Engineering Deals for Success

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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. Welcome to M and A Science Live, where leading M and A practitioners share lessons learned from their experience. If you're interested in keeping up with the latest from Mascience, visit mascience.com and subscribe to our free newsletter. Every Monday we share highlights from our interviews and publications so you can continuously improve your M and A skills for free. Again, that's mascience.com I'm your host Kisan Patel, CEO and founder of M&A Science. Joining me today is Puneet Minocha, Executive Vice President, Business and Corporate Development as Zscaler. Those of you not familiar with Zscaler. It's a cloud based Internet security company traded on NASDAQ with a 32 billion market cap. Today we're going to talk about how to execute successful deals by planning the end game. First. Puneet, they kick things off with a little bit about your background and M and A experience.

Thanks for having me and it's a pleasure to be on here with you and your audience. My background is no different than perhaps a lot of other people that you may have met. I'm an immigrant. I came here from India, did my education here in engineering, ended up at intel, larger tech company, realized very quickly that I preferred being on the business side and went back to school, got my MBA and ever since have doing biz dev and corp dev in various capacities in smaller organizations in larger ones, and now have been with Zscaler for about nine years.

Hey, the American dream. He landed in corporate M and A. Hey, let's jump into it. How do you engineer deals for success?

I tell people there's a mix of art and science here in that certainly there's a construct that you want to follow that's Perhaps a little more cookie cutter, where you're looking at financials, looking at numbers, you're looking at valuations, but there's an aspect of art to it as well, where you have to pay attention to the end state is what I call it. The way I think of it is what is acquiring a company. Getting a deal done is not trivial, but in my opinion is the easier part of the transaction. The more difficult part is digesting the company, making sure there's a cultural fit, making sure there's alignment, and having a point of view in what that might look like end state wise. 12 to 18 months out, if you have a deal, decent idea about that, that really helps because I think you've been doing this a long enough time to know that 8 out of 10 acquisitions actually end up failing. And so when I think of deals, we look at it from the standpoint of how can we give it the best chance to succeed. The way we think about it is making sure that we give enough thought to what this could look like. 12 to 18 months out.

I want to unpack where deals fail. Value gets lost because it comes up in conversations a lot. And doing these interviews, essentially I concluded that if you do integration and people get frustrated and you end up with blowups and people leave the company, they leave with a lot of value with them. And that's essentially where value gets leaked. But I'd love to hear from your perspective where that area or other areas value tends to get leaked.

If things go wrong, you touch on something very important. There's two places, in my opinion, where you can end up losing value. One is actual the people and the knowledge and the know how that they bring. And if they end up leaving, that's one area where you end up losing value. The other is if it's a company that's actually on a pretty good trajectory business wise, you bring them in in the hope that you're actually going to accelerate that. But you muck it up. And so in doing so, you actually end up losing value. That's the piece where you have to give enough attention to the size of the acquiring company as well as the target. That has a very important role to play. If you are a relatively young organization and you're looking to buy another company, then it is more important to pay attention to overall culture, making sure you do not disrupt what you already have going. Because if you're trying to digest a company of a similar size, you might have two conflicting organizational styles, processes and so on. And so it can be very disruptive on the other hand, if it is a much larger organization and you're doing smaller deals, it's not that big a risk and you can easily do tuck ins. The art to this becomes, if it's a decent target acquisition, you want to at the same time allow them enough freedom to keep growing and not encumber them with all sorts of processes of a larger organization that might come with. That's the reason why I say there's art and science because there's no real cookie cutter formula for a company of this size. This is what we do, and so on and so forth.

I like the way you phrase it because it's not just people leaving, but it's also execution that could go wrong.

That's exactly right.

The way you described it sounds like it's not just the strategy, it's more elements within that, how you execute it, the way that people are culturally aligned around their goals and how they're going to end up working together.

Very much the case in this deal climate. Things are rather competitive. And so our job is not only to obviously convince targets that zscale or any other company for that matter, is a good home for them, but then also build alignment internally because you want to make sure that everyone is marching in the same direction to reduce that execution risk that you just touched on.

Let's go back to planning the end game first and leading with it. Can you give me an example of what that looks like?

Yeah, that'll manifest in various ways. Usually you want to think about the size of the company. What is the current culture, the products that they have, the business that they are in. Is this something that is better executed on standalone or as part of the overall bigger organization that plays a big role in whether you are going to try and subsume it or whether you're going to try and keep it as an independent business unit or an independent operating unit and just let it run independently and then just provide some air cover. The air cover could come in the form of some gna. It could come in the form of there's a mothership that has a sales team that is providing leads to this new organization. We double compensate the sales folks and so on and so forth. That's one model, right? That's a model that works. If you have the mindset that it's better done without mucking with each other and keeping them independent for at least 12, 18, 24 months, at some point you'll try and bring it together. There's another train of thought that might say we are Buying this, it's a younger organization. We might be better served if we just subsume it. Those are the types of things that you want to pay attention to, not only within the maturation of your own organization, but also for the target. When you do acquisitions, it's a great way to actually build bench strength, bring additional fantastic talent in. In doing the acquisition analysis, we actually pay close attention to the target. Are there some leaders that could actually be very pivotal in the overall organization going forward? Those are all factors that you sort of think about when you're orchestrating these acquisitions.

Who's all involved with that? How do you bring in the right people to start shaping that thinking?

It's a very good question. So usually, and I'm sure your audience knows this Corp dev folks spend a fair amount of time with the CEO. You're always brainstorming different ideas and thoughts. And then from there on, I'll spend a fair amount of time with the cfo, the head of products, head of human resources, organizing the people aspect of things. So there's quite a few people, but some of these other folks are more to socialize and sell them on the idea. It's usually the CEO who has an idea.

You're talking about the target company CEO?

Yeah, both actually. It really just depends. I'll spend time obviously with the target, but also say my CEO with the idea and not just at zscaler. This is. In prior companies, there's a target, there's they have some good. We could subsume the talent in these types of roles. We could add additional bench strength. You're almost trying to shape the organization of the acquiring company as well. 12 to 18 months out. Because if the aspiration is growth, everyone knows finding good people is not simple in this market. And so you have to have a lens into what this could look like to extract full value.

So the key people involved, the CEOs. You have product folks on your side. When you said people, I'm assuming you meant hr.

Hr, yeah.

And getting them together to really align and start creating that vision 12, 18 months out. Anybody else that I missed on that?

Finance.

Finance folks as well. When you get this team together, I want to get an understanding of when you start building that alignment.

It really just depends on the case by case. And so what I mean by that is if it's a smaller deal that is not going to be as disruptive. What I mean by disruptive is maybe more of a tuck in and is not going to impact as much of the financial modeling as much of the People, et cetera, then it's pretty much at the tail end where we are spending more time externally and then less internally. If, on the other hand, it is a sizable deal and the model might be more along the lines of keeping them separate, keeping them as a separate operating unit or a business unit, then the socialization and the planning starts well in advance, I would say a couple of months. We are floating the idea. We're getting all sorts of reactions, some to the point where you guys are nuts. Doing something like this could be disruptive or this could be fantastic. And so you're building that alignment, trying to make sure that you're not out in left field. And it's usually a very select group of people. This is not something that you can float around with ideas. And so it's usually the CEO, the CFO and the head of product at that point. If you're going to float this idea of doing something big just because word can get out, and so you have to be very careful on who you share those ideas and with and who you talk to.

This is all early. This is pre loi.

This is all pre loi. Absolutely.

This is part of shaping the deal is really looking at, hey, what marriage is going to look like and really planning how do we want to raise the kids, what religion should we bring?

And that's right. And then some parameters on what we may want to put in the loi. And then once you get into loi, that's when the heavy lifting really starts. Once you're in loi, all the various functions are in there trying to figure out what this would look like and just trying to make sure that there's enough of a bias towards the end state. I'm back to the end state at that point. And this time there's more people, more brain power putting thought to it. Obviously there's a lot of things that are not covered early on. And so that is all bubbled up.

I want to stay pre loi for a little bit. I talked to a number of corp dev teams and I feel like this is a big challenge. It's almost associated with the maturity of the corp dev function where in the early beginning a lot of these things, the go to market planning, all these things bubble up well after loi and it becomes the taxing burden when you go through integration process. I don't know if you can just make up an example. You don't have to use a real one, but almost walk me through a timeline of what that engagement looks like. Here's this Conversation we're having. This is maybe an original idea that shaped from you having that initial outreach and how you bring people in and really start bringing those considerations.

And I'm trying to shape this in a way that is going to be meaningful for your listeners as well. We have a target in mind. It is something that has been brought up in the past by a handful of our product teams. Usually either someone from my team or myself will end up meeting the target, you know, build some conviction. And then at that point the meetings that are had internally are usually with the CEO, the head of product and the cfo. To some extent, that's where we leave it. We then start work on what an LOI can look like. We might get a handful more people involved on the finance and product side just to make sure that we are thinking of things the right way as well as in some instances sales leadership. Just what could this look like going forward? So it just really depends on the size of the deal. But what I would say is the way to think about it is early on, pre loi, the type of talk that my team will have with other folks internally is hypothetically, if you were to go and do a deal like this, what are some of the important things to consider? That's the way we try and architect things because we don't want the word getting out. Confidentiality matters a whole lot. And then at the same time we don't want people getting emotional internally, that is, hey, I really wanted that deal and you didn't get it done because hey, that's a pretty, shall I say, competitive climate out there. So what I'm saying is our job is in a way tricky because you're trying to make a deal happen, you're trying to make sure it succeeds, but at the same time you want to keep expectations in check on both sides.

You don't want to be misleading in any way.

That's right.

When you mentioned there's a variance depending on the size of the deal, can you give me an idea of what type of variance that would be in some of this sort of shaping between the small tuck in versus regardless of.

The size of the company, if the target is anywhere less than 20, 25, 30% of the overall business. I'm just making gross statements here, but in general you can get away with just trying to tuck in the organization. If on the other hand it is far more material, then you want to try and keep it separate. But the 20, 30% is somewhat arbitrary. It actually really just depends on the size of the business. So the more meaningful metric I would suggest you actually the percentage part is perhaps not as relevant. Once you cross 50, 70, $100 million of business and it's over 50, 60, 70%, if it's a younger organization, it should have that trajectory, then it actually almost behooves you to try and keep that separate because they have a good thing going. And if anything you want to try and amplify that. If on the other hand, you're picking up something that is sub 50, sub 30 in that range, it's easy to digest and just say we're going to lump it in, we're going to use the mothership to actually amplify. But that's how we think of it and there's no right or wrong answer here. And that's why it's very dependent on the acquiring company size, scale maturation. So there's no right or wrong answer here. It's just generally you want to feel things out in the overall corpus that exists within the target and what's best to try and amplify it.

That's really great, helpful examples. I want to switch it up a little bit. I want to get out of your corp dev head and I want to get into the head of that target company CEO. I want you to walk me through that mindset because you've had those conversations enough and I'm sure at your level experience you probably put some time to get that thinking down. What's going through their head. Obvious stuff is what's my role going to be post close, what's that going to look like, how's this company going to impact us, Is it going to impact my people and so forth. But can you talk a little bit about that? And after that let's talk about how do you get that thinking around the end state or what that looks like from that CEO's perspective.

This is not just related to the CEO, but there's a few things that matter to any professional. It's usually progress that they're making personal growth, it's the people that they are around. Is that a fun place to be around? And finally, personal compensation, are they being well taken care of? And this is not just to a target CEO, this is people in general. I'm of the opinion that if these three pieces are taken care of, whether they being well compensated, they're continuing to grow professionally and they're surrounded by people they enjoy working with, they usually will not look to leave your organization. I use that same mindset when I'm talking to the target Company. It's my way of trying to get in their shoes and say, you know what, you have the potential to grow. Obviously we sell them on the culture, we believe in what we have and I certainly amplify the attributes of that. And then there's the personal compensation piece of it. So it's usually a package that we try and sell, not just the CEO, but then the key employees that we might want to be bringing in to the organization. That's usually where we start. And then of course we get into the details.

What are the key things again, pre loi that pop up to start getting that CEO thinking around what's going to happen, what are these key considerations and is that just. I feel this company is being really transparent with the good and bad or is this part of painting the grand picture and getting them?

It's a bit of both. And so you're going to do a fair amount of selling. You're also trying to understand your past track record. If you're dealing with a CEO that has a track record being a serial entrepreneur and running company after company and then having good exits, it's important to have the awareness and the realization that might be in his or her DNA. And the idea of trying to find a good role for them 18, 24 months out might not be the best of assumptions. There's some people who just prefer to keep building new companies. And so that does play a factor in how we orient things and we are transparent about it too. I'm of the opinion that some of these discussions are best had rather openly. It actually relieves the target CEO sometimes, believe it or not. If I was to tell them what if we had a framework that allowed you to be part of ZSCALE or any other company for 24 months and after that you decide that suddenly gets them far more comfortable versus something that's 48 months, so on and so forth. Just having that awareness I think is important. There's others that this is their first shot at it and there you have a better chance of retaining them and so you'll do other things to try and keep them motivated. So it really just depends.

Okay, what about outside of their personal interest, the business like the go to market, things like that? Is that coming up?

Oh yeah, for sure, absolutely. On the go to market side, usually we are meeting with their CRO, getting a sense of how they go to market. We usually have a decent sense of things. And if it is something that is different than the acquiring company and is of interest, then the mindset changes A little. Because then what we try and do is we take what they have and we actually say we're going to let you hire and go build this model out. Let me be more specific. If on one side today the acquiring company is calling on traditional IT folks, I'll just give you a simple example versus the target company. Today everyone talks about cloud and they're calling on DevOps, like people building stuff on cloud marketplaces, et cetera. That might be of interest. If anything, you may want to try and amplify what the target has. And so it's in your interest to not just bring that in and squash it. If anything, you want to actually amplify that and say, go at it. Let's go build this out and make. Maybe at some point it might make sense where both sides are feeding each.

Other and you're starting to paint that. And this is still pre loi.

Absolutely. And the reason why we do that pre loi is because you want to sell them on the potential for themselves that they will play an important role post acquisition and they will have a very important strategic impact on the organization 12, 24 months out that could paint additional growth opportunities, additional leadership opportunities, et cetera. So it just really depends and it.

Sounds like a very dynamic approach around that because it really, hey, let's let the strategy shape what that go to market is going to look like. Have that conversation as part of our deal discussion. Any of the other elements that come up. There's a lot of things with HR and the legal side and things like that. Or is it very much a big variable?

There's always curveballs along the way. Historically, I don't think I've ever come across a deal that was just smooth sale. There's always something that comes up and you just work around it. These days the deal climate is such that the instruments that are available to us, I'm amazed whether it's insurance, whether it's all sorts of different things that are available that perhaps were not five, six years ago that allow us to do deals, but at the same time manage the risk and at the same time be comfortable in this competitive climate.

Anything particular around about that shaping the end state that comes up earlier that hey, here's a view from an HR side or anything like that.

Usually the HR side is all around titles and experience and who's reporting to.

Who after loi, or is that it.

Can come up sometimes in ploi, but that's usually post loi. You're right, ploi, the HR aspects usually are not bubbling up to be perfectly transparent, I'm trying to get an LOI done and so I take it upon myself to cover the big points as much as we can without trying to get into the details just yet. Because our goal is to get them into an LOI and then actually consummate the deal.

So it sounds like main emphasis is obvious stuff about here's the general deal terms but then go to market and what's the vision of working together is.

Going to look like and product by the way. So there's two aspects. The go to market and certainly product. Absolutely.

And then product with the go to market. You mentioned the CRO involved with that. Who would you want to get feedback around? When it comes to product, it's usually.

Our head of product.

So you have their head of product and your head of product get together and.

Or head of engineering or whatever the case might be.

Yeah, our tech stacks look good or tech stacks are not good, those type of things.

Yeah, and there's people do get emotional.

I want to talk about. Obviously you sign the loi, then you really start weighing in on things. Maybe give me a little bit of that. Then we can get into how you start thinking about integration planning.

Once we are into loi, we usually will kick off various work streams, right? So there'll be a product work stream, there'll be a HR work stream, there'll be an IT work stream, a legal work stream, finance work stream, you name it. With all these various work streams we'll have leaders on both sides and what they are trying to do is make sure that they go through. We'll usually have checklists of sorts. Make sure you understand any and all of this, what this looks like. And depending on the timeframe. But we could be meeting two or three times a week where we're having readouts from both sides. That's usually how we're trying to bring bubble up issues and then solve for them and try and bring this to a definitive agreement.

So pretty typical of running through a diligence process. Now I want to get into the good part of obviously we talked about integration, making sure that goes well. What does integration planning look like for you?

There's a fair amount of thought put into that. What I usually tell people is you certainly are inheriting a company so you have their P and L. But what you want to do is take that P and L and in fact take it into the acquiring companies format. But then also try and amplify it in the sense that adjust for it the adjustments perhaps reduce some G and A as an example. But then there could be adjustments in the form of increasing product investments, increasing go to market investments. Making sure that you do that integration planning with an operating plan early on is certainly something that I do suggest and advice. And it does two things. It signals to the target directionally what you're thinking and so there's nothing lost in translation. And they understand what is going on for the better or for the worse. Usually it's for the better in that they may be operating independently, they may be getting additional investments, resources, so they get happy. But then more importantly internally, your finance people, IT people, the other organizations within the company also understand that this is the new operating plan that we're going to work towards and this is going to require additional investments and everyone is on board. So it serves a dual purpose internally as well as external.

Are you doing earnouts?

It depends on again the stage of the company. I'm usually not a big fan of earnouts just because they can be tricky and usually is fraught with assumptions. And it's tough to plan what happens 12, 24 months out. But in a handful of instances when you're looking to bridge gaps, if a target feels particularly confident of what they bring to the table and what they are worth, then certainly we will consider.

Announcements because I was curious if that would impact how you integrate the financials the way you described it. Throw a wrench in doing that.

It would. There's nothing black or white. It just really depends on a case by case deal. The last couple of years we have done deals with earnouts, they've worked out well. We have done deals without earnout and they've worked out well. It just really depends on a case by case basis.

Got it. So some of that financial integration may be postponed if you have an earn out in place and you need to track that company's independent performance.

That's right. But even then the financial piece to the earn out is still applicable. And let me be more transparent. Let's just say the target wanted evaluation, wanted a deal of 100 and we were prepared for 75. I'm just throwing out numbers. So there's a gap of 25. And the 25 million gap is primarily because they believe that the coming 12 months they'll do $10 million worth of sales. And I'm saying they'll do 5. So there's a delta of 5 and I say neither here nor there, let's see what you can do. Try and get to 15 and then we'll see where that goes. And so we build an earn out. The target might say to get to that 10 or 15, I need additional heads in product and in go to market, we will fund that. Most growing companies will say, you know what, it is worth making those investments for that different growth trajectory. The market today rewards growth and growth that within the reasonable limits. But certainly we will make those investments. And so the point I'm making is even with earnouts, there may still be an aspect of financial planning where you are making some investment because you believe in the direction and you believe, well, if there's a deal to be had that can help bridge this. It's easy to go sell internally saying the growth is going to be X and in the outgoing fiscal years that's going to look 2x3x4x. If you make those investments now.

Great example and I think to your point, a lot of variances in that and how you put it together and what come out of it. We talked about finance. When it comes to integration planning, what's the next most important function or area.

To think about besides finance? I would say obviously it's the people. And the people side is just making sure that they find roles that they're able to continue to grow in professionally at the same time, not feel encumbered as part of being a larger organization. And usually what you're trying to do is make sure that they have enough of a foundational help to keep growing and running but not encumber them with overhead is perhaps the best way to describe it. And so the people aspect becomes particularly important. Just because they should be comfortable with who they're reporting to feel that they're going to grow, any and all of that is extremely important.

When do you start this just integration planning in general we went through here's this sort of shaping of the go to market and some of the key considerations pre loi loi kicks off then is there a gap? Do we start working on little things in increment or what does that look like?

The people aspect? Usually we are starting to do post loi right away or pretty much when I said we have those various work streams. One of the work streams is hr and one of the things that they're doing is obviously mapping the organization, the titles, compensation, all of that. But then they're also looking at end state. Where would these people likely fit in? And it really just depends. It could be a separate operating. If it's a separating operating unit or a business unit, then it's perhaps not as cumbersome an activity. If on the other Hand it is something that you are planning to tuck in or integrate, then you have to pay a thought that the target could have some GNA folks, it could have some HR folks. Right. As an example. And so where would you want them fitting in? It really just goes through that entire organizational structure. An independent operating unit makes that discussion far more simple.

You get interesting red flags from hr. Hey, we've identified some flight risk over here or things like that.

Absolutely. It happens all the time and usually it'll manifest itself in this person. He or she thinks very highly of these people. And we don't think so based on our experience. This is a red flag or not a good cultural fit. Any and all of that comes up Just generally people management is always something that is just a. It's something that you have to continue doing. There's no right, wrong, easy answer. It's not easy to do do one that we take very seriously because people have ambitions and personal ideas and growth and you have to cater to that. And it is a competitive market out there. It's just a combination of all of those.

Are there any other key areas or functions that are important when it comes.

To integration planning IT it is huge just because if the IT systems and again depending on the size of the organization, the systems that they use, how easy or difficult are they to integrate? I touched on finance, but. But the financial aspects are also quite important. It's one thing to do the deal and say you know what, we paid X so that's one aspect of finance. But to the extent that you're going to have this going forward and the target had material business making sure that the way they close deals, recognize revenue, the types of customer contracts they have and so on and so forth. That's a pretty cumbersome task. Just making sure that you're still in compliance with what you have been doing and not risking any of that. So that does become an important aspect as well.

There is a lot of assumptions as the deal shape from the initial investment thesis and as that progresses and it's obviously aligned around the specific value drivers of the deal. How do you keep that alignment going through where something that comes up. If I interviewed a bunch of folks from the integration side where that becomes one of the challenge is keeping that clear alignment around. What are the drivers of doing this deal and making sure everyone's following through. I think that coupled with just general momentum and trying to reduce the fatigue as possible.

The best guidance I might give is be adaptable because things change. It could be within the target it could be within your own organization as well. And so you're right, value drivers can change. Sometimes it's for the better. Sometimes you just realize the market is changing around you. For example, I've been in IT security for 20 plus years and it is just ever changing. And so you could end up doing a deal and literally 12 months later, the deal that you did for why you did it, it may have changed. Or the value proposition is it could be even stronger or it could be weaker. I'm giving you both examples. And so the reason I bring that up is you just have to adapt. There's no right or wrong. The beauty of this is because you're dealing with consummate professionals on both sides. Even if the value drivers, for example, decreased or the value proposition is not as significant, the target company knows about it, 12 months later, they're actually reflecting and going, we actually got a good deal back then. You see what I'm saying? Or if the value proposition is perhaps stronger, they perhaps might command a more important role within the organization. So it just really depends. And it's important to keep adapting.

You ever have it where you do a deal and the CEO of the company you're acquiring is just losing that motivation and excitement?

And absolutely.

What do you do when they're. They're not feeling comfortable with everything?

It's very difficult, to be honest. We've had that happen in the past where there was fatigue. The CEO just wanted an exit. I will say this, that's the one thing that has made it somewhat. I'm specifically talking of smaller deals. When you're dealing with larger organizations, you have professional CEOs and a professional leadership team and so it becomes a little easier. But when you're dealing with smaller organizations, that's the one thing that I do say I miss with this Covid era. Pre Covid, we would spend a fair amount of time outside of work, whether it's just getting out to meet the CEO and the extended leadership team over a beer or whatever it might be, and just get to know them a little, try and smell out if there's fatigue, if there's not fatigue, and so on and so forth. We lose some of that now in this Covid environment where it's all zoom sessions and you miss out on some of the other side aspects that are actually quite important.

I wanted to ask, how do you map out the process over to the end state?

Map out the process? Can you elaborate on that? What do you mean by that? I want to be sure I answer.

The question Your overall deal process, when we talked about keeping this sort of end state in mind. But when you're going through diligence and integration planning, how do you sort of keep that continuously mapped out to the end state?

There's really not a formal reiteration or recursive loop that we take per se. Perhaps we should consider that the best way perhaps to describe it is we have a thesis in mind. During the integration planning, we are always going back and testing the original assumptions that we had. Do they still hold true? And if they don't, then usually it's again, because we are in post loi. I will usually do a internal meeting with our CEO, our finance, our head of products, et cetera. We have uncovered something. We may want to change a few things here, massage a few things, adapt, or everything's good, let's keep moving. It's usually that recursion that we go through, but I wouldn't say it's necessarily anything out of the ordinary that we have to say, okay, let's go back and test what we had originally planned. It's usually if there's a deviation that we go back.

It sounds like being adaptive is generally the key skill to have throughout all of this. Is there anything you do to foster that as part of your culture and doing deals?

If you've dealt with the folks that do customer support within IT organizations, I do spend time talking to customers and customer support people. Let me explain why. It's very unusual for someone to call customer support and say, hey man, you're doing a great job. It never happens. They usually call to complaint. And I find customer support people to be extremely calm, composed, and just be ready for slacking or beating because that's what their customers usually do. The reason I bring that up is I've found that their personalities are such that they just adapt. And I try and do that as well. Talk to customers because you learn new things, but they also give you feedback, both positive and negative. And I've gotten to a point where my team will bring up curveball after curveball, and you just go, okay, we're going to solve for it. It's all about being sure that you can stay grounded. My personal life, I try and do things, whether it's a whole lot of physical activities or meditation, to stay calm. But that's usually what you want to do because you need these tools to be able to adapt.

That's true. I feel like the big challenge is the shift in priorities. Managing that and being conscious of when you need to realign when those changes happen, you've done a lot of deals, you got a lot of experience and we have a pretty significant corp dev audience, M and A practitioners in general that listen to this podcast. What are some of the big key takeaways from your experience or lessons learned?

I should say I might be repeating, but pay attention to people. That to me is perhaps the most important aspect of doing deals. M and A folks get a thrill out of doing deals. It's a feather in the cap. I'd like to think you should measure your success by how well those deals have done 12 to 18 months out. That's when you really see the value that you have contributed to the overall success of the organization. Have the awareness of the where you fall. There are some that just love doing deals, want to be in banking. Nothing wrong with that. I think the world of bankers, we use them quite extensively. Just have a sense of what you're passionate about, which side you are in. I come from more of an operator bias and so I spend more time on end state and growing the organization. There's others that might want to just do deals. Nothing right or wrong about those, but just having that awareness early on in which camp you fall I think will serve you well in the future.

Do you have a best mistake you've made in M and a best mistake?

Yeah, I do. There was a deal where just from the get go, I was not on board, shall we say, as in the product team wanted it and something just didn't MSMELL Right. The CEO said let's just still go ahead and do the deal. We were pretty much done and suddenly out of the blues. We were with someone and I heard something else that helped me build even more conviction to the point where I went back and I said we need to pull out now and here's the reasons. And I was able to convince these folks it was perhaps the best thing we did. Just because someone else ended up doing that deal two months later and within six months it had completely imploded. So my initial gut instinct was right, the best mistake there was just trust your instinct. Sometimes people, your listeners have been doing this for a long time and they have that gut instinct whether there's something here or not. Trust you.

Very good. What's the craziest thing you've seen in M and A?

We were done with the deal the Target had signed. We were signing off. We were going through the process. It was 9:30 at night and over a weekend. And at 11:00 I got a call from the Target company. CEO saying, we've had a change of mind, we are pulling out.

After you signed and closed.

We had not closed. This was a signing of the da.

Okay, so you signed.

Yeah, they wanted to pull out. And of course we suggested, hey, we've done the deal. And they said, we're going to pull out and we'll go to courts. We haven't really quite done this, et cetera. And so for the next 24 hours, it was, what the hell is this? And so there was a lot of finger pointing, et cetera, a lot of explaining to do. Believe it or not, we decided, okay, there's no point in doing this if this is the way we're going to get started. Imagine that. And so we just suggested, let's pull out. What's ironic about that is three months later, six months later, nine months later, that CEO just kept coming back saying, let's do a deal, let's do a deal, let's do a deal. I'll take less money this time. And we just kept saying no.

Wow, that's crazy.

Yeah, stuff happens.

I enjoyed this conversation.

I did, too. I hope your audience did too.

Hey, I appreciate it, Pruni. Thank you so much for your time today. And 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 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 Kison K I s o n dealroom.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 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.