November/December 2015 Issue
Alese Stroud and Bridget Farris have created a startup
that fills a void in the mergers and acquisitions space.
Photography by Sara Edwards NealWhen companies merge or one company looks to acquire another, executives often only take finances into consideration, but other aspects, such as processes, environment and culture, are frequently overlooked.
Little Rock entrepreneurs Alese Stroud and Bridget Farris want to change that.
They have developed an assessment tool to help companies evaluate organizational, operational and cultural health. They say their system can improve the success rate of mergers and acquisitions, which, depending on the source, research shows have a failure rate of 50 to 80 percent.
In spring 2015, Stroud and Farris launched their startup Merger Match LLC. By early fall, they were wrapping up the testing phase with three beta customers and looking to expand.
“We started it focused on mergers and acquisitions,” Farris said. “We assess the health of a company and give them an assessment of their own company’s health and well-being, or we can compare their results against another company to see if they match.”
Farris said the process helps identify gaps. She explains that gaps in culture — including such aspects as leadership style, environment or dress code — can lead to some of the biggest issues.
“The financials may look great, but you might have some mismatches in your processes, in your culture, in how your company is structured, that are going to be really big issues down the road,” she said. “That leads to the huge numbers that we see in failure rates.”
Farris and Stroud bring their experience as programmers and consultants to their startup. They have known each other since the early 1980s, and both worked as programmers for Systematics Inc. Farris also worked at Alltel Wireless and Acxiom Corp., developing capability maturity models. Stroud was a consultant for more than 20 years, mostly handling the information technology side of banking mergers.
Together, they say they have seen both sides of company mergers and acquisitions — either as employees or consultants. In forming Merger Match, they have taken these experiences, and the “horror stories” that they’ve heard about mergers, and created their own assessment tool.
“Part of our passion about doing this is that having been through the process from the other side, as part of someone who got acquired or was doing the acquiring, we’ve seen the huge toll in stress that it has on the employees and on their families,” Stroud said. “We’ve seen the impact that the losses involved in a bad acquisition have on the company.”
Now done by hand and using Microsoft Excel, the assessment includes more than 150 questions about operations and organization, in addition to a 30-point culture survey that is given to employees. Farris and Stroud start the process by first meeting with a company’s executive leadership team and asking them to agree on their level of maturity — where the company is today and where they want to be within a certain timeframe.
“Sometimes, there’s a big disconnect,” Stroud said. “But, they say that meeting itself was worth it.”
Stroud and Farris use the data they collect to identify the company’s strengths and weaknesses. They provide a road map, with action steps, along with a Merger Match score.
Now, they are paid a one-time fee for the assessment, the amount of which depends on the size of the company and other criteria. Early next year, they plan to invest in an automated system and hope to one day offer a licensed software model.
“We wanted to get the process buttoned down before we invest in the technology to automate it,” Stroud said. “Startups shouldn’t invest in a lot of tech until you’ve really fleshed out your process.”
Being a part of central Arkansas’ entrepreneurial community has provided many opportunities for Merger Match. Stroud first became connected in this arena after attending a Startup Weekend at The Venture Center in Little Rock a couple of years ago, where she met Lee Watson, the center’s president. She said the level of ideas presented there “blew my socks off.”
She and Farris had been talking about the idea for Merger Match for a while and went through The Venture Center’s Pre-Flight class, which is a 14-week pre-accelerator program that helps entrepreneurs evaluate their ideas and get feedback. Stroud said they got some “pretty strong validation.”
Currently, they have their office set up at The Venture Center, and say there are no other companies like theirs. They are working on marketing and expanding their client base. Stroud said they need additional funding, staff and infrastructure, but are excited about the future.
“It’s nice to feel passionate about what you’re working on,” Farris said. “We see an obvious and clear need. We’ve lived through that failure [of companies merging] and know there’s a huge market for it. It’s been an interesting journey.”