Episode 18 Special—An Acquirer’s View into M&A with Taylor Barada, head of Corp Dev at Adobe

In the 18th episode of Acquired, hosts Ben Gilbert and David Rosenthal, along with guest Taylor Barretta, VP and head of Corp Dev, Corp Strategy, and Strategic Partnerships at Adobe, delve into the intricacies of mergers and acquisitions (M&A) from an insider's perspective. They explore the importance of strategic alignment, cultural fit, and the post-acquisition integration process. Taylor shares insights from his experiences at Adobe, Zynga, and Yahoo, emphasizing the critical role of M&A as a growth tool rather than just a transaction. The conversation also touches on Adobe's partnership with Pilot, a comprehensive accounting service for startups, and the impact of M&A on both the acquiring company and the entrepreneurs involved. Taylor's reflections on his journey from professional soccer to corporate development and his reading recommendations further enrich the discussion, providing a multifaceted view of business growth and personal development within the tech industry.

• Pilot is a company that offers accounting, tax, and bookkeeping services.
• It is the largest startup-focused accounting firm in the US.
• Pilot is backed by prominent investors like Sequoia, Index, Stripe, and Jeff Bezos.
• The philosophy behind using services like Pilot is for startups to focus on their core product and outsource non-core activities like accounting.
• Pilot provides comprehensive financial services, including CFO services and investor reporting.

"Pilot is the one team for all of your company's accounting, tax and bookkeeping needs and in fact now is the largest startup focused accounting firm in the US."

This quote emphasizes the breadth of services Pilot offers to startups and their position as a leading firm in the industry.

"Every company needs it. It needs to be done by a professional. You don't want to take any risk of anything going wrong, but at the same time, it has zero impact on your product or customers, things you do uniquely well."

The quote reinforces the importance of professional accounting services for companies, highlighting that while necessary, it does not directly contribute to product development or customer experience.

• Pilot has grown from a startup to a billion-dollar company.
• It serves a wide range of clients, including prominent startups like OpenAI, Airtable, and Scale.
• Pilot can scale its services as companies grow from startup to growth phase and beyond.
• Offers a discount to Acquired podcast listeners for their services.

"These are now companies like OpenAI, airtable and scale, as well as e-commerce and other companies."

This quote lists examples of Pilot's diverse clientele, indicating their capability to serve various types of businesses at different growth stages.

• Taylor Barretta is the VP and head of Corpdev, corp strategy, and strategic partnerships at Adobe.
• He has a background in business, including a VP position at Zynga and head of Corp Dev at Yahoo.
• Taylor holds a JD MBA from Northwestern and has experience in deal-making within the tech industry.
• Taylor was a professional soccer player in England before his corporate career.

"Taylor Barretta, who is the VP and head of Corpdev corp strategy and strategic partnerships at Adobe."

This introduces Taylor Barretta's current role at Adobe and his relevance to the topic of corporate development and acquisitions.

• Conversations between Corp Dev and startups are often relationship-driven and informal.
• The process is fluid and can start with simple connections or introductions.
• It's important for startups to not focus solely on selling but on building value and relationships.
• Acquisitions are not just about financial transactions but also about cultural fit and shared vision.

"The valley, as we all talk about and sort of the broader technology industry outside of the valley, is incredibly small. And so because of that, it's very relationship oriented."

This quote highlights the importance of relationships in the tech industry, particularly when it comes to acquisitions and corporate development.

• Adobe places a high value on cultural fit when considering acquisitions.
• The company has walked away from deals due to cultural mismatches.
• Successful acquisitions are those where the entrepreneur's vision aligns and expands with the acquiring company's vision.
• The focus is on execution post-acquisition, not just the strategy or financial aspects.

"We've walked away from extremely large deals north of billion dollar because we didn't feel like the culture fit was there."

This quote demonstrates Adobe's commitment to ensuring cultural alignment in their acquisitions, even if it means passing on significant deals.

• Execution is key to creating value in acquisitions.
• Relationships and understanding between the acquiring company and the startup are crucial.
• Entrepreneurs should focus on building their business and consider acquisitions as a means to accelerate their vision.
• The outcome of an acquisition is heavily influenced by the ability to execute on combined strategies.

"Execution creates value. Strategy is what allows you to have the opportunity to get into that mode, but you got to go do it."

This quote underscores the primacy of execution over strategy in realizing the value of an acquisition.

• Marissa's SVPs of product at Yahoo demonstrated a passion for online media and its potential growth.
• Microsoft considers people and culture fit as a critical factor in M&A, as seen in the LinkedIn acquisition.
• The significance of the human element is also evident at Adobe and is considered a positive sign for successful acquisitions.

"And they rose to know two of Marissa's svps of product. And these were smaller acquisitions, so it's not like they came in the door doing that, but they had a real passion for sort of online media and where it could go and sort of not just what they were doing with their product. But what you could do if you applied some of the principles of social and mobile to the broader Yahoo business. And we've seen the same thing here at Adobe and I think it's a classic sign that things will work out quite well."

The quote emphasizes the importance of having a passion for the industry and the potential for growth within a company's broader business context. The mention of Adobe suggests that this approach is not unique to Yahoo and is a recognized indicator of a successful acquisition.

• The acquisition process is strategic and includes evaluating technology, product fit, financials, and people.
• Each acquisition is unique, but large acquirers typically follow a structured process.
• The process begins with preliminary meetings and progresses to more detailed evaluations, including legal and financial diligence.
• The Letter of Intent (LOI) is a significant milestone, usually containing a no-shop clause.
• The acquisition process is compared to venture financing in terms of legal negotiations and determining market standards.
• A definitive agreement is reached after thorough due diligence, which may lead to either immediate or delayed closure of the deal.

"Yeah. Look, ultimately you're going to do a deal if it makes strategic sense, the technology product fit is there. And the financials you think make sense for your shareholders. Right. And for us, the fourth one that I would put that cuts across all of that is just the people as we've already talked about."

This quote outlines the critical factors considered in an acquisition, including strategic alignment, product and technology fit, financial sense for shareholders, and the importance of people involved. It highlights that the people aspect is intertwined with all other considerations.

• CorpDev guides the acquisition process and collaborates with the business owner.
• The business owner's involvement is crucial, and they should not be bypassed.
• It is important to establish a relationship with both CorpDev and the business owner.
• The process is collaborative, and both sides should evaluate the potential partnership.
• Missteps in the process can usually be overcome if the business deal makes sense.
• CorpDev and business unit strategies can lead to introductions and potential acquisitions.

"Yeah, it's critical. So, I mean, one thing to know is you can't ignore Corpdev in many ways. They're going to be your guide and your partner throughout this. And I truly view it as a much more collaborative thing. If you're going to get a deal done eventually, it's going to be because everyone thinks it makes sense and you're able to get together at a valuation that everyone feels good about. Right."

The quote explains the significance of CorpDev as a guide and partner in the acquisition process. It stresses the importance of collaboration and reaching a consensus on valuation, indicating that successful deals result from a shared belief in the acquisition's rationale.

• The acquisition process shares similarities with venture financing regarding legal negotiations and establishing market norms.
• Both processes involve determining leverage and negotiating terms that are considered standard in the industry.
• Partner shopping, or trying to influence the deal by reaching out to multiple partners, can be detrimental in both venture financing and M&A.

"It's funny how that parallel yes, you're going to have your lawyer and they're going to be able to tell you what's market. They'll educate you on what the business ramification patients are of what is being done."

The quote draws a parallel between the role of lawyers in venture financing and M&A, where they provide guidance on market standards and the implications of business decisions. This comparison highlights the shared dynamics between the two types of transactions.

• Strategic alignment between the acquiring and target companies is essential.
• The business owner and CorpDev need to evaluate if the visions of both companies align.
• The relationship between the business owner and CorpDev is a partnership aimed at determining the feasibility and desirability of the acquisition.

"You're selling your baby that you put heart and soul into creating. You want to find out if we're good stewards of it, if our visions align. And you should care about this."

This quote emphasizes the emotional investment of the business owner in their company and the desire to ensure that the acquiring company shares a similar vision and can be a good steward of the business. It underlines the importance of alignment in values and strategic direction during an acquisition.

• Statsig provides real-time product observability by linking new features to core business metrics.
• It allows businesses to instantly determine the impact of new features on customer usage.

"It lets you tie a new feature that you just shipped to a core metric in your business and then instantly know if it made a difference or not in how your customers use your product."

This quote explains that Statsig's service enables businesses to quickly assess the effectiveness of new features by measuring their impact on key performance indicators.

• Statsig facilitates data-driven decisions regarding product changes.
• It offers testing for product changes with different user groups and provides accurate reporting on impacts.

"Statsig lets you make actual data driven decisions about product changes, test them with different user groups around the world and get statistically accurate reporting on the impact."

The quote highlights Statsig's ability to provide insights into product changes, enabling companies to make informed decisions based on data and user testing.

• Notion, Brex, OpenAI, Flipkart, Figma, Microsoft, and Cruise automation are among Statsig's customers.
• Statsig serves a wide range of customers, indicating its versatility and widespread utility.

"Customers include Notion, Brex, OpenAI, Flipkart, Figma, Microsoft, and Cruise automation. There are like so many more that we could name."

The quote lists some notable companies that use Statsig, demonstrating the platform's credibility and adoption by significant industry players.

• Statsig is particularly useful for testing AI product features.
• Notion's generative AI features evolved rapidly with the management of Statsig.

"Also, Statsig is a great platform for rolling out and testing AI product features."

This quote emphasizes Statsig's capability in managing and testing AI features within products, suggesting it's a suitable tool for companies focusing on AI innovation.

• Statsig can ingest data from data warehouses, making it compatible with a company's existing data storage solutions.
• Companies can start using Statsig without migrating from current solutions or changing their feature flagging setup.

"They can now ingest data from data warehouses. So it works with your company's data wherever it's stored so you can quickly get started."

The quote explains that Statsig's compatibility with data warehouses allows for seamless integration with a company's existing data infrastructure.

• Companies are often categorized by the type of acquisition: product, business line, or people (acqui-hire).
• The speaker from Bain & Company refers to a framework from the book "Profit from the Core," which analyzes the success rate of growth initiatives based on their adjacency to a company's core business.

"We say, was this a product acquisition or a business line acquisition or a people acquisition?"

This quote illustrates the common categorization of acquisitions, which helps companies understand the nature and strategic purpose of their M&A activities.

• Understanding the core business is crucial for successful acquisitions and growth initiatives.
• Changing one of the five core aspects (customer, channel to market, geography, business model, product) increases risk.
• Success rates for acquisitions decrease significantly when multiple core aspects are changed.

"Anytime you change one of those five things, you're like a one step adjacency further from the core, and it creates risk."

This quote underscores the idea that straying too far from the core business when pursuing acquisitions or new ventures increases the risk of failure.

• Acquisitions should be made for strategic reasons, not just for diversification.
• Smaller tech and talent deals are more likely when they align closely with the core business.
• Larger, riskier bets are acceptable if they present significant opportunities and are managed carefully.

"It's not that you don't do those things, but you do them for the right reasons."

The quote implies that acquisitions should be pursued with a clear strategic intent, rather than simply for the sake of expansion or diversification.

• Building a large-scale enterprise salesforce is extremely challenging and represents a significant investment.
• Once established, the goal is to maximize the throughput of the sales channel by adding additional products.

"Finding additional products to put in the salesperson's bag is a big part of it."

This quote highlights the strategic importance of leveraging an established enterprise salesforce by continuously introducing new products to sell.

• The success rate for deals moving from consideration to completion is very low, possibly sub 10%.
• A disciplined approach to acquisitions, including a willingness to say no, contributes to higher success rates.

"You have to be willing to say no in order to make sure that you get the right ones."

The quote reflects the selective nature of successful M&A strategies, where saying no to unsuitable deals is as important as pursuing the right opportunities.

• M&A strategies and processes differ across companies based on their culture, strategy, and growth stage.
• The speaker's experience across Yahoo, Zanga, and Adobe showcases how M&A approaches are tailored to each company's unique situation.

"The culture of the company, the strategy of the company, where it is in the arc of its growth, will define what process it creates and how it goes about it."

This quote emphasizes that the M&A approach of a company is shaped by its overall culture and strategic objectives, and there is no one-size-fits-all solution.

• Adobe's corporate strategy focuses on three major trends: making mobile a tailwind, unlocking network effects in SaaS, and leveraging data and content as strategic assets.
• M&A is seen as a tool to support these strategic trends and not as an end in itself.

"So the question is, what is your strategy if you sort of tie that back to your core question of like, how are things a little bit different at different companies?"

The quote connects the importance of having a clear strategy to guide M&A activities, ensuring that acquisitions support the company's overarching goals.

• M&A integration is a critical function that should be aligned with the deal-making process.
• The speaker views M&A as a growth job, emphasizing the importance of integration for the success of an acquisition.

"I've always felt like that's a critical to be combined in the same group because otherwise it breeds a behavior that sort of feels like, hey, we're just responsible for banging out the deal."

This quote stresses the importance of integrating the M&A process with post-deal integration to ensure that acquisitions are not only completed but also successfully incorporated into the company's operations.

• Emphasize the importance of partnership with entrepreneurs during growth phases.
• Recognize the necessity of being involved as a CEO of the growth opportunity until a permanent leader takes over.
• Understand the nuances of retention packages and the shifting importance of roles post-acquisition.
• Collaboration and communication are key in determining how to reward and retain critical personnel.

"You have to partner with the entrepreneur and partner with the business owner and sort of be CEO of that growth opportunity until someone else can truly take the mantle that will be responsible for running that business."

This quote highlights the collaborative approach required in working with entrepreneurs and business owners to manage growth and transition periods effectively.

• Integration is a critical focus during the deal-making process.
• Culture within the group is considered a growth leader function rather than merely a deal function.
• Regular reporting to the CEO, CFO, and board is conducted to ensure accountability on key value drivers and metrics.
• Honest evaluation of performance, including acknowledging areas of concern, is essential.
• Deep dive post-mortems are conducted when necessary to understand and learn from challenges.

"By having the integration function in there, we make sure that they're in our weekly meetings and we share learnings and it's sort of part of the culture."

This quote emphasizes the significance of integrating the acquisition process into the company's culture and routine operations to ensure successful post-acquisition management.

• Culture fit is crucial for value creation, especially when market conditions change.
• A misfit can lead to bitterness and a sense of disrespect for the entrepreneur's work.
• Successful post-acquisition stories greatly enhance the founder's legacy.
• The importance of being honest about commitment and passion post-acquisition is stressed.

"If it's not the right culture fit, you're not going to have that drive to keep going 100%."

This quote underlines the necessity of a strong culture fit to maintain motivation and drive after an acquisition, which is vital for the continued success of the venture.

• Failed acquisitions can result in bitterness and a feeling of disrespect toward the entrepreneur's work.
• The potential destruction of a startup within a larger company due to bureaucracy or lack of culture fit is seen as a tragedy.
• The importance of alignment and shared approaches to avoid negative outcomes is highlighted.

"It can be sad too, because you see it where entrepreneurs who sell something and it doesn't fit and it ends up withering on the vine or being killed or dies inside a big company."

This quote reflects on the emotional and practical consequences of a failed acquisition, stressing the importance of a good fit to prevent such outcomes.

• The closing of a funding round is just the beginning of hard work for a company.
• Entrepreneurial drive is essential to keep founders engaged through challenging times.
• This drive is analogous to the necessity for motivation post-acquisition in a larger company.

"The happiest day of the next two years of your company is going to be when you close that round and then the real hard work starts."

The quote draws a parallel between the initial excitement of securing funding and the subsequent effort required to grow and sustain a business, emphasizing the continuous nature of entrepreneurial challenges.

• Instagram's launch of Stories is a strategic move in competition with Snapchat.
• Facebook's attempts to disrupt Snapchat through other branded platforms were unsuccessful.
• Instagram's existing user base and the introduction of a new feature are part of Facebook's defense strategy.

"Super interesting to watch what's happening with Instagram Stories."

This quote points to the competitive dynamics between Instagram and Snapchat, highlighting Instagram's strategic initiatives to capture more user engagement.

• The contrast between professional flexibility and personal routine is discussed.
• The importance of routines and systems for success is considered alongside the value of being adaptable.

"I need to wake up at the same time and have the exact same morning routine every morning or else I'm not myself."

This quote reflects on the speaker's personal need for a consistent routine, despite professional flexibility, illustrating how individuals manage different aspects of their lives.

• Discusses the importance of reading and learning.
• Recommends "Mindset" by Carol Dweck, which explores growth versus fixed mindsets.
• Mentions "Shoe Dog" by Phil Knight, a memoir about the entrepreneurial journey of the Nike founder.
• Recommends "Originals" by Adam Grant, focusing on creativity and originality.

"I read constantly. My wife is definitely much more of a purger. And I think if I moved entirely to a kindle she'd be happy."

This quote reveals the speaker's passion for reading and the joy it brings them, highlighting the personal value of books and learning.

• The dominance of athlete Simone Biles in gymnastics is highlighted.
• The shift in Biles' mindset from self-doubt to confidence is inspirational.

"This girl is like the most dominant athlete in her sport, I think I've ever, like, she makes Michael Jordan look like he's in the, you know, would be the comparison."

This quote celebrates the exceptional talent and success of Simone Biles, using her as an example of peak performance and the power of a confident mindset.

• A video on the history of the Concord and its impact on supersonic flight is recommended.
• The video explores the challenges and reasons why supersonic flight is not prevalent today.

"There's this incredible video on Vox. It's only 10 minutes long on the history of the Concord, how it came to be, what the other supersonic airplane undertakings were, and why we don't have supersonic flight today."

This quote introduces a resource for those interested in aviation history, specifically the story of the Concord, and its significance in the context of supersonic travel.