Back in early February two old friends and former colleagues met in a pub to discuss a potential acquisition. That meeting between Gary Dunn (pictured above), MD of Sumo Digital, and Ed Blincoe, Studio Director of Lab42, kicked off what was to become Sumo’s recent successful buyout of Lab42, three months later in May.
Of course, neither of them knew back in February that the COVID-19 pandemic would not only make this their last visit to the pub for some time, but also would make this a rather unusual acquisition and onboarding for the 30 staff based at Lab42 in Leamington Spa.
Here MCV/DEVELOP gets a rare and honest view of the negotiations and process behind such an acquisition and how best to tackle it – an insight that will be useful to many in the industry who will experience such changes in their careers. With a few added twists due to the unprecedented situation that surrounded it all.
KEEPING A LID ON IT
While recent events have been undeniably terrible, Lab42’s Blincoe tells us that the emergence of COVID-19, and the subsequent guidance given to work at home where possible, actually played in both parties’ favour in at least one regard whilst the deal was being pieced together.
“One major problem, for all sorts of reasons, can be when people start to suspect something’s happening, that maybe a big change is in the pipeline,” explains Blincoe. “But the first was that pretty much all of our staff knew about [the acquisition] as the deal happened.
“In that sense – and trust me I know this is a weird thing to say – lockdown helped us, because everyone was at home and we didn’t have a train of people coming in and out of the office, I wasn’t trying to keep things all hush-hush. It presented challenges for due diligence, because you would normally meet people once a week, go backwards and forwards quite a lot; none of that happened.”
That whole process, Dunn confirms, only took about six weeks, from pub chat to done deal. He can’t recall getting an acquisition over the line in a shorter time (and Sumo Digital has plenty of recent experience in this area with Red Kite Games and The Chinese Room amongst others). Blincoe stresses, however, the importance of that intense period, and how due diligence should mean much more than crunching numbers:
“From my point of view, the very nature of the due diligence process answers quite a lot of important questions for us. Because, the questions that people are asking you, are they the right ones? Are they asking for the right information, the things that we think are important, or are they just asking for the data?
“Because if you just want the data, then you’ve got no interest in the culture, but that wasn’t what Sumo wanted, they were asking about what the team does, what they’re about. Are the projects that we have right now the ones that we want to continue to pursue? Those types of questions, rather than just ‘how many programmers have you got?’
“Also, they were always all about retaining the Lab42 brand, retaining the same culture within Lab42,” says Blincoe. “‘You’re still Lab42, you still have the same opportunities and the same building and the same staff and everything else. But, at the same time, you’ve now got the support of the Sumo network behind you.’”
Sumo’s Dunn recalls: “As I said, we had a head start, because I’d worked with a number of the leadership team before, but we also have an M&A guy, Pat Luker [senior finance lead at Sumo Digital], who acts as deal captain. He manages the process and makes sure everything’s covered, and he got on really well with all the team. We definitely look at the cultural fit. The Sumo Group and Sumo Digital have a great sense of family. We always try and make it feel like we’re going to work with our friends as well as colleagues. And it felt like that more and more as we got to know the wider team at Lab42.”
THE BIG ZOOM
Once the contracts are signed, both men agree that communication becomes key. It is the sort of situation that would normally call for a ‘town hall’ style meeting with all staff. But, of course, nothing was normal at the time, and so a company-wide Zoom call was organised. And it was clear this wasn’t a quiz.
Alarm bells would have been ringing, Blincoe recalls: “You have to understand, we were right in the middle of lockdown, nobody had been out of the house in about six weeks, so these were not normal times and so people were worried on all sorts of levels.”
It didn’t help calm the nerves when the announcement was pushed back – after the call had already started.
Dunn explains: “It was scheduled for, I think, 5pm on a Thursday, but 5pm came around and we still hadn’t actually executed. I told Ed we’d have to push back, and he said, ‘They’ve already started coming into the room!’.”
“I freestyled for a bit,” laughs Blincoe, “started wondering if I could make up a quiz on the spot! Thankfully word came through pretty quickly after that: we had the signatures.”
And with that Blincoe could start as planned: “So, point one, right up top: ‘everything is fine’. Even before you say what the news is, you simply say it’s good news. And then after that, as soon as they knew that it was Sumo, we had nothing but positive comments.
“A lot of our people already knew lots of Sumo people and had heard nothing but good things from them about what it was like working there. Everyone was really excited to see what was going to happen next and where we were going.
“I freestyled for a bit, started wondering if I could make up a quiz on the spot!”
“They had questions, of course, the most common ones were, ‘are we still Lab42?’ and ‘are we staying in the same building?’ And the answers were yes and yes, which made everyone even more relaxed.”
Dunn was also on that call and, whilst reiterating the message of reassurance, he was also keen to gradually introduce notions of increased opportunity and support.
He says: “After Ed dealt with, ‘Don’t worry, you’re all safe, we’re still Lab42 and we’re not moving’, I backed that up, but I was also very clear that we purchased Lab42 to grow it and help it achieve bigger and better things. And that means opportunity, growth, new projects. We were very clear that this wasn’t an acquisition just to bolt a bit of capacity onto the main mothership.”
Blincoe adds: “There are career progression pathways within Sumo. So, everyone that works for Lab42 now knows how they move up within the organisation, what they need to do to be promoted and rewarded going forward. Whereas before, again, small company, how do I get from being a junior programmer to an experienced programmer? What does that look like?
“Within Sumo it’s a case of, right, these are the things that you need to do to move up through that. And people have responded really well because now they’ve got something to aim for.
“It has helped tremendously within Lab42 to put people onto a track where they know what they need to do to progress their careers. That’s a fantastic introduction into Sumo.”
THE IT-TY GRITTY
As well as opportunities, there are challenges and headaches. Dunn insists, however, in this case they were to do with processes and details, not workflow and culture: “The first one that always comes up is IT. And COVID definitely didn’t make that any easier! They were all on G Suite, and we’re all on Microsoft 365. You’ve got to literally put across a whole business from one system to another, virtually immediately, and that takes some planning.
“Then it is what you would expect – payroll, finance, HR, new contracts, all that sort of thing. But we have a 100-day plan, and Pat’s job is also to make sure that the 100-day plan is executed, nothing gets missed out. It’s our integration kit, and in order to be considered fully integrated, you need to have a tick against all of these boxes; it’s a lot of work,” the Sumo boss admits.
“And, in terms of that boring but necessary stuff, we do pretty much rip out what they do and put in what we do, because they have to interface with all our systems. I think it’s fair to say that’s probably where most of the wrinkles come in.
“The only other possible negative I’d highlight in a deal like this, is perhaps a bit of a loss of agility,” says Dunn. “I actually think Sumo is relatively agile for a big company, but it’s nothing like a group of 30 people running their own legal entity, because whatever they want to do, if they had cash in the bank, they could pretty much just do it.”
“That’s true”, reflects Blincoe. “Previously, if someone wanted a quote on a scope of work, we’d get something out in a couple of days. Now there’s a bit more scrutiny involved. It’s asking more people the same questions – and the likelihood is you’ll get the same answers, but sometimes you won’t. And that’s okay, a bit of extra scrutiny isn’t a terrible hardship.”
The new partners are getting on well it seems, but the continuing pandemic is no less frustrating for it, agree both Dunn and Blincoe.
“In terms of the big picture, we’re in no rush to get everyone back to the office”, says Dunn, “but it would be great to get a social in, certainly before Christmas, for everyone to meet up and have a drink and a bite to eat together and just to get to know each other. If we can pull that off in a safe way that doesn’t compromise anyone’s health, then we’ll do it.”