What happens when crucial M&A information gets withheld after you’ve committed to a Letter of Intent? Jeremy Segal, EVP of Corporate Development at Progress, faced this during the Mark Logic acquisition. Post-LOI access to the target team was denied—a surprise that stalled the deal. This experience birthed Progress's "Orange Flags" system, a structured approach to identifying subtle deal risks before they become deal-breakers.

Progress aims to double revenue every five years through inorganic growth, outbidding private equity firms. Their secret isn't just shrewd negotiation; it's a commitment to financial discipline and transparency, codified in their Orange Flags.

Key Takeaways

  • Progress, led by EVP Jeremy Segal, doubles revenue every five years via inorganic growth, demanding strict M&A financial discipline.
  • Post-LOI access denial during the Mark Logic acquisition led Progress to formalize its "Orange Flags" system.
  • This system flags potential diligence issues—e.g., a seller withholding basic info for weeks—requiring immediate CEO/CFO discussion.
  • Orange Flags prompt leadership to demand transparency, address concerns, or walk away, preserving capital and avoiding bad deals.
  • This "Orange Flags" system helps Progress outbid private equity without overpaying, ensuring deals are built on trust and complete information.

The Progress's M&A Orange Flags System for Due Diligence

Progress formalizes potential due diligence red flags into an "Orange Flags" system. This structured approach identifies early warning signs requiring senior leadership intervention before significant resources are committed. Jeremy Segal explains, "we created this thing called orange flags... Things that sort of rise to the level of let's go talk to our CEO and CFO and discuss do do we want to continue going here based on these orange flags?"

  • Identification: Things that sort of rise to the level of let's go talk to our CEO and CFO and discuss do do we want to continue going here based on these orange flags?
  • Common Examples: Not receiving basic information requested for two to three weeks, lack of access to certain key people, or a seller not being fully bought in to doing a deal.

“Like what's an orange flag? Well, you know, we've been asking for this basic information for the last two 3 weeks and they haven't given it to us. Well, why haven't they given it to us? What are they what are they hiding?” Segal shares. He also points out, “If if if you don't see the seller being fully bought in to doing a deal, that's a flag.”

  • Escalation: When an orange flag is identified, the issue is discussed with the CEO and CFO to determine whether to continue seeking the information or walk away from the deal.
  • Resolution: Stating that the deal cannot proceed without the required information often lights a fire under bankers and sellers. Progress, as a disciplined buyer, is comfortable walking away if the information or commitment isn't secured.

“we're comfortable saying all right well the best thing for us to do is to walk,” confirms Segal.

When This Works (and When It Doesn't)

The "Orange Flags" system excels at managing information asymmetry and mitigating risks early in diligence. It stops companies like Progress from wasting extensive resources—time, legal fees, bandwidth—on deals likely to fall apart or need re-trading. Jeremy Segal states enough orange flags can combine into a red flag, a clear deal breaker. The framework works best when the buyer is disciplined and willing to walk away, making their threats credible. It's less effective for buyers under pressure, or those lacking the fortitude to say no.