Progress successfully acquired Chef over PE bidders by modeling cost synergies unique to its platform, such as shifting development to its Bangalore center and sales to an inside sales motion. PE, treating it as a standalone, couldn't match these savings.
Progress's M&A model focuses on acquiring companies at a price that, after executing on cost synergies, results in an effective EBITDA multiple lower than their own public market multiple. This creates immediate value for shareholders through arbitrage.
Progress uses an "orange flag" system to identify diligence issues that, while not immediate deal-breakers, are serious enough to warrant a discussion with the CEO and CFO. This allows for an early decision to walk away before expending significant resources.
Progress secured the ShareFile carve-out because they cultivated a long-term relationship with the acquiring executives from their time at a previous company, Broadcom. This trust ensured Progress got the first call when the asset became non-core.
Progress builds its pre-LOI synergy models by focusing on high-conviction cost optimizations it can control, such as leveraging global centers of excellence and consolidating sales/back-office functions. Revenue synergies are treated as upside, not core to the valuation.
A failed deal where a co-owner backed out at the last minute taught the team that misaligned or unmotivated sellers should be treated as a major risk ("orange flag") early in the diligence process, before significant resources are spent.
A major disconnect exists where public software multiples have dropped significantly, but private company sellers, especially profitable ones held by PE, have not yet adjusted their valuation expectations. This gap complicates deal-making for disciplined public acquirers.
A buyer can mitigate the risk of losing critical talent by making a deal's closure contingent on securing the commitment of a few essential employees. This shifts the responsibility to the seller to ensure those key individuals are motivated and aligned with the acquisition.
To make an acquisition pitch more compelling, Progress's Corp Dev team brings in the relevant General Manager (GM) to speak directly with the target's CEO. Hearing the vision from their potential future boss builds more excitement and trust than a pitch from the deal team alone.