A look behind closed doors: From search to acquisition
A Q&A with Booth alum and current CEO of Subatomic Digital, Alex Lintott, MBA ’12.
Even as the number of active and successful search funds continues to grow around the world, the life of a searcher remains highly individualized. In hopes of growing and solidifying the community of searchers within the Booth network and beyond, the Polsky Center is committed to sharing different stories and perspectives of active and experienced searchers at various stages of the process.
The below is an interview with successful searcher and Chicago Booth grad, Alex Lintott, MBA ’12, who acquired a company in mid-April and switched his fund’s focus from searching to operating. Below, he shares his experience from start to finish and some of the most important lessons he learned along the way.
Polsky Center: What first attracted you to the idea of pursuing a search fund?
Alex Lintott: It was a mix of being entirely accidental and the fact that I am probably totally unemployable.
Polsky: How so?
Lintott: Pre-Booth, I worked in accounting and investment banking — so I was well versed in numbers, not so much in operations — which is also why I decided to go to business school in the first place. I wanted to round out my skill set so I could change what I was doing, and while I was at Booth, Chevron offered me what seemed like the perfect opportunity to cut my teeth. It was a leadership development program where they would move me around every 6–9 months — both around the world and around the organization, giving me the opportunity to bulk up on operational experience in a variety of environments.
I never had any intention of raising a search fund. But, while I was working for Chevron, four things happened. The first was that I got bored and started searching for businesses to buy and meeting with owners because I thought it was interesting. The second was that I realized that there were some solid opportunities out there. The third was that I realized doing this part-time did not give me a decent shot at making something happen. The fourth was that I realized my decision to go work for a big company was probably on the list of poor decisions I had made — bad fit. Once I realized these things, I had no choice but to become a searcher.
Polsky: Let’s talk about the company you recently acquired — Subatomic Digital. What kind of business is it? And what about it made it attractive to you?
Lintott: We work with media clients, both video and print, to monetize their preexisting IP.
For video clients a recognizable example of what we do would be Downton Abbey for PBS. Once the show airs, it will just sit there unless you do something with it. That’s where we come in. We will take the content, edit and convert it, and then deliver it to iTunes, Hulu, Netflix, a DVD manufacturer and distributor…etc. for PBS, allowing PBS to monetize the program that would otherwise sit there.
The other side of the business is focused on print clients, primarily newspapers but we are making headway into magazines as well. A good example of that kind of work is what we do for the New York Times. They have a lot of preexisting IP — all of their decades’ and decades’ worth of archives. And all of this IP is really just sitting there. There’s no doubt there’s a lot of value in this IP, but besides hawking a bunch of microfiche, the idea of how to monetize it is a little challenging.
Where Subatomic Digital comes in is that we will take archives, work with our clients to design prototypes of physical products using this IP, and then we serve as their on-demand manufacturer and fulfillment house in making sellable products out of their archives. We turn the content of their archives into anything from birthday books to jigsaw puzzles to home goods. We also do loads of personalized gifts and reprints. Then, we let them sell it or connect them with an online retailer who will sell it, and we fulfill each of the orders. We do this for quite a number of newspapers.
The biggest thing I love about this model is that we can go to any newspaper and say we can do this, this, or this for you. And if you don’t sell it, you don’t have to pay us a dime — and they hold no inventory.
All they have to do is allow us to connect with their computer system that handles their e-commerce, and if or when they sell things, we’ll fulfill each order and take our cut, and they get another source of cash.
Polsky: How long did it take to close the deal from the time you first made contact?
Lintott: I made contact with them through a broker for the first time in mid-October of 2015 and met with them a few days later. Negotiations lasted for a while — we didn’t sign a letter of intent which locked up exclusivity until mid-January. Then, we finally closed in mid-April. So, all in, it took about 6 months.
Polsky: What were the most challenging aspects of the search process?
Lintott: Because it’s a little bit of an odd company, which is to say that it didn’t fit the standard bucket that everyone is looking for, a lot of the investors weren’t particularly supportive at the beginning. The two initial reactions I got from my investors were either, “I don’t know…” or “Why are you even considering this? Here are 10 reasons this is a stupid idea…”
Really liking the deal and not feeling like I had investor support was a struggle for me initially. But I came to the conclusion that the reason investors weren’t hot on the deal wasn’t because it was a bad deal; it was because they just hadn’t given it enough time to fully think through yet. Look, a lot of investors probably have 10–20 searchers reaching out to them each week trying to get their thoughts on a deal — investors simply don’t have the bandwidth to dig into each deal so it’s likely they will just go with pattern recognition and their gut. I fully believed that this was not a deal where either of those would lead to excitement, even when I fully believed there should be — and a lot.
So, even without strong investor support, I got the deal under LOI (letter of intent) and flew up to Burlington to gut check the owner to make sure they were serious. Once I got comfortable there, I reached out to my investors again and basically said “This deal is under LOI, I am in Burlington 4 days a week, and will be here every week until the deal closes”. The entire dynamic of the conversation changed from “what do you think?” to “this is happening. Do you want in or out?” All of a sudden, the investors that showed little support or interest were fully engaged and paying attention — I even had the ones that initially reacted the worst to the deal become the biggest supporters.
I very much believed in the company and was excited about the deal, and I think that for some investors this is one of the most important things — that the searcher, who is about to stake their career and financial future on something, is excited.
Polsky: Tell me a little bit about how the transition has gone with the seller?
Lintott: The employees were terrified - understandably. One of the biggest challenges that made their fear worse was that many had worked together at a previous company that was bought by a private equity fund and then promptly run into the ground. When that company went under, the sellers took many of the employees and started Subatomic. So, when I got here, everyone was more than a little skeptical. I’m sure they thought I was just another jerk with an MBA who was going to come and ruin their company again.
Overall, there was a lot of fear, and it took a lot of human touch. I met with everyone one-on-one and I openly talked about what scared me, hoping that they would open up in return. I even painted my office baby blue to be less threatening, and that worked in a way because they started to joke about it. I put comfy chairs and a mini fridge in my office, so they would feel more comfortable to come in and chat. But the best thing I probably did was bringing my dog into the office — people would come in to play with the dog and end up chatting with me.
I think I’m starting to win them over. The first step was getting them to see me as normal person, and not “just another pompous MBA.” Now I think people may be realizing that this could be good for them — especially since we’ve been growing so quickly. We’ve hired 6 people in 60 days, and we’re making big investments in infrastructure.
Polsky: Was there anyone who was particularly helpful as you worked to close the acquisition?
Lintott: I formed a very strong relationship with a fellow searcher that came out of a somewhat strange introduction. He had a deal under contract that was marketed to me. So we got in contact to figure out what the hell was going on, and it was a pretty awkward first conversation. But, somehow we became friends out of it. We were going through the exact same investor drama, and we were able to talk about each other’s deals and give advice from an unbiased perspective. It was also extremely helpful from a sanity perspective to talk to someone regularly who was going through the same sort of thing.
Polsky: What advice might you have for other searchers as they move through that part of their own processes?
Lintott: At first, I really looked to what my investors thought. They know a lot, they all seem really smart, so it was easy for me to do this. But what I quickly realized was that I’m the one who has to be willing to put myself on the line for this, not them –worry about getting excited about or killing the deal first for yourself and no one else.
And that’s the most important advice I could ever give. You have to be the most excited about your search and your company. You have to be the toughest judge of the deal — because, for the investors, this is just a small part of their portfolio, but this is going to be your life. So, stop worrying so much about what your investors think, and start thinking more about what gets you the most excited — and then sell it to them.