An Unexpected Offer

August 11, 2015

Case categories include: Leadership   M&A   Strategy & Planning   

The Alliance of Chief Executives was created to provide safe environments for CEOs to discuss their most sensitive and highly strategic challenges and opportunities in ways they really can’t do anywhere else. New members are always amazed at how open, honest and direct they can be with their fellow CEOs. There are two key elements which create the trust within our Alliance groups: 1) No competitors are allowed to be in the same group; and 2) There is a prohibition against anyone selling their products or services to other members. It’s okay to buy from fellow Alliance members, but CEOs can sense a sales pitch from a mile away.

Although doing business with other members is not the primary purpose of the Alliance, every so often a business synergy emerges among Alliance members that simply cannot be ignored – a deal that is begging to be struck.  This case study is one such occurrence.

Meet Marco Marini, the CEO of ClickMail Marketing, who has been an Alliance member since 2011. His business brokers clients into email service providers (ESPs), in essence acting as a reseller. ClickMail is based on the value proposition that there isn’t a single best solution: by offering a multitude of different ESPs to meet specific client needs, ClickMail creates value in finding the right fit and tailoring that solution to the client’s specific needs.

Now meet Bart Schaefer, the now-former CEO of iPost, who was in Marco’s group earlier this year and has been an Alliance member since 2011. Bart’s company is an ESP that enables sophisticated and successful email marketing campaigns through a cloud-based platform. He and Marco had been in the same Alliance group for years and, while their firms were in the same general space, they were not in direct competition: ClickMail was a reseller of ESPs focused on the enterprise, while iPost was a specific ESP focused on small to mid-market companies.

“We went after different business,” commented Marco. “I would say that iPost is a small business to mid-market solution. And we were focusing on the enterprise. It was simpatico. We actually shared happenings in the industry. Things he didn’t know I shared and vice-versa. I actually sat down 6-12 months beforehand and gave him candid feedback on what I thought he should do. There are a lot of players in this space. Sort of my take on what he should do to differentiate. We’ve had those conversations and I was never worried about sharing that kind of information in the room.”

At a meeting earlier this year, Bart and Marco were with their group members discussing iPost. The ESP market was rapidly consolidating and iPost had just lost a key sales-oriented executive to a large technology company. As the group opined whether this might be the right strategic moment to posture for acquisition, Marco spoke up.

“I could be the one to make you that offer,” he said.

While surprised by Marco’s forwardness, Bart could not ignore his interest in the deal.

What happened next was unusual for the Alliance. Director Marty Reed, always quick on his feet, morphed several monthly Alliance meetings into a snap advisory council to help Bart and Marco examine the facets of a potential deal and decide what was truly in their best interests. Both Marco and Bart were intensively questioned by the group – without the other one in the room – and pressed to provide solid raison d’etre for the union.

“That process was the most interesting part,” remembered Marco. “We did it muItiple times: I stepped out of the room and they spoke with Bart. Then vice versa. I got grilled a couple times; and it was really really good that they did that. They spent time focused on Bart, looking out for Bart, questioning Bart. They did the same thing with me. Honestly, it was very uncomfortable. But it was the right thing to do. Ultimately, the group helped solidify the deal because they were behind it. Not immediately; it took a while for everyone to get their arms fully around it and why it makes sense. Finally Marty said, ‘I can’t believe I’m saying this, but I think it’s the right move for everyone involved.’ And that’s that extra little push.”

What emerged was a solid business case for iPost’s sale to ClickMail. iPost had a variety of resellers that were reselling their product, but not much of a sales engine. ClickMail not only had a strong sales team, but also was familiar with the iPost platform as a reseller. Moreover, since iPost was already one of ClickMail’s most resold ESPs, ClickMail was protecting its business by assuming control of iPost and not leaving it open to poaching from the competition. Yet, perhaps the most compelling catalyst of the transaction was the relationship that Marco and Bart had built up over years in the Alliance together. There was real trust there, and trust is the currency of transaction.

“The caliber of trust was more thanks to the Alliance,” remarked Bart. “The fact that we had been openly discussing with one another various struggles of our businesses and revealing our personalities and philosophies – that made it much easier to leap to the conclusion that this deal could work as a closer partnership than the simple reseller arrangement that we had done previously outside of the CEO group. It made it possible to go through the process very quickly.”

True to the Alliance code disallowing conflicts of interest, Marco and Bart are no longer in the same group. However, their working relationship has significantly deepened and the two companies are now aligned and bringing greater value to the email marketing industry – solid proof that the deep strategic exchanges that occur behind closed doors in Alliance meetings often lead to breakthroughs in the real business world.