Cuckoo’s acquisition - The inside story of entering the Giganet nest

You can read the full press release here.

No one starts a business to get acquired. Or at least they shouldn’t in my opinion. The journey of business creation is a team one. And if the only thing you’re building for is to create a tidy exit multiple for your shareholders, what value in the world can you truly create? Financial value is a by-product of striving after meaningful goals for customers, with great people in your team, while doing good for your shareholders along the way.

I started Cuckoo with my two co-founders Dan and Tommy in February 2020. We built a functioning broadband business in 5 months in the middle of a global pandemic and have been scaling ever since. We’ve acquired happy customers. We’ve hired a great team. We’ve raised money from respected investors.

I love behind-the-scenes views into anything. Space travel. The train industry. Waste management. The world is a lot more complex and interesting than we give it credit for. So here’s how this acquisition all started, what the process involved, how did it make us feel and what’s next for Cuckoo and our fellow flock in Giganet. Eggciting times lie ahead. And as the hackneyed tech saying goes, we’re only just getting started.

It all started innocuous enough. A LinkedIn DM from Jarlath, the CEO of Giganet. We met shortly after this in real life in July this year at Cuckoo HQ in East London.

At this first meeting Jarlath, a bit shyly, suggested combining and accelerating forces and asked me whether I was interested. I said yes. A week later we received the first offer for the business and a couple of weeks after that is today! One of Cuckoo’s values, and my personal favourite, is #RaceToTheFuture. My experience with Jarlath was just that.

I’ve read before how deals like these only get done when the personal chemistry of CEO’s click (our Whatsapp message count is now very high). It was the same here. Giganet and Cuckoo align almost perfectly in values, ambition and skill sets that compliment each other. There was even a phrase in the internal Giganet team before we met that used to say #whatwouldcuckoodo. It’s rare to find such similar temperament.

All this was happening while venture capital markets were taking a beating, many tech businesses were starting to reduce team sizes and consumers around the world are facing the largest cost of living squeeze in living memory.

Let me tell you now. Selling all the shares in a business is a real faff. I don’t really know how professional M&A bankers and lawyers do it for a living. Signature chasing. People chasing. Document retrieval from the depths of history. Debates over the minutia of wording. Not what you really want to be doing in place of building for customers, but a necessary endeavour.

There were broadly 8 concurrent pieces of work, which had the codename Project Uncle Sam.

Why a code name? The deal team has to be very small to prevent news leaking out as well as not get people too excited if it turned out to not work out.

Why Uncle Sam? The name came from the Muppets, whose character is a bird. Get it? Hat tip to Paul, the CFO of Giganet for the name. I also personally think the character looks a lot like Paul too ;).

The 8 bits of work are broken down below:

1. Heads of terms - Here’s where the overall price and structure of the deal is set out and agreed in general terms, before diving into the detail. This is actually not legally binding (just frowned upon if you change it) apart from the bits around exclusivity for a period and confidentiality.
2. Share Purchase Agreement - This is the big, bad, meaty section that earns lawyers theirs pounds of flesh (sorry, not sorry Cuckoo legal team). So what does this actually include? Here’s the long list: definitions, price, sale and purchase mechanics, expert witnesses, completion mechanics, warranties, tax, indemnities, restriction, confidentiality, assurances, costs and schedules (to name but a few).
3. Data room and due diligence - All the juicy stuff is here about the business. Including details about team, financial and key performance data. We used Notion to setup our data room combined with our legal data room.
4. Disclosures and other bits - Any skeletons in your closet? This is the bit where you shine the light of day onto them.
5. Change of control consent - Sometimes you have key partner whose commercial contract contain rights to change contract if there is a change of control. A delicate piece of negotiation is required here if there are competing interests between buyer and commercial counterparty!
6. Team communications - Managing this is critical. We broke this down into speaking notes for an all hands announcement, post-all hands Slack post and Q&A, slide deck for day after presentation on the deal and Slido Q&A for anonymous questions.
7. Shareholder communications - Very important that shareholders get the right information at the right time. Normally multiple emails with detail about the logic of the deal, shareholder return, other options etc.
8. Public communications - The final piece of the puzzle. Press release and blogs are the key bits here.

Below are a few snapshots of the different bits.

My operating model for how I like to conduct myself is above. Its through this prism that I have experienced this acquisition. Truthfully I’m feeling equal parts excitement and trepidation. A bit like when we started Cuckoo in the first place. Trepidation about the unknown but excitement about the opportunity.

There was a lot of pressure and collapsing halfway through a work out in the sun probably didn’t help things! Not to worry, the paramedics gave me the all clear (results to the top left). Too much sun, not enough water…There was also some fun moments, such as when I sneaked off to Croatia (Hvar harbour top right) to work from without the deal team (some of them below) ever finding out.

However, more importantly than me is how everyone else is feeling. Our senior leadership. Our team. Our shareholders. So here’s a snapshot.

We conducted a full team survey a couple of days after we announced the news to the team. The key next steps are we'll bring out more plans for the future over joint workshops in the next few weeks. One of the big things everyone agrees on, customers are going to really benefit. And we're aiming to scale really bigger and better!

We've raised a lot of money and work hard to deliver for shareholders, as we do for our customers and each other. To every Cuckoo investor, thanks for backing us along our journey. You have helped build Cuckoo as much as anyone else.

Giganet and Cuckoo were successful in their own ways. Combining will make us even more successful. Why? Well four broad themes; software eats networks, full fibre is the wave, marketing and customer service are twins and also our secret plan for the future....

Software eats networks - Home internet works like a two layered cake: the top layer is consumer software and the bottom layer is a host of different networks. Traditionally, telcos have been locked to the networks they’ve built themselves. But that is changing. Our crucial insight is that no single network can provide for all consumer demands. That can only be solved at the consumer layer by aggregating the USPs all types of networks.

Full fibre is the wave - The graph below roughly tracks the share of UK switches moving to Full Fibre (FTTP), which represents a seismic market shock for UK broadband over the next few years, allowing us to spring board our growth. Every road in the UK will be dug up. Every landline will be turned off. Everyone will need to consider their broadband purchase decision, often for the first time.

Marketing and customer service are twins - The two dials of our business are growth and customer experience. We modulate both of them through software innovation, marketing analysis/implementation and operational analysis/implementation. Growth and customer experience are inextricably linked. We keep on pushing growth until we expect (or it actually) starts to impact the customer experience levels we want to provide (reply times, waiting times, high Trustpilot scores and high NPS scores). Our marketing “stack” essentially consists of launching new channels and saturating them until they reach our marketing spend ceiling.

A tale of three cities - Now here is the exciting part. Adding the magic of customers, technology and networks together. But you'll have to join our team to find out more...

Hope you found that interesting. If you’d ever like to chat about this (or fancy joining us on our journey) just drop me an email on alex at cuckoo.co