Hafeezah Muhammad's company Backpack Healthcare recently acquired two companies. At the 2023 Chicago Smart Business Dealmakers Conference, she talked about how the business has supercharged its analytics to better identify targets, how she dealt with sellers who were hanging on to market valuations that had passed, and also discussed some of the key considerations for post-deal integration. Speaking on the latter, she says one thing they had to consider with those two recent acquisitions is layoffs, which they did, and why it made sense in these cases.

"It's a very tough environment," Muhammad says. "To keep those existing employees, some of them who are not being laid off, how do you bring them within the culture?"

The acquisitions weren't designed to drive top-line revenue, but instead to drive expansion and improve operational efficiency. In that case, she says one primary consideration was the people capital — how they feel within the integration, ensure that they are being taken care of, and how the patients or the customers are being taken care of.

"And once you nail that down, everything will flow well," she says. "It is the hardest thing ever."

One of the companies Muhammad acquired had a hybrid work arrangement, while Backpack Healthcare was fully digital and everyone works from home. That created some challenges that led to hard decisions.

"That was one of the biggest questions because, surprisingly, those who work hybrid love hybrid — want to go into the office and have that opportunity to do so," she says. "But once that was removed, it created a lot of friction within our organization of how do we help balance those who want to go into the office where that's not our policy or our business case for that? And how do we integrate them? So, we gave them the opportunity that if they wanted to stay with us, yes, they can. But if they wanted to part as friends, and we were open with that as well, because the costs associated with having to pay overhead for in-person was not sustainable for us as a business as we were trying to drive costs out."

In an environment in which sellers can hang onto the idea of the higher valuations seen in years past, Muhammad says she dealt with that through empathy — by working to help them recontextualize that value with an explanation of how to think about the deal and the current market situation.

"I told him about in 2008, there was a crisis, a housing crisis, and at that time the value of homes went down. So, even though you think that your house may have been worth it, it doesn't mean it's not worth that much. It's just not worth that much today. And kind of help navigate him through the conversation of 'Would it be in your best benefit to hold on until the market changes? Or would it be in your benefit to sell now?'" she says. "So, taking that empathetic approach, and bring the explanation down to the level of understanding that nothing is wrong with you or your business today, it's just a market condition. It has nothing to do about you. It's just all about the condition of where we're at right now. And that has helped me convert two of the acquisitions that we were able to accomplish."

She says she had a list of many targets that they were working through, and all of them were saying no. However, much of it came down to the emotional sense of the value of their business. Helping them understand that the business is solid, but the market conditions have changed, helped reframe their sense of value.

To better identify acquisition targets, Muhammad has an analyst who helps the company by looking at all the competitors in the mental health marketplace, monitor the market conditions for things like new regulations that would lead a business to consider a sale.

"As we continue to build those models, we're able to identify our targets of what value would this bring to our organization? Do they have enough traction or are they about to run out of cash?" she says. "And once we're able to identify those using our algorithm, then we start initiating the conversation a few months before, just introductory. So, a lot of the times, it's a LinkedIn, 'Hi, how are you? Let's have a coffee chat.' But what they don't know is that for the last year, my team have been monitoring every single aspect of their transaction, every media outlet, so that we're able to attack when the time comes."

She recently hired a chief technology officer who was the head of analytics and AI at Meta. Now, they're taking that intelligence and building some models so that they can have better predictability of which companies they want to acquire and how they could change the landscape of the company so that they can own the market share and dominate.

"I'm very fortunate that for the last few years, when there was a gold rush for all of those companies that were receiving capital, we said no, because we wanted to wait for the opportunity, which is today, so that we can be able to get the best deals out there to grow faster in a way that's going to be more cost effective for the business," Muhammad says.