Ep. #778 - Preparing for an Exit

Matt DeCoursey 0:01
And we’re back. Back for another episode of Startup Hustle, Matt DeCoursey, here, with Matt Watson. Hi, Matt.

Matt Watson 0:07
Hey, how’s it going?

Matt DeCoursey 0:09
It’s, it’s going man, you know, I, I have been walking towards this bright shiny light that says exit. And I’m not sure what’s on the other side of it. I think just an alley or a street corner or the back of a building, but I’m not really sure how to prepare for an exit. I heard that you might know a couple of things about this. Is that true?

Matt Watson 0:36
I’ve done it a couple times over the last 20 years. So yeah.

Matt DeCoursey 0:40
Did you end up in an alley or behind the building or anything like that? Are we talking about a different kind of exit?

Matt Watson 0:47
It’s really more of a roller coaster than anything.

Matt DeCoursey 0:50
Wow. Okay. Okay. Well, I want to talk all about that. But actually, I do want to let everyone know before we do that, for today’s episode, Startup Hustle is brought to you by FullScale.io. We help you build a software team quickly and affordably. That’s Matt and I’s company. And we, we want to talk to you, you know that it’s hard to build a team of software developers. And if you want to prepare for an exit, I have a feeling that you usually have had some good help along the way. So yeah, getting an exit. It’s a privilege not a right. Am I correct?

Matt Watson 1:30
It’s a lot of hard work, a lot of preparation, a little bit of luck, and a lot of blood, sweat and tears, man.

Matt DeCoursey 1:39
That, that sound the tone of your voice. As it as sounded as if someone had no knows how tiresome that process might be. Is that a good way to describe it?

Matt Watson 1:55
Well, and as other listeners may remember, we did a special Startup Hustle video about when I sold the company to Stackify and that was a really cool video. It’s like 20 minutes long or something like that and find it on YouTube. And under Startup Hustle TV, but yeah, it just kind of catalogued

Matt DeCoursey 2:15
We’ll just put we’ll put a link to that in the show notes.

Matt Watson 2:17
Catalogued what what happened along the process of the exes itself, just kind of some daily video logs. And yeah, by the end of it, I definitely looked a few years older and tireder. And I felt like I should have gray hair like it’s just an exhausting process of, of going through the whole process of completing a transaction.

Matt DeCoursey 2:40
Yeah, now, I want to talk all about that. And this is your you’re the expert here. But you know, for those of you less than a business exit is the selling of ownership in a company to investors or other another company or entity. And an exit strategy is a plan for the business or business owner to reduce or liquidate their stake in the business now, exits come in a lot of shapes and forms. Sometimes they’re to private equity groups, sometimes they’re to other companies. Sometimes. I mean, I would still say an exit in some regards, is the IPO. Because for the founder or the initial shareholders, that’s a changer, you know, changes a lot of different stuff. But you know, when it comes to me now, did I, what did I miss there?

Matt Watson 3:26
Well, yeah, next, it could be any kind of selling a business. And sometimes it could also be buying business partners out or, you know, great grandpa is just passed away. And now we’ve got to do something with the estate. I mean, there can be a lot of different reasons and types of, of transactions there.

Matt DeCoursey 3:45
And one person’s asset is another person’s acquisition.

Matt Watson 3:50
Yep. Absolutely.

Matt DeCoursey 3:51
Yeah. I mean, and that’s because if you’re not, then you’re just shutting the business down. Now, that said, sometimes acquisitions kind of result in that because, well, you know, you mentioned being the founder of Stackify and start and that’s was the founder Stackify, which was acquired by Huntington Beach-based company Netreo, and which, you know, and like, we don’t have to get too centered around that. But Stackify essentially becomes a natural product, right? Yep. And they have a name, but some of that like, but the but to give you some context, like the actual business entity of Stackify, as it was absorbed by natural, so there’s not, there’s one entity there or whatever. And, you know, that’s, that’s essentially what an exit is now, you know, when it comes to so these are like mergers and acquisitions. You know, selling your stake, like you mentioned to a partner advisor. I think family successions is a good one now, the whole the whole legality of of a corporation a corporation itself, doesn’t die. It’s eternal meaning like, but people do. And sometimes those people aren’t ownership say,

Matt Watson 5:05
Well, and the family succession thing is actually one of the big issues around inheritance taxes, right? So let’s say you own a family business. And so and so dies, well, if you have to pay an inherited, you know, the inheritance taxes or the you know, death tax or whatever you want to call it, when somebody dies, potentially, you’ve got to sell the company to pay the tax, like it literally forces, good companies to be sold off just so the taxes can be paid. And that’s one of the downfalls of the the tax structure that the way that that works. You can’t just pass it down to, you know, the children or whatever, you almost have to you’re forced to sell it just so you can pay the taxes.

Matt DeCoursey 5:48
And well, in some cases, you know, and then there have been some changes with some of that. I mean, depends on what it is and how but yeah, so then that’s, you know, another thing too, is, well, you talked about succession, and that in that form of quote, exit, traditionally, businesses don’t do well, when they go from dad to kit. Yeah, the generation the the success rate of generational businesses is really low. And that’s often attributed to the fact that the kids don’t have the same passion that

Matt Watson 6:24
Yeah, absolutely. That’s absolutely.

Matt DeCoursey 6:28
Okay, so now, when we when we talk about an exit, so those are some forums and some wise and you know, we’ve covered we’ve covered a lot of that. And you know, we’re here in part 48 of our series, and we’ve talked about what is an acquisition, so you can go back and listen to our prior episode, in that we’ve talked about raising capital in later stages, maybe sometimes it’s time to quit, that was the 45th piece now. In this particular case, you know, when it comes to preparing for exit, now, buddy, I’ve I’ve been, I felt like I got to sidecar on some of this and I chuckle a little bit, because this is I don’t think there’s really a way that we’re going to Okay, theoretically, you would think that this would be a joyous thing. For a founder.

Matt Watson 7:17
No, no, it’s not.

Matt DeCoursey 7:22
Right, I know, that’s why I’m chuckling I’m like, I’m like sitting down. It’s like, you think everyone’s like, Oh, yeah, exits, and then they’re like, you know, but the people that I, I don’t think everyone I’ve ever talked to is like, you know, it was the, the whole path up to the actual moment we signed was glorious. No, no,

Matt Watson 7:42
it’s glorious. If you’re a shareholder, it’s a nightmare, if you’re one of the executives of the company, and especially the CEO, CFO, CEO, oh, you know, certain positions and have to deal with all this crap, right? Because you spend weeks and weeks and weeks having, you know, spending, you know, 50 to 80 plus percentage of your time dealing with all the due diligence stuff, and talks and this and that whatever, while still trying to run a company at the same time, right. And the lucky shareholders that make a bunch of money at the end of it, you know, they they don’t really have to do anything. So it’s glorious for them. But the executive team that’s got to actually get the transaction done. It is an absolute nightmare.

Matt DeCoursey 8:28
Yeah, and you know, so well, let’s just jump right in. So okay, the the due diligence process. Now, why does due diligence exist?

Matt Watson 8:38
Well, if you’re buying something, you want to know what you’re getting, right? You want to know, do people like the product? You know, how much people really pay for it? Do they really have customers? Who are the customers? How long have they been a customer, right? You want to see all the bank records, accounting records, you want to prove what it is that you’re selling, is what it is right? Instead of just taking their word for it. You’ve got to do your due diligence. And take we were acquired by Netro, which was, you know, primarily owned by a private equity group. Well, and that private equity group also has other investors, right? So a lot of it is cya. Cover your ass all the way down, right? Like Netro wants to make sure they’re covered that they’re doing the right thing, but the private equity group wants to be covered, and make sure that they’re, you know, investors are satisfied and nobody made some mistake along the way, right? That’s going to cause some lawsuits or something like that. They want everything you know, every rock has to be turned over and all that kind of stuff, just to make sure everything is what they say it is and you’re not buying vaporware.

Matt DeCoursey 9:40
Confirmation is the one word answer, right?

Matt Watson 9:43
Confirmation of everything.

Matt DeCoursey 9:46
Now, but that it’s that, as you may have figured out by the long string of things that Matt just laid out, conformation isn’t as simple as just like, Hey, okay, cool. We’re good. Now that can exist in different shapes and forms because, as you and I talked about, so Matt, you’ve gone through two exits, it wasn’t just the Stackify one. Yeah, he went through one with VinSolutions and 20. Was that 2012? Is 22. All right?

Matt Watson 10:14
Well, yeah, I think 2011

Matt DeCoursey 10:18
Okay, so, so that said, that process like your, they can be vastly different the, the level of confirmation or the degree of Well, for me, we could just say, scrutiny can be different for different parts of the business. So you have to look at the business’s, like 500 piece puzzle. And when they when they’re confirming that the pieces do, in fact, fit together, some puzzles are a lot harder to do than others. And then some people are better at doing puzzles, maybe?

Matt Watson 10:49
Well, and so the first time around, I was a chief technology officer, and I was involved, I wasn’t involved in all the detail work of the diligence, you know, our, like, Operation staff, and CFO, you know, dealt with most of it, you know, I had to deal with meetings around our technology and our tech stack and how it worked. And, you know, some diligence around the technology, sorry, but I didn’t have to deal with all the due diligence around like financials and accounting and stuff where the second time around here I did, and I got the spreadsheet pulled up, I can go through the whole list with you. It’s a it’s a total nightmare. And and I think back to your point as a second ago, it really depends on the type of company that’s being acquired, and maybe the risks or the perceived concerns or risks by the buyer. Right. So maybe the buyer is really concerned about customer churn. And so they want to dig really, really deep into all the customer history and how much they pay and whatever. And they may go really deep and certain topics like that. Or it could be they’re like, Hey, we’re trying to figure out how we integrate the companies together. And then and also bring in third party consultants to talk about the market positioning. And maybe you’ve talked to, you know, Gartner and Forrester and things like that, you know, what we buy this company? What, you know, how do we do this? How do we go to market, I mean, it really depends on the situation. And they may go way deeper in some areas than others, partly depending on what their plan is, you know, if they’re like, Oh, we want to integrate these things together, technically, well, they may go way deeper on the technical side, to figure out how to integrate them together, wherever they’re just buying it of like, Oh, it’s a really profitable business, we’re just gonna buy it and let it run as is, we don’t really care, you know, they may not dig very deep in a certain thing. So it just kind of depends on the scenarios.

Matt DeCoursey 12:39
And in some cases, the require there might be a requirement of some third party validation. Yeah, I mean, there’s, there’s, depending on the size of the transaction, and who’s doing the transaction, like, if a publicly traded company has acquired another publicly traded company, you can pretty much guarantee that there’s a third party, there’s a, there’s a long list of third party audits that are occurring, everything for it could be compliance accounting, I mean, dude, it’s gonna go go on and on and on.

Matt Watson 13:12
Well and even selling a private company to another private company, there’s some sort of SEC approval, or whatever it is, I honestly don’t remember the exact details. So anything I say is gonna be wrong here. But I know of VinSolutions we had to do that. And we weren’t really worried about it being denied. On the SEC by side, maybe our transaction was small enough that we didn’t need it. I don’t know. But there is that even happens on the private transactions. It’s got to be based on some dollar threshold or something. I don’t know what they are. But

Matt DeCoursey 13:46
yeah, and then some of these things too, so are you so you’ve you have this long pathway of building the business and with it, you might have taken money from certain people, you may have created a board, you may have created a lot of different things you may have management employee buyouts to consider you got to a halt, like, the the the the exponential nature of the checkmarks is gets pretty juicy and big, quickly, right?

Matt Watson 14:15
Well, and and honestly, it’s, it’s also one of those things where when the company is younger, and it’s, you know, mate, let’s say it’s not very successful, it’s not make a lot of money or whatever, it’s just kind of flying under the radar. Nobody cares as much either about equity and ownership and all these things, right? But as soon as the company gets really successful, or there’s talks about an exit, then everybody becomes like sharks around equity and stock options and all these things right. And, you know, business partners fighting with each other about their equity shares, investors, getting involved, whatever, right? But, you know, when that when you’re not in that situation, nobody really cares. And then all of a sudden, it becomes a hot topic all the time, because you got a bunch of sharks swimming around. trying to get their piece of the big prize, they think it’s coming.

Matt DeCoursey 15:05
We’ve talked about that quite a few times. And it’s funny you look at, of which of the 800 episodes that we’ve published, and we talked about that now. Because now, you know, I say that jokingly, cuz I don’t know, they’re I don’t know if it was episode number one to 8108, or 13, and 19, and 57. But this is a good example of we were preparing for an exit on our podcast, I might need to know that. So in a lot of cases, when you’re preparing, like, you talk about this, so why is it miserable for a CEO or CEO, or CFO or whatever, this is a time when you are really good, can end up being tasked with undoing a ball of rubber bands that you may have created a long as

Matt Watson 15:56
well. And as we talked about preparing for an excerpt, right, you’ve got the the early preparation of it, and then you’ve got the like process of actually doing it. And, you know, when you’re preparing for it way in advance, a lot of times companies will focus on improving their profitability, or EBITA, and things like that, because they’re, you know, they think their valuation is going to be based off of a multiple of EBITA or something, right? So they’re trying to, they may not hire as many people, they may cut some costs, they may do things like that, to try and make themselves look better on paper. You know, so there’s a lot of different things that may go on when you’re preparing for an exit like kind of way in advance, trying to optimize the business to get it in a better financial state. So it looks better, right? The amount of debt all these all these types of things that the business has. But but a lot of it is the preparation of actually doing the transaction is a whole nother whole nother type of preparation. Yeah, both.

Matt DeCoursey 16:55
Yeah, yeah. I’m not saying you know, that. Well, there’s a lot of usually a lot of lawyers, accountants, consultants and other people that definitely benefit from that, right?

Matt Watson 17:06
Oh, my god, yeah, all people you don’t want to talk to and, and that’s the hardest thing about all this, that people have got to understand is, anytime you’re, it’s just like raising capital, anytime you’re raising capital, I mean, that becomes almost like your full time job. And you can’t run the business the same way, like you can’t do what you would normally do. And going through a transaction like this, even when you’re just dating potential investors, just like you’re raising capital, you’re going and you’re meeting with potential companies that would acquire you and building pitch decks and data rooms, and all this kind of stuff, doing presentations. At when we sold VinSolutions, I think we went to California two or three times I met with like over 10 different people. And it was just like, you know, several months of just flying all over the country, having meetings and all this stuff, it’s just, it’s an insane amount of work. And you can guarantee that like more than 50% of your time on a daily basis is spent doing some sort of diligence, or meetings or whatever it is.

Matt DeCoursey 18:03
So there’s kind of a factor that you’ve got to consider amidst all this stuff going on. First off, you’re probably running a somewhat robust business, if not a full, like a full on rocket ship. So there that’s going on, like Matt, you’re saying, Hey, here’s half my time go into this. And then that from like, a human and a reality component. I mean, there could be a lot of money on the line here. And let’s be realistic about the fact that like, that’s stressful, like, because math to the best of my knowledge, those deals that you made, weren’t fully done until you didn’t tell you saw wire transfer into your bank account, at which point then you have the money and then tell them here’s the thing like realist and these things fall apart all the time. And

Matt Watson 18:53
and that’s what our episodes about.

Matt DeCoursey 18:56
Yeah, yeah, yeah. Well, and you know, you get you get into that and, and you know, you also you so we were talking about like the past episodes, you talk about people fighting and being Sharky about stuff like that. Here’s the thing is when it comes to the human psyche and personality types, every step, every personality type, every human, every one, your worst parts come out when you’re under stress.

Matt Watson 19:21
Sure, yeah. You talked about suffering.

Matt DeCoursey 19:25
Now you got a bunch of stressed busy people with a bunch of money on the line and you’re like, Oh, my God, I mean, Matt, really? What was that like? Us? Like it was I know in the BIM solutions one it was a little different is yeah, a lot more partners. Stack. FYI. You were you were the primary owner. I mean, in any case was is there you know enough to throw anyone under the bus but did you see anyone freak out or implode along well,

Matt Watson 19:49
and so let’s talk about that for a minute because you’ve got the you got the run up to it, where you’re talking about doing a deal and eventually the executive team and kind of knows, you’re like, Oh, we’re talking, you know, they’re talking to different people. And you may need to meet with them, right? Like, oh, the potential buyer wants to meet the team. So the executive team knows. And then eventually, you get to the point of like getting an LOI and the deals, you know, supposed to happen within, you know, two months or three months, or whatever. And then you get to closing and finally closing the transaction, right? So all along that process, there’s a bunch of other things that happen that end up causing stress points. And so for example, it sacrifi. As soon as we announced the deal, our head of sales decided to leave, he’s like, I just don’t see my position once this merger goes through. So I’m out of here, right? So now all of a sudden, we got to frantically figure out oh, shit now, well, how’s that gonna mess up our deal? You know, now who’s going to do that work over the next few months while we’re trying to sell the damn company, right? And then you get into retentions, retention type things, and people being nervous about the deal. And trying to figure out, okay, well, if we have an urn out, or whatever, over the next six months, 12 months, I really need Joe on the team. And if Joe leaves, the next 12 months, we’re screwed. And it could cost us millions of dollars, because he’s super critical to the team. So then all of a sudden, you got to babysit Joe to make sure he doesn’t leave between now and the time the acquisition closes, and then pass the acquisition. And, you know, you start, you just run into all these issues of trying to keep everybody on the bus. And a lot of times you got people that, you know, maybe they’re they’re happy working at the company. But then once this gets announced, they start thinking about it, they’re like, You know what, I’ve been happy here, but now seems like a time to consider my options, right? All of a sudden, like, otherwise, they may never really thought about it. And you got the same thing, once the acquisition closes, and all of a sudden, they’re like, you don’t work for stack five anymore, you work for so and so right? Then again, it creates those events and moments where people start reconsidering what they’re doing today, and making a change. And those events. You know, inevitably people quit people leave we you know, we we had that Secretary, I have a couple people leave for this couple people leave for that. They don’t see what their job will be at the combined companies, they don’t like to the new bosses, whatever it is, you got all this shit you got to deal with. And at the end of the day, right? You want this to be glorious, and cashier’s check and all that. But it’s not like you’re dealing with all this bullshit every day. That is just stuff you don’t want to deal with?

Matt DeCoursey 22:28
Well, you know, we’ve mentioned that, you know, a few minutes ago that sometimes these things fall apart. Yeah. And you know, in that scenario you mentioned, I mean, if that if this show falls apart, or if it had, I mean, dude, you’re out of your out vital people with that. Yeah.

Matt Watson 22:47
Or had a left?

Matt DeCoursey 22:50
Yeah, yeah. Well, I mean, and that’s, that’s a very common thing. I actually want to talk a little bit more about that, because I got some experience in that world, too. So, you know, Matt, one thing you should know is that today’s episode of the Startup Hustle is brought to you by FullScale.io, helping you build a software team quickly and affordably now, in the process of talking to so many people that you know, that want to use our services at Full Scale, go to full scale.io, if you fill out the Getting Started page, will give you access to a resource portal. So you can see some of the amazing team members that we have ready to join your team. Now, with that the team is often a key component of the actual exit, like the team turns into vapor, you might have a different offer. You know, and like there are key, cuz we’ve talked about the different types of acquisitions, in some cases, that those acquisitions are more for the acquiring the team than the province or Alliance.

Matt Watson 23:56
Yeah, and it depends a little bit, right. I mean, if, like, XXI were being acquired by a private equity group and merging with somebody else, let’s be honest, they’re probably okay if we lose a couple of people here and there, and can merge some responsibilities between the two companies and save some costs. Right? So it’s interesting, because you kind of want you kind of wonder, you know, how much they want to see a few people leave just so they can optimize the cost. And it’s like, oh, we don’t need two HR people anymore. We really only needed one anyway. So man, we’re really glad that Joe left because all that right. I mean,

Matt DeCoursey 24:34
yeah. And that’s what I’m experienced with because you know, I’ve referenced working for men like 20 years ago, I was a manager in a mute and retail chain that sold musical instruments and they merged so a private equity group, bought that company and six others and mush them all together and like so. The idea there is you create a hub and spoke the I call concept is that operating 70 locations is only slightly more expensive than operating 40. So you are literally doing an acquisition to intentionally spot redundancy and then kill it. Now, we talked about the pressure, and the cattiness and the backstabbing in the shark infested waters. That can happen when money comes on the line. This is just as bad. Because you end up with people in like a whole bunch of organizations that No, these are usually smart people that are like, okay, so I did this at Company A, and now you have company ABCDE, and F. And you if you’re smart, you realize there probably aren’t going to be seven of you. So as you mentioned, you can so you mentioned you get some people that they just fail, they just fail. They’re like, you know, I don’t need this ain’t no one got time for this. So they move on, and then you got and then you have to go through this process that is like, it’s almost like taking people and making them reapply for their own job. Yep. And, and, and it’s not fun. It’s just not fun. And so here’s the thing, like, let me just because I’ve been on the other side of this table. So imagine this. Alright, so Matt, you’ve worked for company A, for 20 years, and you’ve been a loyal employee. And now here comes this dude. It’s like, Matt, tell me what you do here. Why are you important? Why are you valuable? What do you do? What do you like to do what you see as your future? And honestly, it doesn’t, it doesn’t land well, on someone that’s been really committed to, you know, these are oftentimes great people, but you got to sit down and sing for your supper again. And endless culturally, it’s just it because here’s the thing, you are reapplying for your own job, that is a real thing. That’s actually what you are doing there. So in this case, we met this southern companies get mushed together, and honestly, dude, 30% of people were then redundant. And that’s where you see them. Because here’s the thing, that’s where the profit is. Because these motion these companies together, oftentimes, they’re meddling kind of organizations, you know, like, that need this kind of change. But that isn’t a good culture, that isn’t a good feeling. And this is a really common thing, because these kinds of large scale acquisitions happen with mergers and acquisitions all the time. And, you know, it’s just, it’s not it, let’s just put it this way, it doesn’t make coming to work fun every day.

Matt Watson 27:39
Well, for sure, it makes everybody nervous. And not just the executive team that it’s working on the deal. It makes the employees nervous, too. And, but every acquisition is different, you know, when VinSolutions was acquired by autotrader, literally, like nothing changed. I mean, they really completely left us alone. They took over like our HR and benefits, because we had their insurance and stuff like that. But as far as like our sales team, and support team and engineering teams, and all that kind of stuff, it was all left alone. Now Netro, when they acquired stack five, sec, five was much smaller, we only had about 25 employees in the US. And then we had another 15 or something like that internationally, but it was more of a merger. Like we’re the teams kind of merged together and it’s like, okay, now our support team is going to help support their product. And some of the teams kind of intermix like the marketing teams, it’s like, oh, now we have one marketing team, they’re, they’re intermixing and that, and that, of course has totally different outcomes than the VinSolutions scenario where it’s like, everybody’s just gonna stay doing what they’re doing. And it doesn’t doesn’t really impact it. And honestly, if you could do it all over again on the Syfy side that’s that’s really the best way to do it is like just leave us alone at least for a while and make us assimilate and and have you know, all new bosses and new jobs and all this stuff right the same first day.

Matt DeCoursey 29:03
So I’ve one other thing I wanted to share about so that that same company I mentioned had had some issues and a few years later ended up declaring bankruptcy now with that there’s a liquidation kind of exit as well that yeah, meaning and lots of good liquidation you look at these like okay, so Sears Matt used to work there like 1000 years ago right? Yes, it’s Sears is still out there somewhere but they’re certainly not what they were even when you work there. And whatever so when you when some of these you Okay, Kmart would probably Kmart still around to this time Kmart um, I mean there might be like five right or like the last blockbuster. There’s still a blockbuster in like Oregon, by the way. One, it’s like a tourist destination. They have a documentary on Netflix. It’s kind of fun. Because if you need a VHS tape mount it’s supposed to so So, but these are like still exits. So we mentioned exit Turner was being acquired. So in those cases when these liquidation events come in, like we’re, they’re liquid and I don’t mean liquidating your equity, I mean liquidating, closing down units and stuff like that, there are literally people that specialize in this and they come in, and they will sit down with the whole team. And they’re like, so you know, there’s 0% chance that this that this location will be open in 90 days. Why? Because this company has failed or something like that. And they are, it’s like, it’s like the Grim Reaper showing up and you know, so who has questions and they’ll and I remember hearing this account from this, it’s like, well is selling, so sell our regional manager, and they’re like, regional manager as a forward thinking term when it comes to the company, and this particular region has no future. So therefore, there are no longer regional managers. And, you know, they’re literally telling you like, hey, look, you don’t have a job, you don’t have a future. There’s no path, none of this. And then here’s the crazy thing is, and literally, people get up in the middle of these presentations and just go home. Yep. You know, like, look, cuz I mean, that’s tough.

Matt Watson 31:13
You know, like, Hey,

Matt DeCoursey 31:15
I don’t need this, and I don’t need to deal with it. And then you have this like, really like skeleton crew. And it’s like, I mean, it’s like, it’s literally like, you know, like, I mean, it’s a very depressing feeling. And you know, and then another thing, too, is, you know, you think that Mary works at the store, and then she finds another job. And she’s like, Yeah, I’ll just go start right now, I don’t give two weeks notice and do a lot of stuff. So it gets, it gets pretty messy. So there are a couple other things I was talking about with preparing for an exit mount. And like, you know, basically what we said is, is there’s a there’s a, depending on the on the structure of how these things work. It’s also choosing new leadership. It could be because, because sometimes, all right, so let’s just say Full Scale gets acquired, and whoever right now I’m the I’m the acting CEO at Full Scale. Now, in my opinion, it probably wouldn’t be great for our company if I just was gone tomorrow. So in some of these cases, they might want to transition they might need to work new people in and in Okay, so Well, it’s funny, we talked about better.com, the guy that fired seven 900 people on Zoom. They they let pushed him out and then brought him back. So you know, but in some cases, things are toxic. Like, who did Microsoft just acquire Activision? Yeah. Okay, for like a huge sum. It’s funny what orc did was an oracle that bought Cerner for 30 million bucks and Microsoft’s like, hold my beer, and spends like 60 billion on Activision. But Activision has been okay. They have some toxic things going on in their company, with their leadership or whatever, and they may want to oust a leader. So they have to figure out how to either keep people in place for continuity, because here’s the reality. Now, if someone wants to come by Full Scale, and they give us 100 million bucks, and you and I split it, I’m gonna wake up that next day and probably think about doing other things than whatever it is that I did today.

Matt Watson 33:13
Well, and we didn’t talk about that yet. But But that’s part of the problem with this too, is once you get closer and closer to the money, you start spending more and more time on how to spend it too. That becomes a big distraction, as well.

Matt DeCoursey 33:27
Speaking of which, there is there is a spot and acquisition video. And I’m pretty sure you were building a supercar

Matt Watson 33:40
was checking supercars, you’re, you’re

Matt DeCoursey 33:43
struggling with what color to get. Yeah. I never did buy one. We’re gonna let people wonder what you say you didn’t. I didn’t buy one. But you kill the mystery. I was literally about to say we’re not going to let you know whether or not I mean that we could have drawn that out for a while. Sorry. Yeah, I know. You. By the way. Matt’s also the guy that pops the cork on the champagne on New Year’s Eve at like, 923. So we’re gonna have to stay on? Yes. I mean, yeah. After he goes to bed, I keep popping the corks in his champion. So it’s all good. All right. So what about telling your employees?

Matt Watson 34:21
Yeah, I mean, that’s a difficult thing, right? And getting everybody together. And usually it is the worst kept secret. You know, usually the rumor gets gets out some way or another. And

Matt DeCoursey 34:35
it’s hard to keep especially doing during diligence, because, yeah, all of a sudden, new faces showed up. You know, it’s like why, yeah.

Matt Watson 34:44
And people talk and yeah, who are all the weird people coming into our office?

Matt DeCoursey 34:49
What about telling your customers?

Matt Watson 34:53
Yep, we got to tell them to and, yeah, there’s a whole bunch of things you got to do when you actually do the transaction. Um, my favorite of those, by the way is changing the credit card number in about 73 Different places you use a credit card. That’s my favorite thing.

Matt DeCoursey 35:09
I’m going to share this and I think it’s okay. But I remember during the your acquisition and I said, Now, what are your current responsibilities? Right now? I’m very overwhelmed chasing out payment card number. Like I said, how big is it? It’s like 70 or 80 places now. Yeah, look, that might not seem like a big deal. But go do it yourself. It’s not really like what most people wake up and be like, Hey, I can’t wait to do that. Um, yeah. Okay, so all these things we mentioned, you know, like, look, we work being really committed to telling the real story of this stuff. So, you know, not trying to sound negative about it. And this is just a reality. But at the end of it now, I mean, let’s, let’s end on, let’s come up to our approach pattern ending on a high note here. Because, you know, if it does go, Well, how does it feel when it’s done?

Matt Watson 36:07
You know, it feels a little bit relieving. And, you know, we started the episode talking about getting on the roller coaster, and it definitely feels like you’re on a roller coaster. And because it’s, it’s, it’s up and down and hurry up and wait, like, it’s all of those things. And honestly, when it’s all done, and all the diligence is done, the legal paperwork is signed, it’s almost like there’s this weird, calming effect that happens. And you just like hanging out and everything is done, you’re just waiting for the money to hit the hit the bank account at that point, you’ve done all the hard work. And it’s just like a relief, right? And then the deal closes, and then there’s a bunch of shit to do, because like, you got it now I gotta change credit card numbers. And now I got to meet 27 New co workers and all that other bullshit that goes on. It’s just, it’s just a lot of work. And it’s a lot of ups and downs.

Matt DeCoursey 37:02
Yeah, and that’s, I mean, I think the relief thing. I mean, I sense that with you. And I think that that’s, well, that’s got to come from a number of different things. One being done with a bunch of shit. Oh, yeah. Oh, excited about doing anyway. You know, Matt, so how, how realistic is the is the the psychological pressure, especially, while at any point along the way, when it comes to knowing that there’s a huge amount of money online, not only for you, but for your family, for your investors, oftentimes employees, you know, like, I mean, what’s the what’s the real, like, give us a real like, what’s that really like?

Matt Watson 37:44
Well, it’s for sure, really stressful, right? And, you know, as you’re going through the process, that not only yourself, are you getting this money, and it’s a big deal for your own family, but all of your other shareholders, employees. And it’s not all it’s not just the money, right? It’s also the the opportunity and the change for the employees, you know, talk about, you know, doing this on an ending on a positive note, I mean, one of the great things on the sacrifice side is being able to go to our employees and say, Look, now we’re going to be part of this much bigger thing, that’s, you know, more opportunities for you more opportunities for growth, you know, they’re gonna invest in the company, you know, there’s a lot of positive, like, personal and professional things that could come out of this for all of them, right. It’s more job security, more, you know, career advancement, all those sorts of things. As a shareholder, and an owner, you know, of course, it has its other positive benefits. But there’s just so much work that goes into it, and so much stress that goes into it. And you inevitably, during these deals, there’s always moments where it feels like the whole thing can fall apart. And I know we’ve got to our next episode is going to talk a lot more about that in detail. But yeah, inevitably, there’s just a lot of stress, and you run across different things that could blow the deal up, like, oh, the Director of Sales left, well, what is that going to do? Or we’ve got this partner that doesn’t like the fact that we’re doing the deal, and they want to end their contract with us or whatever, right?

Matt DeCoursey 39:11
Client, key client getting cold feet, and, you know, maybe not, you know, buying into it. And you know, that’s and that’s another thing too, because that’s why the diversity of a client list is important, because some, some companies are fueled primarily, they might have like one mega account, half or more of your revenue. And at first, you know, one of the things and, you know, I’m not going to get too deep into this, but you know, it was we’ve been pretty open over the years about Full Scale and people working at stack phi, we don’t make a habit of talking about who our Full Scale clients are, but, you know, natural ones didn’t know that, that we weren’t going to be in a position to jack up the prices right. Which is fair because they had you know, 20 people on a team And, you know, with that there was a little n, that’s just, you know, continuity. And I think as we close this out, like, I think the thing that when I think about preparing for an exit, so you’ve got, it’s almost like a, you have a couple of C’s here, there’s the confirmation, and then continuity, because continuity, I feel is probably the toughest part of this now, I mean, its continuity, tougher than the confirmation.

Matt Watson 40:29
Yeah, business continuity is huge, right. And at the end of the day, everybody wants that everybody wants the business to continue, you know, as is and keep, you know, the status quo. And that continuity is really important. But inevitably, you have employees that leave and have problems, all these things that that interrupt it, but that’s what you want.

Matt DeCoursey 40:49
Control on, there’s things you can you can control, some of the confirmation stuff, meaning like, you know, like, if you’ve done a great job of having your shit together, honestly, that shouldn’t be remarkably intimidating, it doesn’t mean it’s not a pain in the butt. But the, with the continuity thing, because people aren’t always predictable. And you can’t I mean, you know, they abolished slavery a long ass time ago. So you can’t force someone to stay and, and, you know, and then and there’s components to doubt. And then, you know, another thing too, and I think that it’s important to remember is, for a lot of your startups, you may have created small pools of shares and incentives. And, you know, like, there was a bunch of people that benefited from the acquisition a stack of it, because they had been with the company for a long time, and they had vested into some things. And, you know, and remember that, that remember that, that that could be as impactful, or as major an event for them, as it is for you to sell a huge number of shares.

Matt Watson 41:53
So every, every deal is different, right? And in the VinSolutions deal, you know, we sold the company for close to $150 million. And so there was a lot of money to spread around. And we had several people that got a million dollars, or close to a million dollars, at the end of the transaction, you know, key employees, you know, our guy who’s in charge of sales, and, you know, you know, different different people right out of jail. So autotrader also gave out retention bonuses to key employees. So, you know, I had a couple of developers on my team that had been with the company the whole time, but they never owned any stock that all of a sudden now got, say $100,000 Bonus, as retention bonus, well, that was enough money for them to you know, buy a house or pay off their house or whatever, like, it was huge deal. Like, it was a life-altering amount of money for them. 100 grand, so it wasn’t my

Matt DeCoursey 42:46
point, that was my point. So like, that can be a good thing, too. You know, like I’m saying it doesn’t know, they don’t always freak out and scatter. But with that, like, it’s my point as is it’s stressful for them, too. So I think the best way to handle any of this, and much like Matt said, All deals are different. I would say like, all your clients are different. They’re like snowflakes, they have different needs, different personalities, all of it, but just handle it with empathy. You know, cuz, cuz it’s stressful, like all the way down the line. And if you can find a way to be empathetic, positive about it, and know that you’re not getting to the end without getting through all the steps anyway, I think that’s maybe the one of the better ways to look at it. Rather than I don’t know. Just get up and try to get it done. Well, now we’re almost through the series, you know, and you know, the fun part is malar. You have a weekly show coming out soon.

Matt Watson 43:38
Yeah, yep. I believe I’m the Friday show. Is that right? Coming forward.

Matt DeCoursey 43:43
No. I’m not sure I just show up and talk to this microphone. But I’m no longer in control of any of these things.

Matt Watson 43:51
Yeah, but I’ve already started recording them. I’m not sure when they’ll air, but I’m super excited to be a weekly host.

Matt DeCoursey 43:57
No, it’s March the first weeks of March. So I’m gonna do without me, bro.

Matt Watson 44:02
You know, I’m we’re still gonna do this. You’re not off the hook.

Matt DeCoursey 44:06
That’s right. That’s right. You know what? Because I think we already decided that we yeah, I’ve got a couple of people asked me what’s next to think we’re going to talk crypto and fts. Some other interesting things. But But yeah, so you know, mascon Amazon weekly show, which is long overdue. And Matt, Matt are still going to be on, you know, we’re going to this that’s where this started. And we’re committed to continuing to you know, honestly, I love doing the series because it’s not an interview. And in that same kind of conversation, I really enjoy sharing the experience and the and the facts and all of that. And, you know, now now that you’re in your 40s It’s time to get into that wisdom stage.

Matt Watson 44:47
So that’s right. I’m taking my prime here soon.

Matt DeCoursey 44:49
I think you’d like to I snuck that in. I also tried to sneak podcast co-hosts and as you were mentioning, all the people that got paid In your oh yeah you didn’t hear it but yeah I think I made it real though when I said it and we broadcast it to the world. So anyway, Matt, on to number 49. I’ll talk to you soon.

Matt Watson 45:13
See you, guys.