Intuit CFO: The Best Deals Flow From Strategy

Is there a magic potion to a successful inorganic growth strategy? No, but there are some general rules that lead to success.
Neil WilliamsMarch 9, 2015
Intuit CFO: The Best Deals Flow From Strategy

Over the past two years, I’ve been part of 15 acquisitions at Intuit and I frequently get asked: Is there a magic potion to a successful inorganic growth strategy, and what are the deciding factors behind an acquisition? Although we haven’t found a secret sauce to making a good acquisition, at Intuit we have some general rules we follow.

Don’t Force a Square Peg into a Round Hole. Every buyer says they look for acquisition targets that are strategic, but then something bright and shiny comes along and they just can’t help themselves. Of course acquisitions are opportunistic, but beyond opportunity there should be a strong strategic link between your company and the target.

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Neil Williams

Neil Williams, CFO, Intuit Neil Williams, Millennials, Finance

Companies often make acquisitions and then try and reverse-engineer the strategy after the fact; starting a deal this way affects success rate in the long term. In my experience at Intuit, the best deals we’ve brokered are the ones that result from our strategic plan and address an identified gap or need. This is coupled with a comprehensive market scan to find the best candidates.

We also have a thorough due diligence process that includes an assessment of the culture, values, and operating mechanisms of the target company. We choose to pass on a lot of opportunities that represent good companies but ultimately don’t fit our strategic plan.

One lesson I learned when I worked at Banc One, now a part of Chase, where I was involved in a number of commercial banking mergers, was that the most successful mergers involved banks that had a similar culture, style, and operating process. The ones that only brought economic benefit were challenged to succeed.

Build or Buy? If you recognize a gap in your expertise, and someone else can do it better and faster, acquiring that someone will enhance your business in the long run. Doing this starts with an assessment of what functionality is needed to accelerate growth or extend your market. For example, our Mint and Quicken customers have been requesting bill pay within the solutions for years. We realized it was going to be harder for us to develop the technology than we initially thought, so we looked at inorganic solutions. Through our acquisition of Check in May 2014, we will be able to more quickly offer superior bill pay capabilities to delight our customers.

Money Doesn’t Buy Everything. Intuit has not been the highest bidder in all of our acquisitions. Not all founders are looking only (or primarily) at dollar signs: many truly believe in their businesses and want to see their vision for the company fulfilled. We want the company founders to be excited to join our organization and to get excited about seeing a common future. Their dreams of solving a technology problem should be the same as yours. As future partners, ask the target company: “How can we do this better, faster, and on a bigger scale together?”

Need for the RIGHT Speed. If you want to be an aggressive growth company, the ability to move quickly to execute acquisitions has to be part of the M&A toolbox. My team has an accelerated due diligence process to use during an acquisition. One tool is a decision key to get to a “yes” or “no” really quickly — it’s a control to reduce how much we spend on overhead. In the case of LevelUp, a small acquisition we closed in less than 30 days, those tools helped the team identify in short order all of the things that needed to work to make the acquisition a success.

Transparency is Key. When smaller companies or start-ups get acquired, it can feel like they’re being swallowed up by the big guy. Last year, Intuit (an 8,000-person company), acquired Invitco, (an 8-person company). In situations like this, it’s important to be upfront during the diligence process about what can stay the same and what will change.

With a busy year of deals behind us, we asked the CEOs and founders of recently acquired companies Docstoc, Lettuce, and Check to meet directly with our board acquisition committee. They provided their perspectives post-acquisition and shared feedback from their experiences. They let us know that being acquired allowed them to accelerate their “dream” by associating with a larger company with better name recognition, while also providing access to customers, access to capital, and improved technology.

Another upside was Intuit’s culture, employee engagement, and the company’s entrepreneurial feel — its pace of innovation. On the flip side, we learned we could improve in some areas: they all called out an excessive number of meetings and management “overhead” that they felt distracted them from their work. Obtaining this type of valuable feedback will only help us get better.

What if a deal doesn’t work out in the long run? Typically it’s because the strategic linkage wasn’t as tight as it should have been, or the rationale for the acquisition didn’t play out as expected. Many companies bury their problems, but at Intuit we have been very willing to admit when an acquisition isn’t working out. In some cases, we’ve divested the business in question. Every six months we review deals and reinforce this.

A couple of years ago we made the decision to divest two businesses we had acquired: Digital Insight and Medfusion. It’s not an easy decision to make, but divesting pieces of the business that were no longer a strategic fit let us focus on tax and small business, the two big businesses that work for us. It’s like breaking off a relationship when you say, ‘it’s not you, it’s me.”

Wall Street is usually skeptical about acquisitions, but if you divest a company and free up the capital, it gives you more credibility on the deals you’re working on. Divestitures aren’t just about getting your money back, but getting money back into your core business. Investors want to know how much you’re putting into a new acquisition, so when you divest, the market focuses on what you freed up and how you can use that capital back in your business. As an example, we used the proceeds from our divestiture of Digital Insight to fund a significant increase in our share repurchase program with a very attractive return on investment.

Neil Williams became Intuit’s senior vice president and chief financial officer in January 2008. He is responsible for all financial aspects of the company, including corporate strategy and business development, investor relations, financial operations, and real estate. Before joining Intuit, Williams was the executive vice president and chief financial officer for Visa U.S.A. Williams is also a member of the board of directors of RingCentral, a provider of cloud business communications solutions, and Amyris, an integrated renewable products company.