Lessons on how companies are bought not sold, as told by a master navigator of acquisitions
October 19, 2020 | Jani Tsui
When Kirk Simpson co-founded Wave in 2010, he had a short-term vision for acquisition. As often happens in life and business, things didn’t go exactly as planned. But a few years later Kirk and his team navigated a $537 million acquisition with H&R Block. Kirk will be a keynote speaker at the upcoming TechExit.io East and part of the closing panel: The Good, The Bad and The Ugly. Here’s a precursor to the more in depth conversation that will take place then.
When you founded Wave, what goal did you have for acquisition?
KS: I founded in Wave in 2010 with James Lochrie. We dreamed of achieving a great outcome within 3 – 5 years, which was very naive and not realistic. We learned that lesson the hard way. Exit came almost 10 years later, so much longer than we had initially thought.
Can you give us a behind the scenes look at your experience with acquisitions?
Wave was almost acquired in 2014. We lost the deal when the buyer pulled out right at the finish line. We clearly learned that nothing is ever done until the money is wired. It was very painful and difficult to pull ourselves up and re-energize ourselves to go after it again.
The most difficult aspect was keeping positivity and maintaining the necessary energy to motivate yourself and your team. Most people in the company didn’t know that an acquisition was imminent. We had to be careful not to bring that negative experience back into the office with us. When I got the news that the deal was off, I remember sitting in a rocking chair feeling pretty much comatose for several hours. It took weeks to shake it off completely.
With H&R Block, I met the CFO in January and the CEO in March. First via Zoom and then we met in person in late March. The deal was announced on June 11. It was a very short time frame to come together.
Looking back, what worked well?
KS: First off, we had good people on both sides that were transparent with one another and mindful of what each side needed to achieve within the transaction.
Wave’s board was very communicative and supportive. We didn’t have to spend a lot of time unifying them. Also, all the teams including legal counsel and the tax advisors worked really well together and identified key issues early on so we could work through them.
Further, the executive team at Wave (Paul, Ashira, Ideshini, Les, Tam and Mani) really rallied to work long hours and deal with the complex tasks in front of us to get to the finish line. I’m incredibly grateful that I had Peter Carrescia as my partner in the project – he kept the whole thing on track.
Overall, there was a deep alignment between Wave and HRB on what the future could hold – that made it easy to stay true to our principles and what we thought was possible.
Where did you run into challenges?
KS: The whole thing really made me aware of how difficult these transactions are. There are so many details and issues that could trip this up. At times, coming out of a meeting, I’d think it was amazing that any of these get done – there are so many i’s to dot and t’s to cross.
It’s so important to have synergies in that both organizations believe in the future and are committed to powering through those issues. We also just never assumed it was done until it was done.
When the sale closed, a hurdle remained that I hadn’t really thought about since we were in the weeds of the transaction itself. This sale process moved quickly and everyone had kept things very confidential which was important. I knew that it was going to be a surprise to our people and I was very nervous about standing up in front of them and telling them. I had been selling them on the idea that Wave was a rocket ship company with big things ahead and here I was announcing an amazing acquisition but also the end of our path as a stand-alone company – it was more difficult than I expected, but it was also a privilege.
We are thankful that H&R Block has allowed us to remain an independent company. The majority of our executive team is still in place and we remain focused on helping small businesses.
What advice do you have for founders who are preparing for sale?
KS: The age-old saying is true that a company is bought not sold. Build your business to be a long-term sustainable business that focuses on driving customer value. Spend all of your focus on that versus believing that you can manufacture a sales process.
With Wave, we stayed focused on delivering value to customers, building a great culture that attracted great people and doing good work, day in and day out. That said, we always had a pitch deck to tell the story of what we were trying to do. Internally we were focused on doing great work and on our people but externally we wanted to make sure as many people knew our story as possible. We believed – and saw – that if you can do both the outcome will take care of itself.
Join Kirk Simpson, Co-founder and CEO of Wave, and other panelists who have achieved tremendous success in their exits. You’ll hear their behind-the-scenes learnings on what worked, what didn’t and what they would do differently if they went through their acquisitions again.