At Horizon Partners, we have been actively different from other boutique investment banks for a long time. Founded at the tail end of the great financial crisis in 2010, we set out to build a firm that shares its most important values with the clients we serve: product-first (and often what we would call “practitioner built”) software and software-enabled technology companies.
So what does it mean to be “product first” and why do other boutique firms typically fail in this regard?
Let’s start with what the most common founding journey for those opening a boutique investment banking practice (and what we see in most of our larger competitors): 1) work at a larger “Wall Street” investment bank that relies on highly-templatized materials and processes to serve large clients; 2) move to a smaller firm that relies on a sales-heavy model to identify and sign a high volume of smaller clients; 3) set up your own firm that relies on a sales-heavy model and highly-templatized processes while pitching yourself as “different;” 4) become larger based on your sales-driven model and sell hard that larger and more transactions equals better, even if the firm’s close rate is lower, service model creates more client burden, and available information indicates a lesser service.
In such scenarios a few things typically become true: first, the firm’s main focus begins as (and is forced to remain) its sales organization, with promotions, compensation, and firm status all centering around business development; and second, with the main focus on sales, the firm’s client service model becomes highly-templatized and focused on a “portfolio approach” to client execution and transaction delivery (less senior attention, low customization, and very few non-standard, highly-valuable service layers).
That brings us to the firm we have founded and built, which is distinctly “product first” vs. “sales first.” After nearly 20 years focused solely on founder advisory, we are convinced – and our results validate – that there is a better way. It starts with advising clients with an artisan’s passion and mentality vs. as a transaction processor. While not every entrepreneur will immediately identify with this concept, the right Horizon client instinctively will. That is because Horizon clients are product artisans themselves.
From our earliest transactions advising founders, we identified that it was often what we called the “practitioner builder” who created the best, most-resilient, and most admirable business; these were passionate people who started their companies simply to build a product that they wished existed but that didn’t. They had tremendous levels of customer empathy because they were the customer. Subsequently, many of them found what we have: if you build the best product, all you need to do is enough sales & marketing to make the product available to the right customers and growth works itself out (word-of-mouth and bottoms up adoption).
Horizon actively partners with these practitioner builders to achieve transformative M&A or capital raising outcomes. If we are reaching out to you, it is not because we are “casting a wide net” (we are too focused on transaction execution for that!) or a natural artifact of an army of business development professionals tasked with hitting specific sales metrics. We are reaching out because we think you are a great match and we believe you are uniquely suited for our advisory services. We have spent our entire careers advising growing technology companies and after building a bespoke, product-first advisory product, we are uniquely positioned to help realize the ultimate outcome that your journey and effort deserves.
Horizon’s “Product First M&A” advisory practice is built on a number of fundamental principles and differentiated "artisanal" service layers:
There is never a more important time for your business to fire on all cylinders than during a transaction process. For this reason, Horizon has developed an engagement model distinctly different from the “send-receive” structure used by most firms. Instead of relying on our clients to service our information needs, we plug directly into your business systems to uncover key trends and deliver new insights about both realized and latent value in your business.
Fully-informed analysis allows us to credibly identify where we can pitch and / or realize “quick-wins” before, during, or post transaction. These wins become very important in delivering an investment committee or board-ready “angle,” all while dramatically reducing the time burden put on your operations so that you can focus on what is most important: continuing to build your business through closing.
As the only firm of M&A specialists uniquely serving founder operators that integrates with your business as part of our service offering, we are ideally situated to deliver top-of-market, uniquely insightful, robust, fundamental analysis of your business to prospective partners. Given that highly-credible, data-driven commentary is critical in crafting a convincing future growth narrative, Horizon processes are architected to ensure that your vision and product is deemed credible and fortified for growth by market participants, leading to a premium valuation and lower risk profile when compared with other transactions for similarly-situated companies.
This becomes even more important in more complex environments because as complexity increases, so does the “cost of participating” for investors and acquirers. To further enhance credibility, Horizon focuses solely on software and other software-enabled tech companies. This is because distilling all competitive and strategic inputs is critical in delivering the level of nuanced market commentary that will enhance your positioning in the eyes of prospective partners, increasing the likelihood of a robust market of interested suitors. Intensive preparation optimizes buyer interactions and messaging, enhancing market perception of high-value target.
Competition – or at least the perception thereof – is critical in driving top-of-market transactions. While every engagement is unique and important components are customized to leverage Horizon’s “artisanal” approach, we always build each process to expressly deliver a competitive process that optimizes transaction terms and facilitates the selection of your ideal post transaction partner. After adding a company to our concentrated client base, we invest heavily to ensure that our process creates buyer expectation of a competitive bid environment. Rigorous due diligence preparation further substantiates perceptions of high competition, creating credibility that dramatically increases leverage with buyers.
Finally, ‘Bottom of funnel’ competition minimizes risk and lengthens time before exclusivity, if it is ever even granted. We are relentless in building leverage throughout each step of the process in order to maximize buyer enthusiasm and investment while simultaneously minimizing closing risk. This often leads to buyers and investors that are prepared to perform closing diligence, deal documentation, and other closing motions outside of exclusivity, keeping leverage with you.
Corporate finance acumen, legal know-how, and the ability to work effectively with all participants in transaction structuring are foundational to an advisor’s ability to effectively execute. However, they are not enough to ensure that each client is delivered their ideal partner and transaction structure.
As market specialists, business strategists, and operational participants in your business, we are positioned to identify, design, and deliver solutions that wouldn’t be apparent to even our most successful industry peers. The unique credibility that our bespoke service layers facilitate deliver a set of market participants willing to engage in exotic structures like private equity and strategic investor combinations, cross-stage investor pairings, multi-step merger and recapitalization events, and strategic investments with built-in unilateral, client-triggered “unwind” provisions. In many such Horizon-designed transactions, we hear from client and counterparty alike that they wouldn’t have imagined a given structure to be feasible – or even possible – until we conceived of, pitched, designed, and delivered it. That is why we at times call our bespoke offering “artisanal M&A.” As stewards of such an important moment in your company’s history, we consider the role to necessitate being part architect, part builder, and part artisan. Anything less may get a deal done, but it won’t ensure the very best outcome.
One of the best ways to ensure that your financial, strategic, and total transaction goals are met or exceeded in a transaction is to build counterparty and overall market belief that your bright future is nearly certain and that your team is well situated to be significant contributors in the realization of that vision. Unfortunately, most advisors are so focused on simply reaching a completed deal as efficiently as possible that they don’t take the time to help each of your key team members to shine in the eyes of your prospective partners. This not only leads to suboptimal performance during crucial valuation-driving interactions but also increases the likelihood that your highly-talented team won’t appear as capable as they actually are. Clearly, such outcomes don’t optimize “life after the deal” and also imposes gravity on your valuation and total outcome at closing.
Over time, PE firms and strategic buyers alike have built pattern recognition and best practices around validation of an acquisition target’s growth trajectory, upside, and risks. Many businesses are not in a position to tell their growth story through clean data, a prepared team, and via other due diligence deliverables. This can bring management vision into question, increase the costs of buy-side participation, limit process participants’ willingness to continue on a non-exclusive basis, and ultimately hurt a company’s valuation and other transaction terms. Horizon’s process delivers a safeguard against these dynamics and – along with client performance – fosters an environment that delivers a market best-positioned to pay a premium valuation with seller-favorable terms.
While most firms spend a great deal of time selling their “network and relationships” or their past work in an industry, we have found that the most important factors driving counterparty action are advisor and client credibility and cumulative influence from an exceptional process, interpersonal exchange, and pristine information delivery. Unfortunately, because most advisors do not invest in the service layers articulated above, “relationships” can become a firm’s only avenue to influence an investor or acquirer more than the next firm. We believe that if a previously-created relationship ends up being more critical than other factors in driving a counterparty’s action, the outcome has already been under optimized.
This is because in today’s immensely competitive deal world, buyers and investors are already highly-motivated to transact and don’t require a relationship to foster interest. What matters a great deal is minimizing risk and maximizing expected return in the minds of the counterparty while also creating fear that they might lose a highly-attractive opportunity due to other parties’ recognition of the deal’s tremendous pockets of strategic upside. Therefore, understanding each interested party’s motivations and effectively articulating a tailored and compelling message will be paramount in delivering you with both a broad menu of options. As with everything in business building and value creation, actions compound. And it is with this cumulative impact in mind that we build the early, middle, and late components of our processes. While other firms focus on junior professional processing of large portions of each transaction and don’t invest in compounding influence and credibility via the service layers articulated above, Horizon typically finds itself in the position where our similarly strong networks and relationships are simply nice additions to an extremely credible negotiation and closing environment. This is why Horizon-led processes lead to valuations and close rates at the top-of-market year after year and deal after deal.
Horizon By the Numbers
Trailing Ten Year Averages
Average Transaction Size
Transaction Close Rate
Referenceable Client Base