Showpad, Strategic Roadmap Centric Buy or Build Strategy
In 2012 Pieterjan Bouten and Louis Jonckheere founded Showpad as a spin-off of the digital agency In The Pocket. Showpad has raised up to EUR 140 million in funding from prestigious venture capital investors such as Insight Ventures, Dawn Capital and Hummingbird Ventures.
Make or buy decisions are made by Showpad on the basis of its product strategy, where it identifies any missing components and then decides whether to build such components internally or purchase such components through asset or share deals.
Showpad is a platform company with a partnership strategy which allows other companies to build and offer applications on its sales-enablement platform. Any buy & build decision takes into careful consideration the platform nature and partnership strategy of the company and the attractiveness of such platform for potential partners.
Showpad has made six acquisitions since its incorporation, 4 of which were asset deals and 2 of which were share deals. When purchasing businesses retention of key staff is of crucial importance. The consideration payable in such transactions consists of various components: an upfront cash payment, a deferred cash payment tied to retention and performance objectives and Showpad shares to align interests between the founders and key staff of the purchased business and the Showpad shareholders.
Showpad purchased UK-based Hicky Limited, one of its platform partners, and converted their application into Showpad Experiences which is currently used by 3/4th of the Showpad clients. It furthermore purchased Voicevox, which presented a specific meeting intelligence opportunity and useful addition to the Showpad roadmap.
Its largest acquisition to date is US-based Learncore to enhance its learning, training and coaching offering, after first having focused on the development of sales enablement content tools.
Pieterjan Bouten, co-CEO of Showpad, shared the following insights regarding buy or build strategies:
• Product Roadmap Strategy: it is of crucial importance to have a clear strategy for the product development roadmap in the long term. The management team needs to carefully weigh pros and cons in either building any missing components in-house or purchasing such components through asset or share deals. Time to market, development risk, integration risk, company culture are i.a. factors which need to be taken into account. It is extremely important to be critical when making these decisions and to not get caught in “deal fever” when pursuing buy or build decisions.
• Partnership strategy: in platform companies adhering to partnership strategies, allowing other companies to offer applications and other services on the platform, maintaining the attractiveness of such partnership strategy is key. A horizontal acquisition is less likely to pose any concern than a vertical integration with the acquirer becoming active with applications on top of the platform alongside other partners. Under no circumstance may the impression be created that the platform company cannibalizes its partners.
• Consideration payable: in almost all cases it is key for key management and staff to be properly retained and incentivized following an acquisition. Making a single upfront cash payment to such persons is unlikely to achieve such objectives. Thus, applying an appropriate consideration mix, consisting of an upfront cash payment, a deferred cash payment tied to retention and performance objectives, and shares of the acquirer to align interests between the founders and key staff of the purchased business, are key elements to ensure retention and motivation.
• Acquisition valuation: a management team needs to be knowledgeable about valuation metrics, which are continuously evolving. An acquisition must have an immediate positive impact on the valuation of the acquirer, which e.g. is the case if the revenue multiples applied to the acquired business are lower than the multiples applied to the acquirer.
• Integrate fast: while sufficient autonomy should be granted to the acquired business to meet the performance-based objectives, rebranding the acquired products, and integrating key staff and personnel of the acquired business in a short period of time is important. Such integration not only pertains to the general workforce, but also in respect of the senior management of the acquired business which is integrated in the leadership team. Such integration allows for clear messaging to the market and integrated marketing and sales efforts, in addition to ensuring that the leadership team and employees adhere to the general company strategy.