FlexJet CEO Doesn't Believe In M&A, Should You?

Eric plays a clip of FlexJet CEO Kenn Ricci arguing that acquisitions often signal weakness: companies may overpay 10–12 times cash flow for market share they could win themselves, while adding 30–40% of another workforce can destroy an established culture. Neil pushes back with Facebook’s roughly $14.3 billion acquisition of Scale AI, saying it helped push Facebook’s stock value up by more than $200 billion and that management can change an acquired company’s culture. He argues that return matters more than a blanket dislike of M&A.

Eric says his company bought a Southeast Asian business for its customer logos, longevity, reputation, and access to regional RFPs, even though they already knew it had team and culture problems. After the purchase, employees focused on gaming and ping-pong rather than work; at a client conference, some chose to play instead of speaking with customers. Management changed the culture from day one, but Eric calls the process painful and says he would have preferred a better cultural fit if one had been available at an acceptable price.

Neil says M&A can create more than the sum of two companies by combining complementary services. In his example, Eric’s hypothetical SEO agency could sell paid advertising to its clients, while Neil’s paid-search agency could sell SEO to its customers; even a 20–30% cross-sell rate could materially increase revenue. Customers buying multiple services also become more dependent on the agency and tend to churn less. Eric concludes that M&A is neither inherently good nor bad, but a tool with trade-offs, citing Brad Jacobs and large founder-led companies such as Microsoft, Google, NVIDIA, and Amazon.

Neil checks FlexJet’s ownership history and finds that its parent, Directional Aviation, has pursued acquisitions, including Constant Aviation, Flying Colors, Associated Aircraft Group, Halo Aviation, and other jet businesses. He also notes that NetJets became roughly three times larger by flight hours while growing through acquisitions such as Marquee Jets, Executive Jet Management, and the Sorrentini Aviation Group. The hosts point out that FlexJet’s initial business itself began with a $27,000 purchase, and Eric mentions that LVMH later acquired an $800 million stake.

Neil describes meeting an Italian company specializing in TikTok Shop marketing and considering an acquihire, but its annual revenue was only $400,000. Eric says he would not buy it because small acquisitions bring “big hairy problems” and distract from the core business. Neil estimates that even with internal legal and accounting teams, the purchase could cost about $300,000 in internal fees, leaving too little upside. He would consider a tuck-in doing $10 million, $15 million, or $20 million, provided it could move the needle.

Eric begins with the sales principle that reps should listen at least 60% of the time. His AI reports that discovery calls are currently about 50–50, while proposal calls are closer to 60–40 with the salesperson talking more because they are presenting. Neil says their team listens above 50% and that a proposal with no customer questions is a bad sign. Eric also describes asking AI to review daily standups—what someone accomplished, what was highest leverage, and what blocked them—so performance feedback can happen daily instead of only quarterly or annually.

The hosts discuss Gokul Rajaram’s distinction between companies whose margins depend on verifiable work and those that own consequential outcomes, with risk-bearing businesses retaining more value. Neil says performance-based marketing sits far along that risk curve, citing CRO agency Spiralize and clients who resisted paying after unexpectedly strong results. Enterprise customers usually prefer predictable flat fees, and even capped bonuses can trigger renegotiation when earned. Eric and Neil recommend a managed-service fee that covers costs and margin, with limited, capped performance bonuses as additional upside.