How Empathy Makes Mergers and Acquisitions Successful

I'm Kisam 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. In this episode, John DeRusso and I explore empathy and acquisitions. As Director of Corporate Development Integration with Cisco Systems, John has an in depth understanding of M and A as an acquirer. He explains why he finds acquisitions addictive and fascinating. We discuss the importance of empathy, how to evaluate deals, and the role of the governance team. Here's more on John's background.

I'm John DeRusso. I'm a director of Corporate Development Integration at Cisco Systems. I've been doing this for about four years. Prior to that I had 20 some years in supply chain.

Great. I guess starting off with our topic around integrations, why are some integrations successful and some not?

Well, you know, I would just say even in the broader picture of why are some acquisitions successful and some not, it's really hard to predict the future. So if everybody could predict the future perfectly, then you'd never have any failed acquisitions or failed integrations. So acquisitions can fail for reasons of strategy and they can fail for reasons of execution. The strategy piece is all about what are you trying to do with the deal and what are you trying to achieve. The execution piece is how are you following through and what's the path you're taking in order to achieve those objectives. And if you do that well and if everybody's working on the same page, then it can work out. But there may be surprises along the way and those can foul you up. If you have a bad strategy though, or if something happens in the marketplace, the acquisition may fail even if the execution was perfect.

Could you give me some examples of that?

On the strategy side, sometimes you think that the market there and everything looks to be going up and to the right and so you think, hey, I want more of that. So you make an acquisition that gives you more market share and sometimes that market, because of the technology change or whatever, that market just evaporates and then you're left with a lot of nothing. On the execution side, it's a lot more subtle because you can have people that never make the transition to wanting to be part of your company. Maybe they liked being part of a small company and now they're part of a big company. And if you don't hit a critical mass of those folks wanting to stay around especially well enough into the future, then you've lost too much. So there's People issues, culture issues. And I think there can be technology issues as well, depending on the capabilities that you're bringing in.

And that seems to be one of the biggest challenges I hear around integration is that aspect of it is how do you retain those people? I mean, is there a clear goal or strategy you guys start with in accomplishing that or thinking about that early on?

Yeah, absolutely. In fact, I would say that, you know, there's different ways to acquire companies, and the ways that I'm familiar with always are centered around how to grow, how to advance, how to add a technology, how to bring in an innovation in order to complement the innovations that are organic. So even if the company has got a product in the marketplace or a service in the marketplace, I think we always think of them as tech and talent in nature, even though there's also product elements that may be exactly what we're after as well. So we consider the people experience from the very beginning, who are the people? How do they work? What's their culture? As we go through diligence, we assess what is the nature of the company? Are they very hierarchical in their decision making? Are they compatible with the way that we would work? And then we bear all of that in mind and also work to educate people at every step of the way so that they know what's coming down the pike. I think it's really important to think about, what do people mean to you as the acquirer? You know, if you're two airlines that are merging, you know, when you hear about those acquisitions or mergers, it's almost always a conversation around, well, we're going to save so much in costs. One way to save cost is to not have people. So if your people orientation is people are cost, you're going to act in one way. If you're going to consider people instead as the way that I'm acquainted with, people are the wellspring of innovation, and they're at the very heart of why are you making this acquisition? Well, you're going to act in a different way. They're valuable. You want them and you tell them you want them, and then you act because you want them.

It's interesting because it seems like you initially, during diligence, you want to look for this match in culture and sort of think about integration ahead of time and how it's going to go. But when it actually happens, there's this uncontrollable phobia that goes to the target company where what's going to happen during this integration? Are they as part of the Plan, just doing a massive layoff, things of like that. What's your approach to sort of diffusing a lot of that initial stirred up controversy?

Well, you know, when you go down the path of an acquisition, there's only very few people that know it's going to happen. Right. You know, maybe the CEO, private public, however, there's many different forms of this. But very, very few people know about the possibility of an acquisition even occurring. The vast majority of people in a company don't have any clue about it. One day they go to work and all of a sudden there's an all hands meeting or something and there's an announcement, hey, guess what, we just got acquired. And that is an enormous shock to their system. Because when you're out applying for a job and you say, okay, I'm applying at this company, that company, the other company, you're assessing that company as much as they're assessing you for the opportunity. And so you're making a decision, I want to join that company. I've sized them up and that's where I want to be. When your company gets acquired, you're not in that position at all. You're in a position of wow, I came to work today and I work for a 150 person company now I'm part of a 70,000 person organization. That's not really what I signed up for. And you want to ask yourself the question, do I want that? Do I like that? And by the way, what's going to happen to me? What's the plans for me? So we've got a very aggressive communication that starts with usually executive leadership in advance of the acquisition being announced, those people in the know and we work really hard to explain this is what's going to happen, this is how we're looking at things. This is our game plan as it relates to people. And these are the next things about how you, your teams are going to find out what's going on. So we basically help the leaders of the acquired company lead their company through this transition. It's change management of the highest order. And so we arm them with knowledge and information and insight, but also recognize that those teams work for them. And so they're going to be looking to their own leadership to figure out how should they think about this.

So really working closely with the leadership team.

Absolutely. And so I think the right way to think about an acquisition or an integration is like this. Take a company and think about how many ways does that company do business. It has a product or it doesn't have a product, it's got technology, it's providing a service. It's got people that provide the service or the product, it manufactures a product, maybe it's got suppliers of products or services that are both relating to the product or relating to the operation of the organization. It's probably got salespeople, it's got people that fix things when they go wrong. It's got IT backbone, it's got people that buy it stuff. It's got intellectual property and attorneys. I'll just say, et cetera, et cetera, et cetera. Think about everything that makes a company go. It's almost like a little city in a sense. Now take a second company that's got a different way of doing ip, has got a different model for selling, has got a different way of paying people, it's got a different way of paying its customers, has got different channel partners, et cetera, et cetera, et cetera. And now say the job is to take those two companies and make them one company doing everything the same way. Now, not every company has got that approach, but that's the approach that I'm acquainted with. Because usually the best synergies, the best positives, the best magnification of the innovation that you're after comes from combining things together and using common processes that allow people to share information the easiest and best way. And also don't confuse the customers. So that's a really, really hard thing to do. But I will say that once you get involved with it, it's completely addictive. It's just fascinating. It's one of the few places in a company that you can have a job that spans the entire enterprise. Because if you're responsible for an integration, you're responsible for all of those things, not just one part of it. And most people are in a functional role where you see part of the picture. So it's absolutely a blast. The other thing I would say is that people that move into this field are nobody graduates from college saying like, yeah, I want to have a career as integrating companies. It just doesn't happen that way. You start with some sort of background, like in my case, supply chain, although I had some very interesting supply chain jobs that were very cross functional. And it got me interested in where else could I be involved cross functionally. And that's how I came to this role. And this is like cross functional on steroids. It's just an amazing opportunity and it's a challenge every day, and every acquisition and every integration is different.

You know, an interesting word when you Mention addictive. And I immediately think of for us getting into our sales process, when we make a win, it's this huge adrenaline rush and excitement. What points do you have in integration that you feel that sort of level of excitement?

Gosh, there's so many key points. You know, there's the deal team that's out there, you know, trying to figure out what is the right deal, what should the deal look like and such. And then when there's a milestone that gets reached in the deal creation and that's usually the point at which diligence starts. So we're involved as an integration team or certainly I as an integration lead before that point because we're helping shape the understanding of where would we actually go with this, where would we take this acquisition, how would we integrate it? But then there's that moment where you have the first sit down session with the company that would be acquired and you have diligence. And we like to have a company overview. The first conversation is always just, hey, here's a list of things that is provided in advance that we would like you to tell us about. It's like basically a tell us your story, help us understand how your company works. And that conversation is always exhilarating because it's that first meet and greet from the integration team and the senior most executives of the company to be acquired. And then usually I like to have a one on one or a couple people on one, maybe like the deal lead and myself talking to the CEO and just helping. It's the start of that process to help him understand how this will go. Here's how the rest of diligence will work. It's going to be hard. There's going to be a lot of things asked of you, but you can ask me a question anytime we go along now, it's going to be time to meet with your team. So meeting with the broader executive team is exciting. And then announce is that next moment where the deal is made known to the public and to the employees. Pretty much at that same time the employees are wondering what's going on. We're having an all hands meeting, but there's people over there that I don't even know, I don't know who they are. And so then there's the announcement and there's that moment of how are they going to react? Are they happy, are they glum, what's the mood? Best one I ever experienced was literally an applause like this is great, we're going to be acquired. It was a company that was going to go ipo, and they were just thrilled to be acquired.

So instead of going ipo, they were acquired. Wow.

So anyway, those are key moments. And then, so there's a period of time, oftentimes, let me just say it depends on the nature of the deal, where, okay, people know about the deal, but it hasn't closed yet. It's like buying a house. You can sign the contract, but then you have time to do your diligence and such. And then only later does the deal close for the house. Same here. There might be an interim time where regulatory approvals, et cetera, stockholders might need to approve, et cetera, et cetera. And then the deal closes and now you are actually one in the same company.

How do you keep that quiet? Because I feel like that's always something that happens where word leaks out early about a potential deal happening.

We've got a very professional team that it's a permanent standing team. Cisco has done nearly 200 acquisitions over its span, and so that averages out to about one every six weeks or so. So we've got a very professional organization that. That simply does not leak. The acquired companies have been very mature in their own right and so have kept things under wrap. So that's prior to announce. Once announces, you know, announces, hey, everybody, we're going to have a deal. That's when Pen has put the paper and such prior to closing.

Is that brought up formally prior to announce? Is there some kind of blood oath that everybody takes?

There's certainly. Well, I mean, there's the deal making and then there's the integration. But on the deal making side, the dealmakers who would be listening to this would say, like, oh, yeah, the keeping it quiet is part of the condition of the deal. Yeah.

Now, going back to the planning, you mentioned a little bit about that. And it seems like you start planning very early in the process. If you could maybe just dive a little bit specifically in terms of when that start and what happens if you.

Think about the life of a deal, just how does that go? There's the time when you haven't even necessarily talked to. When I say you, I mean the company, when the dealmaker hasn't even had a conversation necessarily, or maybe just like a little bit of kicking the tires. But there isn't permission to negotiate. There's nothing on the table to try to make happen. And then there's got to be permission to go, okay, yes, we sanction you to go forward and try to make a deal. So our planning process starts before that, because the conversation Is what is the concept? Even before we know too much, what is the concept of how we would integrate that company? Is it going to be, I'll just use simple, easy terms. Is it going to be hard? Is it going to be easy? Very relevant. Is it going to be expensive? Is it going to be fast? Is it going to be a long time? And so those things are very germane to even the decision to even go and negotiate, to try to have a deal, because at the end of the day, the cost and the effort to integrate has got to be part of the cost to do the deal in the first place. So it's very germane. And then also you're looking for other things. Okay, well, organizationally, where would we put people? How do we think about their offer, that thing that gets sold? If they have a product out in the marketplace and how that plays with us, how do we see that playing out? How do they approach the marketplace? How do we see that occurring inside of Cisco? So if you can't see the end place of how those things would pan out, then you start to wonder like, well, how would we make this work? And therefore, do we have a basis for integrating and achieving success? So we're involved super early in those formative conversations now. Then once there's permission to create a deal and go forward and all the rest of that, then once we get into diligence, we can test those assumptions. And so we're learning things that are relevant to the risk of the deal more broadly, IP risk and all of those other kinds of HR risk, et cetera, et cetera, legal risk. But we're also working to confirm our original assumptions on whether we think this is going to go down this path or that path or how it's going to go, and then that allows us to reformulate. Well, okay, we think actually this might be more straightforward than we thought, or actually it's going to be harder than we thought, or, well, we think it's going to be more like this, but we're still okay with it.

I'm curious, what are some of the key indicators that come to mind in terms of looking at what's going to be easy versus what's going to be hard?

I think there's good questions around how much does that company look like you? I'm talking more from the company that has got a product that's in the field or a service that's in the field, and how do they go about that? If it's purely a tech and talent play and the folks in that company are just going to become part of, say, a business unit and be added to the technical capabilities there. That's more straightforward. And we would be less likely to find those kinds of things that would stand in the way unless there was something atrocious on the cultural side. But to my knowledge, I haven't seen that. Or at least I can say I have not seen that. But once there's a broader ecosystem involved, then the questions become, does that company look like us or do they look different from us? And it's okay to look different. In fact, being different can be a way to change your own company. But those are important points to size up to. Say, do we have capabilities that align with what that company would need as part of Cisco, or would they be different? And it's okay to be different, but we have to just understand that in terms of sizing up the situation.

So understanding what the differences are and what you're actually going to end up doing about those differences.

Yeah. And just over, over a longer span of time, do we need to come up with new capabilities to accommodate that, maybe that different business model, or can we find ways to have that business model work within our existing capabilities?

How do acquired employees contribute to acquisition value?

I'll go back to my earlier statement. It's like treating every company as a tech and talent, even if it does have a massively fielded product and such. I think there's a lot of paths to innovation and there's a lot of expertise out there. And the paths to innovation can be organic. And certainly I would say that we're successful on that front, but there's sometimes it's just best to go inorganic. So where does that knowledge come from that. That you're after? It comes from the very folks that you're acquiring. So they're very, very key, you know, to being part of the success of the acquisition.

How do you go about protecting the value of acquired employees?

I'll go back to the potential shock that they've just experienced. Right. They didn't get a choice in whether they wanted to be acquired or not. They're acquired. They've got fud. Right. They've got fear, uncertainty and doubt. Their lives just changed in a way that they can't, you know, that they didn't predict was going to happen. So I think people that are successful in this business have got tremendous amounts of empathy, that ability to project yourself into the circumstance of the other person and feel what they're feeling in a very genuine way. And then programmatically, but also instinctively Address those concerns to the best way that they can possibly be addressed. And I say best way because sometimes you may not know all of the answers, but what you can commit to is communicating often and also using, again, their leadership in order to help them be successful. Generally speaking, you want people to stay around and so you, you take the steps that make them, maybe even to their surprise, feel comfortable in their new environment. Recently we had a, in an acquisition. We had an employee on the acquire company that had been through multiple acquisitions, had just happened to be in a startup kind of culture and had gone from company to company and had been acquired. And their statement was, this is the first time I've been acquired by a company that felt like it had a soul. That's what we want. We want them to feel what we feel, which is this is a great company to be in and it may not be what you expected or what you know when you walked into work that day, but it's where you want to be because it's a great place to be.

Where do customers fall during this process?

Oh, man, that is so important. So one thing that can happen in an acquisition and an integration is you can become very internally focused. There's a huge amount of need on the part of people like I was just talking about. And so if you aren't careful, you can over pivot and pay attention to what are we doing internally, how are we going to organize this, what's the decision on that, what's the right approach to this team in this circumstance. But it's very important to be much more broad in your view of how to integrate and look across the entire stakeholder community. So if you look at stakeholders, of course they're shareholders. There's the employees that are gained into Cisco, there's also the functions that are gaining those employees over time. But there's also especially the lifeblood, the customers and the partners that you're doing business with. So, again, empathy. Take things from their perspective. They might have been happy with company A. That nice, smallish response. Not everybody's small, but it's where it especially comes up, right? That nice, smallish, super uber responsive company that would bend over backwards to meet their every need. And then they hear in the announcement, whoa, hey, I like that company the way they were. Now they're part of a, a different company. What does that mean for me? Am I going to lose the great care that I had? Am I going to lose anything? What's going to change? I know how to order things from them. I don't know how to order things necessarily through Cisco, although in a good way. Cisco is a very big and broad company. So they might well be doing business with Cisco anyway. The point being that customers and partners are going through big time change as well. So in the same way that there needs to be a lot of communication with employees, there needs to be a lot of communication with customers and also the people who are working with those customers. So sales in the acquired company is super important. How can you make them feel comfortable that things are going to be okay? By the way, if there's going to be a big change, just again, think about those two companies doing things very differently, right? Someday down the road they're going to need to change from buying things from companya.com to buying things from, in our case cisco.com so that's different. And things work different on Cisco than they worked on Company A. So how do we help sales bring those customers through that change curve? It's super, super important.

I actually worked with a vendor that got acquired and that was the first experience, was total cutback in service and it was important for this particular vendor we worked with. And through the frustration I was always wondering, we just didn't felt like we didn't have a voice to address this and even turned to be sending emails to the CEO of the company that acquired the company. And I'm curious to know, how do you guys deal with that specifically?

Well, we are very communicative with those, you know, the customers of the acquired company. So when I say we are communicative, we want to actually communicate in the way that's best able to be heard by those customers. So the nature of the communications is done in deep partnership with the acquired company's leadership and then is prepared as something that can be provided through the acquire company's sales organization to those customers. And we arm those folks with information that helps them see how this is going to work and therefore how it's going to be okay for those customers. One way to think about this is, you know, as a consumer, let's say your bank is going to make some sort of change, they're going to change the way that they're managing this account or they're going to have a new look to their website or there's your current account that you have with them is going to change in this fashion and whatever, whatever, right? Just think about how that goes. There's probably some email early, early on that says, hey, good news for you, this is going to change six months from now. And this is Great news. You're going to be hearing lots more from us. And then sometime down the road you see another email communication and that one's got a link and you'll link out and it goes to an FAQ or something, right. And then there's a hotline that says, and if you have any problems with the way this went, make sure to click here, right? And then you'll talk to somebody. Live. That example that I just stepped you through would be very good. Change management on behalf of that consumer customer. We put change management as a super high objective as we're going through. Everything I've talked about here is change management of some sort. An acquisition and integration is just the highest order change management there is. There's so many stakeholders that are going through such wrenching change. So we put a high premium on managing them through that change in a way that is most comfortable for them and yet brings them to where they need to be, whether it be employees, whether it be customers, whether it be channel partners, et cetera, et cetera.

I'm picking up a theme. There's very big importance on communication throughout this.

Yeah, absolutely. I think the other thing I would say is if I'm making it sound like, hey, we've got it down, we've got a down pat, well, we're pretty good at this. But the fact is, is that it's too complicated to ever go perfectly. Think about that company A, company B that I started with a little while ago, that's too complex to have it work perfectly every time and in every way. So the reality is that you have to accept that some things are not going to go necessarily well. So what's really, really important is that you've got early detection, that people know that if something's not going right, they know exactly who to bring it to. So like in your example a few moments ago, you said, well, you had to eventually write something to the CEO in order to get their attention on it. I hope that resolved it for you. But either way, that's how you felt like you needed to pursue that. And what I think is important is that there be almost like a hotline that people feel like, oh shoot, I know that was supposed to go this way, but there's something wrong, it's not going that way and they can escalate very rapidly. So A, is early detection of anything not going the way that you need it, and then secondly is very fast reaction. So of course preferred get it right. But because you know, you can't get every possible thing right, Then have fast detection and have fast correction.

So I understand there's a lot of variance from integration. Integration. But the common thing, it really sounds like you're building a process for integration to handle all these different aspects, including what you just mentioned. I mean, does that sound right?

We absolutely have got a process that takes you through step by step by step by step by step. What I would say, though is that's a framework that will help guide you through the process. But on the other hand, this is why this is such an addictive thing to do, why it's such a great field. Every acquisition is different, every integration is different. So while that provides the guidelines that you would follow, the question is, how do you apply them? But there is that basis there. We're not winging it. We absolutely have got a game plan that takes us from that very first meeting before the teams have got permission to negotiate all the way to, okay, we're going to close the integration now. We're handing off to run the business. And we're available if you have questions. But you've got it. I mean, that might be for a large, complicated integration that might be two years later. For a small integration, it might be six weeks later.

Which brings up, how do those decisions get made?

That's a great, great point. Decision making is so vital to the way acquisitions and integrations get done. So you know, early on when you're still framing the deal and the deal's not closed and or deals not even announced yet, you don't quite have a deal yet. There is that point at which the company is going to commit, like, okay, how are we going to go forward with this? Are we going to sign or are we not going to sign? It's a go, no go for whether the deal happens. I think that's probably normal across companies that there is such a mechanism and so involved in that decision are the business sponsor, the executive that wants this to happen, but then also other executive parties that may be executive sponsors for their respective areas. Say sales, for example, is often included in such a conversation as well as the cfo. And they're shaping the basic outlines based upon how the teams have informed them to that point. So after that, after the deal closes, there's still decisions to be made. That's the outlines of how we want the offer to be presented down the road. That's the outlines of how we anticipate the go to market to work. But there are many, many decisions that need to get made along the way, typically. And so there has to be a Mechanism in place to make those decisions. We call that governance. I think maybe most companies would, but I don't know. The point is, is that you have to have a way to get those decisions made. So the way that we look at it is there's a lot of integration decisions and then there's end state decisions. So if the decision being made has to do with how is it going to work when we're done, then that's something that goes before a governance. Now it depends on how big the acquisition is, how impactful it is. It might be rather senior executives that are involved in that discussion, that could be some sort of executive committee, or it might be that this is a smaller acquisition, in which case there might be more of a VP director kind of body. In every case though, these are people that will own the outcome. So if your deal is in a certain technology area, then the person from sales that owns that technology area is on that governance body. The person in operations that owns that technology area is on that governance body. The person of course in engineering, oftentimes sponsor for the deal is in that decision making body, marketing. Same way. I mean you don't want to cast a thousands, but you need sufficiently broad representation to where that team can consider the left fork or the right fork in the road. And how do we think is best to work? Actually, I forgot to mention the other party in that conversation is representation from the acquired company. So they're not the, you know, the victims of that decision. No, that executive, key executive from the acquired company is also part of the governance because they know their customers, they know their channel partners, they know their employees better than anybody in the acquiring side can hope to know. So their point of view is extremely key. So they're part of that governance, that decision making body as well.

It sounds like a big roundtable.

It's a small roundtable, it's not too big, too many voices starts to make it hard to decide. That's one of those things that you talk over with the deal sponsor is okay, who needs to be around this table? And the advisory position that I can take as an integration lead is to recognize who are those impacted parties, generally speaking for the nature of this deal, who need a voice at the table because big enterprises are very interconnected. And the last thing you want is for a decision to be made in isolation without including the broader impact.

Does this make sense to ask how do those vested decision making interact with integration teams?

One thing to consider about those governance bodies is okay, so now you've got named individuals and you have a meeting, some of them may not have been involved in the acquisition. So there's a learning process there. So they need to be brought up to speed and help to understand like, okay, here are the broad objectives, here's the decisions that were made at the CFO level and the CEO level and et cetera about where we're going with this. So here's our objective. Together we're going to be making decisions that have to do with these kinds of things. And then it's almost like they're deputized, right? So on the one hand they need to represent their functional responsibilities, bringing them to the table. On the other hand you want them to have an at large responsibility. So they're not just there to say like, oh well, sales feels this way. They should be wearing two hats at all times. Sales feels that way. But you know, I feel like this is something that's important to Cisco. So they're wearing both hats. And so the reason I say all this is because if you weren't careful, you as, as a person running the integration going before that governance body, you might think of them as an audience. And my advice is don't think of them that way. Think of them as owners of the outcome. And therefore, if there's a question having to do with channel partners or what channel program do we need in order to make something happen, the channel representative on the Sterco should own that. And that's an expectation you set up front. Say, okay, you're going to be convincing each other as to what the right decisions are that we need to make together. I'll be part of that process. We've got integration teams from the respective functions that'll help you be informed, but you own the proposals that are brought to this decision making body. And then we all talk about it and then a decision gets made. Or maybe we talk about it today and then we do some offline work because the next time we meet we'll make the decision on it. So I just say this because I think the integration teams themselves can tie themselves up in knots thinking that they're looking for approval from that body, they're looking for a decision to get made, but the body itself owns finding and solving the problem, or not the problem, whatever the challenge is, how do you.

Keep all this communication from becoming an entangled mess? You know, like during diligence, the big challenge is cross functional dependencies. And I'm curious if you have those similar challenges during integration.

You have different alternatives as you go along. So sometimes it's helpful to just have a broader base communication that goes out periodically to a very broad community. This is once the acquisition has closed. Right. The the deal is done, they're part of your company, but you know, there's still a lot of figuring out to do and moving forward and progressing down the plan. Sometimes it's helpful to have just a very broad based message that continuously says, this is where we are, here's where we're going. That can help. It keeps everybody more or less on the same page. You don't have to do that, but it's helpful or can be helpful. The different governance bodies, it's not like there's multiple ones. There might be two, a director VP and a SVP or so on. For a big acquisition, it might just be director vp, that group. When you meet with them, it's important to track things, publish out notes, publish out recordings of the meetings and such, and then keep the integration team informed of what's going on. I don't actually think it is a mess. I think if you're clear about what you're trying to get done, then in the same way that communications to the acquired company are important, you're going to know that you've got to communicate to these folks.

So once the decision's made, then it's pretty direct in terms of getting the information to the right people that this is the direction we're going.

Yeah. The important thing is that decision has the right voices represented when the decision gets made. And what's to stop you from saying like, oh, you know, this function over here is not an ordinary part of this governance body, but the decision that we've got coming up actually involves them very deeply. So I'm going to pull them into the next couple of meetings as we talk this out because their voice needs to be heard. And the last thing you want to do is make a decision that doesn't include their valuable input, only to find out that, oh damn, they had something that really could have influenced us and we went down a wrong path. And now we have to back up and remake that decision. That doesn't do anybody good.

So make sure the right stakeholders are in place.

Absolutely.

How do you decide the degree of integration?

Different companies have got different philosophies about this. There are companies that just create like an umbrella and oh great, now we've acquired that company. They're one of our family of companies, if you will. You can think of it that way. And their management of their erp, if they have one, is going to be separate from this ERP over here. And that can work. It absolutely does work. It depends on what you're after. The integrations that I'm acquainted with typically are synergistic about growth or markets. And what I'd say is a good rule of thumb is that you integrate as much as you possibly can, which could be complete integration. The company exists only in terms of the people that are now part of functions across Cisco. And their product line is now the technology is integrated into Cisco's broader technological offer. And that's great. Then that's a very maximally integrated state. But it might be that they've got a capability or a way of doing business that is just different than the way that we know how to do that. And if that's the case, then there's like a cardinal rule in integrations which is do not destroy value. So oftentimes your company has paid a lot of money for this other company. So the last thing you want to do is detract from the value that that company brings to, in our case, Cisco. So there's this careful balancing act in integrate them as much as you can, but not so much that you do harm. What would be a really good question like, oh wait, John, where is that line drawn? How do you know? How do you know how integrated is too integrated or how you know where, oh shoot, you broke something or you irrevocably damage the customer relationship, or you don't really know how to do that, but you're just kludging it and it's not working out very well. How do you know where that line is drawn? And then I would say, oh, that's a really good question for the governance body. That's what they're for because they're responsible for end state and because they've got representation from the acquired company and also from the acquirer, it's the exact right spot to have that conversation around. These are choices. This choice looks like this, this choice looks like this. Let's talk about the repercussions of that. And then to make sure that the decision is made on a very, you know, very firm ground that we can only take it this far because farther than that is too far.

What about time frame? What's your philosophy on time frame in terms of do you push to do as fast as you can or where do you find the balance, you know.

As fast as you should? So generally speaking, speed is its own value. Psychologically. When something happens, a very large scale change, people have got this little shock effect that Positions them to accept even big changes to come. And the longer you take to work through an integration, the more that wears off and then they pick up what could be a resilience to change. So I would just say in general, as fast as possible. But on the other hand, two years, if it took two years, is not very fast. So you might be driven by external constraints, the way the external markets work. There might be buying cycles that you need to be careful of. There might be other innovations that are taking place that would cause you to want to move fast so you can capture a market now. And so maybe you do something faster than maybe you're comfortable with, but you can always clean it up a little bit later without destroying value. But I mean, just like a solution that gets you by, because speed was of absolutely the essence, or it might be that that's too risky. We need to have a more measured approach to this and just lay it out over time. So I would say speed is good, but not faster than you should, only as fast as the overall picture allows you to go.

Makes sense. What's the most difficult part of integration?

It's helping people through the change. It's on the one hand, the most exciting part. To put yourself out there in front of a group of folks that never heard of you before in their lives five minutes ago and help them see that this is good, but also to sustain that over time. Because as soon as people start not hearing or if somehow that communication was a little slower in coming, or maybe their leader had a bad day and therefore, you know, said something that wasn't positive, which by the way, is just human nature, right? Then those things make it tougher. So it's this constant effort to help people see what you already know, which is this is a good thing for most people because you're becoming part of something bigger and greater. And therefore, and we want you here, people respond to that. But it's not easy. And not everybody's going to buy in any other challenges. Okay, a long time ago in this conversation, I said, gosh, if only you could predict the future, every acquisition and integration would go great. So what happens when you didn't predict the future? Right? And you're surprised. So something happens and you go like, oh, shoot, didn't know that that was going to happen. Example could be, for instance, well, we've got an IT infrastructure. They've got an IT infrastructure. Despite lots and lots of figuring out about how their IT infrastructure could work. Inside of Cisco, you work at IT and oh, dang, something happened and so that kind of circumstance is exactly the one of early detection. Know that something broke or didn't happen the way that you anticipated, and then it's all hands on deck. And make sure that any stakeholder that's affected by that glitch gets informed. Gets informed that you're on top of it. One thing that I heard a little while back that I really respected was basically if something happens that's not good during the course of the integration, be super communicative about it, be hyper planning about it, let everybody know what the plan is. Because if people see that you're all over it, then they're going to help you make it happen. They might even say like, hey, come down, it's okay, we'll make this work. On the other hand, if they hear precisely nothing, then they're going to give you lots of help. Right. So the idea is again, early detection and very fast and vigorous response to anything that is a surprise.

I need some examples. You don't have to get any names or dates, but, but I would love to hear some specific examples of surprises you come across during integrations.

Well, in companies that are smaller, their network topology might not be fully well documented. So you might think that you know how it works. And even the company might think they know how it works, but they might not. And so if you in the process, over time, after careful planning, moving their network and how it works onto your network, you suddenly cut off an avenue that's customer related, that's a problem. And so such an example might have happened. And so you have to just be all hands on deck. Wow. Customers lost an avenue to do something that's important and actually there's no going back. So what's a fast way to fix so that those customers don't experience harm over an extended period? How can we address that? And you know, team, as you might imagine, got very creative, came up with ways of making it work, you know, set up a hotline, blah, blah, blah, blah, blah. And so fixed it. I won't say that it was fun, but it's part of that. No matter how hard you try, things aren't going to go perfect. It's painful when it doesn't go well, but all you can do is know it as soon as possible and then fix it as soon as possible.

Have you ever had a surprise that was very expensive to overcome?

I personally haven't had that kind of surprise. But I think, you know, going back over the history of a big company with nearly 200 acquisitions that there, there might Be such an example. I don't have firsthand experience of it though.

So what's the craziest thing you've seen?

Actually, I've been very fortunate. I've been very fortunate. I haven't seen a lot of craziness. I think that I've had extremely good deal sponsors, the people that are my business partners that want this thing to happen. I've had extremely good deal partners that are, I call them partners in the truest sense. Like, hey, we're working on this together. You're figuring out the deal, I'm figuring out the integration. But hey, we affect each other in our respective success, so let's work together. I've been very fortunate. I have not had that big, huge, oh my God, expensive surprise.

Do you think a lot of that is just because of the amount of diligence done up front and really thoroughly checking things or you just been lucky?

Oh, I would never rule out luck. I think that you do all of those good planning things and you also work to build up goodwill in the folks that you're working with. Well, just all over the place. Acquire company or not or formerly of your own company. You build up goodwill and then it pays to be lucky as well. So that's how I would put it. I would never rule out luck as an important element.

Fair enough. Let's dive into the lifetime career lessons learned. Given some people are just getting into integrations, listening to this, or just spoke to a person that took over head of Corp Devrel, what would be your big lessons learned over your career?

I think it's most important to recognize that you've got an extremely key job that involves causing other people to make really important decisions. And at the same time, you need to win trust and confidence. So it's business advisory. In that capacity, you might be working with an executive who's trying to make a deal happen. He knows it's a good thing to do or she knows that it's going to have a good outcome. But they haven't necessarily been through it before themselves. And so you've got to help that executive be successful. And there's so many ways that they need to be successful to help the deal be most successful. They might be very good at engineering or technology, but the most successful deal sponsors are those that are most broad minded in their thinking and they're thinking hard about the people aspects of it. How are engineers being integrated into their team? They're mindful of the go to market elements. So the question is not all of those executives are Going to be equally gifted or equally broad minded. So how can you help them with the areas that they may have blind spots in? Do the right thing or guide them to do the right thing so that the decisions that get made and the general direction and feel is more positive than it otherwise might have been. That's super important, is that you're going to end up knowing more about this than anybody in your company or other than folks in like jobs. So you have really a responsibility for helping other people do the right thing. The other thing I would say is if it doesn't come to you naturally, in which case watch out. But if it doesn't come to you naturally, or maybe you're a little rusty in it, literally, practice being empathetic. Go through the thought process of let me put myself in that other person's shoes and see the world as they see it. And I guarantee that will inform how you go about things. And there's all kinds of different people that you have to do that with. The CEO of the company, the senior executives of that company, a customer, a partner, rank and file, just really actively put yourself in their shoes and think, what's it like for me? And it really is eye opening because things that you might not have thought of suddenly become so completely obvious in terms of how you would want to move forward.

So voice concerns early and empathize with everyone.

Yeah, yeah. I mean, it's not a guarantee of success. You know, dose of luck is good too, but it'll certainly improve your likelihood of success if you bear those things in mind.

I'm curious, what would you say are the key skills one should have in your role?

I don't know if I would call them skills. I would call them traits. I think curiosity. So how do things work? As I mentioned, coming into the role, you're coming from someplace, your background is only thus and such, and yet your responsibility is extremely broad. So you need to be naturally curious. About what? Well, how does that function work that I didn't really have any prior experience with? How does this other function work? How do these functions work together? How does this create a network for how my company works? Very few people know that. Very few people know that whole picture. So just a natural curiosity that then spills over to oh for this company that we are considering acquiring? How do their processes work? How can I identify things that don't match with how we do things and therefore represent key points of decision making relative to the integration? So I'd say just natural curiosity is super important. The ability to bring people with different points of view together to ultimately achieve common ground is essential. If you don't have common ground, you don't have an integration, right? So people usually come to that conversation feeling like they're absolutely right about something, and yet they may be at right angles to each other and therefore not in agreement. And so again, you're in that one seat that sees both sides of that or all three sides, if there's three sides. Generally, it's the job of helping each other understand that you might not be that far apart. Or here's what the total picture looks like. So we have to take off our functional hats and look at it as a shareholder in our company. And how would we what's the right thing to do going forward and what are the implications? So that ability to arrive at common decisions help other people arrive at those common, you know, common decisions is. Is key.

That sounds like you.

Oh, you're being very kind. Thank you. But it's back to why I find this addictive. It's. It's a blast. And I can state plainly it's the best job that I've had.

Thanks for tuning in to M and A Science. I'm Kisan Patel and you just listened to John DeRusso with Cisco Systems. We hope this episode provided valuable insight into M and A transactions, how to care for people, and effectively lead acquisitions. If you have interesting MA stories or suggestions to share, reach out to me. You can find my email in the show Notes. For more resources, including links or tools mentioned in the show, visit dealroom.net podcast. This podcast was brought to you by Deal Room. DealRoom is a technology company that helps corporations on both the buy and sell side minimize risk and maximize value on MA transactions. We take the mess of data rooms, spreadsheets, and emails and replace it with one easy to use process management tool. This results in big improvements in collaboration, security, and risk tracking. Learn why Deal teams are switching to dealroom@dealroom.net all views or opinions expressed by any individual in any form of communication on this podcast, written, oral or otherwise, are personal and do not represent the companies, firms, institutions, organizations or otherwise that they are associated with.