Technical Debt Is Killing Your PE Returns w/ Dave Mangot | This Is M&A

Dave, where do you think we should get started?

Well, I think, you know, just to set the frame, right, the, the, your listeners, no one's gonna be surprised by the idea that if I combine a bunch of different companies together with M&A, that there's going to be, like, duplication and, you know, people are gonna have their own processes.

That's not engineering.

That's everything, right? That's gonna be HR, that's gonna be finance, that's gonna, you know, everybody's kinda got their own things.

Certainly some people might be more aligned than others, but it's the same thing in engineering.

It's not, you know, it's no different.

It's...

But I think some of the things that you're touching on are, you know, how do we sort of deal with that, number one, and number two, like, what are the advantages of dealing with that? So let's say, and I'm not a CFO, so man, there's gonna be some CFO-

[laughs]

... who's gonna hear me say this, and then they're gonna be like, "You don't know what you're talking about." But, like, you know, if there's a way I close the books and, like, someone else closes the books sl- you know, slightly differently, whatever, that, you know, that may be, uh, something that's significant.

But in engineering, especially in, because we're talking about software companies, this is the engine that runs, that makes the company go.

So you're talking about things like margins and growth and all these other kinds of things.

That's, that's the engine.

Like, so if engineering is super expensive because I'm doing, like you were saying, maybe manual stuff, but, you know, there's a lot of other reasons why, and we can talk about some of them, why your margins might be awful in engineering.

But aside from that, like, most private equity firms that I work with are very interested in product-led growth, and you don't do product-led growth unless your engineering team is working well.

Right.

Or you can do it, [laughs] but it'll be pretty lousy, and lousy is not how, you know, we wanna grow these companies.

And so I think that's kind of a little d- bit of a differentiator there in terms of how engineering can be a little bit different than maybe some of the other functions inside the company.

Yeah.

Agreed.

You know, the, the first thing that I just think of is, as you were talking, is technical debt and the impact that has on the financials, right? Um- I- I've, I've been part of organizations where there was so much technical debt due to bugs that got released to the customer environments, and-

Right

... you end up spending a ton more in supporting those customers.

You end up with so much more engineering thrashing, I guess you would call it, right? Trying to rush to go solve these problems.

It's, it's a mess, you know.