Unlocking New M&A Strategies: Uniting Venture Capital Insights and Public Equities in M&A

Venture capital experience in M&A

There are a couple of things that I still stress in my day-to-day workflows today that really come from my foundation in venture. One is really emphasizing deal sourcing. The other is around investigating product market fit of a target company.

On deal sourcing first. In venture capital, you distinguish yourself through differentiated deal flow and differentiated deal flow comes from sourcing. But I'll be blunt, for a lot of people, sourcing is a painful exercise. You have many conversations, most go nowhere. 

The process brings about negative emotions because a lot of times the companies that you want to invest in will reject you. And a lot of times the companies that want you to invest, you probably need to pass on, and then you try to do so without sounding like a jerk.

So you add to this a layer of the actual exercise of setting out cold outreaches really in mass in bulk volume, whether that's cold calls or emails. It's viewed as a mundane task and often viewed as lower value-added than, say, research, diligence, or execution. 

You take all these factors into account. It's no surprise that many corporate development functions prioritize in-house resources for diligence and execution and outsource deal flow generation activities to brokers and bankers. 

Coming from a venture capital background, I have a firsthand appreciation for deal sourcing because I've seen it firsthand drive differentiated deal flow, which then drives differentiated investment results. 

When I was an early-stage investor, my core responsibility was to find founders and CEOs who were disrupting their respective industries and invest in, back, and support those founders as they scaled. 

But these companies, these management teams, and CEOs are not easily found. They're not all neatly sitting in one database, ready for you to reach out to. So, what it will require of me is to create and cultivate an entrepreneurial spirit and proactive approach to sourcing and networking. 

So you need to find a way to network your way into these ecosystems. And taking into account, for a lot of these founders, CEOs, when they're raising their first round of investments, institutional capital, they're doing so without a bank or a broker.

So there's no formal process. So the only way you're even included in the discussion is if you somehow networked and sourced your way into the ecosystem. I've taken this appreciation for sourcing. I've imparted to my team at Ziff Davis. So on my team, everyone sources regardless of seniority, and we take two approaches to sourcing. 

The first is network-driven sourcing. As the name implies, this is really getting the deal flow from people we know. It's people such as our colleagues, our colleagues' networks, and people we've worked with in the past. It could be from people we've done deals with in the past, other investors, other bankers, etc. 

The second approach we take is thesis-driven sourcing. In this approach, we conduct fundamental research on a particular theme or industry, go deep, and if we find the theme particularly attractive for investment, say there are strong secular growth drivers or macro tailwinds, there's an opportunity for us to add value, or maybe there's high fragmentation, we invest.

So ripe for a potential consolidation play, we take all those factors into account. If we deem the sector to be particularly attractive for investment, we'll then create a market map of the entire landscape, create a comprehensive list of all the companies that could be potential acquisition targets, and then stack rank them by criteria that are suitable for us.

In another scenario, we would do this where one of our existing portfolio companies or business units identifies a need for a technology product solution, maybe even a management team with a certain expertise. 

In that same scenario, we'd run a buy-build partner analysis. If it makes sense to buy, then again, we create a market map. We create a full list of all target companies and then reach out to them systematically. 

So that's kind of sourcing. If I had to characterize the motion for our team, it's very entrepreneurial and very proactive, which I think is very common for many venture capitalists in terms of their sourcing approaches. 

The second thing I stress today about my workflow is that comes from ventures really investigating a product market fit of a target company and to do this really as much as I investigate a company's financial performance. 

So, in early-stage investing, studying the product and the customer is paramount. It's paramount because, at the early stage, oftentimes, you have very little in terms of KPIs or financial data books to analyze, right from series C all the way up to series A. 

I'd study a specific market size, think about the industry's pain points, and double-click on the potential customer and the product that could actually solve those pain points. 

So with respect to customers, really think about:

• Who is affected the most by the pain point in the industry? 
• Who are the potential user personas that would want a solution to this pain point? 
• Who within the enterprise would be advocating to purchase a solution to solve this pain point down to the job family?

And then, with respect to the product, really consider the landscape of the different types of products and solutions. 

There are a couple of categories of companies. 

• There are the incumbent solution providers, and often, they do not fully meet the customer's needs. 
• Then there are the emerging product providers, and these companies are doing a better job but not fully satisfying customers' needs. 
• Then there's this new class, which I call disruptive product providers or product solution providers. These companies are driving step-function improvement in the solution to fully meet the customer's needs. Ideally, if you're assessing, investing in, or acquiring a company, your company falls into this category.

I would do that assessment really focused on product market fit, specifically on the product and the customer, and then overlay that with an assessment on founder market fit. This is essentially asking yourself, what is it about this particular CEO, founder, and/or management team that makes them uniquely qualified to solve this problem in the industry?

By adopting this approach, I've trained myself to resist the temptation of flipping to the end of an investor presentation to where the historical financials and the three-year growth forecast are and to really delay doing that until I get a full grasp of the industry's problem, and then the potential solutions and the how that target solution compares to substitute offerings to the marketplace. 

This isn't to say that studying financials isn't important. They obviously are part of every corporate due diligence checklist. But I don't lose sight of the fact that financials are a lagging indicator of a company's performance and health. It's really customer behavior that's the predictive or leading indicator of a company's performance and health.

Strategic networking for building a pipeline

Not everything I do may be different from what you're thinking, but I did pick up on the fact that you're more receptive to outreach if they're adding some type of value, helping build out your pipeline, etc. 

There are a couple of things that I do that work for me that I'll share, not sure if it's entirely unique or not, but the first thing I do is try to meet the founder CEO as early in the company's life cycle as possible. 

And stating the obvious, probably for a lot of people, when I meet the founder and CEO for the first time, I am completely attentive, completely engaged, and practicing active listening. I've been in countless investor meetings, where I've seen other investors try to multitask in this initial meeting.

To me, this is a big loss of opportunity. It's a loss of opportunity to build a sincere connection with the founder and CEO from the very first touchpoint. So whenever I meet a founder CEO, I make an effort to put my phone on silent, put my phone face down, and give them my undivided attention.

They give me their undivided attention, and I've seen this allow us to go much deeper early in the relationship and really get a better understanding of the mission, strategic vision, roadmap, and even what they're looking for out of a value-added capital partner.

This is really important because when it does come time for them to think about a fundraising activity or an exit opportunity, you've built that good rapport and are connected with them. 

The second thing I do, which I think you alluded to a little bit, is actually try to add value if and however I can. So, whenever I meet with a founder CEO, I make it a personal goal to actually try to leave them some type of value, and it can be anything small. 

This is only if I can add value, but it can be anything from sharing industry research that could be relevant for them to sharing tidbits that I've been hearing about their competitive space.

It could involve introducing them to other capital partners, saying if I'm not the right one at this particular time or referring talent. So you now have spoken to the founder CEO. You understand their product roadmap and growth vision. You should have a point of view on where they need to invest in their org chart.

So, in that case, I'll refer talent. What I've found is that when I do this over an extended period of time, not just days and weeks, but months, quarters, maybe even years, I build a much stronger relationship with this founder and CEO, one that's built on value exchange. 

Where this pays off is, again, when it gets time for them to raise a round of equity or potentially sell, I'm in the discussion. And for a lot of these companies, you know, in venture, the companies that have great traction aren't actively fundraising. And then in M&A, the highest-quality companies often are bought. They're not sold. So you have to be top of mind and in the discussion already.

And, you know, just to tie back to Ziff, when we look into our CRM on our closed transactions and trace back to the very first touchpoint with a founder CEO, it could be years before. And it's years before in terms of us cultivating and fostering a relationship that culminated in a successful transaction.

One of the things I do that my team actually does is something we call reverse coverage. Reverse coverage means we don't just wait for bankers to bring us deal flow and teasers. We proactively reach out to bankers and cultivate a relationship. 

In doing this, we're staying top of mind and keeping them updated on our M&A priorities. At the same time, we're able to pick their brains, who are experts in their respective spaces, and then also understand what's coming down the pipeline for them. 

So for us today, we've cultivated a list of over 200 investment bankers around the world. Each member of my team is assigned a subset of that group. And we're responsible for really fostering and cultivating a relationship with them throughout the years. 

So, in any given year, we'll touch base with them multiple times a year through Zooms, coffees, lunches, etc. This ensures that anytime these bankers run a sale process in our respective space, we're included in the conversation; if not, we're one of the first calls or first emails.

I would presume a similar approach with PE firms. We also do reverse coverage for private equity. We do reverse coverage for bankers, who are our sources of deal flow, but also with the owners, who are sources of portfolio companies that they’ll eventually sell. So, we’ll do reverse coverage for PE and VC.

Making an effective initial outreach

On the receiving end, you can very quickly tell if it's an automated email or if it's very shallow versus someone who has been thoughtful, understands the industry, and has a more personal message. So, I try to veer to that second example, which has a personal touch to it.

The outreach email should be concise, but there should be enough meat in it that shows that you understand what the company is and you actually see a potential fit where you can help add value. 

Whenever I craft an email message in that manner, the response rate is much higher than if it's, "Hey, we're a programmatic acquirer. We compete in your space. Would you be open to talking?"

Playbook: How to craft effective cold outreach emails

First, there will be a quick intro to the company. We are a programmatic acquirer of a collection of digital media and software businesses. And sites of our brands that are probably more relevant to the data room space. We're not in the data room space.

Maybe the next paragraph would be: As we're thinking about expanding our portfolio and your industry is particularly interesting for XYZ reasons, it’d be great for us to connect and start a dialogue. It would be great to get an understanding of your company and strategic vision and also just get a temperature check on your openness to M&A. Would you respond to that?

If you really study their space, you'll know what conferences they typically attend. And if you're really trying to get smart in this space, you should attend those conferences, too.

So now it's okay if I bump into you in the hallway at a conference. It's, "Hey Kison, I sent you three emails now, and I'm sure you're very busy. You haven't been able to respond, but if you have five minutes, we'd love to just give a quick intro and learn a little bit more about you."

And then, there's a certain point where if a founder and CEO is not interested, you just need to respect that.

On the topic of conferences, another little trick, and maybe it's obvious for many, but oftentimes, you can ask for the attendee list. So, if there are 200 plus attendees, even if it's a two-day conference, it's impossible to meet all 200 people. So obviously, save that list. 

Then, for all the founders or companies that could be interesting to you but you didn't meet with during that weekend or that week, you can send them a follow-up email, something along the lines of attending the conference, seeing you on a panel, finding this XYZ to be really insightful, and would love to learn more and connect. Here's the intro.

There's a lot of science behind conference planning. It involves really targeting all the people. I'm a big believer in serendipity as well. With conferences, the more deliberate you can be in terms of the 12 people you want to meet in person and the following 12 people on the list that if you don't have time to meet, you want to follow up with an email, the more results you will produce.

So I can see how someone can attend a conference and their entire year's pipeline is built if they're very deliberate about it.

Assessing product market fit

So, starting with the market map, means really understanding the landscape and who all the constituents are in a particular ecosystem and the value chain. Let's say you're looking at a consumer app company, a health app company that you want to invest in. 

Now, you want to think about all of the different players in that ecosystem. There's the B2C consumer app, where someone uses that app to do something, maybe to track a fitness activity. But then you also want to think about the market in terms of all its partners. Where does it get its content from? 

Maybe its go-to-market is a partnership with another meal kit company or what have you. Really think about that. Map out all the different players that touch that company. And then think about which ones would be attractive and a good fit for you to invest in or acquire.

Once you identify that company, so in this made-up example with a consumer app, to assess product market fit really take a firsthand point of view, and have independent research, what I would do personally is I would download and buy the app. 

So, if you're assessing buying or investing in a company and you can use the product, you should use it. I would buy and download the app, go through the entire user onboarding registration system, and chronicle everything. 

Chronicle everything from the friction points in the UX to the trigger points to buying premium features and upgrading. Use the entire product, try out all the features, and at the end of it, ask yourself, "Is this a good product or not? Is it a good product relative to competing products in the space? Is it a good product relative to the cost?" 

And also be open-minded that the answer may be no, but it also may not be for you. So you should really open your mind to think about who are the other user personas and then put yourself in their shoes. Is this product interesting and compelling for them for the price?

You do all that, and then you would want to do that for the top four other apps. So now you're looking at the top five apps in the space, do the exact same exercise, download it, go through the user registration and onboarding, try out the product, and use all of its features.

At the end of this exercise, you will have taken a look from a firsthand perspective at all five top apps in this particular theme. Then, you can create a grid to compare and contrast all of the features between these five products. Then, you come up with your own point of view of which company has truly nailed product market fit.

And then you can even take it even granular basis or viewpoint and look at product market fit on a feature-by-feature basis. And sometimes what you'll see is for a particular app or company, all the value accrues to one or two features that really have nailed product market fit, and then the rest are kind of just nice to have bells and whistles.

In certain situations, if you're able to use expert networks to really get a lot of insight into surveys, or even just firsthand consumers who bought the product and really interview them, and really understand what was their path to purchase and then see if that path is consistent with your path and your viewpoint. 

You can put all that together, and now you can see, you can kind of get a sense of the market map of who all the players are, why the consumer app-facing part of the business or sector is interesting for investment, and then double-click into that to see is the app is good or not, and then compare it to the top competitor apps.

That’s the step in the due diligence process when you think about the qualitative piece. Of course, we’re leaving aside the core qualitative assessments. But if you’re thinking about just studying a particular product, that’s where I would start. You’ve really got to get the product in your hands and start developing a firsthand interview.

If it's a B2B product and says it's meant for digital marketers, then if you're not a digital marketer, you'd certainly want to get a subscription or a trial for your company's digital marketers and have them try it.

Strategic thinking and culture fit

That's a little bit later on, but it's certainly important in terms of the investment process, which is really thinking about how likely it is that you are able to successfully combine company cultures. 

If one culture of a company really leans into R&D and is really big into a lot of experimentation, which inevitably means a lot of failures, and that's culturally embraced at the company. 

Typically what you see is kind of an earlier-stage company, sometimes a little bit higher R&D, CapEx, and a lot more staff on engineering products, which may translate into a lower current margin profile. 

And then you contrast it with another company that maybe could be later stage and really everything is around ROI. Every decision they make is around ROI. Then in that scenario being very experimental without an ROI to show for it is not as embraced. 

So it comes down to a question of, okay, if you think you're going to combine both companies, which culture will emerge? Or maybe there's a scenario where you keep the cultures separate and where both people wear their own T-shirts. Or is there a kind of meeting in the middle? 

So those are all things that do come into play, but at the outset, when you're thinking about just the market landscape and then the company that you're interested in and how good that company is, when you view it from a lens of product market fit, I would say the culture fit is kind of later stage in the process.

Some cultures are also no-jerks cultures, and in some cultures, it's, well, if you are an extremely high performer, we'll tolerate jerks. So those are all things that you kind of get a feel for when you meet the other company.

Unlocking new M&A strategies

Where I would start is to conduct research on that segment of folks for whom your perception is they don't really have a solution. And so now, you know, pick what's critical mass to you. 

But maybe your goal should be to talk to 10 to 15 people who are in the buyer's seat, and who are looking for a solution but are not buying because they don't think a solution exists. And then, really understand. What is it that the incumbent solutions are not satisfying for you and your needs? 

It might be just as simple as cost. It's just too expensive, but it might be other things where they might say, “Look, we don't need a Ferrari. A car works, and we're willing to pay for it if it's a quarter of the price.” That's an interesting insight. 

If you have 12 more interviews and everyone gives you the same consistent message, you have an idea for a much more toned down, simple, easy-to-use product at a quarter of the price. And you kind of start building off that. 

So, I would say step one is to conduct potential customer research and really get to know what they think. What is the pain point in terms of the solution offerings currently in the market? And then what is their price elasticity, or what they'd be willing to pay for a product? 

I think those two would be good insights for you to come back, think about it a little bit more, reflect on it, and then go on to kind of the next step.

I really take a venture capital approach when going through this exercise because in acquisitions, often the companies are a bit later stage, so the discussion is completely different versus talking to a seed stage company where it's really a conceptual company. And if it's a concept, then it's about what gives you conviction in the concept. 

Well, I've spoken to a hundred customers or potential customers, and they're all saying the same thing: they have this problem, and they're willing to pay this much to solve that problem. 

That's an interesting insight that could be the kernel to really start a new company. Well, you see how those discussions are less relevant, maybe for a later-stage company that's doing, you know, 50 million EBITDA, and now you're thinking really about the rate of change in terms of financials is really the core discussion.

Market fit also is a point in time. So it can be fleeting. You might have product market fit today, but over the next year, if the consumer preferences start shifting, if the marketplace starts shifting where your competitors start innovating and providing even better products, you actually may lose product market fit.

And that may happen first before it actually starts seeping in and is reflected in your financials. 

So today, things are great. You're growing top-line, making up 20 percent year over year. And then, in real-time, you start losing your product market fit, given just the factors I mentioned. And then you'll start to see revenue in subsequent months start declining. They are always up and to the right, and they always hit a billion or a hundred million in revenue in year five.

Leveraging bankers in M&A deals

Bankers are really helpful. We do source, and we prioritize proprietary deals, but bankers are helpful, especially for larger deals. So larger to me means a company doing over 20 million a year in EBITDA, but bankers are helpful there on the sell side in terms of bringing a deal flow. 

Nowadays, it's unlikely that a company with 20 million EBITDA will transact without running a formal process to ensure price discovery. But we've conducted such extensive research in all the spaces that we compete in that we often already have a target list of companies that we want to acquire and have it mapped out. 

So when we do receive an anonymous teaser from a banker, someone on my team can scan it in a couple of minutes, and we'll know the company. That's always fun. And it's important because it gives us a speed advantage. 

Now, since we go into the process with the pre-research done, with a thesis, with the rationale of why the companies make sense to acquire in the very first meeting with the management team, we can dive right into more strategic topics as opposed to spending that first meeting talking about the product or the business model.

So we go into a process with a prebuilt lead, so to speak. As long as we devote the proper resources to that opportunity, we should be able to sustain that lead throughout the process, which increases the odds of our success.

On using representation on the buy side, I can't speak directly to that because we typically handle everything in-house. In certain special situations, perhaps if it's a bit more complex, but the typical 100 percent acquisition that we complete, we're doing it all in-house. 

Of course, we use third parties for legal advice, commercial diligence, QV vendors, etc. But we're doing that in-house in terms of an actual buy-side banker representing us in negotiations.

Applying the Mosaic theory to M&A due diligence

Something that I still utilize heavily today in M&A from my time in public equity is the application of the mosaic theory, which I'll touch on in a second. But before I do, let me point out that a big difference between diligence in M&A and public equities is the sheer amount of information you can get directly from the management team. 

In M&A, if you're a strategic or a sponsor, you can create a comprehensive list of information requests, due diligence requests, a list of questions, and even request access to their dashboards, whether it be Google Analytics or HubSpot.

You send that list to the company, and in a very short amount of time, you get answers to everything. You get written responses, call requests to walk through your questions orally, and a data pack full of Excel files that answer all of your KPI requests. You might even get access to some of the dashboards you requested.

That's in M&A. In public equities, you're quite limited in what you get directly from the management team. You're limited to what they file to the SEC, what they post to the investor relations section of the website, and what they say in public forums, whether that's to the press or investors.

Essentially, that spans the Qs, the Ks, earnings releases, presentations, transcripts, non-deal roadshows, investor conferences, and the occasional interview with CNBC or your choice of trade journal, and that's the extent of it. 

As a public equity analyst, to become effective at getting a much more real-time sense of the company's health and performance, competitive positioning, the headwinds and tailwinds that it's experiencing itself, as well as its peers and the industry at large. 

You have to be very thoughtful about what other pools of data you can research to get that view because you're not going to get it directly from the company.

When I was an equity analyst, my approach was to consider the full value chain of the target company and all its constituents. That meant researching and interviewing target companies' customers, competitors, partners, and suppliers, if applicable. 

Also, to look at alternative datasets, such as credit card transaction data if you're looking at a more consumer-oriented business, or audience data, web traffic from SimilarWeb or SNL Kagan if you're looking at a media asset.

The mosaic theory involves taking all those disparate pieces of information, analyzing them, and then putting them together like a mosaic to form a cogent investment conclusion. Fundamental equity analysts highly utilize this theory. But what I've come to find is that it's actually quite usable in M&A in specific situations.

The main situation that I apply it to is when you're dealing with a larger company, it's an enterprise where they have a customer who's a public company, they have a competitor who's a public company, they may even have an acquirer or potential acquirer that's a public company. If that's the case, then it's a prime example for you to utilize the mosaic theory.

So, I'll make up an example. Let's say you're assessing investing in acquiring a company, a B2B MarTech company that serves large enterprises. 

In this case, I would consider three additional categories of companies to analyze outside of what you get directly from the management team, putting aside the data room, the due diligence topics, and the breakout sessions you have with the management team and senior leadership. 

The three categories I would think about and analyze would be its customers, competitors, and natural acquirers. The first would be its customers. So in this made-up example, let's say there's a large customer and it's a public company.

Here, you can pour over the financial reports and the transcripts and really try to glean anything you can into two questions. 

1. One, how likely is it that the customer will continue spending on the target company's solution? 
2. Number two, what would be the rate of change? Will they spend more, less, and hold the same? 

In certain situations, management will tell you of the target company that everything's rosy, and the top line is growing by 30% year over year. They're going to continue growing because they're going to increase spending with existing customers.

Then, when you look at the largest customer, a public company, you see they've actually been declining in revenue for the last several quarters, year over year, say 3%. Moreover, the CFO's guiding to margin expansion, so cost takeout and streamlining costs. So now it makes you question how can two things be true at once.

You're saying that the target customer is showing a declining top line and is going to cut costs, yet the CEO and management team of the target company are telling you, no, they're going to actually probably increase spending with us by 30 percent a year. 

Now, that may be possible and may be true, but at a minimum, this becomes another point of discussion for you to investigate further with the management team. So that's one category. 

The second category would be competitors. Here, if you have a public company that's a competitor to your target company, you can do a peer benchmarking exercise. What this really means is you're putting the P&L side by side, paying particular attention to revenue and margins.

In fact, with respect to revenues, you look at the top-line growth rate of your target company, the competitor company, and then the industry at large, the industry CAGR. This will tell you a couple of things. It'll tell you who the sheer gainers and losers are based on the growth rates.

And also by looking at the sheer dollar value of revenue capture, you'll get an understanding of where each company is in their customer adoption lifecycle. That's telling on the revenue side. With respect to margins, we would look at both gross and operating.

The key question here to really think about is: Is there something structurally different between the company that you're assessing and the competitor that should drive a difference in COGS as a percentage of revenue or OPEX as a percentage of revenue? 

Say, hypothetically, they might have different go-to markets, one product-led and one Salesforce-led. That could be the case, but if that's not the case, then you can conclude that the operations are actually the same structurally. 

Then, you can see if your target company is either over-earning or under-earning relative to the competitor. And if they're under-earning, in our case, sometimes we actually log that as a source of opportunity that we can address in the value creation plan post-close.

Lastly, the third category of company is natural acquirers. Here, you're trying to think about your bidding strategy. If you are in an auction process, who else are you competing with? 

Naturally, you could be competing with a larger company that's an acquirer, that's a public company. And you want to think about if they were to compete, what would they offer in terms of price, which gives you an idea of where you need to be competitive. 

Here, the first question I would really consider is who's a natural acquirer of their target company. If the target company provides a product or solution that fills an immediate or clear hole in the larger acquirer's company's product suite, and they've stated publicly that they're looking to move in that direction, then I'd classify that company as potentially a natural acquirer.

From here, you can pour over the financials, investor days, and transcripts to think about anything they state about their M&A strategy. 

• Where does M&A fall in their capital allocation priorities? How acquisitive has the company been in the last several years? 
• When they've acquired a company, is there a type of company that they acquired?
• Is it a certain type of IP or content? Is it a certain type of geography? 
• Is it a certain type of business model? 

And once you have that sense down, now you can look at valuations. 

• What's the largest deal they acquired in the past? 
• What's the smallest deal they acquired in the past? 
• Is there a sweet spot where you notice a kind of range of prices that clusters around? 

Of course, you take all those figures, put them in the numerator, and relate them to KPIs and financials. So now you get a multiple on everything from the audience, user size, and MAU/DAU, depending on the business model. You put those purchase prices over financials to get multiples over revenue, EBITDA, and free cash flow. 

So you run all that through the wash, and now you have a sense that here is a natural acquirer with whom you might be competing in a bid auction. And if so, here's the range of prices you think they'll pay, which will be informative for your bidding strategy.

I know that was long-winded, but that, in a nutshell, is the mosaic theory, which is highly commonly used by fundamental equity analysts but found very applicable in M&A as well.

We sometimes work with suppliers, but it really depends on the business model. If you're creating hard physical goods, suppliers are a much more important topic. But a lot of businesses that we're looking at are very capital-light. A lot of them are digital media assets and software businesses, so they’re less so important, but there are some edge cases where we would look into that. 

Embedding M&A into corporate culture

I would say the hardest thing is infusing M&A into the company's culture. Partly, what makes it challenging is that it takes an extended period of time, just repeated reps and sets. 

As I mentioned, Ziff Davis is a highly acquisitive company. We've completed approximately 40 transactions in the last five years. Our M&A program and team are a highly functioning, well-oiled machine. 

And so, with every closed transaction, we increase efficiencies, we gain learnings, and we reinforce this muscle memory. 

By continuously reinforcing this muscle memory, we've converted M&A from one growth tool into something that's very natural and almost instinctive for the company. It's no longer a tool that's pulled out of the toolbox every other year and has to be dusted off and relearned.

It's building your M&A muscle and then also just consistently keeping it in shape or reinforcing it. 

Transitioning from public equities and venture capital to M&A

I've been at M&A for a while now, but when I first joined, where I went to hone my craft was really around becoming more deliberate in terms of how I want to compete in a highly competitive bid auction process. 

In a highly competitive bid auction process, you're competing on various fronts. You're competing on price, speed, certainty, and ease of transacting. The only way you can ensure victory is by offering the highest price. 

Now, if you don't want to completely lean on that lever to compete, then the more clear-eyed you are going into a process in terms of how you want to distinguish yourself, the more likely you'll have a shot at success.

Before moving to M&A, my job as a researcher and investor, my core responsibility was to generate investment ideas for the firms I worked for.

So that meant I spent all my time analyzing companies, interviewing management teams, conducting channel checks, tracking industries and markets, building models, and forecasting where a company would be anywhere from one, three, or five years out.

All that's still very important in M&A, but there's an added element in certain situations where you're in a competitive bid auction process, and you need to be able to compete on those metrics that I mentioned. 

Over time, our team has leaned into speed and certainty as areas where we compete and differentiate. On speed, we built a system, a machine that works and is repeatable. Without any hubris, we can move as fast, if not faster, than any other party. 

With respect to certainty, something that we do a little bit differently from others is that we actually do a lot of work at the initial bid stage. I know it's common practice for some to almost flippantly throw in an initial bid, IOI, with a wide range just to get to the next stage and look at the data. 

That's not our approach. Given the information set, our approach is to spend the time doing the work and conducting extremely detailed diligence at the initial bid stage. So that way, when we do put in a bid, it's a highly informed bid, given the information set at that stage. 

Over time, speed and certainty have really been something that we've been able to differentiate on. And there have been times where we're not the highest bidder and we end up winning the bid for one of those reasons.

So today, I expect myself but also my team to continue going extremely deep on the purely investment analytical perspective. Critical thinking there, but I also expect myself and my team to run an extremely tight process and ensure seamless execution. 

So that way, we continue to really lean into speed and certainty as a differentiator when it comes to auction processes. It's interesting, we always hear speed and certainty as a combination word almost as if they're linked. They're distinct. Speed is how quickly you can complete diligence, get the internal approvals, and then wire the funds.

Certainty is how likely is it that you can hold your offer through confirmatory and close when you say you're in close. And so those are two things that we think about as discrete, items and we try to be very strong on both. They're not just one word. 

That’s given the information set in stage one. In stage two, if there are new learnings that are contrary to our thesis or belief at stage one, then we'll have to accommodate accordingly.