What is an introduction meeting and why is it important in an M&A process? In this episode of Shoot the Moon with Revenue Rocket, we're diving into the importance of a great intro meeting between a buyer and a seller and what should be discussed.
What are the right elements for an introduction call
What should you talk about, and what shouldn't you talk about
What do sellers want to hear from buyers?
What has to be shared as a seller
Listen until the end for a surprise appearance & history of Taylor Swift*
Mike Harvath 00:05
Hello and welcome to this week’s Shoot the Moon podcast, broadcasting live and direct from Revenue Rocket world headquarters in Bloomington, Minnesota. Revenue Rocket is the world's premier growth strategy and m&a advisor to tech enabled services companies. Today I'm pleased to have my partners Ryan Barnett and Matt Lockhart on the call. Welcome, gentlemen.
Matt Lockhart 00:30
And welcome to you from balmy Minnesota. We've been setting records here, this called, we'll call it winter, it's hard to call a winter. I've hardly seen a drop of snow. But what's going on Ryan?
Ryan Barnett 00:48
Well, I heard earlier and maybe been late last week, Taylor Swift made an appearance in Minnesota. Did you guys hear about this?
Matt Lockhart 00:59
It was spectacular
Ryan Barnett 01:01
Well, I don't know if she completely made it. But we'll have to share a little something with her audience about the her tribute to mergers and acquisition? Well, we'll leave it as a bit of a as a teaser here. Taylor was around, we'll put it that way. But today, we're gonna jump into a topic that's kind of near and dear to our heart, which is really getting to know two parties within an m&a transaction. So as I said, to refresh everyone, we are 100% focused on firms that are in the IT services market. And within that market, we help put together buyers and sellers and oftentimes we're representing buyers who are looking to acquire and, and sometimes we're representing the seller, and one of the most important parts within the process is to get people together for the first time. And so in this context, we'd have traditionally had some kind of screening call. And also, as advisors have helped understand that there is a connection between a buyer and a seller. And we see a strategic fit. And we understand maybe magnitude of financial consideration. But we haven't really dug into too, a lot more in the context of getting two people together. And we typically do this after an NDA, we do what we call the introduction meeting. And today we want to talk about what's a really ideal introduction meeting from both the buyer and seller view. So Mike, why don't you get us started? What what is that introduction mean? And why is it important in that m&a process?
Mike Harvath 02:52
Yes, that's right. You know, typically, in our process, we, you know, our client, and we will understand kind of what their goals are, and objectives for any potential combinations or mergers and acquisition activity. And that will target firms that sort of fit that profile. And as we do that, and reach out to them, we, you know, gauge their level of interest in and if they're interested, the next logical step is to have a call with that client. And that introductory meeting is critical to making sure that there seems to be a fit that warrants additional investment of time and energy, and, frankly, money in investigating a merger or an acquisition. And so that first call, is really getting to know you call, each partner gets to know each other, a little bit about their firm's culture, their customer care and employee care philosophies, the size and scope of the business, typical customers in the light. And it helps formulate a basis for a dialogue, and what may, you know, potentially be a negotiation to combine. And, generally, you know, establishing a good relationship early and establishing trust amongst the parties is critical.
Ryan Barnett 04:25
So, that's the first step to really getting to know each other. So you're, you're seeing each other for the first time, and you're starting to establish the hows and norms of a business of working together and, and it starts from that first hello to the end. Lately, we've seen a few calls that we've been working with a buyer, we're cultures introduced very early on the call and it and very specific natures of the culture of culture and and how that how a company works. And that has been a huge help to getting people started on the call. Man, do you want to kind of dig in on to why it's buyers and sellers? Just setting culture is important in that first meeting?
Matt Lockhart 05:16
Yeah, so, you know, just real quick, we often talk that three things need to come together, there needs to be three fits, if you will. The financial fit ultimately, right. The strategic fit, and then the cultural fit. And, you know, I think our experience is, is that many, many firms really try to go too fast. And, and seeing if there's a deal to be had, right? Like me, Mike likes to say this, it's not a Turkish bizarre this business, but there's a lot of people who just want to get into dealmaking numbers, numbers, numbers, right. And obviously, you know, if you try to do that too early, you're gonna turn a lot of people off. Likewise, and it, obviously, it's super important to assess the strategic fit against the goals of a buying organization. And that's, that's absolutely critical. But if you don't want to establish that relationship, and that trust basis, that that you mentioned, Ryan, you know, you may not really get the chance to sort of peel the onion and understand that strategic fit, and you may not get a chance to even get it, you know, Kevin offer in place, because somebody got turned off, and be starting with that cultural alignment, that cultural understanding. And in particular, for buyers to show an interest in culture is oftentimes a great way to get sellers comfortable with you as a as a prospect. I mean, people like to talk about their business people like to talk about themselves, people like to talk about what they built. And people like their people, they like their teams. So they feel a great deal of pride and ownership, about the culture that they've established and, and that the organization has developed. And so I think, to your point, when when we're able to, to have a good healthy and open dialogue about culture, you're really getting people to be more comfortable and open up and, and building that basis of trust.
Ryan Barnett 08:05
And I think some of this goes into a, the order of events. So when we typically set up an introduction call and introduce the teams, and I should say, typically, a introduction call at the very onset is going to be a business owner, or the person who's most responsible in the business and owns most of the business, that's typically the seller, and from the buyer, it's typically going to be someone that's the spirit equivalent and title. So we often see a CEO, if it's from a private, equity based firm, and it might be the portfolio company sponsor, or it might be the portfolio company, and the PE sponsor, or might be the private equity managing partner. So keep in mind the people this is your matching roles, and you want the highest available, even to the point where I would say that, that you're the only person on the call, I would not bring multiple staff members to any kind of introduction call if I was a seller. So that's something Something to keep in mind. If I was to see again, go back to the order of what it looks like. I would say that starting off with a buyer and going into that culture of food is a huge help, and then understand and explain why you're trying to do an acquisition, and then trying to outline your strategy of why that acquisition makes sense to your strategy. And then getting into a bit of why a seller has targeted that if you've done that, and you're in you've been able to produce some level of capability that you're capable of doing an acquisition I think that's a great way to start a call, again, a buyer introducing themselves the mission and where you go. And sometimes we see this go wrong, we could get into sellers that are our kind of or buyers that are thinking that they kind of have all the chips on the table. And, and that's not necessarily the case, I think sellers have the most to bring in this transaction. And the buyers have to earn some trust to get things moving. Mike, do you believe? Do you think that's the same? Or do you see it a little bit differently? In how one of those intro calls should start out?
Mike Harvath 10:37
No, I think, you know, if you want to look at a sort of best practice, certainly this is it. I think if it's too focused on strategy and numbers early, it sort of falls flat. Because, you know, I think it's important to gauge and understand the other side's you know, philosophy about culture, we're in a, we're in a high culture, called what I'll call a culture rich environment that's employee centric. In our kinds of companies and tech services, companies, it's really in many ways all about your product is your team and your staff and how they operate and how they think about the world. And I think those cultures need to be in keen alignment have to be very much aligned. If any potential relationship together is going to work out alone, up potential merger or acquisition. So I am like to say I'm in vehement agreement, Brian.
Ryan Barnett 11:40
Yeah. That's great. Great. And if I flip that over to a seller, Matt, would you mind you? Can you walk through what a buyer is looking for in an in a, in an introduction to that seller? Just in general, I there's a lot of things that someone who could talk to, but maybe what are three or four things that are absolutely critical that a seller needs to get a part across? And that first introduction?
Matt Lockhart 12:05
Sure. Well, I mean, let's talk about some of the basics, what is the intention of a seller, right, in the context of we're thinking about a founder led business? Right, and or, you know, could be second generation, but what's the intention of the management? Organization, that's a, that's a key point, right, to establish, you know, what type of an opportunity this is, obviously, looking at all of the capabilities of the organization, you know, in the IT services space, where are you positioned? Where's your strength? What is your go to market look like? All of those, those things and then understanding, you know, the expertise of those capabilities, where are you really good? Where are you growing and maturing, but back to that sort of that management intention and this is again, where where culture comes in is is, you know, what type of organization have you built, you know, is this you know, any, any buyer, right is going to be looking at the growth and the upside, opportunity, you know, with the selling company, and, and so, you know, is there a foundation in place? Is there an organizational foundation? Is there a maturity of processes, and, and the like, you know, as it pertains to culture is our people fired up? Is this is this a highly tuned organization? Or, you know, or is there some lag or newness, right? I mean, all of those things are looked at, I think that, you know, again, we're, we talked before this, people just sometimes overlooked that cultural organizational aspect. And, you know, let's remember that old, you know, famous Peter Drucker line, you know, culture eats strategy for breakfast. And so, for sellers to be able to demonstrate that I think is a super key point and gives them more opportunities to look at from from different buyers. Buyer prospects. Yeah, it's,
Ryan Barnett 14:25
I think you nailed it here. If you get people to people in a meeting. What's the best format for talking? Do you prefer to have a slide deck? Do you prefer to have a conversation? I'd love to really get kind of get both your opinions here. Matt once you once you get us gone.
Matt Lockhart 14:43
Well, I think it's a you know, it's an important get to know you, maybe, obviously, we're still coming out of the land at COVID. So a lot of these are, you know, these inner first introductory calls or video calls, which you know, we all know is So, there's a little bit of a handicap in terms of being able to really, you know, build that bridge. So given that, we kind of like, I personally like to stay away from slide decks, right, because, you know, it sort of forces a little bit more of a Get to know your period. Now, for some, they really do like, to be able to present in, you know, they like that, that style of a communication, that style of a meeting, that's all great. But I'd say that in those cases, let's at least set aside a good half of the meeting for more just conversational get to know you, back and forth discussions, you know, connections made, you know, history of the organization, you know, people, et cetera, et cetera. So I that's, that's, that's sort of the way that I leave.
Ryan Barnett 15:59
Yeah, and I think, Mike, maybe you could help. And I'd love to hear your opinion, too, if the conversation or more structured conversation is the way to go. And also, you know, maybe your critical parts of what you think a seller has to get across?
Mike Harvath 16:17
Yeah, you know, I think I've given this a lot of thought, I think in a perfect world, you know, wave a magic wand. You know, these types of meetings happen face to face, but they're very seldom justified and incurring the time and expense to do so, if it's an early meeting. So typically, they happen via web conference, whether that be teams or zoom. And I think that immediate changes a little bit, I think in a face to face meeting, it might just simply be a conversation. In a team's meeting, it might be precipitated by a deck that covers and highlights many of the early cultural thinking. And the dialogue may even get completely consumed with that, in a follow up meeting needs to occur. So talk to more about, you know, both strategy and financial data, I think you'll need to cover all three of those things, strategy, culture and finance in the presentation or dialogue, I think it should be bi directional, and it probably needs to be prepared ahead of time, in order to be able to use that time efficiently, or you'll oftentimes get a little bit bogged down and, and need to schedule additional time, not uncommon, by the way for that call to go, especially if there's great synergies around culture, you'll spend the whole 90 to 120 minutes talking about cultural alignment. That's time well spent, I think if that occurs, you certainly should schedule a follow up and do more discussion of Strategy and Finance in a subsequent meeting. But again, just you know, waving a magic wand and prepared a presentation that covers off culture and Strategy and Finance is what's required. I think that, you know,
Matt Lockhart 18:09
we also need to keep in mind, you know, we're engaged, right, so we're, we're setting the stage, you know, independently, you know, with buyers and sellers, you know, giving some context, giving some some background, understanding what's important, right to, you know, the respective sides. And so, you know, it's not as though people are coming in completely cold. And so you can make sure that you're highlighting the right areas, in that introductory meeting, and, you know, trust that some of the basic parameters, some of the basic financial parameters have been communicated. So that's where you can get to the high highlights on strategy. And then again, making sure that there's enough time for the respective parties to, quote unquote, get to know you.
Ryan Barnett 19:10
And I think it's a great point, there is a level of understanding and homework you need to do going into these meetings. So just understanding having your talking points in line about your your culture, your strategy, your customers, your I would say at the highest level of financials and even maybe some your intention of what your future is, and constraints the business as I think you do need to formulate that beforehand. And the same goes with reciprocal due diligence on the person you're dealing with. Much like you go to a sales call doing that homework of that sales call on your, your target your customer, their needs, and putting any interactions together is important. So do you do your homework, do your basics, check out the LinkedIn profile, check out the website, and this is really ever called both buyers and sellers, to make sure that when you are there, you're at least prepared. The same thing goes there, there's a fine line of giving almost too much information. And like, is it? Can you give an example of what might be too far to go in an introduction meeting?
Mike Harvath 20:17
Well, you know, I think there's the old adage, you don't want to get too far into the weeds of the details of, you know, numbers, it's a good example, high level summary financials are adequate for this kind of meeting. I think, you know, understanding sort of the long tail kind of revenue and profit trends is probably okay to, but I wouldn't get into a lot more detail than that. Generally, talking about your ideal client, who they are, how they fit in your organization. You know, things like how you go to market at a very high level are appropriate, once you start augering into exceptions, or areas that might not be in your IPP, or your ideal prospect profile, or it's easy to get in the weeds on a lot of these topics, anything on culture, I think you have to keep in mind, this is an introductory thing to determine, do you fit along the three pillars that we've discussed around strategy, financial and culture with a focus on culture, being able to have an interaction have not grown on any side of the conversation too long be able to pause and field questions and kind of ask open ended questions of the other party in a dialogue is what will ultimately have a much better outcome than trying to just present that information, as printed on the slide. So stay stay high level and stay nimble, I guess would be my advice.
Ryan Barnett 21:55
If I transition a little bit mad, you've hosted a lot of the all of us, we've all hosted a ton of these calls, what is your roles and advisor? And what should it buyer and seller expect from the advisor on this call?
Matt Lockhart 22:11
Well, largely, it's just setting the stage and pointing out some of the what we know are important points for the respective parties to cover that can be done again, you got to sort of read the room of your of who you're working with, in some cases, you can do that through an agenda or discussion topics, which are our shared before a call, you can just sort of set the stage and say, Hey, I know we want to cover these areas, we we also sort of bracket out the areas that, you know, we're not going to get into detailed detailed financial information and encourage the parties to spend some time in in understanding, you know, and getting to know. That being said, making sure that the discussion, you know, moves along towards those, you know, super important strategic points. And then try to get out of the way, right, you don't want to be seen as somebody who's pushing the agenda, or the one who is you know, doing the the selling, if you will. Because that's, that's not appropriate that could be seen as though you know, one or the other party is isn't capable, you know, themselves. Now, that being said, if things start to get, you know, go into areas that aren't appropriate, then jumping back in and guiding along. So, you know, the more that you can guide and kind of get out of the way. Yeah, the better. Yeah,
Ryan Barnett 24:02
I think Yeah. Often it's, it's best to fade to the back and take notes, and listen, and to make sure that you're listening to for key points and synergies and looking at where you see the great strategic fit, and ultimately looking for potential risks and mitigations to those risks, and as well as just getting excitement for a deal if there is one, kind of and I'll kind of leave this the last question for you, Mike, but what's the ideal? What's the outcome of the successful introduction of dating? What if everything's done, right? What's the next step?
Mike Harvath 24:44
Well, the next step often moves towards evaluation for a seller. You know, if you're a buyer, you know, this is kind of what you're looking for. Likewise, you know, if you're a seller And we're representing you as a seller, you know, it's very likely the buyer will be asking to run the numbers and do a financial sort of diligence to determine if the preliminary discussions about being in the ballpark on valuation are supported by your financial. So it is kind of moving the deal along to the next step. Once evaluation is done by the buyer, and there's a dialogue, usually that goes more towards, hey, we think the value of the business is x, here's how a buyer would like to structure a deal, what do you say, and as a seller, it's your opportunity to, you know, leverage your advisor to help you structure a deal. And to do so in a way that's meaningful to align to your objectives. And then, usually, after that, I have to put the, you know, keep with the cart here in front the horse too much, but usually, then it moves right to letter of intent to get a deal done. So, you know, it's not a typical, also, they have a face to face meeting kind of along this journey. If this initial meeting has been done via, you know, teenagers zoom, or some other video conferencing solution, so that you can, you know, further build trust with that other party, I think, very hard to get a deal done if there's not trust amongst the parties. So, taking the time to do that, while you're on the journey of negotiating up to an LOI is time well spent, as well.
Ryan Barnett 26:42
Yeah, I would say that it, it's, it can sometimes feel abrupt. But typically, if you're a buyer, and you file and you can identify enough strategic and cultural fit. The next Ask after the successful introduction meeting is quickly of moving to financials, and a financial data room and financial request, I think you have to earn that trust in that introduction meeting to get there. And that's why it's critical for both buyers and sellers to to really bring the game and talk about a lot of the things that we talked about here, which is helping identify the culture first, and how you do business and the way you do things and, and identify what you do and the strategic fit of working together is critical. And then from there, being able to highlight ways that you can find and work together and highlight a path of, of continuity in any kind of transaction, we heard that it's, this oftentimes is going to be a meeting that is virtual, or in some kind of a conference room might be in person in person, but expect the top leaders of the business to be there and to be able to, I think willingly share enough information. I heard that if you're a seller, you're the informations gonna be rather high level. So don't expect to have a detailed p&l Don't expect to have a a list of customers and don't expect to have a list of employees. And I think those last two, the list of customers and list of employees are something that is are a really post loi kind of conversations. And if you have a great meeting, expect to have perhaps another one to further get to know each other. But it may move quickly straight into a financial request. Don't view if you're a seller, don't view that financial request is something moving too quickly. It's it's just the most logical step in order to help getting people together to see if a deal is possible. My comment any any closing thoughts or any additional thoughts?
Matt Lockhart 28:53
You know, I think the only thing that I'd add Brian is each and every you know scenario is is its own? It's its own deal. Right. And so, you know, I hope we laid out some good guidelines each and every one needs to be thought of independently. Again, that's why you know, you Alina and I'm really good advisors to understand how people think and what they're looking for. And, and so you know that everyone's time is is maximized towards the intended goal of bringing people together. So a great topic, Ryan. Thank
Mike Harvath 29:32
you. Thanks for having me, Matt. It was it was timely and appropriate. And with that, we'll tie ribbon on it for this week's Shoot the Moon podcast feel free to tune in next week for more relevant topics around m&a and growth strategy for IT services companies.
Ashley Battel 29:52
Okay, so we're gonna move on to this day in history. On this day in history, we look back to Wednesday and spotlight Taylor Allison Swift who was born on December 13 1989, the American singer songwriter began professional songwriting at the age of 14 with Big Machine Records with the goal of becoming a country singer, Vader releasing six studio albums under the label for them to country radio. She later signed with Republic records in 2018, and released albums that focus more on poppin even shades of indie folk and alternative rock. After what widely publicized dispute with big machine over the rights to her music, Taylor re recorded her first four albums and is set to release the remaining two studio albums in the coming months. One of the best selling musicians with 200 million records sold, Taylor has earned 117 Guinness World Records and received the Recording Artist of the Year Award three times from the International Federation of the Phonographic Industry. Taylor's current tour, the era's tour has become the highest grossing tour of all time hitting $1 billion in ticket sales, and she's the first billionaire with music as a main source of income. Taylor has appeared on many top 10 and top 100 lists including Rolling Stones 100 greatest songwriters of all time, billboards greatest of all time artists and Forbes world's 100 100 Most Powerful Women. Among her many accolades 12 Grammy Awards, including three Album of the Year wins one Primetime Emmy Award for the American Music Awards, including artists of the decade for the 2000 10s 39 Billboard Music Awards and 23 MTV Video Music Awards. He was a songwriting, artistry and entrepreneurship of not only influenced music industry, but also pop culture. And she's a philanthropist and advocate for artists rights and women's empowerment. She makes headlines around the world and a seemingly weekly if not daily basis, and was also named Time Magazine's Person of the Year for 2023. Among her many hits, are you belong to me? Shake it off. Look at what you made me. Look what you made me do. Blank Space, Bad Blood antihero. It's Cruel Summer, we are never ever getting back together. And of course, then there's love story for which unbeknownst to many had a secret alternate m&a version that you won't find in any press releases or her Taylor's version re releases. But it goes a little something like this. We were young Tech Pros. When I first saw you, I close my eyes and the flashback starts I'm sitting there. Viewing your website on my MacBook Air. I see the service list the industries and mission and vision I see your video on the About Us page where you say hello. Little did I know that you'd become CEO and partner my director said stay away from Route gatekeepers and I was calling you on teams begging you please don't go and I said CEO talk to me. I'm going to book a screening call we'll be waiting just show up on time and so you will be a seller will help with all the rest. It's an m&a story baby just say yes to both parties. Go ahead and sign NDAs I'll keep quiet cuz business could be dead if anyone knew escape publicity and competitors to o HK as you are CEO and partner and my director said not to call the tech support line that you were the one I need. I was begging you please don't go and our client said CEO I like what I hear. Let's keep meeting on I'll be waiting no need for you to run out. Be the buyer revenue rocket is the best. It's an m&a story baby. Just say yes. CEO trust me, we're fine with your MRR. Your betta does solid, like my favorite sports car. Don't be afraid we'll make it out without stress. It's an m&a story, baby. Just say yes. Oh, you got a little a little tired of waiting, wondering if the deal would ever come around. Your faith in us was fading when your trailing 12 months made us frown. But I said see yo I know you've been feeling so alone. You been waiting thinking this day would never come working capital was a stumbling block. You think that the deal is dead but I leaned over the desk, pull out a contract and said you've merged with us CEO you'll never have to be putting b alone. We got you and that's all you need to know. I talk to your business partner. The sign contracts hot off the press. It's an m&a story baby, just say yes. Oh, oh, because we were at young Tech Pros. When I first saw you ... Thanks everyone have a fabulous Friday and a wonderful weekend