When thinking about M&A, the core opportunity is growth, says Kellie Kucik, Vice President, Payments & Embedded Finance at Serent Capital. So, typically, the focus is on the synergies of the two platforms to be brought together. But what can get lost in the mix sometimes is the merging of two cultures.
"Creating that conversation, starting that conversation, working with the teams even prior to the deal closing has been really critical," Kucik said at the Detroit Smart Business Dealmakers Conference. "You're focusing on making sure these two unique entities coming together, both parties are feeling seen. These are founder-led family businesses, and a lot of these people have spent their entire careers. And so bringing these two cultures together, I don't think you can understate how critical it is to make sure the team of each company feels seen, they feel like they have a place in the new organization. And I think that starts top down. And so really focusing on that, and making sure that that is something where you're putting actually dedicated resource and time has been really critical to the success of our deals."
Integration also involves system synergies, looking at things such as saving on AWS costs and how to expand into different markets by bringing two core platforms together. From an investing standpoint, she says that's where people are going to spend a lot of time and energy.
"But making sure that you're retaining talent, you're making sure that you're keeping the core team together, and that they have aligned interest in making the new organization successful," she says. "I think is a really critical component."
She says her firm has recently set up a post-merger integration team. Previously, there were two teams — investing and growth — and members of both of those teams spent time on PMI. Now, there is a team dedicated specifically to PMI and that still comprises people from the investing and growth side. She says they are specialized in these add-on deals, and can spend a lot more time and energy, and have more specialized focus, on working with companies post acquisition.
When interest rates began to rise, the experience she had with sellers primarily of founder led businesses was that they were willing to hold out for a better deal. She says now they're starting to see that normalize.
"Folks have gone out, they've talked to more firms, worked with more bankers, and it's starting to come around," Kucik says. "They're realizing interest rates aren't really changing that dramatically. We're not going to be in a place where you can get funding at a 2 percent interest rate. And so I think we are starting to see deals pick up again because the sell side is normalized — they're stabilizing in this place in the market and understanding, if we want to get a deal done anywhere in the near term, and we're not willing to hold out for another decade, we're probably going to have to work with these folks and find that happy medium."
She says she's also seeing more willingness for newer, smaller, M&A deals where these businesses realize they haven't had a 30-year growth trajectory. They've maybe been around 10 years, built a business, grown it, and are willing to take that cash and go move on to the next thing rather than doing a core platform deal. That, she says, has been great for her firm and its core businesses.
"We can add on functionality that we maybe don't have the dev resources or the engineering resources to put towards it," she says. "Or we can go into a new place in the market via acquisition with a smaller platform deal with a seller who's more willing to work with us on price and deal structure, etc."
Something she says is helping her firm get deals across the finish line is relationship building.
"Sometimes 10 years in advance of doing a deal work, we're creating a relationship with that founder," Kucik says. "And I think our culture really aligns with founders and founder-run businesses. And that is the No. 1 component of our success — it comes down to the people. And when you are talking to someone who has spent their life building a platform, a product, a team of people that, again, like a lot of these companies we invest in, people have spent their entire careers here. It's not just an asset to them. And so, they want to know that it's going into the right hands."
