Brian Schmidt, Chief of Staff at Trello, on Trello, the M&A process and what’s next for the company.
Tell us a bit about Trello.
Trello is a visual collaboration tool that allows teams to share perspective on a project. If you’ve ever used sticky notes to organize your thoughts, you will immediately understand Trello. We occupy the organizational space between blank canvas-type tools (e.g. a word doc) and a niche-specific, structure-enforcing project management tool (e.g. Salesforce). For any type of idea, a Trello board provides light structure, collaboration capacity and flexibility, which combine to allow a team to orient themselves around a goal. The tool is appropriate for a wide range of scenarios – everything from organizing your child’s birthday party to managing contract reviews in an established corporation.
Let’s talk about the acquisition. How did Trello decide to go the M&A route instead of raising a larger venture capital round?
There are four general outcomes for startups: (1) go bankrupt, (2) remain private forever by building a good and stable, but likely not huge, business, (3) convert explosive growth into an IPO, or (4) convert explosive growth into an M&A exit. But it’s hard to optimize for an M&A exit or IPO. In all circumstances, you’re trying to build a great company and offer fantastic products. M&A, in particular, depends significantly on external forces: i.e., what large companies are thinking about strategically and what the corporate development department of the specific potential acquirer values and is striving to achieve. Deals happen when these external factors align with a startup’s trajectory, so beyond executing on your mission and goals, there can be little opportunity for influence.
After speaking with them, it was immediately apparent that Atlassian shared our views on mission and had a plan to help us execute, faster. For example, one of Trello’s early goals was to achieve 100 million users which surprisingly was also the exact same internal big hairy audacious goal as Atlassian. Ultimately, we decided that Atlassian would help us put topspin on a ball we were already hitting.
What was your role at Trello before the transaction?
I was Vice President of Operations and Finance, as well as General Counsel. We had a small team for these functions – just me, my Assistant General Counsel and a key finance specialist. Operations included everything from purchasing new equipment for the office to making sure employees were paid on-time. In terms of Finance, my team ran everything from expense approvals to audits to board-level reporting. As General Counsel, we covered data privacy issues, corporate governance, commercial contracts, partner agreements, human resources and real estate.
What was your role in the M&A process?
It was significant – not least because before we announced, I was one of the only members of the team that knew that the deal was being considered. Outside counsel helped to review diligence materials and negotiate the merger agreement, but, as General Counsel, it was my job to make sure the diligence process provided Atlassian with a sufficient understanding of the business and to review the merger agreement with an eye toward underlying business motivations and implications.
Process-wise, once the data room was set up, we began the significant exercise of helping Atlassian get to know Trello’s business, people and agreements. A large part of our team works remotely, so we had to clandestinely coordinate technical employees flying in from across the US to join meetings and conduct technical diligence. We also had to pull together our portfolio of commercial agreements for review and negotiate an over 100 page merger agreement. The architecture of that document is hugely complicated and took significant work. Reviewing the representations and warranties and drafting the corresponding disclosure schedules were also a significant part of the process.
What was the most challenging aspect of the M&A process?
Completing a merger is an exhaustive and all-encompassing process. In Trello’s case, the process spanned five months: one month of initial discussions, one month of term sheet negotiations, two months of diligence and agreement negotiations, and then a one-month regulatory waiting period. For four of those months, the process was strictly confidential, so there was intense work coupled with secrecy.
Now we’re approximately one month into the merger, and our primary challenge is keeping Trello moving as we integrate with Atlassian. We still have the same tasks on our desk as before the transaction, but now we also have to focus on the overarching process of integrating the two companies.
How did you think about communicating with employees during the negotiation period and after announcement?
This was the biggest challenge of the M&A process. Secrets are hard – and this was a momentous secret because we knew it would have an impact on everyone’s lives. But disclosing had risks too: negotiations needed to be kept confidential, the possibility of a merger would be hugely distracting to employees, and disclosing could become emotionally difficult if the deal fell apart.
Given these considerations we kept the group as small as possible. Our approach was to only communicate what was happening to employees who needed to know, when they needed to know it. For example, we looped-in product people once product and technical diligence began. Once it became more clear that the deal was going to happen, we started crafting a message for the broader team. We wanted to make sure to quickly and crisply communicate answers to critical questions (e.g., Will I have a job? What happens to my health insurance?) and to help employees process the news.
How did you ultimately communicate the transactions to your team once it was announced?
One of the unique things about Trello is 65% of our employees are remote, so once each year everyone meets at an offsite for a few days called “Trello Together.” This year’s offsite was scheduled for early January, so our goal was to sign the deal just before Trello Together and then tell everyone in person the following Monday. We managed to sign on time, so the night before Trello Together, we rescheduled the opening breakfast to correspond with an early press release schedule.
That morning, I met with our CEO at 5am, and then with Atlassian leadership around 6am (they’d flown in for the announcement). At 7am, our CEO gave a slideshow covering Trello’s history and ending with the news of our acquisition by Atlassian. One of Atlassian’s co-CEO’s, outfitted in a sweet Trello hat, spoke next about the deal and set a great tone for the rest of the offsite. We then focused on onboarding sessions to answer pressing individual concerns and help people through the emotional journey from “I work at a startup” to “I work at a public software company.”
How did employees respond?
It was momentous, reality-shifting news, and it took time to process. There were distinct stages to how people reacted to the news, and ultimately we were energized and excited about our prospects within Atlassian.
What advice would you offer to in-house counsel on the M&A process?
First: from day one, be organized in everything you do. It almost doesn’t matter how you do it – you don’t necessarily have to buy an expensive contract management software solution – but you need to be consistent, disciplined, systematic, organized and do things in a way that makes sense so that pulling together diligence materials isn’t too heavy a lift.
Second: picking good advisors is incredibly important. For startups, it’s hard to know where to spend because cash is always a concern, but getting good advice from the start is incredibly important and has a ripple effect all the way through. From attorneys to accountants, the advisors you pick are hugely important.