Ensuring Alignment for Deal Success

This is it. M and A Science is expanding with our first M&A conference introducing the M and A Science Fair this October 5th in New York City. This will not be like any other M and A conference. You know the ones I'm talking about where it's panel after panel after panel until you're bored out of your mind and need to hit the bar for tequila shots to restart your brain again. The M and A Science Fair is built around peer driven conversations in a design thinking format that encourages real collaboration. Bring your challenges, workshop them with your peers and leave with practical solutions you can apply to take your practice to the next level. The M and A Science Fair is exclusively for heads of corporate development and heads of M and A integration. I know it's pretty limited. We want to make sure this first event drives the best quality networking. We'll probably expand it from there. If you're interested, request an invite@mascience.com Fair again, that's Masscience.com Fair.

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. Hello M and A Scientists. Here at M and A Science, our goal is to continuously expand our understanding of M and A. Use that knowledge to create top notch training programs and resources. By visiting mascience.com you'll find all the information you need to take your M and A skills to the next level. Get started by signing up to our free weekly newsletter to stay up to date on the latest courses, upcoming events and expert interviews. Again, that's mascience.com I'm your host, Isam Patel, CEO and founder of M and A Science. Joining me today is Andy Bilbao, currently CFO of Noble Education Acquisition Corporation. Noble Education Acquisition is a blank check company focusing on the ed tech sector. Now John's got a ton more M and A experience beyond that. I'll let him tell more about that. Today we're going to talk about how to ensure alignment for a deal success and nailing your pitch to the board. Andy, how are you doing today?

I'm doing just fine, thank you for having me and it's a pleasure to be here today.

Andy, can we kick things off about your background?

As you mentioned, I'm currently the CFO of Pre IPO EdTech SPAC. Prior I was with John Wiley & Sons for 11 years, 7 years as Vice President of Planning and Development, helping shape the company's strategy and executing on deals. And the last four years with Wiley, I was the global head of corp dev, or mergers and acquisitions for the company, placed north of $1.3 billion with Wiley, split mainly between education technology and scholarly publishing, meaning journals or publishing and providing services to our society partners at Wiley. Before Wiley, I spent about seven years with the Nielsen company on their business media side.

How many deals you worked on?

I would suspect I worked on several hundred deals consummated several dozen. My experience with Nielsen was noteworthy in that I led the transactions that sold most of the company's media assets. Their B2B assets, most of which are the noteworthy ones now are with their second or third owner after the divestiture by Nielsen.

Nice. So before we start digging into achieving alignment, can we talk about the areas where it's important to have alignment?

Well, I think it's important to have alignment across all aspects of a prospective transaction. People focus on the functional areas first and foremost, which is certainly important. But as you and I have discussed, the cornerstone of achieving alignment is really around strategy. So whether it's a business unit strategy, a divisional strategy, or an overarching strategy for the corporation, making sure that all parties that need to be involved and aligned are. And granted, there's a time and a place for everything. Not everyone on the team needs to know everything all at once. It's a question of who needs to know what when, and making sure that all of those parties do come into the loop as part of the process at the right time in the right place.

So alignment on strategy and then that expands out into the functional areas?

Yeah, functional areas. And then you can go much broader than that in terms of a communication and a plan strategy for alignment around a prospective deal. There are upwards of a dozen disparate parties that we need to keep in the loop as we go through our process. You have your internal stakeholders in the form of the deal team or functional heads or your executive leadership. And then you have external stakeholders in the form of the company that you're acquiring, their vendors, their customers, their employees, and eventually IR and the press.

This goes back to the who needs to know what, when, exactly?

You're not going to come out with a press release halfway through your process. So those are the things that go out further in the timeline and sooner in the timeline. You often want to do what I would call greasing the skids. So before a deal gets too far, making sure that your key internal stakeholders are a part of the process and are aligned with what you're trying to Achieve with a prospective transaction.

Can we break this down? We'll make up a deal and just run it by the timeline.

Sure.

Just to get a sense of when do you start getting folks involved and the approach, aligning them. Even from the very, very beginning, before you're even looking at things, who are you having conversations with?

So the first thing is that and the cornerstone of any good corporate development program is the overarching strategy. So whether it's a transaction that's going to affect the entire corporation, in which case you need the strategy aligned with the executive leadership team and the board of directors, or just divisional strategy, where a prospective transaction only pertains to that portion of the company. But it all starts with that underlying strategy, whether it be at the corporate level or the divisional level, the business unit level, if you will. As part of that, there are certain elements that you're going to want to ensure are included. Strategy, first and foremost, the market that you're serving, is it growing? How is it important to the company? What do the customer segments inside of that market look like? How are we addressing those customer needs? All of those things need to be clear and expressed as part of the activity that you're going to undertake as a corporate development professional.

Okay, so we got some initial stakeholders that are involved with shaping the strategy.

Yeah. And then once that is firmly in place, making sure that you have the division or search CEO, whoever the unit lead is against this prospective deal, on board with it. Here's what we're going to look at. Here's the timeline associated with it. Here's who I'm going to need from your team to be involved in the process. Corp. Dev usually handles all of the functional areas and aligning those folks at the appropriate time based on the deal plan and the timeline associated with it. But it's almost always important to have some person or people from the business unit from the division involved. If it's going to be a transaction that doesn't involve the company as a.

Whole, who typically is the champion for the deal?

On a division lead, it's usually whoever the executive is in charge of that or their designee. But almost always they play a part in it. Especially if you're trying to sell sell this to the company's executive leadership and the board having those conversations up front, getting them bought into the process, getting them to assign folks as part of their team is super important to the process outside of the functional and legal and financial due diligence.

So we're pretty slim in terms of who's involved in terms of shaping the strategy, then even earlier looking at the deals like we're not getting into functional leaders at this point up front, you.

Do want to keep that group relatively small. A lot of deals die on the doorstep, as you will. So getting too many people involved too soon or getting people excited about a transaction that's not going to go anywhere is not a productive use of anyone's time.

So then we identify an opportunity.

We identify an opportunity, we discuss it with the leadership team, we make sure that we have buy in from the executive level to actually pursue it. Even just getting to an loi, if they're not going to back the deal, then we're going to have to explain to the divisional leadership why it's not going to move forward. And if they are going to back it, do we have, at least in a preliminary sense, the necessary resources to go after this deal at this point in time? And I don't mean just money, I mean people. Resources are finite. You can't pursue every prospective transaction. You have to prioritize what deals you will go after and what deals you'll pass on, making sure at least to get a green light from the powers that be, whether it be the CEO, the divisional lead. In some cases you have an investment board, if you will, that you have to run things by. So making sure that upfront work is done and that people are at least on the same page to kick the tires on the prospective deal is super important.

What's your approach in prioritizing your pipeline? And I'm thinking of the firm, like you mentioned earlier, where you got multiple verticals, you can be going after impact.

What is the potential impact to the organization as a whole? What deals are going to make the most difference from a shareholder accretion perspective? Where are we missing elements, whether it be capability, market reach, customer reach, product development, that really are going to influence and affect the future of the organization.

How do you factor those different elements together to get a sense of the impact?

It's funny, sometimes you find some of the bigger groups that really should be putting their biggest and best foot forward, pitching small deals and things that have very little influence on the stock of the company as a whole. And other times you have these tiny little corners of your business that bring up these things that undo needs in terms of capital deployment. It's all over the map, Kisan. It's part of our job in terms of corporate development professionals to help the executive leadership make those decisions, to have a well thought out capital allocation model and deployment mechanism. Things that Sometimes people in the corp dev group think are common sense. The divisional folks won't or they don't realize the competition for the limited resources that the organization has.

I understand how you want everything to go towards a strategy and the more impact towards that strategy, the better. But I don't know, Andy. I'm raised by immigrant parents. I'm wired to be a bargain hunter. I look at value for every opportunity. I don't know if that's the right way to do it.

I think that's true. So if you have the opportunity to acquire an asset that's strategically aligned and it's $0.10 on the dollar versus one that's strategically aligned and is $0.110 on the dollar, bargain hunting can happen, does happen, will happen. But you have to look at the longer term picture. What are the integration costs going to look like? How long is this going to take? When will it have an impact? And shareholder value, whether you're a public company or a small private, is really what you're striving to achieve. So the strategy that you lay out should be focused on deriving increased shareholder value over time. And those transactions that you consummate should all build towards that. And the idea is first and foremost those deals that have the greatest opportunity, the greatest propensity to add shareholder value over time.

I got to strike a fine balance, no doubt. I want to get a better understanding from identifying an opportunity to getting assigned loi of the alignment with the board and any other folks that weigh in on the go, no go decision.

It all starts with the strategy. I think the next step is looking at the market and the market context for that prospective opportunity. So not the company itself, but in what market does that company operate? How is it competitive? What differentiating factors does it have? What does the target look like over time? Assuming tight integration with the existing assets of the acquiring company, those, let's call it three points, strategy alignment, market indicators, and then the company factors of the detail around that I think is the first step in terms of developing that alignment. And then I think it's a question of at least at the top doing a thorough job of telling the story for why this prospective target in this market at this time. So providing some background on the prospective transaction, that market context and then the specific context of the target in that market is one of the better ways of making sure that everybody is on the same page.

I gotta go back and break this down because I think you gave me a whole outline for building a business case here and I want to make Sure, I got it all the strategy part right. Hey, this is why we're buying a company, how it aligns with our strategy, why it fundamentally makes sense. But market context, actually I like the details around this. Where how does this target company compete in the marketplace? What are its differentiators? And then I like this piece because I think it's key is what does that target look like over time as you think about the company post acquisition and it gets integrated into your company.

We can talk about the market context a little bit further and slightly discreetly from the target company. So what is the overarching market size? What is the TAM in terms of the addressable market for this particular aspect of this company? Is the market growing? Is it shrinking? How big is it? How is it defined? How has it changed over time? Why is that market particularly attractive to us aside from this particular target? How when we put these assets together with the assets that we have or don't have, will we compete? What does the competitive landscape look like in the market? Who are the players? How are they defined? What makes each of them unique? What do they bring to the party? How easy or challenging is it for us to be a part of this or enter the market with this asset? Are there any other barriers to entry? Why invest in this particular market versus others, Particularly when you're talking about a business that has disparate or different divisions in which they can make these strategic investments? That's the market context. Within that context, if you talk about the target, what are the attributes of this business? What makes it unique? How do they fit into the competitive landscape? What's their unique selling proposition inside of that market? How big or small are they providing context in terms of the financials and whether or not that's something that we can digest or not? What are the KPIs associated with that target? The key performance indicators that make it an attractive target inside of that market context? How long have they been around? How long have they been operating? What does the management team look like? Do they have any unique capabilities that are additive to our existing business or otherwise employee base? And as you progress through this in terms of your due diligence, Kisan, you'll start to get to the point where you're really not just describing the company or the target, but you're describing your integration plan as well. You're talking about how you're going to bring these assets together. How are you going to make one plus one equal three?

That's a lot of information to put together and present to your board and.

It builds over time. So when you're talking about LOI stage, chances are you only have enough information to be dangerous. You really haven't done your due diligence yet. You haven't laid out the timeline for the prospective transaction and your integration plans. So all of those things build over time. This gets into the piece that we were talking about in terms of communication. Not everyone needs to know everything all at once. The executive leadership team wants to be in the know. They want to know how this is going to fit. They want to know what you're learning over time. All of your information from your due diligence is going to build over time. You're going to have financial due diligence that substantiates or refutes what you have in your models. You're going to have legal due diligence in terms of the company's standing and problems that could face pending litigation, et cetera. You're going to have operational due diligence that allows you to look at and to build an integration plan that at least on paper, looks like you can execute and will realize all of your projected future gains.

How does this evolve from these early conversations? When I'm looking at a target, we always get that one page teaser. If it's a bank process or something that we're putting together in that format, do we start off with something that simple and then at least get early indicator if we're going in the right direction? And then we keep iterating and turn this into a formal investment thesis?

It tends to evolve that way. It tends to evolve from a simple investment thesis and the context of a prospective deal towards either exiting the process and not being party to pursuing it. If you don't see what you like, or if you don't think you're going to realize what you thought you could. When things are substantiated, particularly through due diligence, people tend to get a bit more excited about it. It's important to stick to your guns in terms of what the value actually is. People tend, over time, particularly lengthy deals, to fall in love with the prospective target and lose that perspective of what this means and the potential impact that it could have. So yes, it does tend to build over time. Your knowledge builds over time. The case usually gets stronger over time. Cases that tend to get weaker over time tend to be business opportunities that you pass on or drop.

What is the go, no go decision trail look like? Because it sounds like it's just not one simple. There you go, Andy, go ahead. And we'll give you this much of a check, you can write no.

And oftentimes they're conflicting. So you get one aspect of the business that looks phenomenal and could be an absolute home run, and others that are more black marks, if you will, on the potential deal. You have to weigh those things as you walk through the process. Hopefully the entire deal team is presenting the case, the investment thesis or otherwise, warts and all. It's important that everyone knows that no deal is perfect, no company is perfect. There's always things to fix. There's always something about it that doesn't look 100% like we thought it was going to look. And it's important to be transparent about those elements of the prospective transaction that are not necessarily in positive light. We haven't spent a lot of time talking about this. One of the conclusion pieces of an investment thesis is risks and upside opportunities. So what are the risks? What can we do to mitigate those risks? What are the upside opportunities that we haven't included in our financial models? And how can we go after those opportunities to help either build the business case or to beat it?

You covered a lot of different areas between the market, where the company fits into the market. Why are we buying it? Strategy. Is there a certain order that you find flows well when you're presenting this.

It depends on your audience. So if you're talking about bringing a board of directors along on this journey with you, providing the context of the prospective transaction. So how did we come to find this company? Why? Why them and why now? What market does it operate within? Why is that important to us? Aside from this target, what are the underlying elements of that market that are attractive to us as an acquirer? So even if we didn't pursue this company, we should be pursuing other companies in this market. And then the background and the details around why this target versus all of the others that are available to us in the space, I think is a step through. And then you get into due diligence and you have a deeper look at the financials, at the legal aspect of the company, at the operational aspects of the company. That story is going to build over time. So the first time that you meet with your executive leadership team, or the first time that you meet with the board, it's more of a teaser. You're testing the waters to see if this is an area and a target that we can and should be pursuing. And strategic alignment works well there. If you're well aligned with your strategy, it's very difficult for either your executive leadership team or your board to say no, unless we're not pursuing deals at all. Or if it's a no, why is it a no? And how can we adjust so that we're not wasting everybody's time on a go forward basis? Then the story builds. And this goes back to what we were talking about earlier, Kisan, in terms of that communication plan and timeline. As the story builds, people will be more and more familiar a with the story, with the market context and with the company. But they're going to ask more and more detailed questions. So that's where your due diligence really comes to the fore because you have to answer all of those questions. You have to make sure that you've done your homework and that this is the right target opportunity in the right market at the right time. As that story builds, the questions are going to be more detailed, your responses need to be more detailed, you need to do your homework. Then you need to provide a compelling case, warts and all, as to why we should be pursuing Company X.

When does it get down to the wire when they actually make this go, no go decision.

So depending on how you're organized, whether you're a public company or private, it generally comes down to, in the case of an auction, a binding indication of interest. And in the case of a proprietary transaction, one in which you own it, there are no other bidders or suitors to if need be, either CEO or board approval. And usually you have all of that laid out. In the case of a brokered transaction where you have sell side investment bankers who are representing the sellers in a deal, they'll tell you the dates that you need to hit. Usually there's a day or two in there if you need it, but you try to hit your marks. And in the case of a proprietary transaction, usually corporate development will lay out a timeline that they can live within and they'll discuss it with the potential seller prior to the engagement. Going too far.

When you come back to putting together a bid, what does that process look like in terms of getting a number out there? Is that coming up with you to get an approval with the board? Is the board weigh in on it?

The board generally, at least in most public companies, is not going to argue with you about whether your bid should be 100 million, 90 million or 110 million. And in general you have an underlying financial model that you can live within and you do sensitivity analysis around both price and performance. So in general you'll have at least three cases, usually five. So let's just using my $100 million as a base case, you'd have high performance, base case performance or projected performance, low performance. And then you would have it at say three price points, 90, 100 million and 110. So that gives you a sense in terms of what your internal rate of return is going to be at three different price points at three different performance models. Whether you do well online or below par, the CFOs of the world tend to be a bit more pessimistic. They've been around the block and seen things go sideways longer than expected. Sometimes you're those CMOs. CEOs tend to be more optimistic. Business unit leads tend to be more optimistic about what they can do with the asset. And when you factor in synergies, how great things are going to be in the future. It's our job as corp dev professionals to be as middle of the road, sitting on the fence as we possibly can.

So who's got the most influence on that offer price? The corp dev lead, the bu head, the analyst working on the model?

In general, the CEO has the most influence. The business unit leads less so. They may project optimism associated with the integration of the assets, but they tend not to focus too much on purchase consideration or enterprise value. And in general, you can temper that optimism by looking at the business in terms of the financial returns with and without synergies. So with synergies, you're going to get this performance, this IRR over time without synergies. And that's a sort of a negative way of looking at it. You really shouldn't be doing the deal if there are zero synergies, unless it's adding some capability that you don't have in your existing portfolio. The synergies are usually the element that gets you over the top in terms of performance and helps get you to the price that will get a deal done.

That's the variable to make it all work, no doubt.

It's often one of the biggest pieces of the pie. And when you look at an IRR with and without synergies, you have to be skeptical if the numbers are dramatically different. Because what if you don't achieve those synergies? That's the part of the art and less of the science. In terms of M and A.

Is there anything that I should absolutely not do when pitching to the board? I know you mentioned hide the little bad spots on the deal. I want to be transparent about the.

Good and bad I don't know about should not do with the board, usually you'll iterate at least Internally with the BU leads, with the CEO and the executive leadership team, several times taking guidance from the CEO and the CFO in particular as that what they think the board's reaction is going to be, what they think the board's questions or queries will be about your assumptions. Boards in general try to be as helpful as possible. Sometimes they are, or at least they think they're being helpful by being critical and in a way they are trying to keep you from driving the car into the ditch. And you almost always get smart questions and you almost always get some question out of left field that you need to come back to. For me, I always think that it's okay until you're calling for a board vote. Everybody should ask their fair share of questions and trying to unearth what value this prospective deal could provide to us.

Can we flip around to the other end? Working with functional leads? How do we communicate all this with them? When does that happen?

Particularly during my time with Wiley, I tended to over communicate with the functional leads just because I really trusted their opinions and I valued the perspective that they brought to a potential deal, even if it was outside of their sphere of influence or their knowledge base. For the most part, general counsel, controller, cfo, head of tax. Particularly if you're talking about a multibillion dollar public company. These tend to be really smart people and they occasionally, if not often, add value in an area that you didn't expect them to. So I tended to err on the side of bringing them in sooner. And it wasn't necessarily always in the context of a large group working on a prospective deal. It was often sidebar conversations. I tried to avoid hallway conversations because you often have people that you know have nothing to do with the deal but sidebar conversations, private conversations, making sure that they were aware of what was going on, what kind of capital commitment we were talking about. How important was this for a company like Wiley? If we were going to do a 10 or 20 million dollar deal, you didn't need to bring the controller in early. It's just not big enough for them to worry about. But they would say, hey, given the market context or the geographic location, you need to think about this end. Okay, I'll keep that in mind. I'm not going to waste your time. Thank you. Move on. If you're talking, at least for a company like Wiley 150, 200, $300 million deal, you're going to want them involved almost throughout the entire process. And to the extent that they get tied up or busy, please send somebody in your stead such that we know that you are being kept in the loop.

I like how you get your functional leads involved early. I think that helps get more of the buy in to actually do the deal and support around it. How early are we talking about?

I would say not prior to LOI approval or sign off from CEO or cfo, but as soon as you're in the mix, whether it be with other bidders or simply engaging the target company, hey, we're looking at this deal, Ms. Controller, it's $100 million. Here's the areas that they operate, here's the reason why we think it's a good fit. I just wanted to let you know we're starting this process and we'll have a due diligence kickoff meeting as soon as there is a populated data room and et cetera, that, that kind of conversation. That's what I mean by hallway or private conversation that's not involving the entire team. It's more or less just to give them a heads up that this is coming down the pipe.

So basically when you're ring shopping, it's about the right time to get them involved, I think.

So you can also just ask does it make sense for you to be involved in this stage? And they can say no, I'm going to send somebody in my stead or they're going to say yeah, I really need to be there. A lot of the functional areas report to the CFO or report to the CEO. So you don't want to catch them by surprise. Hey, my boss told me that this deal was coming down. How come you didn't talk to me about it?

One of the things you mentioned earlier and part of the investment thesis of how this target company is going to come together and essentially your go to market, how do you communicate or get your functional leads aligned around that to properly integrate the company to be able to achieve that A go to market that achieves ultimate results.

I'm erring on the side of being early rather than trying to play catch up late in the process. The integration plan should begin with your due diligence. So if you're in a data room, if you're working on due diligence, whether it be legal, financial, operational, you should already be talking about how this asset is going to be integrated. And at the end of a process, once the deal closes, you shouldn't be starting your integration. Then the integration should begin long before the deal is even closed. From a planning perspective, here's what we're going to need to do. On day one, here's what we're going to need to do for the first 30, 60, 90 days. Here's what our targets are in terms of a year out. Because as soon as the deal closes, it's now part of that business and it's part of your business. And so you really need to have a thorough, thought out integration plan for that particular target.

What's the most important part of that plan?

Coming back to strategy alignment, does it achieve the objectives that we're trying to achieve with our strategy? Operationally, communication is super important, particularly as you start to stack up transactions. In other words, if you have two or three deals closing in a given quarter, you're going to start to stretch your central services thin for many, if not most deals. Are you really adding sufficient finance, accounting, FP and a staff, legal staff, HR staff, in order to effectively manage this business inside of the parent organization? And sometimes, and this is coming back to the Synergies piece, sometimes the answer is we're not adding anybody. We're just going to take it all on ourselves and we're going to get it done. And other times you really need to think about the impact to your central services and whether or not that's feasible. And that's all part of the integration planning process. And that all should be discussed openly, not with the target, but internally. It should be discussed openly.

I often hear from integration practitioners that as you move along the integration process, that alignment to strategy can easily get lost or tends to be a lot more vulnerable. How do you keep that from happening?

Floated up the food chain. So at the end of the day, who is the decision maker? Do we actually need to add staff in order to achieve what we set out to, even if it breaks what we had planned? The expression all the best laid plans, and that happens post close with a fair degree of frequency. We thought we could achieve X and we can't. And here's the reasons why. How do you want to adjust? How do you want to revise the integration plan in order to accommodate this? And sometimes the answer is we don't. We're just going to grin and bear it. And other times like, no, we're going to make a conscious decision to break the model in this way in order to achieve what we think is the right objective over time?

How are you involved with that realization of value post close vs pass the baton on to somebody else?

Again, it's a balancing act and it depends on your corporate development organization, your staffing and what other priorities that you have as part of Being a corp dev professional. So there's some things that you have to hand off because you're onto the next one. And there are other things that you really need to sit on as the voice of reason, that person sitting on the fence in order to keep people honest and hold them accountable. It's a bit of a balancing act. I don't know that there's one right way of doing that. But having transparency in both the timeline, the diligence efforts prior to the deal closing and a well thought out, well tested integration plan all help to smooth out what could be those bumpy parts of post close activity goes back to over communicating, just being conscientious of it and transparent and having those dialogues, those conversations, even if they're tough before the close so that there aren't any surprises, particularly if there are differences. If a functional area says this really isn't going to work for us, we're going to need help and the financial folks say then the model breaks and we can't do the deal. You have to have those conversations. And even if it's simply documenting it, it's not to say I told you so. It's to be able to refer to what we think is going to be a challenge at some point down the road and try to address it to the best of your ability before you get there.

What's the hardest part of achieving alignment?

I would say the hardest part of achieving alignment is trying to be objective, not allowing your personal feelings about given transaction or process or integration plan. Working with a lot of different people across the organization can be a challenge. They have different personalities involved. People have their own way of running their own departments. And you really need to get past that and think about the broader objectives, the broader goals, the deriving greater shareholder value over time and not letting ticky tacky things hang you up. Everybody's going to have a different view of what and how to do things. So being open to that, trying to keep the prize in your eye over time.

This may be more of an internal challenge, but how do you not fall in love with your deal? You know it's true. That's why you're laughing.

It's true. It was a little bit easier for me. We always had a half dozen or more transactions going on at the same time. So if I found myself falling in love with one, I would pay attention to the others and vice versa. I think most finance folks tend to be level headed when it comes to these things. More balanced perhaps than pessimistic balance.

They're Pessimistic.

Pessimistic is another word. The business unit folks or the divisional folks tend to fall in love more so than, I think, functional areas, including corp dev. Sometimes it's hard. You see something that really think is completely aligned with the objectives of the organization and how can we let this go? But at a certain point, everything has its price. I can remember several transactions where once you start to stretch the financial model at a certain point it just becomes silly. It becomes a modeling exercise rather than trying to deduce or use your vision about the future of the business in order to derive the right response and the right. So to answer around enterprise value and fit and culture and things like that.

Still answered my question.

What was your question again?

How do you not fall in love with the deal? It's hard.

Yeah, sometimes it's hard.

If you're good at your job, you'll get everybody to buy in. Maybe it's paying a little more attention to the type A pessimistic people on.

The team can't have it one way or the other. If you're going to be active in corp dev, you can't have all naysayers and this deal is bad and that deal is bad and we shouldn't do anything. And you also can't have folks think like kids in a candy store going after everything and everything is the most important and everything is a great fit and we can make it work. You really do need to have some balance in how you look at the opportunities that are in front of you.

Form of discipline.

Yeah, it's a form of discipline. And no company, no organization, has infinite resources. So if resources are scarce, you have to be dutiful in the way that you apply them. And that's the same with every business.

I feel like the topic we shifted, it should have been how do you create a business case to pitch the board? Because we can take that transcript and literally bullet point a whole checklist of everything you should think about having for a proper business case.

It's funny that you say that your team asked about what are the three things in terms of this episode. So, one is how to achieve strategic alignment across all stakeholders in an organization. Two is what are the key elements of communication? So what's the information to whom, when? And the one thing that we didn't talk about was the potential pitfalls to avoid. So we talked about money and time and resources and people and stuff, and the fact that all companies and all resources are finite. Make sure that this deal, whatever it is, will count, demonstrating that obviously with financials to the extent possible and we kind of hit on that. Okay, but what I would say some of the other elements of this, and these are softer, if you will, than just the purely financial question. As a corp dev professional and as a deal lead, aside from the limited resources and money and people and things like that, what are the other things that I need to be aware of? One is ad hoc targets, those that aren't clearly aligned with strategy. And if your strategy is such that you can bring all these disparate elements in and stuff like that, it's not a clearly defined strategy and that needs to go back and you need to start over there. But opportunities that are absent, strategic context should be problematic. You shouldn't be chasing those. The second thing is being aware. And you hit on this in both your questions and steering the conversation, which is around time, response time, deal time. Can we actually pull this off? Number one, and in a competitive environment when you have sell side bankers involved, response time is going to be important. They're not going to just say, just get back to us with your bid whenever you want. So internally managing that across all of the stakeholders, particularly the functional leads, particularly the business or division leads, getting them to respond, getting them to weigh in, being aware that this transaction is going to take place, it's an auction, so unless the sellers walk away, it's going to happen. Getting folks to react to that in a way that gets you, as the head of corp dev, the responses you need in time is a potential pitfall. Don't wait. I mentioned this briefly, but I think it's important to reiterate. Small deals oftentimes take just as much time and energy as a much larger, much more impactful deal. Pick and choose your fights. A lot of these mom and pop deals that you could pick up for pennies on the dollar oftentimes aren't worth it. They don't add value, they don't create shareholder value in the way that you think they will. They might add a capability, but chances are there's a reason why they're small and it's just not going to be an impactful transaction. In that bucket, I would put up startups. So depending on how big you are, meaning the company that's doing the acquiring startups or development deals, oftentimes those are just as problematic as something that's small. So capabilities transactions tend to come with losses. So yeah, if you can digest those losses, that's great. Good for you. Bully. But a lot of companies can't and they don't realize that development deals are not good for shareholder value. Again, we touched on this a little bit, but those hallway conversations and renegotiation and lack of discipline around, for lack of a better term, deal secrecy can be killers. Those hallway conversations, elevator conversations, having these things leak to the other side happens, don't let it happen. It can be an absolute deal killer. And again, we touched on this a little bit at the end with regards to cross border deals. Complex deal structures are challenging and oftentimes hide problems. So there's a reason why the sellers want to do a lockbox transaction. It's because it's good for them. They can align all of the bidders up. They can say, here's what you're buying in terms of the balance sheet, give it your best shot. Then have the performance of the business fall in the three months between the balance sheet date and the closing date or the adjustments are way more in their favor than they are in the buyers. Simple as best. The more complicated a deal is, the harder it is to execute, manage and integrate. Being conscious of that, we talked a little bit about the details. Details matter in terms of transactions. So anything that you miss, it could be something small in the model or whatever, but it could come back to bite you down the road in a way that you never anticipated and that you never, ever wanted to have to explain to your shareholders who now found out about it at the same time that you did. So that attention to detail and doing your homework and doing your diligence is super, super important. You want to do all of that before the deal closes because afterwards you own it. It's just too late.

Andy, what's the craziest thing you've seen in M and A?

I would say in the last four or five years with John Wiley and Sons, the most interesting things that I saw in M and A were related to cross border transactions. Unique deal structures, unique opportunities that presented themselves outside of what I would have considered to be our core business and operating model. And Wiley is a global organization. But we started to look at things that were really disparate and it was important for us to focus on again, that strategy alignment and making sure that there really was a fit and that we weren't just chasing pipe dream associated with a prospective outcome. Those were the most challenging and rewarding deals from a personal perspective that I worked on in the last 15, 18 years.

What was the most unique deal structure.

You'Ve seen looking at a small privately held company in Germany, the way that they wanted to consummate the deal was really strange and challenging over time. For a big public company to look at the technical aspects of lockbox transactions which are pretty common in the UK now becoming more common here in the us provided a unique, not just learning experience.

What is that? What is the lockbox transaction?

Lockbox transaction is where you buy a balance sheet at a given point in time and the deal actually closes some period of time later.

Oh, interesting.

It's fairly common in the UK as are other deal aspects like rep and warranty insurance and stuff like that. It's quasi caught on in the US for companies that are doing a lot of cross border transaction. It's something that you're going to run into. It's a good process to understand and to learn about. But it's complicated. It's not just the legal aspect of it and the financial aspect of it that are complicated. It's also mindset. This is not the way that for Americans, it's not the way that we think about transactions and closing processes.

Yeah, probably a whole nother topic we can pick up. This has been great. Andy, thank you so much for taking the time to chat with me today.

Been my pleasure Kisan. And thank you so much for having me on. And if there are any questions or things come up, I'm happy to field whatever the audience would like to tackle.

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