How To Get Acquired By A Partner

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Adam Ochstein started an HR software company called StratEx in the depths of the 2008 recession. CEOs were asking HR managers to do more with less and Ochstein’s software promised to help HR managers do just that. Despite the challenging economic environment, StratEx was an early success and was particularly popular with restaurants. Ochstein decided to focus on the hospitality sector and forged a partnership with Toast, one of the fastest-growing Point of Sale (POS) providers serving restaurants. The collaboration was a success, and StratEx ballooned to 160 employees.

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Adam Ochstein started an HR software company called StratEx in the depths of the 2008 recession. CEOs were asking HR managers to do more with less and Ochstein’s software promised to help HR managers do just that. Despite the challenging economic environment, StratEx was an early success and was particularly popular with restaurants. Ochstein decided to focus on the hospitality sector and forged a partnership with Toast, one of the fastest-growing Point of Sale (POS) providers serving restaurants. The collaboration was a success, and StratEx ballooned to 160 employees.

Toast raised $250 million in early 2019 and, in July of the same year, took some of that money and acquired StratEx.

For a value builder, the most critical lesson in this episode is in the way Ochstein struck his partnership deal with Toast. He included an option for Toast to acquire StratEx at a pre-arranged valuation so that Toast would not begrudge how quickly they were enabling StratEx to grow. The agreement also had a stipulation that restricted Toast from acquiring one of Ochstein’s competitors. It was a brilliant stroke of genius, which gave Ochstein a built-in exit strategy.

This episode is peppered with insights including:

• Two things Ochstein wishes he had done differently in building StratEx
• How to divide up your sales territories
• The secret to competing with a Fortune 500 giant
• Definitions for terms like CAC, LTV and NPS
• How to structure your earn-out

Ochstein started his HR software company as the economy hit a wall, and the recession (and an influx of giant competitors) forced StratEx to focus on restaurants to survive. This need to concentrate on a specific industry enabled Ochstein’s relationship with Toast and ultimately became the secret to a successful exit. How are you planning to pivot in the face of the COVID-19 pandemic? If you need an outside perspective from someone who has been there, request a conversation with a Certified Value Builder™ today.

Check out our article on Selling Vs. Getting Acquired.

Check out our full M&A Glossary

About Our Guest

Adam Ochstein is a proven sales and management executive who has run both startup and large scale organizations in all aspects of technology for close to twenty years. He led StratEx from a concept to one of the industry’s elite Employment Lifecycle service companies focusing on the small and mid-sized business market.