The Middle Market Review Insights on the Middle Market.

Subscribe Subscribe

Subscribe Today

I want to receive:

Thanks for subscribing!


Corp Dev Professional Sam Tsui on Acquisitions at Microsoft vs. in the Middle Market


Sam Tsui is senior advisor to Chinese performance marketing company Westwin, where he focuses on sourcing and executing on acquisitions. He previously spent 10 years at Microsoft, where he led strategic business development across products like MSN, Bing, Skype, and Office 365 across Asia Pacific, along with acquisitions in its Online Services Division (HQ). Westwin was originally a joint venture with Microsoft dating back to 2005, but separated from Microsoft in 2016 through a management buyout of the business.

MMR: What is the difference between working with Westwin, which is looking for its first acquisition targets, versus a seasoned buyer like Microsoft?

Sam: The first difference is name recognition. When doing acquisitions for a company like Microsoft, all you need to do is raise your hand  and let people know that you’re interested in opportunities, and everybody will come knocking. You can always have a conversation.

With a company like Westwin, we must go out there and do the work to let people know who we are. We’ve been making a lot of outreach to advisors and brokers in the middle market. That’s why we joined the Axial network. We must get people comfortable with the fact that we’re a foreign acquirer and convince them we have the necessary capital and execution capabilities.

MMR: This is your first foray in middle market corporate development — how is it different from your experience in the large market?

Sam: I see more of a focus on fundamentals, which is a good thing. In the online world, or the big M&A world, there are significant premiums for market cachet, or growth that’s hard to apply a figure to. But in the middle market world, unless a business is growing super fast, I think you can still apply basic corporate finance fundamentals to a business and get a realistic valuation.

I was an investment banker earlier in my career. What was confusing to me back in the day when we were doing acquisitions at Microsoft was that I basically threw everything I had learned from my days of investment banking out the window. It was a very different discussion. You’re not focusing so much on trailing or forward EBITDA  — you’re focusing on top-line revenue growth, user growth, or some other made up calculation that tries to back into an expected valuation.

MMR: Tell me more about Westwin.

Sam: Westwin is the exclusive partner to Microsoft’s Bing Ads business in China on a cross-border basis. We represent Chinese advertisers looking to reach audiences on the  Bing network outside of China. So for example, we might work with a small to medium Chinese business looking to sell computers to people that are searching on Bing in North America.

Another portion of our business has extended into Smart Ads solutions, where we offer Chinese advertisers other performance advertising solutions on platforms in and outside of China such as Sina, Tencent, Alibaba as well as Facebook, AOL, and Twitter.

In addition, we offer inbound solutions to advertisers outside of China that have an interest in reaching the more than 400 million middle class Chinese population that are increasingly consuming goods and services from the outside. If you’re a company like Coca-Cola or Nike — those brands are already well-established in China. But if you happen to be more boutique shoe producer in North America or Europe, you may not have reach in China, but you know that there’s an audience there willing to buy your product. That’s where we can help.

MMR: What types of companies are you looking to acquire?

Sam: We’re looking to acquire a business in the U.S. that would serve as the anchor for our U.S. operations, and help extend our international reach.

We are looking for a digital marketing services company, preferably an agency, but we are also willing to look at companies that offer a unique technology solution. We are a performance marketing company, and ideally, we focus on a business that also knows performance marketing. Revenue size depends on the business model, but minimally we are looking at businesses with $2 million EBITDA..

MMR: How many deals are you looking to do?

Sam: Ideally, we are looking to do one deal first, then follow-on deals within 12 to 24 months. Right now, we are working on building up our capital base. If, however, we see two deals that combined meet our profitability criteria, we’d consider simultaneous deals.

MMR: What are the perceived risks of working with a foreign acquirer?

Sam: First, there is the company execution risk, as not many Chinese entities are fully versed in the international M&A world. That’s everything from language capabilities, to negotiating specific terms, to style of operation, etc. Part of my job is to alleviate those concerns and show people we’ll operate in a manner that people are familiar with.

Second is government/trade risk. There are a lot of concerns from the US government about  Chinese acquisitions these days, and in certain industries, there may be a right to be concerned. If Westwin were a telecommunications company and wanted to buy telecommunications assets, we’d likely have a difficult time. However, Westwin does not operate in a sensitive industry. Still, we may need to go through the correct government/regulatory approvals.

Third, there is currency risk. People familiar with China know that the government has put in capital controls over the past couple years to stem the outflow of capital. Again, we’re playing in a non-sensitive industry and looking to purchase a company similar to ourselves, which is considered low-risk in our opinion. We have spoken with regulators in China and feel confident we’ll be able to convert our CNY into USD to complete any acquisition.

MMR: What advice do you have for other companies just beginning to pursue an acquisition strategy?

Sam: Understand the basics. What steps do you need to go through as an acquirer, from LOI to due diligence to ultimately closing? Know the norms of how people transact in the marketplace, for example, do they transact in EBITDA or revenue multiples in your industry? Know in advance what terms are going to be and not be acceptable to you in the long term. I also think it’s important to be open to potential opportunities, but also know what you want. Know what you are going to do with the business after you close. If you’re unfocused going into acquisitions for the first time, you’ll get a poor outcome.

MMR: What’s your favorite part of your job?

Sam: I like constantly looking at opportunities and seeing how they may fit into our strategic puzzle. In an ideal situation, we’ll find something that’s suited exactly for us. But that’s not always easy to come by, so when we talk to companies, we think about how a business, that is perhaps outside our core business, might fit into our business goals in the long run.

Learn More About Joining Axial

Request Information

Subscribe to Middle Market Review

Subscribe to Middle Market Review

Subscribe Today

I want to receive:

Thanks for subscribing!