The Complexities of Sell-Side M&A

Selling your business is not always easy. The longer it has been a part of your life, the more attachment you have with it and the people. The decision to pull the trigger comes with a lot of complexities, especially for most entrepreneurs, as it could be the biggest transaction of their lives. Sharing his experience and the intricacies of sell-side M&A is Noah Waisberg, Co-Founder & CEO of Zuva, as Litera just acquired his company Kira Systems. 

“Being empathetic and understanding what the buyer wants from the deal will help you be creative in your deal structure.” - Noah Waisberg

Entrepreneurial Journey

Noah started Kira Systems back in 2010 with a mission to provide machine learning and automated contract reviews to law firms. As a lawyer himself, he knows that most of them are stuck with the mundane job of reviewing contracts. But as he was developing this software, he found it hard to find investors, as no one was willing to pay for something that was not currently available.  

His break came when he landed a big four firm looking for something similar to his software. Also, he discovered that auditors and consultants were also interested in the software he was developing. Securing a big contract helped him grow the business and improve the software. 

With hard work and perseverance, Kira Systems became the leading provider of contract analysis software to the majority of the largest law firms in the world, along with other leading professional service firms.

The Decision to Sell

Success comes with more opportunities. At the beginning of 2021, Litera approached them with a proposition to acquire their company. They came in with a good offer that would change their lives and the lives of their shareholders. 

But Noah didn’t want to sell at first because he felt like the timing was off and unnecessary. They had two developing products that no one would pay for, they had cash in the bank, and because of COVID, they had a flat 2020, and felt like they could have done better. 

However, a life-changing offer is not easy to ignore. And as he pondered more into the deal, he realized that Litera was only interested in serving the law firms. With that, Noah came up with an idea to carve out the business, create a copy of the underlying technology that enables finding information contracts, and spin it off to a new entity that could serve corporate businesses. Litera agreed to their proposition, and Zuva was born. 

Lessons Learned

During this sell-side process, Noah spent a lot of time negotiating the term sheet. It was a fairly complex deal, and getting the IP right was important. Also, the reps and warranties were a bit of a double-edged sword. 

In the beginning, it made it easier for everyone as they would have fought and negotiated a lot longer if they didn’t have warranties. But after the deal was signed, the insurer made things a bit more complicated because of the diligence needed to write the policies and exclusions.

Also, the buyer’s flexibility, combined with a good offer, allowed them to close the deal faster and stopped Noah from looking for other buyers. 

Transition Service Agreement

The deal’s TSA was also interesting as it went both ways. Zuva needed some help standing up their newly formed business, while Litera needed assistance transitioning Kira Systems into their organization. 

However, it wasn’t as difficult as expected. Inside Kira Systems, they were already running a separate team for the corporate side of the business, so when it was time to carve it out, they only needed minor assistance in hiring and setting up the new entity. 

Advice to Entrepreneurs

Noah believes that the key to this successful deal that ended up changing his life was empathy. Because he understood what the buyer wanted from their business and their goals, he was able to be creative and come up with a deal structure that made everyone happy.