Developing Leadership in M&A

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I'm Kisan Patel and you're listening to M and A Science, where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals.

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Welcome to M and A Science Live, where leading M and A practitioners share lessons learned from their experience. When you use proven techniques in M and A, more value is created. If you're interested in keeping up with the latest from M and a science, visit mascience.com and subscribe to our newsletter while you're there. You'll find a ton of free resources as well in our past podcast interviews. Again, that's mascience.com I'm your host Kisan Patel, CEO and founder of M and A Science and Deal Room. Joining me today is Scott Heil, Senior Director, Corporate Strategy and Development at enviva. Scott's an accomplished mergers and acquisitions and global business leader known for uniting globally dispersed teams around cohesive project visions and achieving organizational goals. He's got over 20 years of experience in M and A and worked on over 80 deals. He's also got a law background. Today we're going to talk about what important leadership skills are and how to develop those skills. Scott, how's it going?

Great. Thanks for having me.

My pleasure. You're a returning alum, so this is actually exciting to have you.

Yeah, lots of change since then.

Absolutely. Well, this is going to be a fun topic, one I'm additionally passionate about. But maybe just to kick things off, can we talk a little bit about your M and A experience?

I started, like I said, on the legal side of the house practicing at a law firm back in the first of the dot com run ups way back when when my hair was less gray and worked on a lot of venture and M and A deals back then, moved back east, went in house GC for a company doing deals globally. We had operations in about 32 countries around the world. Moved on to another company that had operations globally and was continuing to grow as well. Most recently after doing consulting for a little while, I got coerced to coming back into corporate found great company that I'm with now who does M and A. But we also do greenfield development, some other things. So I keep learning that's the right idea.

I think that's an important attribute to have as the leader right from the get go.

This is very, very true. I agree with that wholeheartedly.

So first question I have is how important is self awareness as a leader?

It's a good one, I'd say. I say that has to come first. To be honest, over these years, I wouldn't have said that when I was a younger professional, but at this stage in my career for sure, self awareness is key. If you look at leadership as a good leader becomes something you pursue for your whole career, to be honest. And I don't know if you ever really achieve it at the level that you want to. But harnessing and honing your self awareness, your empathy, your relationship management, I think that's really the key because you need to build trust and to be successful in M and A with all the complexities that come around with it, being able to quickly build trust requires a level of self awareness and empathy that you have to focus on to become a good leader. And with that self awareness, most times I think it gravitates towards recognizing your vulnerabilities and understanding that you don't need to know everything, but you need to be able to lean on your abilities and your strengths, mitigate the weaknesses that you realize and help the team achieve the goals. With vulnerabilities, I think it's hard for everybody, right? You don't want to acknowledge your vulnerabilities many, many times. And the reality is whether you acknowledge them or not, other people see them getting the feedback. Understanding where you have blind spots that we all have is the key to really rounding out your ability as a leader. You know, that can be a technical side. I always joke when I'm in meetings that, you know, I know enough about cross border tax issues to be dangerous. That realization that self awareness came, that I know enough to know to call the subject matter expert, I know enough to know that can add a lot of value in deals and you need to look at things earlier rather than later. Those are the life learnings of self awareness that came. But I would never claim to be as smart as someone who's keeping up with all the day to day changes. And when you add complexities of multiple jurisdictions, it's too much for any one person to keep up with. I also think about vulnerabilities from like a leadership standpoint this is one I still work on. I'm a kind of a big presence in the room. And when I'm in a meeting or leading a meeting with team members, I gotta be conscious of the fact that without intent I might drive things too much. And I want my team to show off. My team's doing a lot the heavy work. I need to make sure that they have a voice and they're developing. Making sure you step back and understand that you don't have to be the biggest one in the room at times. It's something else that I've become aware of over the years.

I like this. You connected with self awareness to empathy and then vulnerabilities. This is M and a science. We're not going to just keep this high level. I want to take this apart because I'm even thinking of a person I know in Corp Dev that's sort of at that point where they're coming up as a more of a junior role. And I can read them out that for you to progress and get to that next level, you need to start developing these kind of leadership skills. And what would you point at as some of the practical ways that you can start developing this? Because it's easier said than done.

A lot of times I ask for feedback. Those who work for me or have worked for me, I get done with a meeting and I ask what could I have done better? I think initially when you're new to a team or someone's new on the team, they might not feel comfortable. But I feel one of my jobs is to make them comfortable enough to give me honest feedback. I can't get better without feedback and they can't get better without honest feedback. It's got to be constructive, it has to be helpful and part of how you're looking to build upon your career success. But you got to get that feedback. Don't be afraid of feedback, you know, embrace it. That's one thing I would challenge younger members looking to grow within corporate development to do to gain that self awareness vulnerabilities, I think we all generalizing. But you know, most people kind of understand their key ones. They might not want to admit them, you might try to hide them. What you need to do is embrace them as well. And some of them you can work on, some of them you can take active steps to figure out different ways to address them, to mitigate them, like I mentioned earlier. But denying them is where I think you run into problems. And we've all got folks that we probably know that are still successful. Who don't necessarily ever recognize that they have vulnerabilities, at least outwardly. I think there's more the exception than the rule. And the reality is you might not know that they spent a lot of time working on their vulnerability. You never really know the people that well to know that they haven't been working on it for a long time. Even though at this stage in their career they are perceived as not really having clear vulnerability.

Can you challenge it? Can you come out and say, hey, Scott, I want to sort of take your time and I want to get some feedback from you and how I can push myself to be better. Or, you know, there's some of that where I want to encourage the criticism.

Yeah, there was a personality test that we did back at one of my prior companies with the team. And you got the team dynamics in there. And I'm one of those people that scores real high for ego strength. So that means that you can say whatever you want to me and I might react like a flash in the pan, but it's over with and I'm your best friend afterward. Not everybody's that way. And you have to find the best way for your personality type to feel comfortable getting feedback. So what I can handle, what I might ask for might not work for everybody, but I think that there are methods to get it in a way that can be digestible for each person's personality type. And then once you have that information, that's power. You can do things once you know, it's hard to guess what people think and it's hard to guess the way that people view you. And I think that's just a key.

Part of developing leadership skills, understanding what you don't know. I like it. What makes it interesting is I feel like a lot of finance culture doesn't lend to this.

No, there's more.

Especially if you come up through banking. There's so much critical pressure on perfection.

Yeah, look, I came out through legal, big law firm, and I tell the story that when I was a baby lawyer, things were crazy. They would hand stuff down to at the time, a second year associate like me. And I'm sitting there negotiating a deal to buy the majority percentage of a French tech company from two Swiss banks. I was scared in many, many ways, but I played it through and BS my way through. And luckily back then we didn't have video so that these old senior bankers didn't see how young I was on the other end of the line. You manage your way through, but I guarantee you, if I went back and looked at what I did and how I did it. You always have to make sure that you don't sacrifice good enough. But I would do stuff differently now because I understand more vulnerabilities. And understanding your weaknesses also allows you to use them in a way because other people are going to see them whether you want them to or not. Use them to your advantage. When you know them, you can control how they're perceived by others better. So when you're starting an M and A deal and you're trying to gain the trust of another party, however that is whether you're sourcing a deal, whether you're negotiating against other people, it will give you a powerful tool to gain that trust.

What I got from you so far is admit your mistakes, which shows you're human, solicit that feedback and really understand your weaknesses.

That's right. It starts with self awareness. So I'm kind of glad you asked that as the first question.

We talked about trust before. Can you start off with some of your thoughts around how do you develop trust as a leader?

As I've come up through the years, the big thing I've realized is everybody has their different ways of approaching things. So I will caveat everything I say today with everybody needs to find their own voice, their own way of achieving. I've had successes in my life. I hope to continue to. I'll have failures still and I can say whatever I want. I'll continue to. But you've got to develop your way of doing that. For me, I find being empathetic comes easier. But it's been that way since I was a child. It's changed over the years because I've gotten wiser and my remarks and things are better. And my openness to differences is much more attuned now. And it's come from years of experience. This is all about practice, right? So all the deals I've done, I tried to be better on each deal I worked on. For me, it really comes down to understanding the other party. What are their drivers? For those folks coming out of business school, you read some of these books like Getting to Yes and other books about negotiation. You got to understand the other party's position to be successful. Then you understand their drivers as best you can. And you can tailor how you approach your negotiations to address their concerns because they'll have them while still trying to achieve your goals on the deal. But the only way you're going to get that information on the other side is to build their trust so they share it for Me that's come in different ways. It's come from in person meetings. We live right now in a world where that's not the same unfortunately. But there's still benefits that it's hard to gain trust the same if you're on telephone calls and emails only. The positive thing that's come out of the past year if you know there are many but one is this video that we're using now that's more widespread. People have gotten used to it. You can see people's facial expressions without a mask on since you're at your desk or at your home and you can have more of a personal interaction and that's ultimately what people want. Yes, some people know how to manipulate that but I think they're in the margins. I generally think people want to feel connected to others, especially in M and A. Yes, the big corporate deals where money is the key driver. If you're working on a middle market deal and it's a private owner, it's their little baby that they started from scratch. They want to know it's going to a good home. So I work on understanding them as a person, making them feel comfortable enough to share the type of information that I can use to help hypothesize sometimes or guess but other times respond, really hear from them. What are their key drivers, what are they trying to achieve with this apart from getting paid a lot of money.

Really good points there. You're making me think of a couple strategics actually approached us over the past year and what I found was interesting was sort of watching the approach where hey we got this great strategy. We see where your product line could fit into it. We got this private equity backing. We could sort of help you get some shifts off the table now and potentially have a future exit again as we grow and align on all this stuff and going through all this. But there was never what exactly do you want? And I feel like that was the whole missing disconnect which in the back of my head I'm looking at my chart and sort of looking at their chart and where there is no reason we're interested in this. And that's where I think that whole misalignment was. There was no can I get understanding what the other person, how they're feeling about the market, the situation and their long term goals. Going back to the junior Corp dev person, let's give him practical advice and how do you actually develop that leadership ability to be more empathetic? Because that's another one. It's a big definition but how do you actually put it into practice?

Empathy is something that I think you can learn. Some people obviously have a kind of natural skill easier than others. And you got to find the way that you can be comfortable dealing with it. Because empathy also likely going to catch emotions. What kind of conversations do you have? What do you ask them in a deal context? Here's a good example. I think when I was younger, a lot of times, whether I was representing a client or even in my early days doing deals, we would show up. There's a process running and you go to the first meeting with management, you aren't prepared to talk. I mean, somebody might talk about the company, but you're not presenting about your own company. You're like, I need to know this about you. Here's my list of diligence questions. Here's what I have to know. You talk to me, you talk to me. Over the years, my team said, let's come with a kind of a pitch deck for us, some of that was bred out of competition and processes, but in the end it was something that we use for all kinds of processes, even ones that we sole sourced ourselves. Because you're selling the party on who you are. You're making them feel comfortable about who you are as a potential acquirer or investor. And at the same time that makes it like a little bit of a quid pro quo. They're going to be sharing lots more information than you'll share with them. But you started off by sharing a little bit about yourself. And I think that's just a normal tactic that people use as humans to show empathy and to gain trust. Such a simple thing. There's so many simple things that I've seen over the years that I see companies or teams not do. And it's not because they're not. They're very smart teams or very smart people and they can still have success. But there's things that can make their lives easier and a lot of them are kind of these simple things.

I like that view on asking questions because it allows the other person to really speak up and share their perspectives. Ultimately, we know these deals rally around online vision and that's what carries over to post close success, that alignment isn't there. Then things fall apart and get chaotic pretty quick. So I'd like that view around how do you sort of get the understanding from the other side of the table and what their vision is and really bring it together?

I think it becomes even more important when you're transitioning over to the integration side of it, which we all know and the studies show nine times out of 10 is what drives success or failure for acquisition is good integration. And I had been told or read, I can't even remember now. It's been so long ago, but have implemented this idea that like that first week when we're on site, the team's not allowed to ask questions to the target who are now we're trying to integrate, who are going to become part of our company. They're there to listen because these people have been answering questions and answering questions to us, to other potential buyers for however long it takes. Could be months. No one's really asking them questions. So we, we implement that. So we just did the last year here and first thing we did is today, the next day you guys get to ask us questions. So you start to understand their issues because it'll help drive how you approach them. Otherwise you're making assumptions. In assumptions, we all tend to have a feeling that people are the same way as us. Reality is everybody's different. Some of them will be the same way as you, but other people will be different. And you can't get a good approach that will be beneficial to the entire team you're trying to integrate unless you take the time to hear from them.

Big time sort of addressing it. Hey, Scott, I know we're doing this deal and we had to make a lot of changes which is going to impact a lot of things in your world. You know, let's really understand what your concerns are. For those of that want to dig deeper in empathy, a couple of books that come to mind is Just Listen, I think Mark Goldston and never split the difference. Chris Voss. I'm actually reading that one right now with my daughter, which is pretty interesting because she's only 10.

That's cool. I haven't read those, but it's just such a key thing. It's good to know there's stuff out there. I might add those to my list too.

Both are really good reads. I actually had Mark do a podcast interview and we talked about empathy and applications in M and A. So that's in the backlog as well.

That's great.

What are other skills leaders need to have?

Scott, we're talking about books. One that's really resounded with me is a book called Extreme Ownership. When you read that, you've got retired US Navy SEAL team officers, what, Jocko Willock and Leif Babbitt. At a level you could say military and Navy seals are different. They're done with life and death this is true. I think they've done a great job of showing or realizing actually if you read the book, how much some of what they learned and experienced can be applicable in the business world. Simple things, admitting failures, checking egos, delegation, leading up the chain. They're all kind of simple concepts, but they do a good job of pushing that. And I think this idea of a leader having to have extreme ownership, that the team performance falls on you, that's got to be the key driver, I think all the time. Not that you didn't know this, but became more pointed to me after reading the book. When something doesn't go the right way, if the team fails at whatever it's trying to accomplish, what did I do wrong? Right. We have a good team. It can't be viewed as what's their fault, they're not good enough. Did I give them the level of training? Did I help them understand the goals that we're supposed to achieve? Did they get enough support? They had enough information to be successful. So that's one of the things. As a good leader in M and A, you have to step back and if there's a mistake or an opportunity for improvement, how could you have done stuff different? And lots of M and A professionals. And I've fallen into this. Other times you're busy, these deals can get very hectic. And taking that time seems like you don't have time for it. But the reality is a team is never going to advance. The team will have a higher probability of repeated failures if you don't take that time to understand what you could have been doing better as a leader. I really like that book. I was. I've got a rising 4 year old, as I think I've told you. We were watching Bugs Life the other day and I think one of the most hilarious things is they're lying there saying the first rule of leadership is everything's your fault. I mean, that's the mindset you kind of have to have as a leader. So there's your bit of advice from a kids movie. But it's really the truth. As a leader, it falls on you. And what does that mean and how do you deal with that as a leader?

I like that one, by the way. Extreme ownership. I don't know if you heard the audiobook version of it. Yes, the audiobook is incredibly good. Just because Jocko's doing the whole audiobook himself. And him talking through the war story narratives is just entertaining and educational. And then I like the Bug's Life. Everything's your Fault. That's a good one.

Yeah. This one I think comes up all the time and it's something as a younger member of the corporate development career path, it's understanding the strategic picture. So I work for renewable wood biomass company, so it's kind of tongue in cheek to some extent. But seeing the forest for the trees is literally something you have to keep on your mind. You can get so far in the weeds on things that you're missing the strategic goal that has prompted. And there's lots of other good groups out there, the big three consulting for sure. You know, I was lucky enough to have a boss in the past who harped on this, who came out of big three consulting. But it's keeping that strategic picture alive in everyone's mind throughout the process. So when you're getting deep into diligence, when you're worrying about integration planning, when you're heavy in negotiations, you know, what's the ultimate goal? Why did you start this process and staying on course for the strategic reason you started in the first place. And that helps you avoid getting deal fatigue, helps you avoid getting too pregnant on deals. Not being able to take that step back and see if the deal's gone the wrong way and it's not the right decision to continue. Those are hard decisions to make. But when you keep that strategic view, a high level view at the top of your mind and everything that you're doing in the process for the team too, I mean, it helps the team understand why decisions are made. It gets lost. You talk about in the beginning a lot of times or there's some high level statement of strategy and then you're just in the middle of this deal and taking that step back and making sure that at least you as the leader are maintaining that strategic view, that 30,000 foot view is a key to I think, success as a leader in M and A.

This is a really good one because we do a lot of surveys and ask people like, hey, why do you see deals fail? And it's always around. This is one of the top responses. The strategic vision gets forgotten. The key thing, I really like the way you described it is why decisions are made. If you have this strategy defined, it essentially guides you in decision making to flip it to the practical side, because we've seen this, people know this, they hear it, they know that, hey, you gotta have this aligned vision. But as you get through integration stuff, get more and more people involved and it dissipates, how do you prevent that from happening? What can you actually do to really make that stick and it doesn't get forgotten.

It becomes a top part of slide decks and enforcing folks to tie diligent risk assessments and how we look at valuation, how we look at integration, integration, the steps, the timing, how much of your staff you're going to put on. One thing versus another needs to be tied to that strategy. I've seen companies kind of just let folks loose and some companies bifurcate. The integration team is the operational side of the house. They don't necessarily know a deal's taking place and then the next thing you know they're like, hey, we just NASA, we're buying this company, go make it work. And sometimes they don't even get a full view of what was thought about at a senior level, at executive level or the strategic driver. They're going to get it done. They're competent people. They're going to integrate in the broader sense of the word. But you want to integrate successfully. You can't destroy value. You need to capture value that you expected. And if you don't communicate all those things down through and tie your priority activities, your scorecarding to those. So for instance, on our scorecard, the metrics that we're watching have to do with those strategies. If a sales team is super important to you, the last thing you can have is high attrition of that sales team. And if you decided that you thought it's more important to make sure some other area of the company was going to get all the resources and you kind of just figured that the sales team or the target would stay and they leave, that could destroy the whole value. If they take the customers with them that are not under non competes, they're gone. No matter how good you did at integrating your IT systems, it doesn't matter because you lost your revenue. It's those types of things that can lead to big mistakes. And there's no thing too small. An example I had in my career was we had a credit team who was really, really good. It became almost like a profit center. The ability to collect and they were driven that way. They were incentivized that way. So when they got put onto an acquisition, they wanted to get them onto our credit and our rules and our terms as quickly as possible because that's what made them successful in the organization. They weren't told that not having any disruption to the customer base, this target is a key element to value capture. And one of the things that became a rub, it got solved. It didn't end up ultimately becoming a big, big problem. But it could have been resolved pre close was the change in terms was going to be significant. And the reality was for the credit team to be successful, they needed to have it within, let's say, 18 months, a whole nother financial cycle, before they would be maybe quote unquote, in trouble with the cfo. But no one had that conversation with them to explain those dynamics. And when, once we did, after there were some flags raised by the target sales team, hey, that our customer is going to walk away if we go switch them to these terms this quickly. They said, oh, well, we were just doing our job. We have no problem waiting to implement those for nine months, 12 months. But if that conversation had gone on beforehand, we would have avoided the problem of having the sales team think, this is exactly what I was worried about. This big company is acquiring us and they're going to screw up all of our relationships with our customers and they're going to do stuff differently. And you could have avoided by saying, hey, do you guys think you can implement this now? Would you rather wait? And then it makes it their decision? That's empathy, right? Empathizing with their position. They want to keep these customers that they worked hard to maintain, and they don't want somebody who just acquired them, that they just found out about, fired them, destroying everything they've been working on in their careers.

Great examples and tying those skill sets together. I like the point you made about essentially taking that strategy, making it the top deck slide, really bringing it back front and center for every individual that's getting involved with the deal.

Another one on my list would be idea of communication and listening. These all tie together, right? Communication seems in general, in business, one of the bigger challenges. We have so many new ways to communicate with each other, but in so many ways we don't actually communicate. And as simple as putting together slide decks and internal, and you're using acronyms, you're not defining them. If you haven't thought about the fact that maybe there's a new executive that's going to be in the room, they didn't come from the industry. And even if they had, it's not a industry term, it's a company term. It puts them in an awkward position. If it's a key part. And it was so simple, just sit there and define it. So, yeah, the lawyer in me comes out to find terms. It doesn't need to be front center. It could be at the bottom. But just give people the opportunity to understand everything that you're communicating and make sure that you see that they are hearing you and understanding. One of the worst things I can see from a corporate development standpoint is you walk into a room and you make an assumption about your audience, internal or external, and you set your communication up as if they understand it. And you walk into there and you don't take the time to fully communicate what went on, whether it's your work. My example for that would be you knocked out some options in your analysis to present a structure. So you walk in there with just that proposed structure. You're going to beg the question by executives who are smart folks, they're going to start raising this and you're going to be on the defensive saying, well, we did think about that, but your presentation didn't present that. You could put it at the bottom. You can say, we thought about it, it was vetted. Here's who we vetted it with. But that's going to give them a level of content comfort that not communicating that same information doesn't provide. And then, you know, listening. Listening and communication always go hand in hand. I think you got to listen first. Of course, you might need to listen more, is my advice, and then turn that to how you communicate. When I'm in meetings with executives at every company that I've been at, executives have certain things that they're worried about. If you walk in there and you keep presenting the same thing that might have been the way they did it before, but you didn't realize they got the same problematic questions. And if you're the executive, it's like, why are they not listening to me? I'm telling them I care about this financial metric. I'm telling them I care about this risk. Why aren't they addressing it? And then you're losing the audience because you didn't listen the last time, change your communication the next time. It's a simple way of solving things. It's a way to build trust with the executive leaders who ultimately are people you're trying to get over the hump to make a. A risky. You know, you want to minimize that risk, but it's a risk always decision. That's usually a very important one for the organization. It's just opportunity loss. So, yes. Can things get done even though you did that? Yeah. But could you have been doing it better? Could you have made the conversation run more smoothly and focus on other key areas where you really need them to think and to pressure test? And instead they're pressure testing something that you just didn't take the time to think about ahead of time? That you knew was an issue for them.

I want to share a couple thoughts that came to mind. And then maybe we take these apart a little bit. Two areas that I've been working on for personal development, one on communication was. And adding to the example is adding why. So when you ask somebody to do something, throw in the why and add that extra line to explain why you're asking them to do that. I've noticed that in the past, I've always been short and then you don't provide the context. But that one little thing of saying, hey, I need you to do this because we're trying to do this or this huge difference. So that was sort of when you explained the communication part made me think of that and then the listening part. I think the one thing I've learned is if you can enter conversations cause a lot of time our mind wonder even while talking to you. I'm wondering about the next question I should ask you and things like that. And I'm distracting myself from listening. Can I approach that conversation with this mindset that I know absolutely nothing or whatever I know is wrong? And that gets you a little more attuned to really focus on listening to the other person. And surprisingly, when you do do that, you find out the stuff that you thought you were the expert on. You still find room to learn new things practically from anybody. Is there any thoughts around that? When we look at communication, listening, if there's practical tips for others to improve that in their practice.

I was lucky in my early career as a lawyer because I don't have lots of friends and who've come up through the ranks. And not all of them have this experience. But I had good mentors. One was a senior associate when I was a junior associate and was a partner later on. And they were good at taking the time to explain why things are always rushed. That's the nature of these strategic transactions. But even on the legal side, which may be not applicable to everybody who's listening in on this. But why did these changes get made? Why did my edits not. Why aren't they the ones that you went with? Sometimes it's stylistic and the good ones that were self aware would say it's a stylistic thing. This has got my name on it, so I want to do it this way. But the other times it's like, well, we're trying to accomplish this. I took those good lessons I had when I had good bosses and tried to apply that all the time. And I don't my team, if they're listening in will tell you I don't always succeed because you get in a rush and it forgets. But I'll remember and we'll talk about it and I will always give them the opportunity. And even to this day it's a big deal I think for corporate development folks to not look at legal documents, for instance, as something that lawyers do because then you've lost control of your transaction. My EVP and I were talking about it just recently that you're running this deal and that deal, the ultimate commercial deal is getting papered. If the paper doesn't look like what you've negotiated, then that's a failure on you as the leader of the transaction. That means that when you go grab and are sent these legal agreements, the definitive agreements, they can't look like a foreign language to you. More so even when negotiations happen. And I found this to be a constant when you're dealing with cross border deals where English isn't the native language of the other side. If you can understand how to describe why this is in the agreement, the business party on the other side hearing it from you can be more impactful than the lawyers. It's not always the case when it comes to a commercial term. If you can explain it, this matches what we've agreed to. That's going to be much more impactful. That means that you've got to understand it, not just say I'm sure it does. And then if their lawyers point out that it doesn't, you're losing trust. I think that's just a key thing that you always have to be conscious of is understanding how all the communications that come across the other side are impacting the listener.

I'm convinced 90% of our business problems are related to communication failure.

I 100% agree with you. 100% agree.

I've got some fun questions from some of our attendees here. I like this one from Mary Scott. How do you influence leaders to start thinking about integration earlier rather than later and to include the target in those discussions which would show a great deal of empathy.

We have been successful in doing that. I will tell you that initially and this is prior to my current company for sure it was not thought of that way and we had to take the time and show statistics and studies that one how important integration is. That was the key linchpin to getting executives on board is when you show them, even if you can go look back at prior deals that maybe weren't as successful as company would like, that the failures really emulated from the integration failures that's going to be the easiest way to get people past it. So past examples of your current company and statistics on the outside of what other companies experience, who's successful and who fails. That's where we started. That got us into a position to have us have a decision to put a select an integration manager early in the process, like at the time of signing an loi and have them there. They're not going to maybe add much value. It's not about them adding value. It's about them hearing how you get to the deal closing so they understand the key drivers, not only for you as the acquirer, but also for the issues that the other side had because that will help define the way that they will ultimately approach integration. That turned into a look at integration earlier in the process. I worked for a private company before my current one, so we didn't always have the luxury of a long break between signing and closing for various approvals. So we did a lot of simultaneous sign close. The problems with that is you didn't want the target's employees necessarily knowing about it, that your access was limited. That was an excuse in the past for some folks as to why you couldn't do much integration because you're like, well, we can't talk to these people. In reality, I said that's not a good excuse. You need to acknowledge how important this is and do the best you can and have hypotheses and mitigation countermeasure strategies so that when you do have the real people in front of you, you're not sitting there hoping that you figure out the answer in real time, which takes time. You also can tell the senior executives and appreciate this that if they haven't ever been on the acquired side, they've never been seller. They don't always appreciate what it's like when somebody comes in. The perception isn't that the acquirer doesn't know what they're doing. The perception is that they've thought hard and long about this, they've been targeting this, they've done all this diligence and they're going to walk in there and have all the answers and you're not going to have all the answers. But you can definitely plan and you can plan and have approaches and timing on things. That's going to show the target a lot of empathy for the situation. It's also going to show that you, you appreciate their side of the equation and ultimately they need to be successful within the combined organization, barring the exceptions where you're. It's a company that you're buying the assets only and the people aren't coming along. But that's not the majority of deals. The majority of deals have people. People need to feel engaged and so use real world examples. There's nothing better, I've found to help executives understand the value than real world examples.

I liked your point about getting the integration lead involved early and start getting those planning and conversations sooner from Serene. Any thoughts on how to communicate the strategy differently for the board, media and employees? It's a good question topic of its own.

I know it's something that I've struggled with and found some solutions to. The public discussion of disclosure has the most views on it because you're going to have a team of people that care immensely about how the public perceives that that discussion. But as we've gotten to closings, you have a kind of a three headed beast approach to this. So what's going to be the story to the market? The customers, the third parties that are going to be involved in the acquisition for the target and your own potential customers who may not love that you acquired that company for competitive purposes or whatever. You've got your board who needs to understand. In reality, I would be more surprised if the board wasn't sure of the strategy in the first place and part of setting the strategy that ultimately resulted in needing or pursuing the acquisition. To the extent that they were not fully involved on that, I think that's about being concise and tying it back to what should have been normal conversations going on with the board and keeping it in line with what your executives have been presenting to them. From an employee standpoint, you have two sets of employees, right? You have your own internal employees, which I think sometimes people forget about them as well. Most companies, they find out about the deal because there's a public announcement. Lots of companies still do that. I think that how that's approached optimal way that I would like to see it done is that you have an internal communication and set the tone for what this means for the company with its acquisition and what expectations are. So as far as how that plays with more detailed elements of the strategy, the metrics that you're looking at, obviously there's things that need to be at a higher level. They need to be maintained confidential. You don't want out in the market for how you approach things and you need to be thoughtful and use the appropriate people within your organization to decide what's okay to share and what we should put at a higher level for that audience. Same goes with the target employees. One of the key things there is making sure that to the extent you have senior management or any management staying on as part of the acquisition, that they're part of that storytelling and that they've been brought in line with that earlier than the rest of the employees. Because again, if they don't know about the deal, you haven't had an opportunity to build any trust yet. So there's going to be a natural fear that they would have coming from their own management. It's going to be easier to hear from them, but they need to be the ones espousing your views and how you see this as a good thing. It's more than like, oh, we'll get great synergies and this is going to be a great combination. I'm talking about the next level down. We love your customer base and we want them to become part and benefit from from our adjacent elements that we can now add on and bundle together to have a more robust package and answer a lot of the issues or address a lot of the concerns that they have. If it's software, you know, the combination of these two is going to be more powerful. But this is how, this is how we're going to approach it. This is how the integration team, who's been thinking about this for a while, has decided to approach this. Now, we want your input on that and then we want to roll this out quickly. So we don't want to lose that great first opportunity to reach out to those third parties, mostly customers, but suppliers as well, and be the one that has that first message to them, especially before your competitor maybe tries to get to their ear and say, oh, this is going to be a bad deal for you that they've acquired or that they've merged.

Be considerate of the different Personas and essentially answer the why. Yeah, how do you make sure your message gets through to your people during meetings?

I didn't get to where I am and by far I'm not aware of, I can ultimately get to, but without help from others. I had a boss when I first moved over from legal to corporate development, who had come from big consulting, had a. A great handle on how to approach presentation and presentations in general. We all know typically means PowerPoint. And I started my career where Word was the only tool I used. Got into corporate development, started using Excel more, and then these days it seems like it's PowerPoint, PowerPoint, PowerPoint, but there's using PowerPoint and then there's, there's really mastering PowerPoint. I wouldn't say that I've mastered it, but we spend a lot of time on our presentations and one of the things I've done kind of repeatedly as I've moved in my career is look at what's been done in the past, see where you can enhance that and make sure you've got a consistent message to your senior leaders and to your board. I don't think people understand the value it is for them to see things compared apples to apples to apples. Not that there's not specific things you got to cover that are different between deals, but certain elements. Whether you're showing an accretion dilution analysis, whether you're showing an output from a DCF model, those should be shown consistently and then they can come to expect it. They'll know where it is. And this goes into a bigger view on you've heard me talk before. He's on about pre reads like I'm a big advocate of pre reads. The obvious reason is it gives the opportunity for the audience to get up to date so that the discussions with folks that tend to have very tight schedules and not a lot of time you can focus on the key issues. That's kind of like the table stakes reason for a pre read. And you can't be assured that everyone's going to have time to pre read, but at least you give them the opportunity and you walk into a meeting with people more likely to be at least at a level understanding to have a good solid conversation and be able to make decisions. That's that side of preread. I think the other thing about pre read is you have to build a presentation that stands on its own. Presentations for these types of things aren't TED talks. It's not about the audience waiting to see and wowing them during the conversation. It's not pitch as much as it is a presentation that stands on its own, that can be read. And the logic holds true throughout the document. You've addressed the issues, you've identified the risk, you've shown what the team's done and that takes time. Enforcing the pre read with the team, I found it makes all of us work harder to make a better story, a stronger story, a more concise story. These days or another, we've got technology. I still find myself at times doing old school storyboarding and sitting there grabbing some masking tape and sticking. Sticking the slides up on the wall is it's easier to edit that way. A lot of times everyone can see them and you can pull things out and put placeholders in Those are things I was taught long ago and I still use them. Yeah, sometimes we do it from a technological standpoint, but I found that, you know, we, we're a big user of, you know, a shared access so that everybody can be in documents and editing, which has its benefits for shortening the timeframe to get things done. The negative is if you lose control of that document, then you can have the messaging get mixed up and somebody that's gotta be the leader has to take responsibility for making sure that you always are thinking through how it flows so that when it goes out to the board, to executives, to whomever, that when they read it, it makes sense to them from the executive summary all the way through to what you decide to include in the appendix. That's a big deal for me. Anybody who works, has worked for me, or who's working for me will say that I harp on that immensely, how pretty it is and everything else. That's a skill level thing. The better you are, the easier I think you have with the audience. But I think I loathe things where people throw information up on a page and then expect the audience to see what they saw and not have the self awareness, like the self awareness that if you've been working on a deal for two or three months and they're seeing this information for the first time, they don't have anywhere near your view and understanding of the transaction. So what seems like obvious to you may not be obvious to them. And you've got to learn and teach yourself the skills to take a step back and think, if someone hadn't seen this before, how do I, in a very concise manner, get them up to where I am and understand how do I feed them the key things, how do I drive them to the way that they should review this? And that's about actually it's about being more concise and it is more information. You have to build the trust before that you're doing enough work and doing that hard work and that diligence in the background, you're not just throwing up pages like it's a sales pitch, but when you're showing them the information, you know, it's call out boxes, you know, this is what you should be gaining from this. And then it's a backup to the call out through visual graphs and likewise versus just words on paper. Words on PowerPoint look like just a bigger version or sometimes same version as a word document. It just doesn't impact the audience at all. And you don't want people just reading things you don't want to be reading things. If anybody's gone to a conference and I have to go to CLE's legal ed all the time still to keep my bars up. And the people that sit there and just read their PowerPoints as if none of us could read is one of the most annoying things that I find. Again, that's a lack of self awareness. I think that they're very smart people, but their impact for the audience could be different if they would have chosen a different approach.

I think the thing I really appreciate about pre reads is you eliminate people learning about things for the first time during a meeting. You really give them time to digest it and go through it.

Sometimes people haven't had the opportunity to pre read and it's unfortunate, but at least you've mitigated that. And to be honest, by giving them the pre read, some of them will, you know, the people in the executive teams or the board that are going to pre read and they're the ones that might call out each other for the ones that didn't. And you don't have to be the person who did that because you gave them a pre read. By a pre read, I don't mean an hour before the meeting either. The bigger, the more dense the deck, the longer that they're going to need. Which means you got to plan ahead. Kind of goes without saying, but I've seen some people like, well, I gave a pre read. I was like, you gave it an hour before. Nobody has time these days to consider that a true pre read.

You got to take the Jeff Bezos approach and just everybody sit in silence and read through. I want to get over to developing your team as part of a leader, you need to develop your talent. So how do you foster an environment where they can improve?

First and foremost, they have to have an environment where they can fail to learn. There's a quote out there, I think Jocko likes to say it a lot too, that there's no growth in the comfort zone. You have to give the people an opportunity to be in a non comfortable zone. But when you're trying to develop them as future leaders, they have to have the opportunity to make the mistakes that you've made. I made plenty of mistakes. You got to have people on your team who learn from their mistakes. If you have people on the team that will repeat the same mistakes over and over again, that's a bad sign. But I find that most people in our area of work are not the type that like to make mistakes. They're Type A go getters. They don't like to admit when they don't know things. We talked about that earlier. So how do you allow them the opportunity to try things out and give them the protection, support the information to be successful and coach them up afterward? We spend a lot of time on that. You got to give people an opportunity to present in front of people as you get further in your career and you do have the voice and you are the expected person to present on things you forget when you were back as a junior, maybe one hoping to even be sitting in that meeting. Even if you just get to listen or take notes next to be able to say anything. It's only through being in those meetings and saying things and watching others that you can learn how to do things. And every meeting has got different requirements on whether it's appropriate for a more junior person to speak or not. But having that opportunity and then seeing what they do with it is part of that learning process you've got to put them through. There's risks with that. It's ultimately, as we've talked about, extreme ownership. You own the results and if they fail as a leader, you have to think through why did they go into that meeting and not accomplish what you thought they could. But if you don't have an environment where people have an opportunity to step up and stretch and if they fail to be coached, you can't have a successful team no longer.

But it sounds like create the environment to allow people to be comfortable with the failures, but then also allow them to be able to articulate what they learn from those failures.

Yeah, I've had meetings where people ask me when I was younger, what did I think went wrong in a discussion that I might have been leading, what do I think went right? That's somebody trying to coach you for how much self awareness do you have? I've had people walk on those meetings and think, well, nothing went wrong. Where everybody in the meeting clearly knew that something did. That's not a good data point. I've had other people that could pinpoint it and they're like, yeah, I should have done this, should have prepped this more. To this day we talk about, you've got a lot of hard chargers that are in the M and A side of things. They come from diverse backgrounds. We have a very diverse team from every lens with that. But you got people from engineering, from educational engineering, I've got legal, you got investment banking, kind of your normal groups and everybody's got a different approach, but they've got to be able to understand what's right, wrong in those presentations, what they did, what they could do better and though that they are very smart though that this applies to me too by the way, that we try to have all the answers because that's kind of in our nature. When's the right time to bring the subject matter expert in instead of you saying it? I have a tendency to do that still. I might be 100% accurate. I might say the exact thing that's 100% right about something. Maybe the executives would rather hear that from the people that are getting paid to be the subject matter experts on that. And you can feel comfortable that they're going to walk in and say what you know is the truth and that's what you want to accomplish. But as a leader you need to step back and be like, what's the best way to do that? Do they really want to hear it from me in corporate development or do they want to hear it from the head of technical accounting? Do they want to hear it from Tax? Do they want to hear it from operations? 9 times out of 10, if not 99 out of 100, they want to hear it from the person who does that on a daily basis. So your job as corporate development is know enough to know that what the answer is. Get the person, make sure they're aligned, that's the answer. But invite them in to be the one or get information from them that they signed off on and that's what you present. And that could be way more powerful than trying to believe that the executives thinking that you have to know everything makes you a better leader. Because I don't think it does. It's something I've continued to work at.

Well, I'm sensing open mindedness in the theme of that response.

You've got to be. You've got to be. That's what the gray hairs get me. A little more open mindedness. And I guess that comes with experience.

How do you keep people motivated?

Challenge. I think again, like most things as a leader, you got to constantly work at it. One of the interesting things, I'll tell you some practical stuff that I do, but one of the interesting things that I think you hear about and there's lots of stuff written, is all these differences on the generations. There are differences to some extent, but you're generalizing in that. I think that one of the things that is different is the work environments are different. So you know the way that a work environment was with me growing up, how people acted a lot of it Wasn't good. But, you know, things that I dealt with and work through, I don't want to emulate. But does that mean that team's not as good because they're not suffering like maybe I had to in my early days? No. It's like what's going to motivate that team member to perform their best to continue to grow? And it's not a one size fits all. I don't want. I don't have carbon copies. To me, that would be awful. Because of that, I've got to understand and grasp what's going to help each of the team members be successful in their own right. And being exactly like me is not success. It's not success for me as a team leader because I'm not getting diversity of thought. So that's kind of at the high level, giving them a voice and making sure that they're heard and respecting that voice. We were all at that stage in our career. We all thought what we thought at that stage. And if you remember back, I'm sure we all thought we had all the answers. Lots of times I did have really good answers. And the folks that listened and thought about the best way to act on that were ones I view as some of the best leaders I worked under. Practically speaking. I think you got to keep the motivation and morale up. I think all of us have had challenges with that this past year because we got thrown into this Covid environment where you've got people that are teleworking, you're not near each other, you're not interacting the same way at a personal level. How do you keep that up? My team would tell you I'd try to do things like the happy hours, coffee breaks. And in the beginning, those were great, kind of got us through that initial hump. But those get a little long in the tooth over time and people don't make them. And you can't just be like, okay, well, I'm going to stop doing anything. You got to think of something new to keep them motivated on deals. Not every company is out there throwing huge closing parties and bonuses and everything else for deals. And I think that's appropriate. Everybody's got different budgetary concerns, but for me personally, I still do things out of my own wallet to try to be nice and to recognize folks that have worked hard. I do game balls started way back when where I literally get these little handmade little footballs made, get their names on them, the deal name, and they're the MVP for that deal. And I truly believe that they were, and they deserve some recognition for that. So I get deal balls.

Scott, I know I keep interjecting with my two cents here, but I literally think you hit on all the three things that I truly believe create a motivating environment. One is creating a platform where your team feels their voices being heard. Two, recognizing achievements, and three, creating an environment where you feel you're working amongst friends. And I think you hit on all three of those.

You just said it much more concisely and better than I did.

So that's because I'm taking notes. And I wanted to ask you, what's your best advice for leaders?

I mean, you gotta find your voice. Everybody has their own voice for things. You're never as good as somebody you copy. People say that all the time. And I think that's true. You can emulate things that you like, but you got to find a way that it works for you as a leader. That's a big thing. Look at folks that are really good leaders, and some people get intimidated that they can't do that. I don't think that's true. You just haven't found your voice that's going to be impactful for the teams that you manage. And along with that is what we just talked about. Like, don't assume that what motivates you motivates others. It's a simple mistake that I think we all can make that everybody's got the same view on things as you do. You could try that first. Maybe it does motivate them, but if it doesn't, don't keep repeating the same mistake we talked about. Trust. People need to trust you. Trust is earned. You can't get it any other way. And that. That takes time and effort to do that in the M and A world where time is never your luxury. You gotta learn ways to do that more quickly. But how quickly can you gain at least enough level of trust in order to be more successful in a transaction? In preparation for this, I was kind of looking around and I saw a quote from our sixth president, John Quincy Adams. If your actions are inspiring others to dream more, to learn more, to develop more, to be more, that's what leadership really is. It's not about you as a leader. It's about the team, and it's about the team's success. That's the basic stuff. It's MBA stuff, it's business school stuff, it's military stuff. But it's true. It is all those things it's taught all those places, because that's the truth. So you've got to have the team be successful, and that's a constant effort.

What's the craziest thing have you seen in M and A?

Oh, boy. Crazy. M and A go together like chocolate and peanut butter. I guess there are lots of crazy things I've seen and heard experience let me split it into two. There's the craziest, really great thing and one of the other crazy things. The crazy great thing was early in my career, we were doing a deal with a company. It was going fine, but it was kind of stalled in the negotiations and getting to final deal terms. So not appreciating what I said, let's meet in person. Because that does usually help to get over the log at times. And we picked New York because it was easier for them to get to. I didn't ask anything more. They said, sure, well, we get to New York and before negotiating sessions, we meet up and do the social thing. And took them out the city. And they're talking about how they've never been to the US before and they always wanted to go to New York. They were more enthralled with New York City that they basically gave on all the terms that we were had at issue because they just were excited about the opportunity to visit New York. And you're like, if I knew it had been that easy, I would have invited them to New York like two months earlier and basically given them a reason for a vacation and a visit. It's little things like that that can surprise you. At the other end of the spectrum, this is maybe it's an embarrassing thing for me more than a crazy thing, but we were running two deals at the same time. My team was managing one of them more that was a domestic, while I was off in Australia, but still maintaining level of interaction. That deal gets done, I come back and I have to get on the steel. And we were in for a negotiating session. Was down to the final points. As a deal point, I knew a number that our board really, really cared about hitting. It would be very positive. Even though we had authority to go above that. The division president at the time was more concerned that they were going to walk away from the deal. Maybe this was because I was a little younger, but I was a little more brazen. And there was a big debate that went on while the other side was out in a breakout room. I said, look, you got to trust me to do my job. If I'm wrong, you can get me fired. On the way home, I'll call the CEO myself. They are going to accept this and you got to trust me on that. And it was one of those moments where I kind of put it out there and then the people walk back in from the other side. I put that offer out there and I've never, I've never seen a guy do this, but the other guy put his hand like that's perfect. And our division president jumped up, shook his hand. The deal was cut. I didn't lose my job, thank goodness. We had a great closing dinner and funny stories to tell after that. Funny drinks even later with the Deal team. But that was one of the crazier, crazier times when I put my job on because I thought I was right. We did save a good amount of money on the deal, so I might not be sitting here today if it gone the other way.

Heroic Moments in M and A. I love it.

Exactly.

Hey Scott, thank you very much for your time today. Enjoy the conversation. Learned a great deal.

These are great. I encourage all your audience to continue to listen to lots of the mini speakers. I've been learning lots from listening to them. It's a great thing that you're doing. I'm glad this is finally happening in M and A space.

Hey, thanks Scott. Here's to the deal. Thank you for taking the time to explore the world of M and A with our podcast. Please subscribe for more content and conversations with industry leaders. If you like our podcast, please support us by leaving a five star review and sharing it. I enjoy hearing feedback and connecting with our listeners. You can reach me by my email. It's Kisan K I s o nilroom.net M&A Science is sponsored by Dealroom, a project management solution for mergers and acquisitions. Additional educational content is available on Deal Room's blog@dealroom.net blog thank you again for listening to M and A Science. See you next time. Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity, members mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.