Startup Acquisition Stories w/ Dirk Sahlmer – M&A Manager at saas.group

This is a mini-series within SaaS Acquisitions Stories where we profile the top Private Equity firms and firms acquiring online businesses at scale.

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Transcription:

Andrew

All right. I am here with Dirk from SaaS Group. I’m super excited for this one, one of my favorite private equity firms in the space. With that said, thanks for joining me. 

Dirk 

Yeah. Thanks for having me. 

Andrew

So first question. Could you give an overview of SaaS group? What do you guys do? 

Dirk

Yeah, for sure. SaaS Group was founded about four years ago by three German serial entrepreneurs. They stumbled across so many bootstrapped SaaS founders that were looking for an exit or looking to take some chips off the table. Back then, there were not many options for them. Often these businesses are too small for strategic Acquirers or traditional private equity firms. And they said, ‘Hey, there must be a solution for this.’ And they thought they had enough entrepreneurial experience to help these people and to provide a good new home for their businesses once they are looking for an exit. And yeah, that’s how they actually started up with SaaS Group.

Andrew

How did you get involved in SaaS Group? 

Dirk 

More or less by accident, I have to admit. As you may have seen, I have an engineering background and was involved in hardware rather than software. I started in mechanical engineering, worked in the automotive industry, and then came to start my own business during my master’s degree, which failed for a lot of reasons. I wanted to learn how to do right the next time and that’s how I came to join SaaS Group. 

Andrew

Nice. You definitely learn a lot from failure and I can say that from personal experience. That’s quite the resume, man. You’re now in private equity, acquiring companies. That’s impressive to say the least. How many startups has SaaS Group Acquired, if I can ask? 

Dirk

We’ve Acquired seven businesses. 

Andrew

Nice. What’s your sweet spot when looking for SaaS companies to Acquire? What does that look like in terms of size, industry, and so on?  

Dirk

Our focus is businesses between one to 10 million ARR. That’s our revenue sweet spot. Apart from that, we are looking for more horizontal businesses rather than vertical niche businesses. Otherwise, we’re open to different kinds of products and companies, whether they are growing declining, profitable, or breaking even.  

Andrew

Nice. Could you describe the perfect acquisition target for SaaS Group for founders listening?  What are three things where you’d say, yes, yes, yes? 

Dirk

What’s important to us is that the founder in the end feels comfortable handing over the business. That’s our ultimate goal. That’s what we are working towards. We prefer if founders stay on board, at least for a certain period post-transaction. So the perfect target would probably be a founder that is still ambitious but identified some bottleneck, sees that his or her skill set is somewhat limited but wants to grow the business to the next level. And that’s where we can come in and provide the resources needed and the expertise needed to bring this to the next level. I think this is the perfect scenario, but apart from that, we are also open to full acquisitions where the founders walk away. We are pretty flexible. 

Andrew

Nice. Last year we had a pretty crazy year with acquisition activity in terms of just total M&A volume. For founders looking to exit this year, what would be some advice you’d give them? Maybe as they’re preparing for an acquisition or things they should know about going through an acquisition process specifically with SaaS group? 

Dirk

First, I think they should listen to themselves which exit option they would prefer. For example, with us, they have all of the flexibility so they can decide whether they want to sell a hundred percent or maybe a majority first and the rest down the road. We structure the deal as it fits best for the founder’s life, situation, and preferences, but other buyers might have deeper pockets. I think the founder should first listen to themselves what they’re looking for. So are they looking to sell the whole business to start something new or take some time off, or are there other problems that are just holding them back from growing? 

We are not only acquiring companies, we can also help you find the right role within your company. I talk to a lot of very tech-oriented founders, and they usually don’t feel comfortable managing people, taking care of operational stuff. So maybe you can relate personally. That’s where we can also help. So people can get rid of all the annoying stuff and can go back to the laptop and continue coding and go back to the things they’re passionate about. I think founders should listen to themselves and think about what they’re looking for and then go out to find a suitable buyer. 

Andrew

That’s great advice. I definitely recommend really understanding what your ideal outcome looks like. Do you want to sell the whole business? Do you want to maybe find a strategic partner such as a firm like yours? That’s really great feedback. Do you have a favorite acquisition story that you can share? They’re all probably your favorite, but is there one that stands out? 

Dirk

My main job at SaaS Group is to go out and find potential new targets that fit our portfolio and to talk to a lot of founders. I try to engage with founders early on. So maybe if an exit is still far away in the future, but if I start a conversation and it’s not a fit at that time and we stay in touch,  one year down the road or one and a half, they might come back and say, ‘Okay, we think now it’s time. Let’s dig a bit deeper and see whether we can collaborate.’ I think these are the best deals and that’s happened with quite a few. 

One of my first conversations when I started my job at SaaS Group was with these two founders I really liked, and we Acquired them one and half years later. At the beginning, it was not a fit for various reasons. But in the meantime, we were working together, and also with Git Tower. I think this was the only founder I met in person, because when I started my job, the pandemic hit us. All of the companies we Acquired in the meantime were over Zoom. I liked the Tower deal because I met the founder in person before.  

Andrew

Nice. I really like that. It’s also important for founders to realize it can take time to sell their companies. So building those relationships in advance can be crucial. What do you predict will happen to acquisitions in 2022? Is it gonna be a bigger year? A smaller year? 

Dirk

Regarding micro acquisitions, in general, I think the space is still in its infancy. So I think there’s still a great future ahead and platforms like yours are removing the barrier for founders to find a suitable buyer or also for buyers to maybe buy a small business or a bigger business. This lowers the barrier to entrepreneurship and also acquisition entrepreneurship, and to sell your business for a decent price. 

I also like the educational aspect of your platform. So more and more people know how to approach buyers, what they need to prepare, how an M&A process works. There are more and more no-code local tools popping up, which also makes it easier for people to start their own business, even if it’s just a side business and then maybe grow it over time. I think we will see even more of these micro positions in the future and even more entrepreneurs that are starting businesses in this space. 

Andrew

Yeah. You don’t need to be technical as much anymore. There are no-code tools that can get to a certain place where no-code turns into custom code as you wanna build out more functionality to serve a different customer set. So, it’s a pretty good time to be a founder. I got three more questions I didn’t tell you about because I didn’t want you to know them in advance, but who’s your favorite entrepreneur? 

Dirk

I watched your previous episode, so I knew the question was coming. I’m prepared. I really admire all of the founders that are bold enough to start their own business. So it’s not like that specific person Elon Musk or Bill Gates or whoever, but every founder that builds something on the side deserves respect. If you want me to drop a name, it’s probably my boss because he’s a very successful entrepreneur, but he’s not going out and telling everyone that he’s a great entrepreneur and I really like that. He’s very down to earth. As you may have seen, he also has a climate tech seed fund in parallel now. So he’s involved in a lot of projects because the topic is very important to him and that’s what I really like. 

Andrew

I also admire Tim and I love your response too. Anyone just taking a risk, you know, and chasing their dreams. I admire all those entrepreneurs too. So the second question is what’s your favorite book?

Dirk

Getting Acquired by Andrew Gazdecki. 

Andrew

Okay. Now, we get a second favorite book. 

Dirk

The book I currently started reading is Getting to a Yes, which is a negotiation book. Apart from that, the book that helped me a lot to understand the SaaS Group model in the beginning is Buy Then Build. I don’t know if you’ve read it, but I can completely recommend it for people who are looking to Acquire businesses or to understand the space from a buyer perspective. I think these are the books I would recommend. 

Andrew

Yeah. That’s actually in my top 10 I would say in terms of acquisition books. Well, this has been super helpful Dirk. I really appreciate you taking the time. If founders are listening to this and wanna reach to SaaS Group to see if maybe they’re a fit for an acquisition, what’s the best way they can reach you? 

Dirk

The best way is to reach me is via email, I think. So you could send me an email to dirk@saas.group. There’s also a contact form on our website and you can also reach me over other channels like LinkedIn or Twitter. 

Andrew

Cool. I’ll put those in the show notes so anyone interested in learning more about SaaS Group, which I highly recommend, can get in touch. 

Dirk

Yeah. I’d be happy to chat.

Andrew

Thanks so much for taking the time. I’ve heard so much good stuff about you guys.

Dirk

Yeah. Thanks for having me. I appreciate it. 

Andrew

Yeah, my pleasure. All right. Cheers, Dirk. 

Dirk

Cheers.