Is there a way to find success after an M&A deal falls through? Steve Barone, long-time CEO of cybersecurity solutions provider Creative Breakthroughs, Inc. (CBI) found himself in just such a situation when his first attempt at an M&A deal for his company encountered obstacles serious enough to terminate it. Fortunately, Barone was able to recover, and with Corum's assistance, successfully sell his company to Converge Technology Solutions, a Canadian company that provides software-enabled IT and cloud solutions.
Starting as a networking consultancy in 1990, CBI evolved into a consultancy that offers cybersecurity solutions and other risk management services such as digital forensics, identity management, incident response, and data loss prevention. Eventually, it grew into one of the largest cybersecurity consulting firms in America.
Being the CEO of a successful company, Barone was interested in growing the company through acquisition. "We needed to scale quickly," recalled Barone. "So we looked on the acquisition side. What would it take for us to go acquire?" But Barone and his team also examined the other side ‒ being acquired. They asked themselves, "What if we put ourselves out there and got ourselves acquired so we could tell our story bigger and wider than we currently are capable of?" Barone recalled, "We were looking to buy. Then we were looking to possibly sell. And if we did sell, we were going to be very picky. We were going to look at who was interested and see if our cultures meshed and whether there was a chance for us to go tell our story there." In the end, they took the sell route.
Barone thought he had found the right acquirer, and in fact, had a signed a letter of intent. But the buyer backed out during due diligence. Rather than this being catastrophic, it actually was a blessing in disguise. The buyer, Barone noted, had a variety of issues and was sold shortly afterwards.
In retrospect, Barone realized that he had not done the proper due diligence in pursuing a buyer. He recalled, "I went into it for the first time looking for an offer. But I didn't ask enough smart questions at the beginning. I really wish I'd approached that whole thing a little differently. I think somehow you're happy to be courted extensively, rather than perhaps doing your own set of qualifying. And not just qualifying with where you are in the market, but what kind of people are you? What kind of culture are you building? What do you want to be? What does cybersecurity have to do with your bigger vision and growth goals? I mean, how would we fit in? I don't know that I asked any of those very well the first time.”
Barone then turned to a friend of his, Greg Berard, who was the President of Converge. Berard was previously interested in acquiring CBI, but Barone told him he was going to sell to the other buyer. However, Berard maintained his interest and told Barone at the time that if he changed his mind, he would be there. Now, with the initial deal dead, Barone called Berard and said, "I think we should talk because I think our companies have more of a cultural fit." And that was the genesis of the acquisition by Converge.
To help Barone go to market, Barone turned to Corum. Berard's CFO, Greg Guracech, had met Corum President, Rob Griggs, at a conference, and was highly impressed with him and the company. Ultimately, Griggs became one of the Corum point people assisting CBI through the M&A process. Barone found working with Griggs very comfortable, something he highly valued. "So much of the reason we chose Corum,” he said was because of our relationship with Rob."
With Corum’s guidance, Barone received multiple offers for CBI, and although Converge's offer was not the highest, Barone felt it was the best fit for his company and his employees. "I felt very loyal to a lot of the people that had been with me for a very long time," Barone said. "Many people in the company loved cyber and wanted to continue to make a dynamic career out of it. We were a good fit with Converge, and felt it was a place where we could give our best effort in making something that had legs long term. It was very important for my final decision."
Barone's involvement with Converge continued after the acquisition. He stayed on for a year working very hard to make the acquisition, in Barone's words, "The best acquisition that they had ever done." After a year, he took on a consultant role, advising the practice and keeping it moving forward. Barone is proud to say that after his time with Converge he was able to set up their cybersecurity practice globally for success. He adds, "Today a lot of CBI people are helping Converge run that practice across the globe and the messaging is stronger than ever." At that point he stepped aside from the company.
But in true entrepreneurial spirit, Barone went on to another business venture, one that is dramatically different than his cybersecurity company. He took a 50% stake in a company called Pikəld Concepts that builds and franchises speakeasy concept cocktail bars. Barone had enjoyed visiting a craft cocktail bar near his home in Nashville Tennessee. He loved the place. And one night he and the bar's owner/operator, Dean Marsh, sketched out a plan to grow the concept into something more substantial. The business has grown dramatically since then. Barone is happy to say. "We've been packed since the day we opened. Lines out the door, long wait list, and a lot of press. So we're enjoying every minute of it."
Barone is also enjoying his new-found time by traveling extensively with his family. He noted that the family has always loved to travel, but now it's different because he says, "You can go to great locations around the world and not have to have your day constantly interrupted by hopping on a Zoom session, or putting out fires, or calling a customer at midnight."
Asked what advice he would give to CEOs looking for an exit, Barone stressed the importance of having a confidant to talk to. He said, "Being able to have somebody you can rely on to talk to honestly about the value of your company and what you can do to increase that value, really lets you negotiate from an offensive standpoint rather than a reactionary or defensive standpoint. So you really need that confidant." He also noted that an experienced advisor such as Corum also brings that confidant element that to the table.
Barone also highlighted the importance of telling a simple, consistent story about your company. "If you go to most tech companies and ask 10 people to tell their story, you'll get 10 different answers. The goal is to have 10 people tell the exact same story. If you're going to market, you want clarity around what your story is and be able to tell it in a concise way."
Barone is also thankful for his partnership with Corum, a partnership that was highly professional and effective. He also remembers the great feeling he had when the proceeds from the sale of his company were wired to his bank. "I called Greg Berard first and then called Rob Griggs. Being able to say to both of them ‘Hey, it landed’ is just an amazing feeling."