Markko Vaarnas, the Managing Partner of Takeoff Partners, was invited to speak at the Future Board & Nordea partner meeting on April 11th in the old bank hall of Nordea in Helsinki.
The theme for the Future Board meeting was mergers and acquisitions from the perspective of the board of directors. A closer look was taken into what the board should consider when selling or buying a company. The Future Board meeting was opened by Lari Raitavuo, the Executive Director of the Future Board. Lauri Stadigh, the founding partner of Devco Partners, shared insight into the acquisition process with an example case, and Nordea Business Banking Finland’s experts held speeches about how the bank funds mergers and acquisitions.
This article will focus on Markko Vaarnas’ presentation.
Successful EXIT - Case Global Intelligence Alliance
Takeoff Partners’ Markko Vaarnas spoke about the
board’s role in EXIT through the case Global Intelligence Alliance (GIA).
Global Intelligence Alliance was founded in 1999 and started
internationalization in 2002, which successfully materialized into offices in
10 countries and a 15 million euro revenue. Offering Market Intelligence
software and services to multinational companies, Global Intelligence Alliance
had the US as their largest sales territory. The company was acquired in 2014
by M-Brain with founders, including Markko, exiting shortly after.
“The exit process of GIA that took place in
2012-2014 was educational in many ways”, Markko said and continues by explaining
how the process happened in three stages. The first stage happened in 2012 when
they tried to sell the company for the first time but did not get lucrative
enough offers. As a learning from this first attempt, the company decided to
focus on further improving its financials, and, indeed, managed to double its
profitability to 15% EBITDA by 2014, while keeping a 10% annual growth rate.
After the increase in sales and profitability, it felt like the right time to
try to sell the company again in 2014.
In his presentation, Markko highlighted the
specific steps in their successful EXIT process. They managed to find a vast
number of potential buyers and built a detailed plan on how to approach them.
Following the initial discussions, they arranged management presentations with
the most interested investors. Even though there was considerable amount of
initial interest, the number of actual offers by the deadline was limited to a
few as the timing did not prove to be optimal for many of the interested buyers.
At this point, Markko’s main aim was to convince the interested suitors, that
the company had attracted a lot of interest, as the goal naturally was to raise
the selling price as high as possible. During the negotiations, the board of
directors were getting slightly nervous as the negotiations went back and forth
with the selected buyer. It was all worth the effort in the end as they sold
the company for a higher price than anticipated at the beginning of the
Markko underlines how crucial it was that they were
focused and driven to reach their goal. It required a lot of hard work and
persistence to get through the various stages successfully.
Lessons learned from the EXIT
“If you’re ever in this type of situation, be sure
to find a very good financial advisor to handle the deal”, Markko advised.
In this case, Markko managed to find a
well-connected leader of an investment bank in London, who had vast experience
in selling consulting companies. Even though Global Intelligence Alliance
wasn’t a straightforward consulting company, it was assessed that consulting
companies would be the most likely buyer group for the company. The investment
bank handled all the phone calls and emails with the potential buyers, and
overall run the process with clear timelines for all parties involved.We also
made the choice of getting an advisor who knew how to drive up the value of the
company”, states Markko.
Maybe the most important lesson learned is to start
planning the exit very much in advance. The best situation for Global
Intelligence Alliance would’ve been to start meeting potential buyer candidates
several years before selling, in order to have created the right kind of
awareness. This way, the company would’ve been in the mergers and acquisitions
pipeline of potential buyers to begin with. This starting position would have
made the EXIT process a lot easier.
The role of the board of directors in the EXIT process
During the EXIT process of GIA, the board’s role
was mainly to oversee the development of the situation. Markko says that the
management was pushing the process forward mainly on their own while having
discussions with the key owners and board members. The founders and financial
investors were all ready to exit from the business. They knew that it
would be very difficult to develop the business further without significant
long-term investments and the founders especially felt that they
would not get personal development opportunities by staying in the market
intelligence business for any longer.
In Markko’s view, they made a smart decision in
2003, when they identified the need to back up their internationalization
efforts by bringing in external professionals to their board of directors. “We
found solid board members who had experience internationalizing professional
services companies and a chairman who had more of an all-around international
business background and past experience of the chairman role”, Markko says.
The example of GIA is very entrepreneur driven.
Markko was the CEO of the company from day one until the final day. Even though
he had lost his genuine interest in running the company operations by 2013, it
would’ve been difficult to change the leader of the company, while the plans
for selling were ongoing and even harder when closing in on the EXIT. So Markko
decided to push through, which in the end was rewarding as the EXIT was realized. And he did not need to stick around with
the new owner for more than 4 months after the EXIT freeing him up for taking
new professional challenges in angel investing and working as a board
professional. Overall, the GIA story had a happy ending for the founders
& management as well as the financial investors getting their fair share of
the financial returns. The new owner M-Brain got an important piece to
complement their growth strategy, which they have afterwards complemented with
some further acquisitions.