Startup Acquisition Stories w/ William Barlow – Partner at Barlow & Williams

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Andrew Gazdecki:
All right. I’m here with Will Barlow from Barlow & Williams. Will, how you doing today?

William Barlow:
Good. How you doing Andrew?

Andrew Gazdecki:
Doing great. So, Will is kind of a Acquire legend. He’s helped a number of, I’ve lost count at this point. I’m sure you would know better than me, get Acquire. And so I’m really excited for this one. So Will, just to kind of kick things off for listeners that may not know you, do you want to just give a short two minute intro of yourself?

William Barlow:
Yeah, sure. So, not, my name’s Will. My background is, I’m a lawyer. I worked on the Wall Street after I graduated law school, did that for a number of years. And then during the pandemic I left and I started my own firm. And…

Andrew Gazdecki:
Good.

William Barlow:
It was around that time…

Andrew Gazdecki:
Good for you by the way.

William Barlow:
So, I have an entrepreneurial bent as well.

Andrew Gazdecki:
Yeah, we’re all about that.

William Barlow:
And that was how I originally ended up finding Andrew and Acquire. I did a SaaS deal for one of his friends. And…

Andrew Gazdecki:
I remember that, we were talking about, that was one of my favorite, sorry to keep interrupting you. But that was one of my favorite acquisitions. Are you referring to the pushing gauge deal?

William Barlow:
Yes, exactly.

Andrew Gazdecki:
Yeah. That was a good seven figure deal. Sorry, I couldn’t…

William Barlow:
No, it’s great. So, and that was really a lot of my introduction to SaaS because my deals in the past, private equity Wall Street, we’re talking hundred million dollar deals. Billion dollar deals. And the SaaS space is really a lot of it’s dominated by this startup, Acquire, all of these other things. And so it was just, it was incredible different energy involved and I just loved it. I just fell in love with it.

Andrew Gazdecki:
Nice. So, on the legal side of things, arguably one of the most important, and sometimes confusing parts for entrepreneurs as they’re going through an acquisition, what are some key ways that you help entrepreneurs as they’re going through an acquisition? I know this is, I know the answer to this question, but I’d love to hear your take.

William Barlow:
Yeah, no I think for a lot of entrepreneurs, the legal cost, especially because it’s a big expense item, especially on a smaller deal. It can be, it can feel like a real barrier to entry. And I think Acquire is actually doing a great job with some of it’s legal forms, especially for smaller deals where maybe like it doesn’t make sense for a lawyer to get fully involved. But, especially on larger deals, what you’re really looking for is number one, you help with the general terms. So you often like, because I see so many deals, I think we have like eight SaaS acquisitions going on right now. We have a good sense of what the market is in terms of how much do you pay up front? How much do you defer over time? What are the transition services like?
So when you’re thinking about how do I make an offer that a seller is going to feel comfortable with, but still protect me? A lawyer is going to be there to help you structure that offer to kind of balance those two objective. And then there’s a legal diligence side of it. And I could talk a little bit more about what that entails and what comes up. And then probably the most important part is drafting the actual documents, the purchase agreement. And once again, with a good attorney, the desire there is to, on the one hand, you want to make sure you are protected as the buyer or the seller, whatever the case may be. But you also don’t want to make it a super one-sided agreement that makes you just go back and forth a million times. You really just want to be practical and get the deal done. And that’s really the job of a lawyer it’s, in some ways it’s just making the process move smoothly so the business people can really do their job, which is more important, frankly.

Andrew Gazdecki:
Nice. So, I know you’ve done a number of acquisitions. And I’ve heard nothing but amazing things about you. And again, that’s, I don’t want this to be like infomercial for you. But I truly have. And we worked together on an acquisition and it was an absolute pleasure. But I know my favorite deals that I’ve done with you which are, but I’d love to hear yours. Do you have a favorite acquisition? It could be good outcome for the buyer or the seller that came to you and any interesting stories you could share?

William Barlow:
Yeah. I think one of my favorite ones, I’ll have to be a little discreet about this because it’s still ongoing right now.

Andrew Gazdecki:
Yeah. You don’t have to disclose numbers or anything like that. You can make it up.

William Barlow:
Yeah, exactly. It’s a 15 Billion deal, which I found on Acquire.

Andrew Gazdecki:
It’s a Twitter deal.

William Barlow:
Yeah, exactly. I represented Elon Musk. No, it’s one where the buyer is a strategic, overseas actually in the United Kingdom and it’s a stock for stock deal. There’s some cash up front and there’s some stock involved as well. And the company has gone through one major round of funding with some very well backed VCs. And this seller who’s a Acquire seller is, potentially going to play a large part in that company going forward. And so for me I think it’s really fun because most of the time with these deals you get your cash, maybe you provide some transition services and you’re sort of, then you’re on the other side. This one, not only are you doing the acquisition but you’re thinking about the long term relationship. And I don’t know, it kind of feels fun to be, not just a one off but a sort of building things in perpetuity.

Andrew Gazdecki:
You’re in the mix.

William Barlow:
Yep, exactly.

Andrew Gazdecki:
You’re moving and shaking stuff. I also want to touch on, if you’re comfortable with it. Just your acquisition pricing as well. Because I’ve gone down this rabbit hole where you hire an attorney and the all in legal costs, like my legal bill for business apps, which was like, let’s just call, I won’t say that, say a number. But the legal bill I believe was like 150,000. And I remember the attorney telling me hey, every time you email me, I have to charge you for 15 minutes of my time. And their hourly rate was a thousand an hour. Can you walk me through just like, let’s say a deal that’s two to $5 million. What does that kind of look like in terms of cost? Because I know you have a fixed structure that’s not hourly, which I think is awesome.

William Barlow:
Yeah. Well we, honestly it’s like a bad experience for both sides. You’re not going to email this guy if it’s $250 every time you send an email.

Andrew Gazdecki:
No I did. I was that nervous. I was like, I don’t care.

William Barlow:
Yeah.

Andrew Gazdecki:
So, walk me through, like I remember going through disclosures and I was like, just talk to me like in five.

William Barlow:
Just get it done. Yeah so, our thing is as you mentioned it’s flat fee. So it’s one half a percent of the transaction size with a minimum of $10,000. So, if it’s a $2 million deal, that’s $10,000. If it’s a $5 million deal, that’s $25,000 to give you a [inaudible 00:07:24]. We…

Andrew Gazdecki:
And how did you get to that? I think probably experiences like mine maybe led that?

William Barlow:
Yeah. It’s kind of two things because from the lawyer side it’s actually also very frustrating. Because one of the most frustrating parts of my job when I do hourly work is having to keep track of any time anyone sends me [inaudible 00:07:44] because not only do I have to respond to the email, I have to go into my billing system, I have to mark how much I did. I have to say what I did it for. I hated that. I had to do that all the time when I was working [inaudible 00:07:55].

Andrew Gazdecki:
I can’t even, I couldn’t imagine, I would literally like it, just between me and you Will and I guess all the listeners, once I found that out, I would just email them randomly. I’d just be like, hey, what’s up? Because, I don’t know, I was just like hey, what’s up? I just wanted to give you a tip with this email. I don’t know.

William Barlow:
[inaudible 00:08:20] like oh, I got to put that down.

Andrew Gazdecki:
So on the other side, I don’t know if they were happy or mad. But that’s an interesting perspective.

William Barlow:
When you’re at a law firm you literally have like in the upper right hand corner, I had these different timers up. You’d create different timers for different clients and you’d have like 25 off on a single day and you’d just be clicking between them as you move between different matters. And then you’d have to like put in all the entries for all the things you did. It’s honestly a nightmare. So, and the other problem I should say is with the hourly model, we’ve made some software to make our own selves more efficient. We’ve built in forms. We’ve done all that. If all you’re doing is billing hourly, and for you, every efficiency gain you make as a lawyer is basically just lost revenue. And so, we just thought, I don’t want to be tracking my hours. I don’t want to be, have the client not talking to me because of their hours. And I want to actually be able to be paid for the efficiencies I make. And that’s, it was an iterative process of just seeing what the market was accepting and kind of going from there.

Andrew Gazdecki:
I think it’s a total win-win. So, tell me about your transition into entrepreneurship? First of all, I want to say I’m super proud of you because the deal we were talking about at the beginning I believe you had not started your own firm. And so now you’re, you’ve ventured out on your own. How is, how’s that been for you?

William Barlow:
It’s been great. Welcome to the world of entrepreneurship.
I find it makes it a lot, it makes it really fun to talk to entrepreneurs because you understand the miracle that it is anytime you get a new client that’s actually paying you money to do anything. I remember the first time I got my first client. It just, I don’t know, it just felt like, how is this happening that somebody is, without me being a part of some big organization, somebody’s just paying me for my value for my time.

Andrew Gazdecki:
You never forget that first customer. I remember mine and yeah. Everyone, you never forget it.

William Barlow:
Who was yours? I would love to hear.

Andrew Gazdecki:
For Acquire it was actually Ryan Holmes, the CEO of Hootsuite. Or now chairman. And I’m kind of a startup nerd, so when that came in, I was like whoa, that’s so cool.

William Barlow:
Oh man.

Andrew Gazdecki:
Hey Ryan, I hope I don’t let you down with my require. He’s now an investor in the business and fantastic individual. But yeah, he was the first paying. And the story goes is, with our current business model of having buyers pay annual subscription access deals, I sent out an email, he signed up within two minutes. And I was just like whoa.

William Barlow:
Wow.

Andrew Gazdecki:
Which is really cool to see.

William Barlow:
Wow.

Andrew Gazdecki:
And then I also remember my first customer app business apps, which was actually an attorney.

William Barlow:
Really?

Andrew Gazdecki:
We made a mobile app for them. Yeah. All [inaudible 00:11:21]. It was a local attorney that I’m so close with today. I think it was kind of a sympathy sale. Like hey, yeah I love what you’re doing, but I still remember it.

William Barlow:
No, but it’s so awesome when you get, because it’s kind of like what [inaudible 00:11:36] says, it’s like the zero to one, that’s the hardest part. And when you actually get over that barrier, it just feels golden.

Andrew Gazdecki:
Right. So, let’s say I’m, I found an awesome deal on my [inaudible 00:11:48]. I’m circling with the seller. We’ve landed at a $4 million purchase price. Now I’m calling you up because that’s all we’ve gotten to is an agreed price. Can you walk me through just kind of how you would work with me in terms of helping me get the deal over the finish line?

William Barlow:
Yeah. So the first thing we would probably do is we would help you with the LOI, draft that up. We would talk you through terms. $4 million, is that all upfront? Do you have any deferred payments? Do you have any earn out payments? We would talk you through what transition services do you expect that you’ll need from the seller going forward? That can be typically included. We can talk through, sometimes you get into the weeds of this, sometimes you don’t. The period of the non-compete, et cetera. Basically the idea is you want to kind of front anything that are big enough, that they could potentially turn the deal south if you don’t agree to them kind of upfront. And then once you do that, then what usually will happen is, kind of a period where the lawyers will step a little bit into the background.
And this is why, usually after you get an LOI signed, you start doing financial diligence a little bit more heavily. And when deals fall apart, they typically happen because something has come up in financial diligence, income wasn’t what you expected, expenses were greater than what you expected. And so you typically don’t want to be incurring a lot of legal fees until you at least do a couple, get through a bit of financial diligence. But once you’re sufficiently through that process, that’s typically where you kind of bring back the lawyers, they draft up the purchase agreement. And sometimes by the way, with financial diligence, the purchase price will change a little bit, terms will change, earn outs will change. That’s that’s perfectly fine. But then you bring us in. We are usually very quick to draft. We can usually draft within a couple days, get an agreement out to the sellers. And then we’re just doing the back and forth until, typically in these sites of deals, you have a simultaneous sign in [inaudible 00:14:00].

Andrew Gazdecki:
Nice.

William Barlow:
Does that kind of answer some of your questions?

Andrew Gazdecki:
Yeah, it was just way too simple. I was expecting, I mean no, I’ve been through it but it was a little more on my end, just from personal experience, it wasn’t that straightforward. My experience was basically on the seller side, I kind of made it this way just because I was 29, so I didn’t want to do anything, I wanted to make sure the company was represented, but we spent I think a week on disclosures.

William Barlow:
Yep.

Andrew Gazdecki:
Like relooking at them, making sure everything was good to go. And then, so yeah. I wish I knew you at the time, I guess.

William Barlow:
Well, I’ll tell you a little bit of an experience from the buy side. So, one of the things that causes a lot of angst amongst sellers, especially new sellers is the disclosure schedule. So, you’re making all these representations about the company, but then, you put on schedules like here are my employment agreements. Here are my contracts. Here are my intellectual property. I had, we represented a buyer in a deal just, I want to say a month or two ago where the seller was a founder. And there came to a section where he said, please disclose your intellectual property. And we’re thinking, the trademarks and the web domain names, the main things. He goes through and he puts literally every single image he used at any time in his website. And it becomes like a 40 page disclosure schedule.

Andrew Gazdecki:
Oh man.

William Barlow:
He must have spent days putting that together. And as buyer council, the truth is that we only care about the intellectual property that really is, really kind of necessary and compelling for the business. We want to know your patents, we want to know your trademarks.

Andrew Gazdecki:
That’s it.

William Barlow:
We want to know that the code is actually properly assigned to the company. We don’t need to know all of these things. And so, it’s very common for sellers to feel like this is their whole life to just kind of overly enthusiastic about populating schedules. When in reality, you could kind of take the temperature in terms of what the buyer is really looking for.

Andrew Gazdecki:
Nice. I guess what is your preferred acquisition size? What’s the largest set you would do? And what’s the smallest you would do?

William Barlow:
So…

Andrew Gazdecki:
Or have done.

William Barlow:
Right.

Andrew Gazdecki:
I’m sure you’d do the Twitter deal.

William Barlow:
Yes, exactly. So, the largest one we’re on right now is about $60 million.

Andrew Gazdecki:
Not bad.

William Barlow:
Yeah. The smallest one we have done, especially if you were asking us a year ago we’ve done a hundred thousand, 250,000. Now that we have a $10,000 minimum, it’s just not making sense for a lot of those deals in that range because you’re eating up 10% in legal fees. But we’ve certainly done, one, 2 million deals. And we do a lot of work I’d say in the two to $20 million space. But the thing I should say too is that we have attorneys that we work with that do some of the lower transactions as well. So, if we’re not the right fit for someone, then we love to have a second recommendation in line with somebody who like has a similar model and understands that.

Andrew Gazdecki:
Nice. What would you say, I’m just having fun just chatting with you man. What’s what would you say like your, the favorite part of your whole job is?

William Barlow:
Ooh, I think that’s a great question. I think in another life, maybe in this one I’ll be a professor. So, I think one of my favorite parts is when you have new people who come to this confused and inquisitive and you’re just explaining to them like what this is. You’re like, they get this document that’s 40 pages and they’re scared and they’re confused. And you just walk them through line by line and say well, this is what this does. This is that what that does. And all of a sudden their nerves start coming down and they start to think oh no, okay I get it. This is why. And I think that’s, for me, that’s one of the biggest value ads is you can see people going from the realm of afraid and uncertain to feeling confident and knowledgeable. And I just love seeing that phase shift.

Andrew Gazdecki:
Nice. Yeah. No that’s, I can definitely relate to that in terms of, if, as an entrepreneur, if you go through one acquisition, that’s amazing. If you go through two, that’s incredible. But it’s usually just once. And so it’s always kind of this first time learning experience and it can be daunting. So, it’s always good to have someone, experience like yourself in either corner. I guess, my final question would be, in terms of the acquisitions that you’ve helped close thus far, shoot, I totally lost my train of thought there. I had a really good question.

William Barlow:
Well, I have some questions for you. Think of your question first, but there’s…

Andrew Gazdecki:
No, you fire and give me a break. I had a good one. I totally missed it.

William Barlow:
Well I would love to hear sort of a little bit from your side of the table, like from a legal perspective or just generally like what, when you were coming to the table for one of these things.

Andrew Gazdecki:
Oh, that was, that my question was around, like what was maybe the most nervous buyer or the most story around that. But continue with your question. I’d be happy to answer it.

William Barlow:
Yeah no, I would love to because one of the things that we’re thinking of putting out of there, because an article of like, what are the things that founders are worried about that they shouldn’t be? And sometimes what are the things that they should be worried about but they’re not? But I would love to get a sense, when you were coming to this acquisition, what were your sources of anxiety? What were the things I don’t know, what were the things that were on your mind? What, were you afraid of anything? What was kind of going through your head?

Andrew Gazdecki:
Yeah, well I sold to a $10 billion private equity firm. And at the time I was 29. So, it just kind of felt like a David versus Goliath situation. And the firm I sold to is very professional. No hard nose negotiations. It was a fantastic outcome. But still you only know which, or you only, you just don’t know the legal aspects. And so it comes as a complete surprise. So, I’d say for me, it was, just ensuring that everything was done correctly. Because it was going to be a life changing acquisition for myself. And so I was just, again that’s where I would email small questions just to make sure we’re crossing every T, we’re dotting every I. So, I would say just the fear of the unknown and the fear of missing something is probably, thinking, and this was like five years ago now. But that’s what’s coming first of mind.

William Barlow:
Yeah. Well I think because the nightmare scenario is a situation where you sell and everything’s good. And then they come back a year later or six months later.

Andrew Gazdecki:
Exactly. Yes. That’s what I was trying to avoid. And that’s why the disclosures took so long. Because I think we over kind of just like, here’s everything that’s possibly, it kind of felt like telling like your wife everything bad you’ve done in your life. Like here’s all the stuff, all, everything you’re asking, but in the end, it all worked out.

William Barlow:
It’s, being a lawyer, you’re part lawyer but you’re part a priest and you’re part a therapist. Somebody says like oh, what about this thing that came up? And you say like I bless you from a legal perspective [inaudible 00:21:47].

Andrew Gazdecki:
You’re all good. Yep. Yeah. I remember the attorney who went through the disclosures with me. I remember it like it was yesterday. He was like you really, you, we don’t need to spend as much time because we had already gone through due diligence and we were just kind of rounding third base on the disclosure. He’s like we can do this in like an hour. I have basically all the information needed for the disclosures. I could probably do this myself or do you want to walk through with me? And I was like oh yeah, let’s spend like three hours on this. Let’s, so maybe there’s a potential blog post for you there. I guess, final question would be, as you’re helping entrepreneurs and going through acquisitions and you continue to help buyers and sellers. If people want to get in touch with you to just learn how you can help on the buy side or the sell side, what’s the best way to get in contact with you?

William Barlow:
Yeah. So, there’s a lot of ways. I’ll say my email is whbarlow, B-A-R-L-O-W, i@barlowwilliams.law. And if you just search Barlow Williams, you’ll be able to find our website and there’s a contact us. And that goes directly to our email as well. So, if you can’t remember my exact email, just search Barlow Williams. M&A lawyer and we’ll come up as a search result. And you’ll be able to just find our information from there.

Andrew Gazdecki:
Nice. I’ll put all that in the show notes. But Will this was awesome to just chat with you and just learn more about your side of the world and thanks for helping so many founders and buyers on Acquire, we truly appreciate it.

William Barlow:
Yeah. Well thank you so much Andrew. This was great. Thanks for having me.

Andrew Gazdecki:
All right. Cheers Will.