Q&A: Corporate Development Analyst At A Tech Startup

1. Right now everything is cash. As I mentioned above M&A as a growth avenue is pretty new here so we're dipping our toes and making smaller acquisitions to test the waters (typically M&A - our job as a corp dev team will then be to identify targets, acquire them, and run integration.

2. No... Haha, but really nothing. When I look back and think about what I liked about banking (negotiations, strategic thinking for buyers/targets, etc.) I do all of that, but in a greater capacity in my current role without a lot of the BS that comes with IB. Even the pay is negligible to me in the sense that sure maybe I do make a good amount less than I did in IB, but my hours are a fraction of what they were and I'm still making good money with great trajectory in the org.

For me personally, not so much. I'd say

So I use the term "startup" kind of liberally here. Culture wise and the way we generally operate is like a start up, but the company itself is 10+ years old. To answer your question, the money itself comes from years of high profitability.

1. Total comp is going to be potentially $130-$140k. I've been told I'll be up for a promotion soon this year, but not sure how much that will change comp and when that will happen.

2. Usually 40-50 a week with no weekend work.

3. Randomly applied and was contacted through internal recruiters from there.

Overall, I'm very grateful I got this position. For me it's a good mix of hours and pay with lots of interesting M&A work.

Honestly I’m not really sure. They’ve done the same for past finance / accounting people where they’ve made their title an entry level title despite years of experience.

For me I was ok with the analyst title because 1) we had agreed on / discussed a fast track to promotions depending on my performance and 2) my compensation was a good amount more than my last Corp fin role and was more in line with what an experienced Corp dev associate / manager might make in my city.

Right now, I'd say the most used skills that carry over from IB (qualitative and quantitative) include:

• Conveying ideas in a clear and concise manner. As mentioned previously our leadership is less concerned with financial metrics of a deal and don't really want to see 10+ slides of financials, etc. What they do want to see is a clear story of who the target is, what do they do, how they fit with us, how do they enhance our product, potential integration pathway, valuation estimate, and immediate next steps. Taking a bunch of random files, conversations, presentations, etc. and synthesizing one cohesive, compelling story is incredibly important.

• Being able to strategically think about targets. In IB rationalizing buyers and targets is done usually with the perspective of lets go really broad and hopefully something sticks and leads to a deal. Here, that view gets honed in a lot more in that we're not contacting ~100 targets, but rather here's a couple of targets now take a look and work with other teams (e.g., engineering, product) and formulate a more in depth perspective of if it actually fits.

• Strong analytical mindset / strong mental math to quickly estimate valuation, target size / financial health, sanity checks, etc. The targets we look at are pretty simple in terms of financials / operations, but you'll have to be able to take a look at their numbers and be able to analyze trends and formulate stances on them. Also, a lot of times we'll be in discussions with execs, business owners, etc. and you'll have to make an estimate on the fly or you'll have someone say something on the fly and have to determine if it makes sense or if it's total BS.

Overall, finance knowledge, modeling skills, etc. are still used a lot, but the skills above are valued way more in this role than they were in IB. Sure, in IB you'll make a pitch and it'll have to make sense, but you have numerous levels of control (VPs, MDs, etc.) that have the final say on the end product. Here, it's just my director and I so whatever I put down on slides needs to be at a higher level of quality in terms of logic and flow. The ultimate goal here for me is to be less of just a number cruncher for my director and more of someone that can eventually run 80% of deals by myself, which places more emphasis on logic and rationale than grinding away in Excel and ppt.

To your second question, yes. In the past I've seen a lot of valuation guys either be eligible for or obtain corp dev roles. I'd say IB is generally seen as more favorable, but honestly once you have the foot in the door and are in the interview process it comes down to how well you do as the interview process can be pretty hefty with case studies, etc. Like I'd take a guy who's from valuation who wow'd me with how they approached a case study and had polished interviews than a IB guy who sucked.

Finally, overall, I think networking is important and it can only help, but it's not necessary to get a job. All three of my past positions came from cold applications as in there was no networking done to get them. What they ultimately came out of was just spamming applications and hoping something stuck. I've also even gotten a few offers in PE and larger IB groups that came just from cold applying. That being said, I have gotten a lot of interviews (not just corp dev) through networking, but many didn't pan out into offers. So overall, my stance is I think networking does usually help get your foot into the door for interviews, but ultimately once you're in its up to you to prove that you deserve a position networking or not. Obviously there are exceptions, but those are just my general thoughts.

If you don't have IB / PE experience I would suggest experience in strategy consulting, valuation, venture capital, or other corp dev experience. Maybe corp strat experience could work too. Honestly, outside of that it's going to be very hard to break in as from what I've seen corp dev teams want that strong transactional / strategic background that's hard to find and / or gauge in professionals from other fields.

That being said if you're outside of that I wouldn't say it's impossible. I've seen people in typical corp finance roles move to corp dev teams within the same organization setting themselves up for similar future roles. I'd imagine a big part of that is being in the right place at the right time though.

So far all of our targets have come in through networking (e.g., being involved in the local tech space, accelerators, conventions, personal networks, etc.). We keep in touch with a few brokers who sometimes run formal processes, but we try to stay of that. Generally, the thought is that if we strike first and bypass a broker we can skip a lot of deal related road blocks and pain points (e.g., bidding against other buyers, formal IOI and LOI submission dates, etc.).

Right now all of our deals came out opportunistically (i.e., we had a connection with the target and they happened to be open to selling when asked, or they contacted us first with the intent of selling to us). However, we're looking to formalize our deal origination process into something more structured. So instead of random deals popping up, we're looking to have a few growth avenues set aside to pursue through inorganic growth and from there we'll take a deep dive looking into targets within those spaces then narrowing the scope to some acquisition targets to contact.

It's heavily skewed towards legal, HR, and product / engineering in terms of due diligence. Legal we'll lean on outside counsel to make sure everything looks ok and that their legal docs are all in order with nothing sticking out. HR we'll use inside teams to make sure transitioning people to our org goes smoothly and to see if any pay adjustments need to be made to bring them up to our standards. Product and engineering come in to see if / what parts of their product and team can mesh with ours.

Financial due diligence is pretty minimal as most of these companies are doing little revenue and consist of very simple operations (e.g., for example one target we're looking at is 5 engineers making no revenue). Essentially, we just want to make sure there's nothing too wonky in their financials, that their taxes are in order, and that we're set up to take over their financial operations (e.g., people get paid post close) no matter what the integration plan is.

Overall, everything is relatively light at least compared to be IB experience. Time wise we typically push to close a deal in 60 days, which can flex up and in some occasions down depending on the situation of the target.

In the next five years hopefully in a manager / director role in my current org. I really like it here and hope to stick around for a bit. In 10 years maybe I can be in some sort of advisory / independent consulting role. I don't plan to chase after any sort of C-level position and am pretty happy with comp, so hopefully in 10 years I'll have enough invested and can stay involved in M&A on the side.

I can see a bit of that perspective in my org right now. I do have the opportunity to push acquisitions through, but a lot of deal approval to proceed comes from the product team. I can see a lot of that being exacerbated in FAANG where corp strat / dev is skewed to heavily depend on product / other groups' approval. Outside of tech I've seen both ways as well. I've seen corp dev groups determine the inorganic strategy and have a seat at the table in determining general business strategy while I've seen other groups simply process transactions for targets dictated by the CEO or another group.

That being said, in my org corp dev is still strongly backed by the CEO and CFO, so we have more footing when it comes to business directional decisions. The general understanding is that product, engineering, etc. can tell us if a company fits from a technical standpoint, provide feedback, and can sometimes veto a target, but corp dev is the one driving inorganic growth and (eventually) lead creation of a formal inorganic growth strategy.

To answer your last question I like finance and M&A, so I don't regret my trajectory and eventual place here in corp dev.

Nice, glad it's been helpful and awesome that you've got these two opportunities!

So, in a few ways I've faced similar questions of corp dev vs. FP&A, large established company vs. more nimble smaller org, etc. At the end of the day it really depends on what you want.

For me, I wanted a place that brought a lot of value to me (good pay, hours, and work environment) in an M&A role. I didn't necessarily care too much about career trajectory and prestige / respect. I guess for me, coming from a no name LMM IB role, I've kind of faced and eventually succeeded at getting interest and a handful of offers at more competitive roles (PE, HF, corp dev, etc.) so I haven't been really worried with a "what if" scenario of lack of prestige or high profile IB experience getting in the way. To me, given enough time I don't see too many roadblocks stopping me from transitioning to another competitive role. Sure, I'll probably never be in PE at a megafund, or be the VP of corp dev of in FAANG, but that's not what I want. As mentioned above, I don't see myself chasing after exec level positions, but really "coasting" career wise in the sense I'm very content with my role, I'll work hard and advance at a steady pace hopefully, and I'll just see where this eventually goes.

That being said, that might not be what you're looking for. Maybe you want the fastest track to VP or corp dev. Maybe you want to work on larger $500mm+ deals. I would figure out what you really want in your career and see which role fits best. If you're like me and want a great work environment with limited red tape and a fun atmosphere and place more value on that than how it sets you up for your next role, #2 might be better. If you want to beef up your resume with F500 experience, work in a high performing team getting good mentorship, and do large high profile deals #1 might be better for you.

One exception though is if the 2nd opportunity is in the cannabis industry I probably would skip it. I'm not sure what "not so highly regarded" means, but I got voluntold to help do some pro bono work for a past client when I was in IB and from my perspective that arena is pretty murky and not seen at the same level of sophistication of other industries, which could hurt your exit. Just my 2 cents though.

My director's background is in Big 4 valuation and was originally part of the corporate finance team at my org before moving to corporate development when we decided that we wanted M&A as a dedicated part of our growth strategy a couple of years ago. I have no idea on compensation.

I'm not sure on specific headhunters / recruiters, but I personally have found pretty good success just applying for whatever position interests me, which often results with initial conversations with recruiters who then send me a steady stream open positions that match to my interests. Most of the recruiters in my network are region specific as well.

Awesome, congrats on the position!

I think the standard work ethic for IB, etc. is always good (e.g., triple check everything, be proactive in learning, good communication skills, financial modeling, etc.). For corporate development though you'll have to lean more into the why of a transaction rather than simply running and closing a transaction. I think it's easy for me to turn my brain off and run support work for my manager and still do a good job. However, in order to really add value I think it's important that you develop the thought process necessary to drive M&A strategy. Practically, that could take the form of a lot of things. For me that involves doing my own independent research, formulating my own ideas and questions and using my manager as a sounding board, and also asking my manager to ask me my opinion / thoughts more to see if I'm on the right track with my thinking (basically quizzing me). I'm lucky to have a manager that wants to help bring me up and I hope you have someone like that too.

On top of focusing on the why, you'll probably also need to do a lot of heavy lifting in integration. In my eyes integration really depends on you forming good relationships with key people in other departments as well as managing and tracking various moving pieces. It's not the most glamorous job, but a significant amount of an acquisition's success lies on the integration period. Ultimately, I think 80% of success is really just being a person people want to work with. Helping people keep track of tasks, reach deadlines, offering up help, etc. really goes a long way IMO.

So right now we're still pushing forward with acquisitions. Financial performance is slightly down, but we're still profitable and nothing catastrophic has happened. Also, the amount of dry powder we have is more or less unaffected by the coronavirus. If anything, this is a buyer's market for us. For example, we're submitting an LOI this week for a target and the owner basically had to accept our offer since 1) he is running out of cash and 2) raising additional funding is going to be difficult in this market. As we maintain our cash position and decent financial performance, and as more of our targets struggle due to coronavirus I think we'll see a lot of good opportunities come to us.