Strategic Acquisition or IPO? - with Tom Reilly - Former CEO, Cloudera and ArcSight

**Ray Rike** (0:00)
Hello, I'm Ray Wright, founder and CEO of RevOpSquared and host of the Metrics That Measure Up podcast. We talked to a wide variety of B2B SaaS industry thought leaders, executives, and people just like you to discuss what metrics, KPIs, and benchmarks they use to enable better data-driven metrics-informed decisions that accelerate revenue performance and increase enterprise value. Now, on to today's show.
Welcome to today's episode of the Metrics It Measure Up podcast. Today, we are joined by Tom Reilly, former CEO of three successful disruptive software companies, including Cloudera, which Tom took public, ArcSight, which Tom helped take public, and then was acquired by HP, and Trego, who he did in partnership with Byron Deter from Best of Reventures, a former guest on the Metrics It Measure Up podcast, which was ultimately acquired by IBM. Today, with Tom, we'll be covering three main topics. Are the metrics different in a private acquisition valuation versus a public market evaluation? Number two, Tom's lessons learned from taking a company public, and then leading a public company, and three, a discussion on the pros and cons of strategic acquisition versus an initial public offering. Tom, please take a moment to give a brief background over you of your journey to becoming a guest on the Metrics It Measure Up podcast.

**Tom Reilly** (1:34)
Ray, thanks for the background and good to be joining you today. So, just by way of introduction, I began my career as a salesman and then a sales executive. And then later in my career, I was hired in three times as a CEO to well run companies, companies that have found product market fit, but I was hired in to help scale the companies. And so that's kind of where my focus has always been on, how do you take companies to scale? And most of that is around go to market. And what are the levers you can pull and go to market?
And as Ray mentioned, the first company I did that with was acquired by IBM in a strategic acquisition. The second company, we took public, and then that company became acquired by Hewlett Packard. And then the third company, most recently Cloudera, was a public company that also merged with its largest competitor. So by way of background, that's how I come to your podcast.

**Ray Rike** (2:28)
Well, thanks for that, Tom. And I think our listening audience will get a lot of benefit from the insights because you've had such a stellar career. So let's move right into the first topic I wanted to discuss with you. And that is about your experience going through that strategic acquisition process, which you've went through twice, as you mentioned. And what advice do you have for early stage founders and CEOs who are either considering strategic acquisition as a possible exit strategy or maybe have recently been approached by a strategic acquirer expressing interest? What's your advice for them?

**Tom Reilly** (3:03)
I have a few thoughts, Ray. As you mentioned, I've been a CEO of a company that's been acquired twice, but I've also acquired a number of companies in those CEO roles or general manager roles. This is a truism. You want your company to be bought. You don't necessarily want to be selling your company. And the way a CEO can affect that is through strategic partnering. I think it's a very important role of a CEO to have very close relationships with their partners. Increasingly, those partners that might be likely acquirers in the future. Because large companies, when they want to do an acquisition, they're not buying someone that's knocking at the door saying, hey, we're here for sale. Companies tend to buy folks that they know and that they partner with. And it's partners that there's going to be synergistic value between the two companies if they're combined. Otherwise, why would you partner? When companies partner, you get to know the teams.
You get to know what the customers like about the two technologies together or the two teams together. And so strategic acquirers are much more comfortable approaching partners because they know the team, they know the technology, and they know how the customers like it. So my advice to CEOs is you should spend 20 to 30% of your time working with larger companies that are not only partners in a good route to market and can help you grow your business, but could be potential acquirers if the scenario is such that that's the right exit.

**Ray Rike** (4:30)
That's interesting. I don't think a lot of earlier stage CEOs and we're talking about that 5 million to 20 million, not one or two million. Think a lot about partnerships, especially in the SaaS ecosystem. So how do you reach out to partners and under what auspice when you're first starting to think about those partnerships?