Accounting for Innovation

M&A Success: The Story Behind Decimal's Purchase of KPMG Spark, Formerly Bookly

• Jody Padar & Matt Tait • Season 2 • Episode 3

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What’s it like to buy a business from a Big 4 firm?

In this episode, Jody Padar and Matt Tait explore the details behind Decimal’s acquisition of KPMG Spark, formerly known as Bookly. Matt shares the story of how the acquisition unfolded, including the motivations, challenges, and key takeaways from the process. The discussion highlights the importance of cultural fit, thorough due diligence, and strategic planning in ensuring a successful merger. This episode offers valuable insights for accounting professionals and business owners considering acquisitions as a growth strategy.

In this episode, we cover:

  • Overview of Decimal’s acquisition of KPMG Spark
  • Importance of cultural fit and people-oriented approaches in acquisitions
  • Initial contact and negotiations with KPMG
  • Detailed due diligence process and timeline
  • Transition planning and integration strategies
  • Challenges faced during the acquisition and how they were overcome
  • Role of legal and corporate development teams in the process
  • Benefits of the acquisition for Decimal, including growth and team expansion
  • Key lessons learned from the acquisition experience

This episode is brought to you by Decimal and the Radical CPA.

Welcome to the Accounting for Innovation podcast, where we explore cutting edge strategies and insights into the world of accounting and finance. Presented by Decimal and the Radical CPA, each episode dives deep into industry trends. Whether you're a seasoned professional or a budding entrepreneur, join us as we unpack key concepts and share practical tips to drive success.

Jody Padar:

Welcome to the accounting for innovation podcast. I'm Jody Paydar, the radical CPA. I've been at the forefront of innovation in the accounting industry for over 15 years. My co host Matt Tate is the CEO of Decimal, one of the fastest growing accounting companies in the country and an accounting innovator. And today we're going to talk about, the acquisition he did from KPMG. So I'm excited to kind of dive into that, Matt. So you're going to tell us the war stories, right? You're going to give us all the dirt.

Matt Tait:

We did that episode before and we immediately ended and you said you didn't talk enough about KPMG. I really want to hear the story. And so I, I said. All right, let's talk about it. I think anytime you're a business the size of ours, and you have the opportunity to do any type of deal with a top three firm, it's worth doing. And it's an exceptional learning experience on the good and bad. But I'll tell you one of the best parts about this when you do a deal. And your lawyers come to you with deal documents. They pulled a template that they've used and in past deals. Well, I am now the top deal template for the Michael Best's law firm. And that's because I asked during the process that KPMG write into the deal documents. That we received an iron pig's head dinner bell that they used to ring for sales and two orange bikes that they had in the office. So best learning from that is I have a great bike and an iron pig's head dinner bell somewhere.

Jody Padar:

That's awesome. And so what do you do with this dinner bell?

Matt Tait:

Well, so they used to ring it for sales. I got it. And my wife immediately said, it's going to the basement, get

Jody Padar:

rid of it. So

Matt Tait:

it's in the basement, but the bike was cool enough that I now ride it. My kids are of the age where they think the color is ugly. But what, what had happened in this deal was, a couple of years before KPMG had bought a company called Bookly, awesome company from some guys down in Salt Lake City. And they rebranded it as KPMG Spark, and it was its own ledger combined with bookkeeping and tax. And so the bike is actually a Bookly bike because the origin story of Bookly was that the owner had a bike shop and he was struggling with his bookkeeping and tax. And so we started a company to help do that. And that eventually became KPMG Spark.

Jody Padar:

Yeah, that's interesting. And I remember when Spark was like, you know, popular. And everyone was talking about it because spark was basically came so far downstream, right? Like, why does KPMG want anything to do with a 500 a month client? It was like, but honestly, I think that was foreshadowing to show that if you had the right, technology and the right service offering with that technology, we You could actually become a profitable company and maybe, and I believe that's what KPMG saw when they purchased it right now. Maybe they were too big to figure out how to get it done and they had too many like, you know, big figures that they couldn't actually operationalize it. But to me, when I saw that, like, it was like five or seven years ago, whenever, whenever it had started, I was thinking, wow, like, here's truly the opportunity because KPMG sees an opportunity as well. So, you know, it was part of reading the bigger market. So they come to you and they say, Matt, buy our firm. Right. I mean, like what happened? You got a call, an email, like what?

Matt Tait:

What had been happening was they, we had been growing like crazy as a company and through that growth, we had actually hired a couple of their best employees, some amazing people. And now that we have their whole team, like, I can't tell you how fantastic these people are and how great it's been for the decimal culture. And, but so we've been taking a bunch of their employees and then we'd also been taking some of the bigger clients and, through some intermediaries, they reached out and we're basically like, Hey, would you just like to buy the whole thing? And they wanted, it was really cool because typically when big billion dollar plus company sells something, they don't think of people in the process, but KPMG did the opposite. They said, we want to find the best home for these people. We're talking about like a massive multi billion dollar business and the size of this, it was perfect for us, but it's, it's not a significant deal for that.

Jody Padar:

Right. They probably spent more on legal fees than they did.

Matt Tait:

Absolutely. And as a recovering attorney, I'm not fun to negotiate with anyway. So I may have made those fees higher than they needed to be for them. but they approached us and basically asked if we wanted to buy the business. So we did a little bit of negotiating. One of the cool things in learning experience for us was we dealt with a Corp dev group. Their entire job is to buy and sell companies with KPMG. And so they're like very experienced in the whole thing. And I'm an attorney. So like it worked out really well. Like we knew how to have the conversation. We knew the economics, we knew the, all the sides of it. And we negotiated the X's and O's kind of high level X's and O's of the deal. signed a letter of intent pretty quickly. I remember I was up, for an event in Chicago. I drove from Indianapolis where I live and I'm literally like getting ready to change, put on a suit and I'm, I'm sitting in like my boxer shorts and a button down shirt on the phone, writing out some final notes, negotiating this LOI and they send it and we signed it and I went to the event and, it was awesome. We then took a, gosh, it was August, so it was almost four months to do full diligence and negotiating on the actual deal documents. And, part of that was us. We intentionally went slow in it because we asked for, time to basically interview and recruit. Their whole team. We said, look, you guys have done an awesome job. This is a people decision for you. They had other people that they talked to, but ultimately they wanted to find a good home for the team. And, we all felt like culturally it was the perfect mix and the perfect match. And so we spent months getting to know their team, doing multiple interviews, getting to know the X's and O's of the business, the technology side. And then negotiating a larger deal document than I hope to ever use again. The downside of a corp dev group,

Jody Padar:

right? A big, thick, a big, thick contract.

Matt Tait:

Oh yeah. If I had actually printed it, which I never did, I would've killed a few trees.

Jody Padar:

Wow. So, so, so that's really cool. So then afterwards, and because they had the corp dev group, the transition was like, I don't want to say perfect because I know nothing's perfect, but it was like, it was seamless. They knew how to do it. Right? Like, they

Matt Tait:

did. One of the things that they were really good about and, and it's something that we try to apply into our future deals and the subsequent stuff that we've done is during diligence, we built the transition plan together so that we knew from the month before we signed the deal to the three months after how we would all operate. From even like talking to the big clients before the deal was signed to when the press release went out, who went, it went out from what it said to transitioning all the technology and all of the other stuff, because we're also dealing with like visa and we're dealing massive billion dollar people and I can tell you, you. By the way, it is really different when KPMG calls Intuit or Visa than when I do. I miss that. So they really worked with us on that and they were so honest and transparent about it. And Brett, Was one of the guys that was running their firm and he actually stayed with KPMG, just an awesome human being and really helped us through the client transitions and getting to know their clients so that by the time it happened, was a known commodity. And that was just such a high level of trust. And I've dealt with bigger companies before. And I have to say the way that KPMG did it was, was really, really cool.

Jody Padar:

Well, that's, that's awesome. And so I, it's funny because like the way you position it is that it was really positive and I was expecting this horror story. Of like working with a big company and, and everything. So, I mean,

Matt Tait:

look, there were parts in the arguments where we argued about really dumb shit sometimes, and it was on their side, but it was also on our side. And there were phone calls where we would hop on with the Corp Dev, the guys on the Corp Dev team and, the men and women were awesome. I mean, we had a, we had a spreadsheet checklist. That was hundreds of lines long and I had a woman, Rebecca, who was working for our team and literally her entire job was to work with them to manage the checklist and so like that, but yeah, we would just hop on the phone and have the conversations and ultimately because they were so people oriented. focused. And that's just are like every part of our being at decimal is people centric that it aligns so well. And, and then we just kind of reached timeline. We're like, okay, we're done. And like I said, we, with that big document, we argued about every line, we argued about every word. So no, it was not perfect, but it was in the realm of like expected pain.

Jody Padar:

Right.

Matt Tait:

Versus like gratuitous pain. And I've done other deals that were just like, why are we art? Like, please stop. And I didn't really have as much of that with KPMG, because they're so professional about how they deal with things.

Jody Padar:

Right. And they're used to it. Like that, that's part of their everyday. So, so that's really interesting. And I think it was probably helpful that they came to you. So I think that's really, Interesting when we even think in broader scale about, acquisitions and buying and selling, right? Like is if someone comes to you because they want to buy you versus you trying to sell them something that they don't even know that they want or need. Right. And so, so, so I think that's an interesting perspective too, right? Like, the whole idea of. How do you position yourself so that they come to you to say, like, Hey, You know, we want to buy you whatever. So, I, I think that's an interesting point.

Matt Tait:

Well, and I think there's something that we've talked about in our previous episodes is the cultural match is so important and we really lucked out that there was a cultural people focused. Culture at decimal. It also existed at spark and sparks. Culture was definitely different than like the big KPMG. Well, right. It was its own little thing. It was it totally. It definitely was, but they also the KPMG corporate mentality fit that. And like we still as decimal partner, we're going to launch a summer education series in a couple of weeks with KPMG, where we're doing some education for the marketplace for CFOs for clients, etc. Because we've kept in touch in that cultural fits been really, really good. And I think that's so important when you talk deals is finding the right culture fit the right personality matches the right and at every level to because that deal with KPMG would not have worked if the minute we closed all the employees left. Right. We would have been screwed, but it was such a match and that team has grown so well and been such a huge part of our growth since that acquisition. And even in subsequent acquisitions, that, that it really was a big boon. And the fact that we were able to interview every single person multiple times and basically run them through a hiring process and then flip it and let them interview us. Really, really helpful in the process and it made it so that we knew even through the lumps and there are lumps clients leave when you don't expect them to leave other clients get angry. Maybe you find that there are 10 clients that are paying 5 a month for tax and bookkeeping. It's a hypothetical, of course. but you, you run into some of those things where you. You can get through it when you have people alignment,

Jody Padar:

right? No, I think that's so critical and so key to, to, to any sort of deal. Right. And so, I, I think, the listeners are learning a lot through this.

Matt Tait:

Hey, it was a great learning experience for me, but still the best thing is that bike. Yeah. Next time I'll, I'll actually take a picture, Jody, and I'll send it to you. But, that was just my irreverence as a human being to have that written into the deal doc. So that now every time Michael Best does a transaction, their lawyers are reading those two things. and then I get a chuckle. And then every quarter now in the last 18 months, I've gotten a, An email from our, or a text from our lawyer saying they pulled it again. so that was fun. And, but the, the KPMG lawyers, they were really, truly great to work with and the way that they dealt with it. Also the way that they took care of everybody through it, the way they kept in touch with the original founders of the company was also pretty special. the main founder of the company worked at KPMG until a couple of months before the deal. and so like that never really happens with like tech people. and so there was some really cool parts and I think that KPMG office, particularly in Salt Lake City. but really globally, which we dealt with, it was good to deal with, but it was certainly a learning experience. And there are times when we've done other deals where I wish I was sitting on the other side of the. Corp dev guy. But there were also times when I was sitting with the corp dev guy, wishing that somebody else was on the other side of the table. And he was definitely wishing the same about me.

Jody Padar:

Very cool. Well, awesome. So I think, you know, we've talked about so much about mergers and acquisitions the last couple episodes. I, I think that it's something that every accountant needs to be aware of. And they need to, just get ready because I think the, the thing is going to happen in the world. Either you're going to be acquired or you're going to be acquiring someone. I doubt in the next 10 years, maybe even five years, we'll make it smaller by like how many people will not be part of something bigger.

Matt Tait:

Well, and you know, one of the things that people can do and really think about, we've talked about this in our previous episodes. One of the things that made the KPMG spark deal easy for us, it was ready to sell, which means they had thought ahead about how to structure the business, structure the economics and the financials of the business and clean up some of that stuff behind the scenes. Because they That would have dragged things on or that would have made things worse. But ultimately that business was ready to be acquired, which made it an easier deal for us and to be fair, a much more attractive deal. So that's something for everybody to think about. And like you said, they're gonna be a lot more. There's gonna be a lot more consolidation. But I think on the flip side, it's becoming easier and easier to start your own firm. And so there's gonna be a lot more of that too. And you're just gonna see a lot of people starting. A lot of people rolling up, a lot of people starting. And I think there's a, there's a lot of cool things that are coming for this industry. So with that, thank you for turning into the accounting for innovation podcast brought to you by decimal and the radical CPA. You can find more great episodes anywhere that you listen to podcasts. And please don't forget to pick up Jody's new book, radical pricing, how to optimize profits, delight clients, and build a top value firm. And please, as always Jody, and I would love to connect on LinkedIn. Thanks.