How Integration Debt, Cultural Friction, and Communication Failures Kill M&A Deals

If you're on the buy side, you already know most M and A tools aren't built for you, they're built for sellers. And it shows. That's why we built Deal Room. It's the number one platform for buyer led M&A, designed to help you lead the deal from pipeline to diligence to integration without the chaos. You get real time project management, AI powered contract review, templated deal rooms and live collaboration all in one place. No bouncing between tools, no duct tape workarounds, and definitely no hidden fees. If you're serious about executing smarter, check it out@dealroom.net now back to the episode. 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. Hello M and A Scientists. Welcome to the M and A Science Podcast. This show is part of our mission to rethink how M and A is done and build the operating standard for buy side M and A. That old school seller led approach. That era is over. Buyer led M&A is all about strategy alignment and execution, putting value creation at the center of every deal. And let's be real. Not just about closing the deal, it's about making it successful and we get there by learning directly from the best. If you want to go deeper into the framework, grab my book buyer led M&A. If you want the full system frameworks, templates, exclusive content, expert Q and A sessions, access to me and the AI Powered Intelligence Hub, join the M and A science membership@mascience.com it's the home of buyer led M&A. While you're there, make sure to sign up for our free newsletter. Lead the Deal, Own the Outcome let's jump in. I'm your host Kisan Patel, Chief Scientist at M and A Science. Today I'm joined by Dinara Jagginyan of Transformation and Integration Leader. With deep experience in public and PE backed environments. She's led diligence, post close integration, TSA execution and enterprise system implementations across healthcare, SaaS, professional services and financial services. She's one of the rare operators who's actually done the work not just governance on a slide, but real integration, real TSAs and real change management in the trenches.

Today we're going to talk about all things it takes to make a deal.

Truly successful from integration planning through execution, TSAs, change management and more. This episode is part two of our conversation from last episode. If you missed part one I recommend giving that a listen first.

Otherwise let's pick it up right where we left off. When people say integration debt tracker, like what is it and why do they have it?

Integrations accumulate debt and not everything being integrated within 30 days.

Similar concept as like technical debt.

Yeah, it can be the same. Sometimes you come up with the internal processes that cannot be fully achieved to the target state without the cross functional dependencies system being set up, employees being hired. So for the functional leads to not come to the program level reporting all the time if they think they have achieved significant progress, it is more business as usual. And there is one or two long tail harmonization or integration items still remaining. You give the liberty of okay, functional integration is complete with the caveat of one or two items. You hop on a call, you document it and you assign owner, you assign timeline dependencies. It's a tool to make sure it is not forgotten. Because. Because once you close the integration or six months after, or a year after, it's not an active topic, it is easy to get lost.

So these are the long tail items that hey, this didn't get done in the 90 days or it's going to take longer. And you're tracking that so somebody else can take ownership of it.

Somebody else or they still have the ownership assigned, but it's a long tail. Sometimes it can be. You have to create a new policy in order to actually integrate this item. So in the big organizations it's not a day exercise to draft and get the policies approved and there's transformation or enterprise activities need to be happening for the integration to be complete.

Yeah, integration debt.

Yes. Oh, beautiful. And long lists. We tried to keep it short, but.

We talked about change management before and you did some stuff around that you like learned some stuff, implemented some stuff, saw how it worked and didn't work. Talk to me about it.

There is organization level and how you implement. Right. I did a leadership certification at Cornell university for like six months. It was very helpful. And seeing M&As from both buyer and a seller side, it just truly bridges the gap as an IMO leader to count all the activities that are happening part of the integration. So integration is the how is the what is happening to the employees. But change management is how they experience the integration. When you talk about change management it can be organization level restructuring, coming up with new policies. But in the integration lenses it's multiple layers. How do you bring in employees, how do you change behavior before you change the processes, how do you make sure you adopt to their processes? Sometimes. How do you make sure that they adopt your processes? There is cultural components to it as well. So it's making sure you account for the how you understand the gaps, you understand what roles or responsibilities are changing. It's a big exercise of not just integrating.

Yeah, you're going to have to spend some time and convince me this is a bunch of fluffy crap. Now I'll start with going back to the culture piece because I feel that comes up so much with integration. In the beginning it was probably the scapegoat. Like integration failed because the cultures didn't align and that we shouldn't have bought this company. Blah blah, scapegoat. And then I feel like things are evolving. Here's this old school. You buy a company and just like they're going to figure it out, make their own culture unique. That's old school corporate guy. And then you have this more progressive approach where we want to understand their culture so we can tailor our integration based on the uniqueness of each culture. Like some departments will integrate fully, nicely, sure. Some maybe not like have different operating models and styles and leadership. Maybe we should partially or keep them separate.

I've seen that and then I've seen.

Some where it's more of culture is the strategy. We're proactively trying to change our culture into be fitting of how we operate. I want to start there because I feel like the change management comes up and people will have a different view of how that comes in play. But I want to understand how does it intersect with the perspective and actions you take against the cultural part of the organizations. But then maybe you can convince me that change management is the thing and that it actually like facilitates.

Look at change management as a framework. It sits on top of the integration. Like being agile. It's like how do you operate? It's the how the experience.

Okay, I can get with Agile, I think exactly.

It is the same and I 100% agreed. Most of the integrations fail not just because of tools and processes, they fail because of the people. But it happens most of the cases. You buy a company and we're going to make you professional. We're going to show you how integration is. That company has been operating for a while, but the change management you understand what are the key drivers on the seller side on the company that you acquired? What are the key processes? Who are the people who are doing those processes? What are the gaps? Sometimes you take over, but sometimes you bring in as well. Are the people ready to assume it? It's not just the Headcount or like the bandwidth? Are they trained? Do they know what they are taking over? Do they need to be informed? There's so many layers to it. So you do an assessment. Coming to your point. Buyer led M. Right, baby? 100%. As a buyer, you want to make sure that they feel the integrity. They are part of the integration plannings. Because if you do not get their buy in, you have to work with them to integrate. You have to work with them to give you all the information, you have to work with them to draft up materials and all the documents that you need to import to your systems. So is the experience of how you talk to people, how you do the assessment, their gaps and then what do they need to be successful?

Is this a work stream?

No, can be. Depends. Integration.

I'm failing that answer.

Legal will love that. It depends. But usually change management sits in the HR department. But that's if you are doing organizational change in the M and A context. It's more of a framework that as a functional lead on the technology side.

When there's like a transformation function, is that sort of AKA change management? No, no.

Transformation can look differently. We've seen where we were, SAS clients, company bring in professional services. That's where you do transformation of how you recognize revenue, how do you transform your ERP systems, how do you train.

Your new teams, how to do massive initiatives? Transformation.

That's the tool, that's the conflict where.

That's where you see like how IMO and transformation could intersect. Yes, because sometimes they're overlapping or repurposed.

I guess it is. That's where sometimes deharmonization exercises happen as well. So I've seen. And there is the conflict when you talk for example to hr. Is it an integration activity or it's a harmonization exercise? Business as usual. If you look at it, it's still integration because you bring in five countries into your tent and now you have to integrate to one benefits package. Right. Sometimes you leave it as is. Countries can drive some decision making, but the ideal goal is to have as minimal packages as possible. So yes, employees, day one or after acquisition, they have benefits, but it doesn't mean the integration is done because you yet have to harmonize your benefit packages. In Spain, where you have five entities, that's where the transformation, harmonization and integration bubbles intersect.

Okay, let's go back to this change management.

Yes.

I want you to convince me on this. Let's say I'm buying a company, first time doing an acquisition and I'm just like telling you hey, my friend told me to talk to you. I'm going to go do this acquisition. Teach me like how would you get me to start thinking about change management? I can probably even say I got a little bit of uncertainty with how this founder is going to fit into the company and stuff like that. Teach me how would you get me to implement change management as in the.

Framework, there's multiple surveys that you can do at the earlier stages. For example, how formal the communication channels are. What are the dynamics of founder and employee based conversations? What are the channels they use? Sometimes like in the technology firms dev teams, just the slack they have multiple communication channels.

But some like what you do in cultural diligence.

Of course that's the driver of the change management. You are trying to understand how they operate. Are they truly prone to keeping systems or an experience of introducing new system and they were okay with yes, it's a better process. So you can do surveys, you can capture it from the conversations as well. Sometimes it's the microbehaviors that you identify that come out during due diligence as well.

Is that the biggest thing I'm trying to address when I think of change management is avoiding points of friction or identifying points of friction.

Of course, yeah. It's not just completing oh integration is done. You have to make sure people adopt.

That the goal of change management is to figure out where there's going to be friction. Some people are pretty amenable to change, some people are not. And is a goal of framework that you're identifying where there's friction and then being proactive to overcome it? Or is it more of like just an end to end framework that we're really pushing a change on all front combination.

It's a change that you are pushing up front. But how you going to change that? And trying to be proactive. What would be the unknowns, what would be the resentment that you will receive?

So and you start playing essentially you gotta be agile in this framework.

Of course.

Okay.

You know what's interesting on the change management is the change agents that I've learned in a hard way. Sometimes you think that oh you are ready to roll out and you do mass announcement and that's where it happens. But sometimes top down communication is more important. Where before mass announcement you find the manager from one team or like higher up to have enough influence and you try to teach them or just walk them through why we're doing so.

For example, these are like the neighborhood.

Mayors where they of course, but imagine if I'm coming to your team is like, hey, we are going to change your expense management system. People are used to it, they are using for many years. But it's not just or you've been doing manually, let's assume. But if you have as a manager you can tell your teams look instead of three weeks, no, I can approve your expenses within three days. It resonates with the people more so it's levels up communications and making sure they are unable sometimes coming back. It's not just integration, it's how you enable them to adopt. Whether it's the trainings, it's the guides, it's the tools that you give along with it and making sure that that's also receiving back the feedback. It's not only change management on the feedback side, but you have to make sure that you hear. It's two ways Communication didn't convince yet?

I'm getting there. To me it's like being pragmatic about the change in an adaptive way. You're accepting change isn't easy and you're actually putting more of a pragmatic effort to really like have extra assurance that you're supporting change by learning these variables, figuring out the key change agents and being able to like make that part of your strategy. An integration.

Yeah, usually people don't really resent the change, they resent the uncertainty. So when you go out and you're like we have to use this process, we have to do this now without the why it's really hard or if you don't really communicate for a while, that's where it's part of the change management of what is going to change and then do layer up of how many communication do I need? Usually you have to communicate up to seven times for the communication to reach to the end user. It's the entire framework of being proactive, knowing what's going to come and building up around it. Whether it's true materials, it's true meetings, sometimes it's also the manger enablement as well. It's again change management. Make sure you were company A, now you are under the company B and there's multiple systems. Do the managers know what are all the systems? And as an imo you help the managers drive the change by saying yes, this is two systems that we are doing but the end system is going to be B because all those questions are going to come up. And again it's tying up to the documentation and making sure that teams are unable to receive the change when it happens.

Are there tools you use to facilitate this Assuming like meetings are part of.

For the change management. Yeah, there is change impact assessment training needs templates. There's so many that you can use. I love playbooks, I love templates but it is hard to use one for all. You can get the framework but you have to customize to your needs and.

You have to know that it sounds like it's a lot of things that could be big variables that come up that you almost need to address them specifically. If it's the benefit change example like hey this is actually we identified this is going to be a change and it's not going to be received positively. Like we're going to have to get ahead of that. We're going to have to really figure out a plan to communicate it and elaborate the why and get people comfortable with it.

Yes, usually that would sit on the functional level, but we would the question would be the function to ask those questions. Are people going to react to it? Are you ready to provide materials? It doesn't have to be materials or referential links. Sometimes it's the geographics driving some politics. We will help definitely the functions come together by asking the right questions, bringing up the themes and the audiences. But there is no standard template for one size fits all.

I'm starting to get it. You mentioned that US work standards don't always translate globally. You learned this firsthand. Can you tell me a little bit about it?

Yes. With the mindset having replying emails by end of day or answering if it's critical answering after working hours or the US work dynamics versus Europe or Middle East Eastern side of the world where they yes, work is professional but taking the lunch break is important. Taking the vacation as a vacation is very important. You learn that while working on the actual project where you firsthand expect that it's a US hq is in US and they have to operate that way versus it takes layers of approval on their side before they reply back. It takes over the weekend to reply back. You just grow to adapt to it. Understand that not everyone works as much as it's US Working culture is the same as European or Middle East. You just adapt to it, establish working relationships.

Culture can get more challenging on cross border deals. Have you experienced that?

Yes, in a hard way. Sometimes geographics drive how people operate, how decision making is done. I had an experience in a TSA again in Middle east where we had to transition payroll and benefit services for employees. And believe it or not, many months into the TSA it wasn't just moving forward as an imo we were working With HR directly and they were handling the relationship. But at some point it got escalated to that we have no extensions anymore and we have to exit it. And that's where I almost stepped in. But in some of the countries there is hierarchy, there is role based and sex based decision making that has been influential. And as a woman going to conversations with a group of men, it was interesting dynamics trying to, yes, try to speak legally or drive conversations per the contract terms. And you see how yes, contract is affecting course there. But that's not the main decision driver because they have to make sure they talk to one specific person in order to release some people from the payrolls. So it's just interesting situation handling, I would say, so they wouldn't take direction.

From you because you're a woman.

That as well. It had to be escalated to my manager and it was interesting conversations. An email that I would send like multiple times wasn't being replied on. And then whether it's a title conversation, whether it was a woman, but my manager emailed and within a day it was like, sure, we'll do that.

Okay. This is pretty extreme of some culture challenges.

Yeah, it was interesting.

What about on the other end? Have you had crossbow deals go well?

Of course. Oh, interesting. Most of the cases they do. If you build a relationship, you have the respect for sure. That's one of the key aspects that we had as part of the IMO is making sure you connect with the parties and you connect the functional heads from the founder and the seller side as well. But what I would usually do is take a time to learn them, learn about them, learn what they do and learn about their pain points and that's it. Not just fix it. Not just day one. I'm gonna change this. You just hear around it. Interesting story that happened was one of the people from the acquired company, they were in Western Europe, they saw my last name and they're like, are you from Armenia? And after confirmation they said that they were in Armenia at specific year and they went to the university that I was in the same time where I was at school. So it was a nice bonding moment where we started like engaging around that. And I started like getting to like asking where they were after that. I felt like the relationship, the working relationship was so smooth. So sometimes it's the human component that comes into the play of. It's not just work. Yes, I hear you. And then I need this. I'll get this done for you.

You're hitting on a good point is around trust. I mean, do you Feel you gotta really meet people in person to sort of find those. You could do it on a zoom call, but it's not the same.

It's definitely in person is the best. It's no layers. You get the emotions, you get hands on experience. But we live in a digital world and not all the teams have the opportunity to travel and meet the peers in person. If you can do in person, that's great.

Do you have an approach where you're proactively trying to build trust, where you're asking them where they went to school, how many kids they got and where they grow up?

It's truly curiosity in me that building relationship is the best thing to get work done and I don't do that with that being in mind. I just genuinely am interested what works for them, how did they land on their position, what has been their journey? And it just genuinely comes to like, how about you? How did you land in the imo? You just build the trust by similarities, by pain points and the challenges that you had. And I've seen the relationships come into play where you have to do things and people have many things on their plate, but they'll tell that I'll get this done because at the same time it's the trust that they know if they have roadblocks, they have other priorities. As an IMO leader, it's, it's critical. We need to put a pause for a day or two for this team not having the bandwidth they have to do this, but you have to trust they'll come back to it and within a week it will be executed. It's again coming to the work relationships.

Where do you see like friction actually coming up in the deal? Yeah, it's always good before loi.

Of course, that's, that's the fun part.

A lot of fun excitement there.

But then it depends on how well you communicate. There's unknown unknowns and you don't know until you close the deal. But from the leadership side, you want everything to be perfect. When you communicate to employees, but from the employee side, like bottoms up, you don't really care about the end goal. You just worry about the uncertainty where it comes. And yes, you are acquired. Yes, you know you're going to be integrated but communicate to me, that's where the friction happens. Where sometimes leadership pauses when they think communication. If they don't speak or they don't have right answers, it's better to be silent versus no, it creates just.

You get a read on this pretty early. Yes, because I'm thinking of a deal where the other executive was such a pia on doing just initial like first pass of diligence. Like just to get the first pass of diligence. It was such a hard thing and I could tell we didn't move forward with that deal. But that would have been.

Look, we want the integration to be successful on both like execution side and the leadership side as well. And everyone understands. Yes, there's a limitation how much you can expend on the team, but you want to integrate it. And for the leaders it's the.

Is it all communication? If I were to ask you as an operator.

Yes.

What makes deals successful post close. Is it all about communication? What else? What would you say? Bottom line? No, no, don't keep me illegal.

It's two sided. So for the leaders, quick integration, first sold product. That's how you would look at it.

First sold product like jointly of course.

Like integrated product line already branded one.

Actually that's the right metric. Like first sold product.

Of course it's the first deal. Yeah, whatever gets the revenue metrics. But for the functional side, as the operator it's a bit different because you see not all the companies have the manpower of bringing just M and A people to do just the deal. Usually it's the people who do their daily jobs on top. You bring in an M and A and you see the bandwidth, you see the struggle. For me it's successful. When we advise both sides, yes, this important. What's the earliest we can do but also what's the healthiest way that we can do so the burnout doesn't happen, attrition doesn't happen. You want to maintain the knowledge, you want to maintain the people. But in the right way. That's tying back to the day one controls. Not everyone like, like things happen that people leave uncertainty, so many things. And you want to make sure you have the right controls before friction happens.

What are the biggest things that go wrong in integration?

All the beautiful plans that you lay out for 30 days, 90 days they shift get delayed. They do, they delayed. But sometimes the actual integration strategy happens as well with the leadership changes. So if you have a deal sponsor or you have person A controlling the P and L and then it changes and then new leader comes in. They want to of course they want to adapt to their process. Sometimes they introduce complete shift which drives how do you do integration on the front office, on your contracts and go to market can change as well.

Right. So delay plans, leadership changes. What could you do to overcome that? What's the best Way to do fast integration.

Fast integration. Give me all the teams I'll do within 30 days. Just like a right headcount will do that. But sometimes that doesn't really help because you sometimes have to lift up to integrate. Sometimes you bring in process or tools that as a buyer you are not there yet. So you might have to implement a new system in order to complete full ERP integration. So just trust in IMO when they give timelines or when they push back. I think that's really important because we sit in between, we hear what the leadership goal is, the why and what, but we also hear the how. So just being in between and like listening when it needs to take six months because it needs to take six months.

Tracking the balance. They're not just artificially making of course timelines that are achievable.

Diligence and synergies are really good thing. But you can try to integrate in the right way and do no harm and make sure that doesn't break. That's what you want to do.

If I hired you as my IMO lead on this deal, I'm eventually going to do. Eventually. People on this podcast will be the first know what is the first thing you're going to do?

Call my mentor and say I just got hired. I think having the right team is very important. It doesn't have to be big or.

I'm only giving you.

I'm not just me. Oh my. Okay.

You gotta work with the functional leads, but okay.

Diligence. Just hands on learning what your integrations to RJ strategy is very important.

Diligence right away.

Of course. Yeah. On top of diligence is the peril, how and where you are marching. So the questions are in the right way as well. Ask just merging into two and sign up a new business.

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

Oh, in my experience, that one PSA where I wasn't getting any traction on my emails and took just my manager shooting one email and the TSA was resolved within a day. Some founders just stepping out from their equity deals, they're like, we just did the transaction, we don't want to stay another two or three years.

That's actually really interesting because I know some people actually recently that had a big exit. I already know they're probably on a two, three year earnout and you hear about that. I think in one where it was a huge earn out and they walked away because they got pissed off at the integration process. Does that ever happen?

Sometimes it's the pissed off. Sometimes there is a clear intention. When people make the founders come up with their business, it's like I want to sell it to company X and I'm done. But some founders, it's like they leave and breathe with it. So it's their culture, it's their baby. So even after the acquisition they want to sell stay. They are usually transitioned to be head of like R and D or like a strategic advisor. So that's the difference how much their relationship with the product.

And that part is what sours.

Yes.

Things for them.

Yes. Coming back to probably the founders in the integration plans, it's important to get their buy in so they feel that they are integrated into the planning.

This has been a great conversation.

Thank you Kiyon.

Appreciate you taking time from doing deals to help me become better M and A scientist.

Thank you Kison. Thank you for having me.

If you've gotten this far on this.

Podcast, my fellow M and A Science.

Brothers and sisters out there, I love.

To hear from you. Give me feedback what you think on this. I'm trying to get more technical in these podcasts or diversifying getting people in different roles like Dinara who's very hands on doing these M and A deals and sees it the weeds of it, what really goes wrong and well, I'm always open to ideas of topics or other roles that I haven't interviewed on. Connect with me on LinkedIn. Till next time. Here's to the deal.

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