Searcher & Seller Stories - A Fair Deal: Handing off the Baton at Page Vault
A Fair Deal
When negotiating a search deal, searchers may be tempted to think of it as a transaction, aiming to buy at the lowest price. However, search deals are inherently relational. The conversation not only involves negotiating valuation, but also the buyer-seller relationship, and by extension, the quality of the leadership transition. When Luke Suydam and Alex Sappington acquired Page Vault, a web content capture software for legal professionals, they understood the importance of reaching a “fair” deal. This approach, which involves building both industry smarts and a strong seller relationship, helped Luke and Alex establish credibility early on and maintain a strong relationship with the CEO, Jeffrey Eschbach, as he continued in the company in a new role after the transaction. Digging into Luke and Alex’s story, we can derive some lessons about what a “fair” deal entails.
Fair is a feeling, not just a number
Intentionally, Luke and Alex didn’t bombard sellers with a lot of questions about their business during a first call. Instead, they focused on relationship building, earning trust by being curious and asking intelligent questions that showed their industry knowledge. Part of trust-building also involved being transparent. For example, Luke and Alex would do some basic financial analysis and share it with the seller to showcase their thinking and value-add as partners. Building trust can come in a lot of forms, and being open and direct goes a long way. In Luke and Alex’s case, these interactions helped frame their relationship with the seller as collaborative rather than transactional, and heightened the probability that a subsequent deal would be perceived as “fair”.
Fairness is a reflection of industry knowledge and fair market value
Early on, Page Vault’s seller often talked to unprepared searchers who would offer “2x EBITDA” - a gross undervaluation of the business that anyone doing their industry homework would have known. Unsurprisingly, he didn’t bother entertaining these conversations further. When Luke and Alex showed up, they were able to differentiate themselves by providing a valuation that was informed by their understanding of the business and industry context. By pinning valuation on a logically defensible analysis of business fundamentals, Luke and Alex were able to create a sense of fairness that made Jeffrey open to having a conversation with them.
Fairness translates into an ability to continue working together afterwards
When asked what made it possible for him to continue working with Luke and Alex post-acquisition, Jeffrey said: “What it comes down to is... you have to have a fair deal. If, after two months post close, either party is thinking that they got screwed, then you didn’t have a fair deal”. After the deal closed, Jeffrey transitioned to a Customer Success role, working under Luke and Alex. They continue to have a close-knit and successful working relationship today. While not every search deal will involve the former CEO staying on, a good litmus test for fairness is the ability of both parties to continue having a productive relationship in the future if needed.
Rather than thinking about a deal as a negotiation, searchers can think about a deal as an exploration of what is important to both parties: a co-creation process to build something that works for everyone involved. In today’s search environment, it is highly unlikely that a searcher will find a company that no one else has stumbled on before. That means the name of the game has changed: it is no longer about just finding a company, but convincing the seller that you are the right person to sell to.
From this perspective, the foundation of a successful closing conversation begins from the first moment the searcher and seller meet. Whether through dinner chats, time spent with the seller’s family, or over rounds of golf, the searcher begins making 'deposits' into a relationship bank that will be withdrawn later on. In Luke and Alex’s case their deposits yielded great dividends - not only in the form of a successful acquisition, but also an experienced and motivated team member they were able to retain. “They came in fresh and we thought their strategy made sense,” Jeffrey Eschbach recalls. “Culturally, they felt like people that our employees would like. There isn’t any one specific reason why we sold to them – but all those pieces came together.”
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