Last month TiE New Jersey (Edison) presented a case study of how two entrepreneurs who met at a TiE New Jersey event got to know each other and find common ground. The result: a company acquisition.
The highly focused discussion called, “Executing M&A Growth Strategies Successfully,” was moderated by Anjan Lahiri, CEO and managing partner at Navikenz (Cranbury). Panelists included Raj Patil, CEO of Orion Innovation (Edison); Guy DelGrande, formerly CEO of Tekmark (Edison), before its acquisition by Orion, where he is now chief sales officer; and V. “Bala” Balasubramanian, senior vice president of life sciences at Orion, and formerly president and CEO of Cabeus (Plainsboro), which Orion also acquired.
As Raman Kapur, TiE New Jersey’s president, stated when he introduced the meeting, this was a good example of the TiE New Jersey group becoming a catalyst for TiE members who can benefit from interaction with one another. The event could have been titled: “When Bala met Raj,” as Orion’s acquisition of Cabeus had stemmed from a meeting between Balasubramanian and Patil.
Patil took over as CEO at Orion in 2015 as part of a private equity sale. At that time, the company was about 20 years old, he told the group. It was a small company doing some big things for some big clients. The DNA of the firm was to “punch above its weight at all times.” They knew they could do a lot more than they were doing, so at the time Patil came on board there was a lot of pent-up energy, and the team was ready to do big things.
He told the group that with the disruptive trends of digital transformation, the idea was to build agility at scale, and that required a new breed of company. Orion at that time had some good bones and some “amazing clients, but we had to just step back and cull some things out” and strengthen others. “We put out an architecture” back then, saying “this is what the firm is going to be, and we’ve stuck to it. Everything we’ve done via M&A, via organic [growth], via investments … had to fit that architecture.”
He noted that one of the challenges that he found involved the original people and their loyalties, and those things needed to change. Within 30 days, the management team made the decisions that were needed to align everyone with the new direction of the company. He picked out people who were performing well and could do bigger things, and reorganized the company to reward that and give them the opportunity to grow. He also reached out to Orion’s customers, to ask them why they were doing business with this small company, so that the company kept those things that were going well.
The conversation then turned to Balasubramanian.
Lahiri asked Balasubramanian how, as president and CEO of Cabeus, running his own company, he made the decision to give that up and sell. Balasubramanian responded, “We were a niche company, started by founders focused on domain-based services and consulting in the life sciences industry. We knew we could do well because there were many large-scale providers, but they didn’t have the domain knowledge to really succeed.”
He continued, “You let go of so many things in your life, that you have to be prepared” to let go of a company you built. However, there were factors that made it the right time.
For example, while it was growing year over year by 30 percent, clients would ask for international reach. Cabeus didn’t have the ability or resources to open offices and pursue business in Europe, India and Asia. The company was focused on regulated technology. “We had created a model around software as a service, and we were actually looking for more funding, as well. We were at a point where we had to grow, we had to scale up. We had to have a global presence,” he said.
At the same time, Balasubramanian attended a TiE meeting and began speaking with Patil. “It was a total happenstance. It was not a planned thing! It was a great discussion that I had with Raj post the TiE meeting in June.”
He went back to the cofounders, and although they had been looking for money for their product, there was a fit that couldn’t be ignored. On the one hand, “Raj was planning a platform company, but verticalizing it at the same time,” while on the other, “we were looking to be a vertical company in a more horizontal platform.”
DelGrande had a similar story. He had worked for a long stretch at Tekmark, where he grew from employee to owner, and then sold the company to Orion.
An audience member commented that he had heard a remark from a banker that went like this: “It’s remarkable that services companies are either bought or sold, because when a founder is selling a services company, they are really buying a retirement plan and the buyer is buying a hard-charging founder.” DelGrande noted that he was at a point in his career where he wasn’t ready for that retirement.
However, he realized that he could only take Tekmark so far. “I didn’t have outside capital, so I was somewhat constrained. I didn’t have delivery centers throughout the world. My clients were looking for that capability.”
When he decided to sell, there were some caveats. For example, he said, “It was critical for me to have a senior role in the [new] company.”
Another critical element for him was remaining loyal to the members of his team. “I have people who have worked for me for 25 or 30 years, and a large percentage of people, not just five or six. That was one of the first things that Raj and I talked about. I knew there would be some synergies … but I wanted to make sure that a lot of the members that ran various organizations,” such as the telecom, data analytics, and security groups, as well as the people in sales and HR, “had a home.” And that’s what has happened here, he said.
All of the panelists answered extensive questions from several of the 60-plus participants in the videoconference. The TiE New Jersey group is made up of many entrepreneurs, with a number of the members in the tech services industry. The complete hour-and-a-half video can be found here.