Know the buyer’s narrative 🧏🏻‍♀️

Welcome back to another edition of The Wise Exit!

I’m Brian Dukes, a Managing Partner at Exitwise. 

In today’s newsletter, I’ll cover: 

• 3 lessons from Harry Glaser about his exit from Periscope Data 📊 

• Selling a business checklist – a complete to-do list 📰

• Why I fired an investment banker on a 9-figure deal 💡

• Interesting books, podcasts, and more 📚

Let’s dive in!

Featured Founder

In 2012, Harry Glaser founded Periscope Data, an analytics platform he grew to $25 million in annual recurring revenue and 150 employees. 

He sold it to Sisense in 2019 for $130 million.

Glaser wrote about the lessons he learned on his website, from which I’ll share three with you below.

M&A Lesson 1: Don’t raise beyond your fundamentals

It’s important to match your funding round with how your business is performing, as your post-money valuation is a hard floor on your sale price. 

Glaser says, "At Periscope Data, after a failed Series C process, we ended up selling at our Series B price. It’s tempting to think a Series C would have helped us get a better outcome. 

“The opposite is true: In fact, we’re lucky the Series C investors all passed, so that a well-priced acquisition was still possible."

M&A Lesson 2: Know the buyer’s narrative

While founders focus on preparing their own business for an acquisition, Glaser recommends trying to understand what’s happening on the acquirer's side, too.

For example, has their company had a series of recent setbacks, leading to a perception of decline? Have their competitors launched a string of new products, which makes them look stagnant?

This could mean that what the company is really looking for is a big splashy acquisition to change the narrative. Understanding the optics is a key to the negotiating process.    

M&A Lesson 3: Understand the tax implications

This may be the least sexy lesson, but it’s one of the most important. Maximizing value and cash flow requires a tax-focused analysis and modeling of any potential deal. 

Founders are the ones responsible for the final decisions, many of which have tax implications. Glaser admits he’s still striving to learn this one.

But he understands its importance: “The best CEOs understand their deals so well they understand how they’re taxed. Just know that’s where the bar of excellence is.”

Featured Blog 📰

Getting your business ready for sale can be exciting, all-consuming and… daunting. I’ve tried to simplify the process by creating a checklist you can follow to ensure you’re getting all the right things done.

It starts with a business valuation and consultation with advisors to align personal and business objectives.   

Read the blog post: Selling a Business Checklist – Complete To-Do List.    

M&A Tips from Brian Dukes 💡

I once had to fire an investment banker on a 9-figure deal. Although it felt great to hire a swanky investment bank who gave us a massive (outsized) valuation, they didn’t have the expertise in our industry to see the deal through. 

The solution? We hired an industry-specific M&A expert, who had experience in our sector, understood our business, and knew our potential buyers. And that’s why I now help others put together their M&A dream teams.  

For more M&A tips from someone who’s been there, follow me on LinkedIn.

What I’m Watching 👀 

Here’s what I recommend watching this week: 

The Last Dance (sports documentary)

I recently re-watched The Last Dance on Netflix, giving an inside look into the Chicago Bulls run to the '97/'98 NBA Championship. I enjoyed it more the second time around for several reasons: 

1) Growing up in the 80s/90s as a Detroit Pistons “Bad Boys” die-hard, the Bulls were an archenemy. It was fun to relive the victories, and painful to watch the fall from grace. 

2) As a business leader, I appreciated coach Phil Jackson more than ever - the complexity of managing the egos and motivations of an exceptionally talented team demanded a special coach. (The Dennis Rodman to Las Vegas story in ep. 3 is a must watch.) 

3) The (somewhat unfair) posthumous inside story of GM Jerry Kraus. His career (and life) is complicated, but he was far more talented than The Last Dance gave him credit for. 

4) A reminder of the toll that greatness takes on an individual – Jordan gave everything he had, and we were all left wanting more.  

That’s all for now. 

Tune in next Wednesday for another set of M&A lessons, and have a great rest of the week. 👋

Best,

Brian Dukes, Managing Partner