the entire system. However, this is a delicate process. If done right, it can make for an efficient machine. If executed poorly, it could lead to diSaaStrous consequences.

00:00:31:11 - 00:00:59:13

Ben Hillman

In the same vein, mergers and acquisitions demand meticulous planning, execution and foresight to ensure success in the world of B2B SaaS. The stakes are just as high. Companies must be able to grow, adapt and evolve to maintain their competitive edge. Mergers and acquisitions provide the opportunity to expand a company's product offerings, increase market share and optimize operations. When done correctly, these strategic moves can propel a business forward.

00:00:59:17 - 00:01:28:05

Ben Hillman

Just like adding cars to our metaphorical train. Enter Thomas Smale, founder and CEO of the International Experts in Navigating the complexities of mergers and acquisitions. With a wealth of experience under his belt, Thomas orchestrated successful acquisitions for thousands of founders, owners and acquirers. His keen understanding of the intricacies involved in M&A has made him a valuable advisor for businesses seeking growth and expansion.

00:01:29:00 - 00:01:52:16

Ben Hillman

In today's episode, recorded at SaaStock 2022, we'll dive into Thomas's insights on the importance of strategic mergers and acquisitions, particularly in the B2B space. We'll explore the challenges and opportunities these transactions present and discover how Thomas and his team at AP International have helped businesses successfully integrate new cars onto their trains, solidifying their positions in the market

00:01:52:20 - 00:02:15:15

Ben Hillman

Don't miss this opportunity to learn from a true master. In the world of mergers and acquisitions From Padel, its Protect the Hustle, where we explore the truth behind the strategy and tactics of B2B SaaS growth to make you an outstanding operator. On today's episode, Thomas Smale speaks to the other side about what blows M&A deals apart. They talk about how the SaaS landscape has changed the last decade.

00:02:15:21 - 00:02:37:19

Ben Hillman

Essential Advice for Founders Looking for an Exit. The impact of the economy on SaaS valuation. Factors that make deals fall apart and finding a process that aligns with value and vision after you finish the episode, check out the show notes for a look into how to avoid tanking in M&A deal. Then, while you're leaving your five star review of the podcast, tell us what resonated most about Thomas's advice.

00:02:44:08 - 00:02:48:12

Ben Hillman

First, Thomas talks about how the SaaS landscape has changed the last decade.

00:02:52:05 - 00:02:57:23

Neel Desai

Thomas, welcome to the show. Thanks for being here. Matt Yeah, thanks, Neal. I've heard that you've been to every single ask. Is that true?

00:02:57:23 - 00:02:59:00

Thomas Smale

I've been to all of them.

00:02:59:16 - 00:03:00:14

Neel Desai

How does this one compare?

00:03:00:19 - 00:03:10:02

Thomas Smale

I think this is the biggest one. Yep. Yeah. And I probably the best one yet as well. Yeah. I've been coming to the hostel since there was a 20 person event in a very small room, and now it's 5000.

00:03:10:03 - 00:03:14:20

Neel Desai

I feel like the energy has been meaningfully different. post-COVID. People are just buzzing to get out.

00:03:14:20 - 00:03:27:08

Thomas Smale

And me, I feel like I want to get back to events wherever they're attending. Yeah. During speaking up versus 2019, when the last event was, I think people were going to have been going to events all the time. Maybe a little bit tired. Yeah, everyone's re-energized.

00:03:27:09 - 00:03:40:11

Neel Desai

We've got a lot to get into today. You're the guy for all things M&A and SaaS. But before we dive into some specifics, how would you like why this? Well, how did you land here? Right. Like, what's your background? How did you end up here and why is this interesting to you?

00:03:40:11 - 00:03:59:17

Thomas Smale

12 years ago, when I started, the company, SaaS didn't really exist. It was software, desktop software. If you had a business that you wanted to sell in the software space, there was no one that could help you. You could call a big investment bank like a Goldman Sachs. If you had a business worth less than $1,000,000,000, they wouldn't pick up the phone.

00:04:00:02 - 00:04:20:15

Thomas Smale

And if you wanted to sell for the marketplace thing back then, your only option was eBay. And I think most people would know eBay is not a good place to sell a company and Goldman Sachs are not going to pick up the phone. We fit somewhere in the middle, which was we provide investment banking level services to businesses up to 100 million and valuation.

00:04:21:02 - 00:04:37:19

Thomas Smale

So that's kind of how we fit in. 12 years ago, people would look at me like I was crazy because the market didn't really exist. It we were very much first mover of very early mover. Today it makes way more sense because you would be many people in this room who've either worked with us or otherwise. You've had a successful headset.

00:04:38:02 - 00:04:51:19

Thomas Smale

So it makes a lot more sense now. But 12 years ago, no one was really thinking about it or doing it, but the opportunity was the market was clearly going to grow. I've been bullish on SaaS 12 years and I say, Hey, we are today. Biggest event they've ever had is looking at what was.

00:04:51:19 - 00:05:05:02

Neel Desai

It like back then? Because I feel like today you're right, there's indie hackers and bootstrap founders and VC folks and everything in between. And there's a lot of services out there to help. Marketplace is actually to buy and sell. SaaS What was it like that Like what was it like starting it at the time?

00:05:05:11 - 00:05:23:15

Thomas Smale

So firstly, the bootstrapping also is not a term then no one, no one would ever use that term. Every company was looking for funding or talking about getting funding. Self-funding a business was not common. I think even the early days of SaaS stock, I don't think now they have a bootstrap sage. I don't think that existed when they first started.

00:05:23:15 - 00:05:44:23

Thomas Smale

It wasn't. It was B.S. How do you get funding all the talks were how do you raise money? How do you build a business of funding, all of those kind of things. So I guess we got laughed out of a lot of rooms early on. But what we found very early on, we did a lot of similar to you guys, did a lot of content marketing, and you only need a very small base of people who recognize what you do and the value and they would come to you.

00:05:45:00 - 00:06:01:05

Thomas Smale

When we started talking about what we were doing, a lot of people would say, Oh, I didn't even realize this existed because it didn't exist. I guess it's kind of like writing content no one is searching for, but you know, those people are out there. Yeah. So that's really what we did early on. I guess it was content marketing, as you would call it today.

00:06:01:06 - 00:06:16:10

Thomas Smale

People came out and then the business is the same now, but it's all word of mouth from that. If you sell a business, you guys know, you tell the whole world about it and you tell your peers, you tell your friends. If you've had an advisor in there, you're going to be like asking them how you did, who spoke to things like that.

00:06:16:14 - 00:06:30:17

Neel Desai

I feel like you were early on the soundtrack, but also on the content channel as well, right? Like they ever was in content. But back then you had to educate the industry alive and founders too, on what success means and how to think about this. The motions you go through to successfully sell your business, right?

00:06:30:17 - 00:06:55:22

Thomas Smale

Yeah, there was literally nothing. So now we have one of the most popular pieces of content ever in about SaaS valuation. When we first wrote that piece of content and we've updated over the years, but I think six years ago there were maybe five similar pieces of content. Now there's about 100 articles which all look surprisingly similar to us on the same topic, and it was exactly same back then, but 12 years ago you didn't really have social media.

00:06:55:22 - 00:07:15:01

Thomas Smale

It was becoming a thing that most people hung out on, like forums which don't really exist now, but kind of like Facebook groups. All of our content and the early days was there and it was literally just talking about what we did. We start to get a little bit of traction with the high end service like ours. You don't need tens of thousands of customers to build a sustainable business.

00:07:15:01 - 00:07:20:05

Thomas Smale

So that's what we did next.

00:07:20:08 - 00:07:23:16

Ben Hillman

Thomas talks about essential advice for founders looking for advice.

00:07:27:07 - 00:07:40:23

Neel Desai

To shift gears a little bit. When we think about and obviously the place like sounds like there's a ton of founders here, a lot of which are VC backed everything in between. They tell you when you start a business, then I think about the right, then I think about the exit and I think about liquidity and all those things.

00:07:40:23 - 00:08:03:12

Neel Desai

But perhaps at some point in time that changes and you start thinking about what up an M&A transaction could look like. What advice do you have a founders who are at that stage where thinking of potentially getting there sooner, it's in the next couple of years are on the horizon. What are some of the things they should be thinking about or doing to maximize their chance of succeeding and maximizing their outcome in an M&A type transaction?

00:08:03:17 - 00:08:22:07

Thomas Smale

Yeah. So I think firstly, you're entirely right. You shouldn't think about it too early. The most important thing to do early in your business is build some traction, start making some money, make sure you have a viable business model. You shouldn't really be thinking about exit strategy on literal day one. It should be once you're profitable. When are then comes to thinking about an exit?

00:08:22:07 - 00:08:43:13

Thomas Smale

The most important thing to do is establish what kind of exit you're trying to achieve and then not really. Then determines the second part of your question, which is like what kind of things should you be considering? Should you be thinking about? And we work with clients of all sorts of different sizes of businesses. Some of them might say, okay, my target is $5 Million, and other people might say, My target is 500 million.

00:08:43:21 - 00:09:05:18

Thomas Smale

If you have a $500 million target, the things you need to do for the second ball, Your question, I'll completely different from the person trying to get to 5 million and there's not a a right or wrong answer. There's no M&A firm or advisor that can tell you which number is correct. It is true that some businesses don't have the potential to get to 500 billion valuation, but almost any business can get to 5 million.

00:09:06:02 - 00:09:27:00

Thomas Smale

We've sold 1200 businesses over the years, businesses we've sold worth seven or even eight figures. You never would have heard of. You would look at it probably wouldn't even make sense to you because it's a very specific product for a very specific audience. Once you've established what you're trying to achieve, you can then build specific goals and targets around that, but they really depend on what you're trying to have as an outcome.

00:09:27:00 - 00:09:33:12

Neel Desai

Sounds like what you're saying is you need to be intentional about the outcome like or the range of outcomes that you even want in the first place, right? I think.

00:09:33:12 - 00:09:53:14

Thomas Smale

Yeah, you shouldn't just do any random stuff to try, you know, have an exit with it might be, for example, if trying to build a $500 million business as a leader or CEO, you need to hire a C level team of leaders to help you get the feature on to build a $5 million business. The vast majority of companies we represent the sell for $5 million don't have a leadership team.

00:09:53:14 - 00:10:08:05

Thomas Smale

They have a CEO, six contractors and that's fine. But if you're just trying to build a $5 billion business, I would not tell you to build a board or a like level. So it really depends on what you're trying to achieve and then you can make intentional progress towards that.

00:10:08:05 - 00:10:28:03

Neel Desai

I feel like that ties in to nicely to like there's a lot of should we raise, should we not raise, should we stay bootstrapped? What's better ABC or now ABC and it goes back to like what are your actual goals, right? And what are how do you define success? Because I think in order to get to some of these outcomes, it's going to get busy is just a tool to get there, right, rather than like a culture or a philosophy, Right?

00:10:28:03 - 00:10:37:03

Thomas Smale

Yeah, exactly. There's again, there's no right or wrong way to do it. In some businesses, it makes sense to raise capital, some it doesn't. In the vast majority of cases like either could be fine.

00:10:37:06 - 00:10:50:13

Neel Desai

Let's take regardless of the size of the exit are there things on a whether it's auditing your books and other things that come to mind that are kind of consistent across all deals that founders must kind of keep in mind as they think about this one.

00:10:50:13 - 00:11:10:18

Thomas Smale

Hundred percent of deals, You have to have clean books and clean financials. That's unavoidable. Whether you're selling a business for $50,000 or $5 billion, you have to have that. So I say any and I in this room today, there's tons of companies to help with that kind of thing. But having clean books, very important. It doesn't need to be complex financial controls.

00:11:10:18 - 00:11:27:18

Thomas Smale

I would describe as basic bookkeeping. But you may be surprised or maybe not surprised that a lot of businesses don't even do the basics a lot, don't even really do bookkeeping. The owner has no idea how much money they're making month to month. Most people know their revenue. The very few people know what their costs are potentially in the smaller businesses.

00:11:27:18 - 00:11:51:06

Thomas Smale

And again, this really differs. If you have a $500 million company, you're going to have a CFO, you're going to have a finance team. Chances are your financials are in quite good order. The $5 million business is much more common. The numbers are all over the place. All businesses have to have that. Obviously, there isn't really anything specific that every business has to have to be sellable because it really depends what you're trying to achieve in terms of size.

00:11:51:12 - 00:11:58:02

Thomas Smale

I guess the burden of quality is completely different and a five minute acquisition to absorb 50 or 500.

00:12:01:16 - 00:12:05:21

Ben Hillman

And now Thomas talks about the impact of the economy on SaaS valuation.

00:12:09:14 - 00:12:30:12

Neel Desai

Obviously, the elephant in the room is, as we round out 2022 here, macroeconomic conditions, right? Especially in SaaS and growth companies, has absolutely taken a hit in public markets. Funding has tightened up a lot, right? There's international conflict here and there. What is let's unpack this a little bit. If you're a founder that has resourcing in a war chest, what do you recommend?

00:12:30:12 - 00:12:37:22

Neel Desai

How do they how do you think about maximizing your opportunity as you as we head into a very uncertain and delicate macro environment?

00:12:37:23 - 00:13:03:05

Thomas Smale

Firstly, I would say the the market for SaaS business is below. Let's say a hundred million and valuation has been relatively unaffected this year. We're going to be see, we haven't completed 2022 just yet, but we're going to be up here on in terms of deal volume, total deal value, at least what we're seeing as good where it looks really bad is if you look at the public markets, valuations are in half larger deals as well, which tend to mirror the public markets anyway.

00:13:03:05 - 00:13:30:15

Thomas Smale

The lower level that we operate in, so below the 100 million level on average, those deals have been less affected. They're still not public market valuations anyway, which is why I see the industry opportunity to be, which is small private company multiples will continue to increase until we get to public multiples. The flip side of that is if you are a found a with a war chest, maybe you could change your immediate mindset to acquisition, since going through acquisitions is a valid way to grow your business.

00:13:30:15 - 00:13:50:15

Thomas Smale

There are we are growing year on year. There are still lots of companies that are not and there are still lots of opportunities out there and I tell you, with founders definitely more worried than they were 12 months ago, and I say the sentiment in 12 months time from his body going to be even worse. So, yes, as much as I would love to think we do, we do not speak to every single founder in the world of SaaS.

00:13:50:23 - 00:13:54:23

Thomas Smale

So you can kind of take advantage of that lack of information that I always knew about him.

00:13:54:23 - 00:14:05:22

Neel Desai

Adjusted to that, are you saying under 100 million? Our thesis is the same. Valuations are more or less the same. Our team is business as usual. Or has your team shifted their strategy and diligence and their investment thesis?

00:14:06:01 - 00:14:26:00

Thomas Smale

Very similar. We definitely put more emphasis on when we're looking at quarries and whether or not we should be advising our clients to accept their offers, looking at how their funding is put together. So if they're arrive at the firm and they've just raised equity and they have invested capital on hand, which is a lot of them, then that's fine.

00:14:26:00 - 00:14:45:03

Thomas Smale

If they're relying on external debt. That's where we've really changed our mindset to. We pretty much would not advise any seller to accept that offer because I mean, in the US at least, interests are rising. Most places in the world, interest rates are rising, raising that is significantly less than it was 6 to 12 months ago. So everybody takes a huge amount.

00:14:45:03 - 00:15:05:10

Thomas Smale

I guess we've just got a little bit strict some parts of the process and I guess the burden of quality is a little bit higher than before because I'm talking about multiples haven't really decreased, but that's putting all the average across the board. That's just we take on the best businesses that actively want to sell. There are still lots of businesses are not doing well and could not be sold at all.

00:15:05:11 - 00:15:11:12

Thomas Smale

I have the rose tinted glasses that I just see the best businesses and we're very fussy with what we take on.

00:15:11:15 - 00:15:32:11

Neel Desai

I also think if you look back in over the last couple of decades, some of the biggest outcomes have been during recessionary times or times when the market has been down, when folks are a little bit more hesitant to make some of those big decisions. If you do have the capital and you can make those moves, it could be an opportune time to scoop out folks that are looking for a nice, sweet landing spot.

00:15:32:11 - 00:15:34:16

Neel Desai

If there's synergies in the product team and everything like that.

00:15:34:16 - 00:15:51:11

Thomas Smale

Yeah, for sure. And I think I speak in somewhat about this area, but it also depends a lot on the sub industry you're in. If you're in service and maybe saw a business I was in, I was a platform in the real estate space and our advice to them was you absolutely need to sell now because real estate is going to fall off a cliff in the next 12 months.

00:15:51:11 - 00:16:10:18

Thomas Smale

And that was probably six months ago. And that's definitely beginning to look like it was very true. Some businesses, like if I am Alex and I own that stock, I'm probably very happy at the moment because events are back bigger and better than ever before. I don't think if I'm many people in this room who had a bag and saw stock not being bigger next year by a deathly bag and Sirena stays off business being smaller.

00:16:11:00 - 00:16:33:12

Thomas Smale

So see, we talk about at least we use SaaS in our Broadway. The reality is within SaaS you have subsets of businesses which are going to do really well. Business is another to do very well and most businesses will be fine. Like business as usual. Therein lies the potential opportunities by businesses while they're down. There was a lot of activity during COVID buying businesses which were but could maybe not operate during COVID.

00:16:33:17 - 00:16:38:12

Thomas Smale

Founders got desperate. Yeah, Didn't wait until things reopened again and wanted to sell.

00:16:38:12 - 00:17:00:00

Neel Desai

What's your take on if SaaS heads towards more consolidation or not over the next, let's say, five years? I feel like these days there are it's infinitely easier to start and build a better business tool. There's so many platform companies that make it easy to handle the infrastructure in the back end. As you guys think about the M&A scene, like is there do you do you anticipate a higher consolidation of B2B SaaS?

00:17:00:00 - 00:17:09:06

Neel Desai

Like if I'm a new entrepreneur and thinking of things to start right now, are you so bullish on business as a vertical or do you anticipate more consolidation in a few years?

00:17:09:06 - 00:17:24:09

Thomas Smale

I would say B2B SaaS is definitely not going anywhere. If we go back to we go back to about about 12 years ago and if we're all on stage, no one would ever ask me that question. People talk about desktop software. They're like nobody. They my desktop software like Paul does this new thing called SaaS. Like, what do you think reality is?

00:17:24:09 - 00:17:53:06

Thomas Smale

If you look at any of the data, poor large companies are moving away from on premise. Everyone's moving towards cloud SaaS is inevitably going to grow for the next 20 years at least as large companies move away from on premise and a lot is really big. Enterprises have not adopted SaaS yet, so there's still a huge amount of adoption to come and anyone, any 22 year old kid graduating college tomorrow, starting a business is not, which is what you had to do 12 years ago.

00:17:53:06 - 00:18:17:07

Thomas Smale

No one not setting up a server at home. You're signing up for a cloud product and you're just using B2B SaaS tools. That Mark is definitely not going anywhere. I think just culturally within the industry, even if you just walk around this room and you go speak to any of the 3000 founders in the room, almost everyone would view M&A either as an acquirer, as a seller, as a valid option for their business.

00:18:17:07 - 00:18:39:22

Thomas Smale

Ten years ago, no one was talking about it, so they wouldn't even the question neurons saying people wouldn't even consider acquiring businesses. So I'm definitely bullish on SaaS and I'm definitely bullish on more companies doing M&A as a strategic way to grow their business, whether it's buying like another SaaS business or whether it's bolting on something useful like a content or media arm.

00:18:40:03 - 00:18:49:01

Thomas Smale

We sell a lot of businesses like that. We publish a magazine called SaaS Mag, and the reason we do that is because we want to kind of own the audience as well as maybe a different place in the funnel.

00:18:49:01 - 00:18:56:13

Neel Desai

We've seen that a lot in B2B too, right? HubSpot being the hustle we saw earlier, we were talking with Mind the product and I don't know.

00:18:56:13 - 00:18:57:00

Thomas Smale

Yeah, right.

00:18:57:04 - 00:19:11:22

Neel Desai

Over our paddle and proper well cutting edge from from Bravo was something that now the rolling off with the paddle I think using M&A as a way to grow that's a very interesting way to think about it because they could be a growth lover if you get really good at. Right, the integration of the tech, the culture stuff.

00:19:11:22 - 00:19:24:15

Neel Desai

Right. And the team. So that could be and historically has been thought of largely as like largely old beta. We've lowered the barrier right. And made it more accessible to many growth stage companies that previously maybe it was just the public companies that could grow the remnant.

00:19:24:15 - 00:19:41:20

Thomas Smale

Yeah, but to your point, that is also the hard part. You're not going to see many. I do not think we got by as they come to us all the time of this is a hypothesis I like. I raised $100 million. We're going to buy 20 companies and roll them all up. That sounds great in theory, but the reality is combining 20 companies is extremely difficult.

00:19:41:21 - 00:19:59:13

Thomas Smale

So I think there'll be lots of businesses that will buy one business as not on. But will there be many companies that go out and buy ten to add to that company? I think no. M&A is a strategy. Yes, but kind of be your only strategy, I think in very limited cases, because as you guys got to experiencing, it is difficult.

00:19:59:13 - 00:20:12:04

Thomas Smale

You have different products, different culture, different tech, different leadership expectations, all sorts of challenges of combining. Combining two things is doable, but still challenging. Lots of acquisitions like that fail.

00:20:15:19 - 00:20:18:23

Ben Hillman

Next, Thomas talks about factors that make deals fall apart.

00:20:22:12 - 00:20:26:04

Neel Desai

What's that? That it's like 70% of M&A fails in the first 12 years, is.

00:20:26:04 - 00:20:28:13

Thomas Smale

It plus I think our corporate level yeah he's.

00:20:28:16 - 00:20:34:04

Neel Desai

Legit like he's I read that in all the time but is that really true? That's not really bad.

00:20:34:08 - 00:21:06:21

Thomas Smale

Interpretation of that statistic is is always related to large public company M&A where you hear the Blake the stories of a company shut it down the next day for more we see that's not really the reality. Most people buying businesses if they buy one or two, whether it's a small fund or whether it's an individual, that generally putting significantly more time and effort into making that work, particularly if it's all of their capital they've deployed under their fund, it's completely different from Apple buying a business for $10 million that in care of how successful or not.

00:21:07:01 - 00:21:11:17

Thomas Smale

I think that's where the stock comes from. At least that's always been my interpretation.

00:21:11:17 - 00:21:25:12

Neel Desai

No, I mean, you got the data, right? You've done that. A thousand plus deals are over the last decade. And so I've always been curious on like, where is that coming from? Because I think it gets M&A gets a bad rep from that perspective. But to your point, it is it probably skews towards larger corporate roll up.

00:21:25:12 - 00:21:41:14

Thomas Smale

So I think a lot of it is just like media. I think they're the stories that people want to hear. You want to hear the good stories and the bad stories. So you hear about $1,000,000,000 acquisitions and you hear about the companies that got shut down and everyone got fired. And when they made movies about M&A, it's about five aps-c firms who do exactly that.

00:21:41:14 - 00:22:00:20

Thomas Smale

They buy a business and the next day everyone gets marched out and fired. I mean, like obviously that that does happen. But at least in the world, I live in an operation that's relatively uncommon. Most buyers want to keep the existing team. They want to keep them happy. They want to compensate them all. They want to combine the two entities efficiently.

00:22:00:20 - 00:22:10:22

Thomas Smale

Does that mean sometimes their roles they get let go or are not needed? Yes, but it's it's more like some of the movies you see where everyone gets fired. Yeah, it doesn't really happen. Not in the tech space anyway. Sure.

00:22:11:03 - 00:22:18:09

Neel Desai

There's this I don't know if you've watched succession at all, but as I said, right when you were Kindle fires, everyone from that a media company.

00:22:18:09 - 00:22:30:11

Thomas Smale

And I think that's where people get it from. People get out and like, Oh, wow, these guys are scary ever must do deals are that and my experience, it's a little bit more boring than that. Most people want to keep the team want to keep them happy. Yeah. And will do what they can for that too.

00:22:30:12 - 00:22:37:04

Neel Desai

Especially in this environment when hiring and recruiting is already insanely difficult. Right? I think it's not a simple decision to just like cut costs.

00:22:37:09 - 00:22:58:01

Thomas Smale

And also in like tech people in this room, if you're an employee of a company, there's never been more employment options for you in history if you're working in a I think a lot of bad stories about this happened in manufacturing companies in Ohio where there's three factories. Yeah, do what you do in a thousand mile radius. That's completely different.

00:22:58:01 - 00:23:15:11

Thomas Smale

Yeah. Like finding talent in that space is different. In the south space. The reality is, as much as like a CEO don't want to admit this. You go wherever you want. Yeah, pretty much CEOs are definitely I know for me on my to do list for the last two years retention and recruitment is always number one and two.

00:23:15:15 - 00:23:27:07

Thomas Smale

Yep. And it's the same for I'm pretty sure any CEO you meet in the room is exactly the same. So I think people are becoming more conscious of that. You know, people are not throwaway resources. Yeah, that's just not the reality.

00:23:27:07 - 00:23:43:15

Neel Desai

As we round this out. The first is I'm always curious, are there I in my head I always picture these like M&A due diligence war rooms as intense and like sort of stressful environments. Are there common things that come up that blow deals apart that you've seen time and time again that founders can get ahead of these situations?

00:23:43:20 - 00:24:09:04

Thomas Smale

Yeah. So I guess our job is to remove all of the variables as much as we can that can kill deals. Deals are so deals up and privately versus deals we represent are going to be different safe deals. We represent the biggest variable for us and in any M&A transaction is the the founder or the decision maker and quantity, the emotional side of that, even though you're selling a business, you're still dealing with real people and real people, even really small people are unpredictable.

00:24:09:07 - 00:24:24:17

Thomas Smale

You don't necessarily know how they're going to react. That's why a lot of people bring in M&A firms. There's a lot of value we bring to the table. But one part of it is objectivity. You can say whatever you want to me and I can assure you will not offend me and I will not be emotionally offended as part, particularly in any sort of transaction.

00:24:24:23 - 00:24:54:05

Thomas Smale

Our job is to be, I guess, like transactional. And sometimes you might even describe this as code. It could be very direct nor emotional about things as deals as they get bigger. Often you have like accountants dealing with accountants that genuinely involve you, where I guess contentious is usually lawyers and attorneys. So we spend a lot of our time, I wouldn't say like herding cats, but trying to figure out how to get attorneys to play ball, because attorneys tend to have egos and they tend to want to add the spin on a deal.

00:24:54:10 - 00:25:18:14

Thomas Smale

They want to like re trade points of already been agreed. So attorneys are the biggest variable. Accountants usually fine. They're generally not going to argue with each other. The founders are a big variable, but if someone has been self-conscious enough to realize they need an M&A firm like us or whoever else it might be, then that probably also self-aware enough to remove the emotional side as part of that negotiation.

00:25:18:14 - 00:25:26:09

Thomas Smale

Yeah, at an in private deals as an unlimited number of things that blows deals up that we would mitigate for our process.

00:25:30:00 - 00:25:37:23

Ben Hillman

And now Thomas talks about finding a process that aligns with value and vision values.

00:25:38:01 - 00:25:46:15

Neel Desai

What are you most excited about as you think about the next year? Well, we could be personally, professionally, the time has never been better to build and grow with XYZ companies. What are you excited.

00:25:46:15 - 00:26:11:21

Thomas Smale

About So selfishly? Not selfishly, industry wise, I think it's going to continue to grow very bullish just on the industry as a whole. I don't think that's going anywhere. I think selfishly talent and retention has been very difficult for the last couple of years. I think with more and more companies making layoffs, I think relatively small companies like us are going to have the opportunity to hire talent that was previously not available or not accessible.

00:26:12:02 - 00:26:30:04

Thomas Smale

And I think most of companies in this room that might have about 150 people in total now there are a lot of companies in the firm are not going to have hundreds of 500 range that maybe could not previously have afforded C-level talent. How much larger companies, which I think is going to be good for the industry, is it going to gather more experienced talent come into the space?

00:26:30:04 - 00:26:52:03

Thomas Smale

It will help kind of solidify the industry. So that's what I'm excited about. And again, like 12 years ago, if I was on stage one of a C-level executives at, say, Apple to come work for us, there would be zero possibility I would even consider it. But now we're in a world where senior people at large companies love the idea of this world and this room.

00:26:52:04 - 00:26:55:02

Thomas Smale

Yep. And that just was a cultural normality years ago.

00:26:55:02 - 00:27:03:08

Neel Desai

Any final words of wisdom or advice to founders that are thinking of selling your business are involved in some M&A over the next 12 months? As you think about Maximizer.

00:27:03:08 - 00:27:30:04

Thomas Smale

Algo number one is just ignore what you read in the press. If you have a business below $100 million valuation, which is almost everyone in this room, the market is is fine for the vast majority of businesses. If you are thinking about selling, you should explore lots of options, but speak to different M&A firms, speak to different potential acquirers and get a range of options because I'd be biased and I'd say we're the best in the world of what we do, which I objectively believe to be subjectively believed to be true.

00:27:30:04 - 00:27:39:09

Thomas Smale

But we have a very specific process. A lot of people won't like that, and they want to run things the right way. You need to pick a process and a company that aligns with your own vision, your own values.

00:27:39:09 - 00:27:44:12

Neel Desai

Tom, is if people want to learn more about you guys or find you where where can they find you? We're going to go to learn more.

00:27:44:12 - 00:27:56:18

Thomas Smale

Sure. So you can go to the international dotcom website. We have some of you guys, tons of content, green content, downloadable content, white papers, lots of podcasts you've been interviewed on. So you can go to social media, you can find us.

00:27:59:06 - 00:28:18:21

Ben Hillman

Shout out to Thomas for being on the show. Now you know what to avoid when going to your M&A deal. Today, we talked about how the SaaS landscape has changed the last decade. Essential advice for founders looking for an exit, the impact of the economy on SaaS valuation, factors that make deals fall apart, and finding a process that aligns with value and vision.

00:28:19:01 - 00:28:32:04

Ben Hillman

Make sure to give Protect the Hustle a five star review and tell us what lesson Thomas taught you from today's episode. Thanks for listening. Subscribe to and tell your friends about Protect the Hustle, a podcast from Paddle Studios dedicated to helping you build better SaaS.