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1. UA Online IT
Outsourcing Forum
September 18

2. M&A For Smaller Teams
September 18

3. What is
it about
3

4. What is it about
• Digicode is NOT an investment banker, NOR a financial
consultant
• Digicode made few merges in the last year
• Subjective opinion based on personal experience with
smaller teams
4

5. Looking for partner with solid
project pipeline, good
infrastructure to join and
keep/growing the team
Need help to grow
It is not fun anymore
It is too hard
Technology (UX design, business
domain) is more interesting than
sales, recruitment, finance, legal
and other operation roles
I like technology more
One of the partners wants/need
to exit
Partner’s initiative
Or any other personal reason
Cash is needed
In many cases (not always)
relocation significantly affects
company growth
Relocation
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5
Why?

6. Labor market is super tough
Hard to hire new and replace resigning
team members
Current Situation
Attrition growth
Big players are hunting, clients are not
willing to raise rates, team morale goes
down
Sales are difficult
New sales are not only hard to make,
but also hard to deliver
Got stuck
It is difficult to pass certain size of
business, not sure what to do next
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7. Reality for small companies
It’s mostly about merges
Do not expect billions
Team, founders and /sometimes/
clients are the real value
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8. Types
Horizontal
Merger
Competitors of similar or different
size are merging together
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9. Types
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Vertical Merger
The client is merging with its vendor, for
example to get it’s own delivery center

10. Types
Market
Extension Merger
Competitors of similar or different
size, operating in different
markets are merging
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11. Preparation - Assets
For small deals assets are usually included in the price. With a significant amount
of assets it is possible to cash it out zero balance.
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Web sites, media
resources, domains, SM
Cash
Account Receivables
Cloud, on premises
hosting
IP Rights
Trademarks
Office Equipment
Licenses
Other

12. Team structure
Owner(s) involvement in
operational process
Preparation - Merging Team
Merging company (buyer) will integrate the merging company, including team, assets, clients and
most probably will not need to provide a classic legal due diligence of legal entities.
Skills matrix
Compensation
Delivery process, tools,
methodology
Senior staff
Benefits package
Employer Brand
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13. Clients review
Preparation -
Merging Team
and Clients
Merging company will transfer client agreements to
its own legal entity taking over merging company
responsibilities. This may be done using Assignment
or contract termination and signing a new one.
Contracts legal review
Partners, resselers
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14. 1  2 weeks
Intention
To discover a mutual interest in
the transaction, sign the LOI or
high-level agreement
Deal Draft Finalization
Legal entities, due diligence,
merge formalities
Up to 1 month 1  2 months
Execution
BPA or SHA, formal
agreements, legal registrations
Integration
Actual merge
2  6 months
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Timeline
3  9 months
Closure

15. Common or Complementary Goals
It can be clarified on 23 calls or meetings,
maybe most important is how owners see
their future roles in the joint company
Good personal/cultural fit
Personality match, respectful collaboration
level, gut feeling
Same/Complimentary Tech. Stack
Different, but equally good ways to grow
together
Reasonable Financial Expectations
Expectations or model is a good match to
continue with the negotiation process
True Readiness
If you are shopping around - it’s ok. Let it
know to set proper expectations
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Intention

16. LOI structure
LOI is a simple form of the final agreement which secures major details of the deal.
Parties Subject Timelines Financials Warranties General
● Merger
Company or
UBO’s)
● Merging
UBO’s
● Negotiation
● Transaction
● Transfer of
assets
● Integration
● Price or
formula
● Payment
Schedule
● UBO’s financial
terms
● Non compete
13 years)
● Non
Solicitation
● UBO’s
warranties
● Confidentiality
● Penalties
● Governing Law
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● Business
● Legal Entities
● Trademarks
● Assets
● Clients
● IP Rights

17. BPA/SHA
Formal Agreement(s),
Notary
Disclosure Letter Board Resolution
Financials, obligations ✅ ✅
Warranty with periods,
personal warranty
✅ ✅
Transaction(s) steps ✅ ✅
Legal Structure ✅ ✅
Actual Shares Transfer ✅ ✅
Business Situation and
Threats Disclosure
✅
Execution Legal Work
Full contract which include more terms and consist of number of documents, most common are:
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18. Team merge is another form or recrutement. In
this model Merger will perseipt transaction as a
way to recruit new team members. Valuation will
be based on team skill set and seniority, team size
and other subjective factors of team
attractiveness.
- Fixed amount parties consider as
reasonable
- Multiplier of team financial compensation
(aka recruiting agency)
Valuation
Buying out clients portfolio merger will measure
ROI. In this model valuation may be based on:
- Revenue (0.51 yearly revenue)
- Profit (38 yearly EBITDA
- Fixed amount agreed by parties
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19. Payment
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Cash Stocks Mixed
Price agreed during negotiations,
with fixed schedule sometimes
depending of achievements
milestones goals
Interchange of stocks, for example:
● Merging company valuation i
$100,000
● Merger’s pre-money
company valuation is
calculated by same formula
is 1,000,000
● Companied exchange
shares/stocks equal to same
amount of:
100% of Merging Company
9.09% (post-money)
Partially paid by cash and partially
by shares/stocks.

20. Last, but not least
Announcement
For clients and tems it is always good
to hear it properly in person, rather
than to hear from other sources
Business Processes
and Assets
Legal, Financial reporting, IT
infrastructure, VPN access,
accounts, tools, policies, presale,
shared resources, licences, 3rd party
vendors - insurance, rent
Team
Benefits packages, personal
agreement, NDA, policies, HR
processes, HRM, personal meetings,
company values, career path,
adaptation process
Sales/Marketing
Update joint portfolio, expertise
matrix, web sites, SM pages, other
media resources
Clients
Agreements transfer/assignments
05
01
02 03
04
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21. Risks
As usual business is a risk from A to Z. But with proper
preparation risks are pretty manageable and low.
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Not being fully clear about
expectations
Payments must be
conditional
Business not going as
expected
Lack of M&A Experience
Improper Warranties /
Representations

22. Measure
of success
Agreements and business
plans are kept.
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23. 1 214 556 6622 hello@mydigicode.com www.mydigicode.com
Max Maslii
Messengers: +380 67 403 32 69