Growth in the technology industry is always on the forefront of companies’ minds. And while no two growth paths look the same, a lot of tech companies are looking to M&A transactions to support their expansion. But what does it actually take to undergo a merger? Withum’s Melissa Roth sat down with Emily Moran of Beeswax to talk about how their recent merger with Freewheel went and what key takeaways she would recommend for tech companies with smaller finance offices.
1. Was this your first merger, if so how was your experience?
- Yes, this was my first merger! It was a great experience all-in-all and I am really glad that we had a successful outcome and the hard work of many months’ pay off. I learned a ton and was challenged by both large, strategic questions (such as, which is the best acquirer for our business, what are the go-to-market opportunities, etc.) and smaller, tedious problems (such as, how do I estimate net working capital). I am glad to have this experience in my career and it made for an exciting Q3 & Q4. It was perfect timing that I was able to go through this while working from home due to the pandemic…much easier to be secretive and manage the workload without it impacting my home life too badly.
2. What was the most exciting prospect about integrating a start-up accounting team into a larger corporation?
- I’m really excited about having a larger team of experts to work with and lean on as we integrate. I joyfully handed off our insurance responsibilities, for example — I really don’t have a deep understanding of or interest in insurance! It’s also been great to find the ways in which we bring fresh perspective to the larger corporation. For example, we have worked hard to really understand our AWS costs with detailed tagging, reporting and deep-dive analysis of cost drivers. This is something we felt was vital as we were managing our cash runway as a start-up and a core competency we look forward to bringing to bear within the larger team.
3. What are three things you wish you were better prepared for/had known sooner?
- First, I wish I had been better prepared for the pace of the team transition during the acquisition For example, each employee received a new offer letter at close with little advance notice to managers,. which made it challenging to troubleshoot the offers and prepare them for delivery in a timely manner. Second, I wish I had spent time earlier building a net working capital forecasting template. Third, while I kept detailed records of our contracts, it was an enormous challenge to transform them into the legal template required in the merger disclosure schedule. Definitely having all vendor, sales and other contracts in clean order is a MUST and I would have had my team do a ‘refresh’ project in Q3 if I had a do-over.
4. What was the biggest change in the transition?
- The transition (or, I think, many little transitions is more accurate) continues as we integrate into FreeWheel. The pace has been fast — in the past, they have acquired companies and let them operate somewhat stand-alone for the first year or two. Though there have been so many changes (migrating software, meeting public company reporting deadlines, transitioning tax, and getting to know so many new stakeholders), the biggest change to our team is working through is figuring out how to navigate a larger company environment and make decisions within it. Our acquirer is still learning our business and customers and operates quite differently than we do. For example, they have a different process for approvals, so figuring out who needs to approve and review contracts, headcount additions, commission plans, etc., is very challenging as we integrate the businesses.
5. What is one piece of advice you would offer those contemplating a merger transaction?
- I would press really, really hard on the acquirer to provide a good understanding of the HR landscape to ensure that they have prepared your team to have a good landing into a new, larger team. I would suggest asking for one on one meetings between senior leadership and each person, even if they are brief, in order to start introducing the team to the new environment. It is really common for the head of the team to be inundated with requests and absorb a lot of the back and forth during the transition, but the sooner that the team can build their own connections within the larger company, the better.
Withum’s Technology and Growth Services Team to help address further questions.