Hi SAAS NORTH Community,
We caught up with Stuart Lombard, Founder of ecobee to tease out a few tactical learnings from his massive exit…except, it wasn’t really an exit. When Stuart sold ecobee to Generac in 2021, it was to continue ecobee’s mission rather than to retire. Now he’s still the CEO and still growing the business.
- All good acquisitions start with vision alignment and transparency between parties.
- Don’t try to win additional dollars through legal contracts; focus on deal simplicity and transaction speed.
- Communicate all changes—and the related impacts—with employees early and often to avoid confusion.
Co-Founder/Producer, SAAS NORTH Conference Editor, SAAS NORTH NOW
Stuart Lombard didn’t want to sell his company, ecobee. But in the process of exploring an IPO, he found the perfect acquirer in Generac—the deal was announced in November 2021 with a reported $770 million USD price tag.
Post-acquisition, Stuart is still the CEO of ecobee with no plans to sail off into the sunset. Looking back on the acquisition, Stuart shared what he felt were the keys to his successful acquisition.
Speaking with SAAS NORTH, Jen shared three ingredients every SaaS company needs when it comes to scaling operations to set the stage for revenue growth.
The word “exit” is somewhat tainted for Stuart. He’d sold his previous company but admitted he did it for the wrong reasons. With ecobee, he committed to himself, things would be different.
Ecobee had reached around 500 employees and Stuart was thinking about the next growth step. Only one path seemed open and clear: IPO. He didn’t even think being acquired was on the table given ecobee’s goal to make a global impact on the environment.
During the IPO process, Stuart met the CEO of Generac, a large power systems generator from the United States. Originally, Stuart wanted Generac to join the company’s IPO as a backer. But once the two CEOs got to talking, he realized how vision aligned they were. That’s when the thought of an acquisition first bubbled up.
“As the CEO of Generac and I got to know each other, we felt we had a similar vision, a similar view about how the world was going to unfold, and a similar strategy to get there,” said Stuart. “As a result, Generac would allow us to significantly accelerate our road map.”
Transparency with your acquirer
The acquisition began to move, but the COVID-19 pandemic threw a major wrench into the company’s projections.
“We were in the middle of supply chain hell when the transaction happened,” Stuart recalled.
But instead of hiding the impact of supply issues on revenue (or making up an excuse), Stuart was transparent. He told the Generac team what was going on, how it would likely impact them, and how the company is working to both mitigate damage and set up a strong foundation for the future. He also came prepared with plans for the next six quarters to demonstrate the company was thinking about short-term survival, long-term growth, and continuing to march toward its bigger vision.
“Transparency helped set expectations on both sides, which helped build trust,” said Stuart.
Stuart recommends putting in as few special conditions as possible. This is partly continuing the trust-building relationship (by not adding any sneaky clauses) but also for deal ease. When deals get complicated, they cost more and take longer to close.
“Every deal has a natural momentum or cadence to it,” said Stuart. “You really want to keep the deal moving at that cadence.”
He especially disdains anyone who tries to eek out a few more dollars for themselves via complex or hidden legal clauses. This, to him, is not in the spirit of an acquisition, but instead of greed.
“I’ve worked with people who want to win through legal clauses,” said Stuart. “It’s frustrating and challenging.”
Over ecobee’s 15 year existence, it’s had many board members and investors. Stuart said getting them all aligned was a challenge—and something he cautions other CEOs to get done as quickly as possible since it was the longest step.
“Everyone’s heart is in the right place, but over time different investors have differing objectives,” said Stuart.
In the end, Stuart said it’s your job as a CEO to create a good outcome for everyone. The best way to do that, he said, is to align everyone on a similar vision and goal so that a deal that’s good for anyone is good for everyone.
Stuart shared the acquisition news with team leads first so they could help answer any employee questions and concerns, held an all-hands team meeting with Generac to announce the news shortly after the press release went live, and hosted a celebration and Ask Me Anything town hall a few days later.
But looking back, he wishes he would have been clearer about the exciting future ecobee and Generac were planning, that there would not be layoffs and that this was not an exit but another important step in the journey to realize our vision.
“People hear the word acquisition, think it’s an ‘exit,’ and wonder if they should move on too,” said Stuart. “They get concerned about whether everyone will be fired, if their job is safe, and other issues that weren’t the case but we didn’t communicate as clearly as we should have.”
Stuart’s advice to other CEOs in this position is to think carefully about explaining the path forward, not just for the business but for individual employees. In ecobee’s case, for example, the company would operate independently as a subsidiary of Generac. This meant there would be no mass layoff resulting from the acquisition nor would the company feel much different at the outset. Once he explained this to employees, concerns quieted down. He just wishes he did it sooner and more forcefully.
“Telepathy doesn’t work,” Stuart joked. “I wish I’d spent more time reinforcing how the acquisition was an opportunity to improve the business. I was so deep into it at the time that I missed some communication steps.”
Stuart is still CEO of ecobee, but he doesn’t have to worry about things like making payroll anymore. It freed up a lot of his mental energy to focus on driving ecobee’s mission forward and continue to grow the organization.
This newfound freedom is great, but Stuart was clear that he’s not going anywhere. Ecobee still has growth targets to reach the full value of the acquisition, meaning Stuart still has a lot of work to do. But he’s fine with it since that was the plan all along.
“I never thought of it as an exit,” said Stuart. “I always thought of it as a continuation.”
Listen to Stuart share his story—LIVE at SAAS NORTH’S sister event, TechExit.io Toronto Edition on October 19th, 2022. Get your tickets HERE.