Each month I write and send an executive update email to Brightflag customers, prospects, partners, and more. I write each update personally; it’s an opportunity for people to hear from me directly, unfiltered, on a regular basis. This month’s topics are Brightflag’s first acquisition and M&A generally. Since I haven’t written about M&A on this blog, I thought I’d share the entirety of the update for my readers’ benefit.
We just announced our acquisition of Joinder. Joinder combines task management and calendaring, document collaboration and storage, and in-app communication for corporate legal departments, all in a secure and privileged environment. Joinder will now be known as Brightflag Workspace.
I want to use this month’s update to share my thoughts on Brightflag Workspace and the challenges it helps corporate legal departments to overcome. At the same time, as this is Brightflag’s first acquisition in a hot market, I’ll share my views on M&A and how our strategy appears to differ from that of our competitors.
Let me start with an unfortunate truth.
Few corporate legal departments have a system of record. They have great software for engaging outside counsel (e.g., Brightflag) and for managing contracts (e.g., Ironclad), but they don’t have a solution for operationalizing the overall delivery of legal services to the business. The most used system of record is (you guessed it) email. I love email, but it’s a flawed solution when your priorities are visibility, reusable best practices, and security.
This category is sometimes called matter management, a term I dislike because of how inconsistently it’s used. It’s varyingly used to refer to maintaining a structured list of matters, to managing documents, to workflow, and even to engaging outside counsel. No one can agree on what exactly is and is not matter management. In my opinion it makes for a poor framing device.
We chose the word “workspace” when renaming Joinder because that’s what it is: a space where legal work gets done. Brightflag Workspace is modern, easy to use, and backed by fantastic operating team members, all of whom have joined Brightflag. The combination offers an end-to-end solution for getting legal work done, from intake to engaging outside counsel to strategic planning.
I’m particularly excited by a capability we call solutions. Solutions enable legal professionals to create best practice playbooks including the tasks, workflows, informational resources, document templates, and organizational structures proven to deliver results. Once created, anyone can use a playbook with the click of a button, maximizing reuse of knowledge and consistency of work (and of course, all the work takes place and is stored and searchable in the secure, privileged environment). Brightflag Workspace includes out-of-the-box solutions for common use cases. In addition, customers can create their own solutions, as can third parties like law firms and alternative legal service providers.
We’re hosting a series of webinars next Wednesday, November 10, to expand on the acquisition and our vision for the modern Legal Operations Platform. I hope you’ll join us.
Now let me talk about M&A.
I’m fortunate to have been involved in 17 M&A processes throughout my career. About half of these have been strategic buy side, and a little over half of those resulted in a transaction closing. These experiences have informed how I think about the five reasons high-growth software companies make strategic acquisitions:
- To expand capabilities in current markets, i.e., provide more solutions to the same buyers. Most successful software companies become multi-product.
- To add talent (an “acquihire”). The software companies that build the strongest teams almost always win their market. Buying a company for its team is a way to overcome the considerable challenges associated with hiring top talent.
- To enter a new market, i.e., provide the same or similar solutions to different buyers. When entering a new market, whether geographic or otherwise, you lack a trusted brand, an established team, reference customers, and so on. Acquiring a company that already has these things is easier than starting from scratch.
- To increase revenue, i.e., inorganic growth. Buying a company for its customers can be easier and faster than adding the same amount of revenue organically.
- To block the competition from acquiring the target. It’s uncommon for this to be the primary rationale.
The more of these boxes an acquisition ticks, the more compelling it is for the company making the acquisition. But you, the person reading this update, don’t care about how good an acquisition will be for the vendor; you care about how good (or bad) it will be for you as a customer. Your question is:
Will this acquisition contribute to my success as a customer?
Clearly, rationales 1 and 2 are to customers’ advantage. Rationale 1 is the equivalent of accelerating the product roadmap, and great talent (rationale 2) continuously improves the customer experience. Not coincidentally, these were our rationales for acquiring Joinder.
Rationale 3 (enter a new market) isn’t to a customer’s advantage unless they happen to be in the market in question and will benefit from (for example) a newly acquired local team. Of course, the buyer must meaningfully integrate the acquired company into its own operations for the customer to receive this benefit; there’s no benefit to the customer if the acquired company continues to be operated independently.
As primary rationales, 4 (increase revenue) and 5 (block the competition) are clear-cut negatives for customers. Rather than invest in innovation and customer success, which creates value for customers and drives revenue growth for the vendor, all the investment goes toward driving revenue growth (and profit growth) for the vendor. It’s doubly bad for customers when the acquired company was a direct competitor and continues to be operated independently: every time the combined companies want to bring a new capability to market, it must be developed multiple times. Innovation is diluted by half.
That these rationales make for bad customer outcomes hasn’t stopped a few of our competitors from employing them. I have no doubt their investors are thrilled. At the same time, I’m equally certain their customers are frustrated. Two of these competitors each have three directly competitive products. Think about how severely that impacts their ability to innovate. One of them recently issued a press release referring to themselves as a conglomerate. That’s not a word often associated with customer satisfaction.
When I joined Brightflag, I eschewed the Chief Revenue Officer title in favor of Chief Customer Officer to reflect my strongly held belief that if your primary focus is on customers, revenue will follow. Our competitors likely will continue their conglomerate-building M&A strategy, benefitting investors. To each their own. We’ll continue to make acquisitions selectively when we see opportunities to develop strengths that directly align with your goals.