Three entrepreneurs reflected on their own business journeys to share the inside track and key learnings from selling their business: Karen Malone (FCCA), Global CEO and Co-Founder of Centaur Fund Services, James McGann, Co-Founder at Frankie Health, Denise Browne, Co-Founder at Label Craft.
Here is James McGann’s advice:
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James McGann and his business partner set up Frankie Health in 2020, a Dublin-headquartered B2B mental health platform. It was acquired by UK-based Unmind, a specialist in the area of B2B preventative mental health.
Why is the company acquiring you? It’s because you’re either an EBITDA positive business or you’re a high growth business
If anyone's raised venture capital, you tend to sit in the high growth category, which is where we were. When you're on that high growth trajectory in the back of your mind, your investors are saying things like ‘don't sell too early - you're on this journey’ while others are saying ‘now’s the time when markets are moving and equities are down' so there are all these different voices.
As CEO and co-founder, you have to manage all those forces and dynamics in a constantly moving matrix and make a decision with everyone’s best interest in mind. That’s by far the hardest thing because the people you work with, you grow a lot of love for, and a lot of commitment to, and you really don’t want to let anyone down or be selfish either. So it's very hard to say, ‘Yeah, cool. We'll call it there.’
No one is going to tell you what the right number is - there’s no right or wrong answer
No one is going to tell you ‘That's the number’. Key Capital can’t tell you that, the lawyers can't tell you, no one else can, you’ve got to figure that out for yourself and the team of people you represent within that dynamic. That's probably the biggest dealbreaker and dealmaker.
For me knowing that the acquiring company would maintain our values was extremely important
Our product is therapy and counselling and our approach was to disrupt the traditional approach of maximum six therapy sessions per employee, per year.
We believe people that need long-term care deserve access to that care and people that have a complicated set of mental health challenges should be prioritised for moral reasons and for business reasons.
I got to know the CEO that acquired us through the partnership phase of the deal and that made me really believe - correctly - that those values could be maintained.
A huge negotiation point in a transaction is what the earn out terms are for the founders
You always want to stay away from a performance based matrix of results and with Key Capital we managed to stay away from that and fortunately for us it’s timed-based and that’s the two year earn out that we’re in.
Now I can just focus on the stuff I like, that I'm good at and adds the most value. Having that separation of tasks has been a lovely change in the day-to-day
I think acquisitions along with a lot of things in life come down to timing, not just personally, but also with like capital markets and where valuations are. I think, in our situation, both sides are very happy with with the end result.
I’m on the Board of the Unmind business and I’m in London every few weeks. In terms of how my life has changed personally, I'm happy doing angel investing in parallel to my role at Unmind. I'm still in the game without being in the trenches for the time being. I'm not worried about payroll every month. We had 1,000 or so therapists that had to be paid so there’s a finance team, HR and marketing team looking after all of that now.
As a result the number of hours I have to work is substantially different. The irony was very clear as building a wellness business my own personal wellness got challenged at times because there are no hours to exercise, meditate or go to therapy, so I've been able to use some of that free time for myself, and that's been a huge addition.
"I think acquisitions along with a lot of things in life come down to timing, not just personally, but also where things like capital markets and valuations are."James McGann, Co-Founder at Frankie Health.
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James McGann, Co-Founder at Frankie Health, talks about their transaction with Unmind and their experience with Key Capital as Corporate Finance advisors.
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