How to Define your M&A Strategy for Increased Deal Success

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Welcome to M and A Science where leading M and A practitioners share lessons learned from their experience. If you're interested in keeping up with the latest from M and a science, visit mascience.com and subscribe to our free newsletter. Every Monday we share highlights from our interviews and invitations to events as we build the greatest community of forward thinking M and A practitioners. Again, that's mascience.com I'm your host Kisam Patel, CEO and founder of M&A Science. Joining me today is Sri Vishva Nathan.

He's the Chief Corporate Development Officer at HCS Healthcare.

HCS Healthcare is a pure play healthcare business process management company. Today we're going to talk about building a great M and A strategy shree. Can we kick things off with a little bit about your M and A background?

So I have 25 plus years experience in COP DEV, 5 years in joint ventures and the rest in COP dev. It's more acquisitions divestitures for the partnerships. I've done around 15 plus transactions across US, Canada, India, Philippines across so and divestitures is a different ballgame altogether Then I'm an angel investor in my personal time around six investments. Mostly I focus around digital tech and health tech. So there are one exit, one near around exit soon and two going really well one failure. So there's lots to learn from it. So overall it's time. I'm a cop dev M&A JV partnerships and an angel investor. In my personal time I'm a stock trader so that's my background.

You're really well rounded. I like it.

So everything that has to do with investments and what you have to do with the money later right?

Do you have any like normal hobbies? You play golf, tennis or anything?

So I follow where my kids like. I follow the money approach, I follow where my kids take me. So that's my hobby about I do the same.

Let's kick things off. What happens when you don't have a clear M and A strategy? Why is this so important?

So if you don't have a clear M and A strategy the danger here is this is a very pricey game to play. And because M and A draws out most important thing in an organization. If you're much larger organization the risks are much more. It can suck out the management time in areas where you don't want to. That can derail the organization from the most important things that you want to do and the next assets. It's a very pricey in terms of the diligence any diligence process bigger the targets are it can draw out it can be a very pricey diligence process. So in general you will. You would have ended up wasting a lot of time sacrificing in the time what you want to do and next all the time that if you're not making a deal if you're an M and A side if you're not making a deal it hits the pnl. If you're making the deal you can cap capitalize and that goes on the balance sheet side. Right. So it's for. If it's a listed company that makes a lot of difference that can hit your EPS reporting and very sensitive to the stock price. Right. Really need to know what you're doing about where you're spending your time and.

Money so you don't make expensive mistakes. What about benefits of having a good strategy in place?

Strategy is that it's about an alignment. The good part is that you really know what you have to do where you have to plant your flag. There is alignment across the organization in the sense what's the strategy? What's your capabilities? What do you want to build on your own and what you want to buy. And a good part of the strategy is that the focus is on spending your efforts exactly on things that you want to buy so you can avoid boiling the ocean and exactly to go into a proactive search process and you can articulate your script and articulate what's the value that you get on the table. So if it becomes a very proactive approach it's not that assures of success but at least you're aligned. And any learnings involved you can constantly calibrate to learn improve your strategy and your mechanisms and your offer on the table. And how do you approach the market, how do you run campaigns and how do you convert and how do you differentiate? You can Constantly improve to convert finally right which way which you can encash anyway.

So getting your alignment. I like how the alignment example your local team but even the broader organization you can get aligned and then focus your efforts on more specific targets as well. At least the right ones. How do you think about shaping the strategy for a corporate function?

Yeah, shaping from the strategy like I would like to start anything related to strategy from what you are capable of. Strategy is a very broad word and no two person can define it the same way. It'll say as in any organization standpoint I view it as we have a limited team and people have a daily job and there is so many people can play something extra beyond their hours. So how do you spend your organization time is the way I would like say that starts from your capabilities, how much resource you have, what's the best you can do with your capability and the resources and what choices you need to make is how I will define as a strategy. And then the sense like what you're capable of, what you can do, what's the market through the capabilities where the market can be big. You can use capability as a filter to see what opportunities that you can chew and what opportunities fit you, what you got really good at, what you can stretch to do what's a great opportunity. But that's not for you. It's to make those choices and make those careful bets and allocate your capital into what you are and allocate your organization time into it. It's about making those defined choices based on what you can do.

Basically how you are going to spend your time as an organization and then managing capabilities and again how are you to execute against that?

Yeah, it's finally making choices like it's like I'm good at this and I can say I want to be a crypto coders but it depends on whether I'm capable about. So I'll say it's about making choices based on credible evidence of what we are really good at and based on those capabilities how am I looking into the market or what's my customers saying? What's the market saying? What's the outside in perspective? And then the catch all in is always kind of strategy is many times defined as an inside out exercise. 10 people can lock ourselves in a room and come up with grand plans and decks and it's. It's more an inside out perspective. I can finally it's to have the outside in perspective to put the mirror in front of how to say this is real and this is what you're capable of. This is what you can do like see it with versus your competition, how they are good at. So anything you're putting in your money where you are not capable of, like where the competition can take you out for a ride. So that's how you need to be as a leader. You need to allocate the time and spend the resources in a way where your team has the ability to deliver something beyond your competition. It's about making those choices with these filters in mind. And one strategy doesn't fit like even if you're operating in the same segment, if you're at the same player, the underlying capability of the organization as a leader you need to be aware of the DNA of the organization. You need to be aware of what finally I can deliver, my team can deliver what's a stretch for the team, what's beyond for the team and otherwise, even if you're operating in the same space, one strategy does not fit two players even if you're in the same space.

There's that element you mentioned of a reality check and almost exercise of self awareness as a part of this.

It's funny like you have a lot of experiences like say I have involved in the past with organizations like Tatas. They have adopted kind of Malcolm Baldrige model as across the group. And you come across that there are mature organizations, there are organizations which are premature. It defines how do you look into a strategy exercise. The worst thing that can happen to an organization is that like in a crude form an organization can look the strategy exercise as a budgeting exercise. Right. Like you say, oh yeah, this is what I've done last year and this is what you are going to do. And it can become a number exercise, a financial exercise. All sales, a client service organization and operations can sit together and say we are good at this, we are so good at this and next year we will do. And you can that's becomes an inward looking excise. But ideally it needs to be an outward looking and limiting outward looking, not just your customer that's one level better. It gives an outside in perspective. But it needs to be a broader market excise the macro trends, how it fits in and how do you see an outside. So once you immediately look in as a benchmark with others benchmark with industries, then you know how tall you are and how good you are, what you are good at. So it's very important that it needs to be broader into outside and a good balance of bottom up and the top down bottom up in terms of knowing Reality is important and top down in terms of making those clear choices. Finally, yes, there are hundred great opportunities to go after, right? And finally making those choices to say this is this year, this is next year, this is far off and this is how we are going to do that brings in alignment. Otherwise you are running 360 degree and trying to plant facts in different areas. You dilute the efforts of the team. 360 degree. That comes at the cost of results. What you can achieve.

Who are the people involved in formulating the strategy?

Typically it starts like I'll say any organization, the sales organization, the salespeople will be involved and the client servers, the account managers who are managing the big accounts will be involved. And operations team for running the business day to day will be involved and the finance folks will be involved. You start together like what you have done last year and what you can do next year. And based on what you hear from our customer, these are the typical people involved. Once you step up into bit of a matured organization, the next level of maturity. People start with say the voice of customers to listen to your customers and what they feel like and calibrate that into how they feel about you and what about work you have done and what you can do. That's the next level of maturity. And an organization who is far more matured into it to say beyond customers to say a reflection of the market. Because you may be working with a sample space of customers who may reflect the segment or who may be a lead player in the segment. And then you're fortunate. If your customer is a lack player in the market, then you need to be conscious about taking samples of across the market. What's the requirement of the segment as a whole. And the next level of maturity you need to bring in the outside level. These can be consultants or these can can be voice of other customers, your relationships who can how the market is trending the next wave down. And even if these can be startups in the field, right? If you're thinking about survival of your company, say down five years down. If you. If you take in math, that is every 10 years, how many companies have survived, you'll be surprised by decade. Like many companies vanish every 20 years. If you're also thinking about downtime like your company to be valid. It's also important to involve those companies were disrupting the segment. They may be very small now, but they can sweep you off the floor down 20 years. So you just. You ought to think about their perspectives about how the industry is changing. That's the next level of maturity.

Do you distinguish separately your company strategy and M and A strategy? What does that thinking look like?

It has to start from what's the organization and what's the strategy of an M and A is a subset of the organization structure. It's to execute an organization strategy strategy. That's how I would say in the strategy say this is what we want to do, target A and then it comes into area. Yeah. Out of this I can do 1, 2, 3 on my own. But this is something out of the wheelhouse. Right, out of the wheelhouse. Or this takes too long time to develop or too long. It's of a time my market will change and there is a benefit in buying. I think M and A fits in where a strategy what I can do on my own, then what's the gap like and then what can be a buy versus make on your own? Whether it's in terms of the time it involves to make it or whether you have the capabilities to make it. So once a buy is defined then you make relevant to that. Then you make a strategy to go after the market to acquire. Right.

So the M and A strategy is a subset of a broader company strategy.

Definitely it has to be. Otherwise we are not aligned.

Well, help me wrap my head around this. So say I'm brand new in a corp dev role. Head of corp dev just got this new role, growing company past 5 billion market cap, something like that. What's the first thing that I should be doing? Think in terms of strategy. I'm assuming that I want to learn what the current company strategy is and then help them shape something very specific for M and A. Can you maybe walk me through some.

Of that thinking I'm joining new? The corporate dev role is you have to be a listener like first you have to understand the segment. If I'm joining new for the first thing I'll do like it will differ if from any other person the way they will do. I have to be a listener. The first few months go across the organization with different stakeholders starting from be it the board members and what they want in terms of the financial shareholders, the customers, the leaders across functions from sales, client services, operations, finance and understand the business. I'll have to say what's the business? Where are we playing? Who are the competition? What are the key levers from the business in terms of the macro trends, what's playing out and what's the service we are offering right now and how it's differentiated in the marketplace and how does the revenue Model work why customer is paying and why why they are paying what they are paying in for and what's the value positioning in the market like how customer fees it like and and how we price low high and how the customers are validating. I need to understand the business right play a meaningful role in incorporate dev and defining strategy then articulating the M and a strategy as a subset of it. Then to go to the market I need to understand the business in terms like all the bullet points as an approach I explained is to say how I will try to understand the business. And I particularly feel that while the macro factors is underplayed a lot I will stress a lot like it's like anything like you can understand the all thousand line item details in an Excel sheet but say the macro factors play a big role. It's as much as an organization in a functional silos. They are understanding. They understand the micro factors very well. And when you have to connect the dots and put things together and see a big picture and you need to understand the macro factors in terms of the geopolitical or the industrial level and what's the path around the curve and who's playing and who are legacy competition and who's emerging players and what are the changing business models and what's the buying pattern differences so you like by the customers and there is a bundling or a kind of splitting of the way that they are consuming and what's the convenience playing. You need to understand the macro factors and understand the segment play. Then you can go back to now look at from a different perspective. I heard it from you inside out. Now go back and from outside and go back to the team and say now this is from an outside in. You present with the details in that how you see the trends and factors and with the evidence of it and with the players and how they are performing and benchmarking internal teams performance with the external. Then people will say it's always we need to be cautious because people who are running the business day and day out they are veterans people can be there running it for decades. You heard from them after two months that you're going to go back to them and say oh come on, I'll tell you what you need to do. What's the strategy like? People can throw you out. So hoping is that it can happen as I can go back a few months say this is what I heard from structure. I learned this from you but now I'm bringing this is what outside. Here are the data and here are the trends and here are the evidence, here is what we compared with this. Then once you talk with data then it's very compelling for people to say oh now that's an outsider. And now you can say that's a learning for people to say oh yeah now I can learn from this. I can can make choices from this. And they need to an acceptance is something a clear factor and inside the buy side organization having 20 years it takes a long time to gain acceptance from the team to say that they can hear from you. And being internal to an organization and being accepted as an advisor is a very tough thing because it's not I think across any organization you can say that that's why you hire a McKinsey, you hire a Booz Allen because people can accept anyone outside as a consultant. But somebody who are you having a tea with on a daily basis to come and say you're not selling, you're not delivering, you're not part of anything. But you're going to tell me what's the strategy is going to be how we need to do. You need to gain the acceptance and that needs to come up with tangible evidence and you bringing putting up action opportunities on the table for the team to benefit. So it's to gain acceptance. Once you have acceptance then you get to play long, right? Like internally. So that's why on the buy side if you have sell side engagement on the buy side you are involved. There is a lot of merit in playing long in a segment. Playing long in one one target and you gain acceptance then you get to do a lot of awesome things.

Can we walk through an example of how you formulate an M and a strategy? Can we make up a little company and walk through how you'd actually build that out?

If I have to say if I'm selling example a health care service like which I'm used to like my customer as my insurance payer and say if I'm selling a product of service X and then it's once a strategy is defined to say I'm going to offer enrollment service helping insurance company to sell their services or policies to their members. This is the business your growth is defined to say you want to be a hundred million company and you want to be the best in the segment. And if you need to do then from that you need to come up and say as an M and a strategy is that what you are good at? Say internally example after making the inside out comparison and outside and if it turns out that yes you have a good sales engine. If you Say that if you have a good operating engine and assume that if you don't have a technology backbone and if you're say so many companies operate still in a legacy model. Say assume if I'm one company operating in a legacy model still paper pen or a kind of a limited tech if it comes out as a technology gap then that and an M and a strategy comes up with this gap analysis to say yes one there is a technology enablement as a gap then two I used to say oh I'm not able to sell that I need to I'm lacking the consultative front end to sell. I define a two these things that that becomes the criteria then I'll go of my M and a strategy becomes that like my goal becomes this gaps need to be met in any transaction. So then I define a criteria to say this is the size of my company, these are the gaps and in any acquisitions it needs to check the box and tech front end sales team. This is my treasury. I have X million in my balance sheet. I can raise this much money and I can liver and I can give my shares this much. Like what's my treasury and funding like to go for it. Then I'll create a campaign and with what's all my criteria? What size of company fits the bill? What's the capabilities? These are the capabilities I look in for it. This much I can spend for it. This is the timeline. I define the campaign. Then I go out in the market and check if this is a criteria. This is my wish list. Are there targets that fits a wish list like this? Then I map the competition that fits the area list out and check out for like what's available, what's already available in the market. There are then then through networks that intermediates then through a proactive campaign. Then the message get some real opportunities first to test and validate what I'm looking for and whether it's available in the market. Then I'll have a large scale exercise to double click on each of those efforts.

You had a really good example of why strategy is important where you can understand those characteristics of your business, the strengths and weaknesses. Now you're adding an extra layer into. Not only am I looking at targets to add that business line I want but I'm going to look for these specific characteristics that can bring additional value in these areas that the tech stack and things like that to strengthen.

Very importantly like the M and A strategy needs to come out. It needs to be born needs to come out of the overall strategy and the gaps in what we cannot do, that's one. And second, if you have to make it really powerful even out of this options because there can be many gaps. There are some gaps. If you fill it the organization needle in terms of what you're delivering to the customer may not change. And the powerful choice of M and A strategy is that where you can multiply the value you can identify a target like these are the gaps I can go for a company like this. If I acquire this company, I can make it E to the power of X. Then there is a huge value I'm developing for all the stakeholders. Be it for the acquiring organization or for the acquired organization. Then you're making it a big win win there. That's how you can prioritize. While there are many things to buy, what I will buy first, that's something which moves the value for the organization. Whether you measure it as the value to the customer in terms of the service, they see them the way they can see you. That's a powerful parameter for us to choo from. And then I'll say oh, if by acquiring this new capability that changes the perception how they are going to look and next is by this change in positioning, are they going to pay something extra for me for the change in positioning? Then third is this is a such an attractive segment. This is a big needle mover. Can I take this from 1 million to 50 million or 1 million 100 million? If that's an area. If I have that's the biggest for me say in bottom line there is which moves the needle or in terms of on the customer size in translating into your financials that becomes the highest and first thing to go after. It needs to burn out of it. That's how I'll prioritize. If I do this, then it becomes an easier thing. When you're going after it. You are picking order risk in terms of the biggest in terms of value. Then any efforts that is spent you're having a much larger numerator on a smaller denominator. What you're doing that becomes the value multiplier effect is much more that benefits more even the acquired organization. That's very important because so much if I'm parking a small amount of the consideration for the future benefits to be achieved. The acquired organization sees that as a good upside which they cannot do it on their own. Because that becomes a key attracting point to say. And in this world nowadays it's a big difference because there is a long lineup for new age talent and new age people. And there are 20, 30 bits. And that comes to say how you differentiate. So when you're picking orders in the theme of starting from your area of strength and where you can make a difference and you are coming in and you're looking into a target to say that I'm not buying you for what you are, but I'm buying you for what I can make out of you beyond what you cannot do yourself, that becomes a huge selling point to differentiate, acquire, add value for everyone.

Really great point on having the priorities, you know exactly where you're focusing and then building that compelling story to be competitive in those situations or get the level engagement. There's this big step. We have strategy in the front end of the deal process and the end is integration, where ultimately value gets created or destroyed. How much does integration play a role in strategy?

Honestly, integration is 80% of it. Or I'll say even if I need to put in really integration as 90% of it, or even much more. If you have to say everything, because finally when you make an acquisition, say if I'm on the strategic side, I'm on the buy side, I'm buying. Like in this case, I would say integration is everything, even if I have to say. Because once a deal is done, people sense that's where we need to understand how the incentives are aligned. On the sell side, who are a banker who is selling it to you for deal is done. For him, everything is done and he will take his check and he'll move away. On the buy side, you made a deal, that's great, you can celebrate, you can have a drink and you can hear your part of your incentives are aligned to making a deal. But after winning, executing that is everything. A great deal can be made, but if it's integration sucks, then everything is out the drain and everything is a waste. On the buy side, if you call, I'll say integration is everything kind of deal made is only 20%. It's great to celebrate. It's good market news. And if you're a listed company, the right story of acquisition, right target moves the share price, but the market has expectations on how you will deliver or what they will expect from you. And continuing that and delivering that continues that value and builds on that value. If integration you're not able to do even a great deal can be the worst one because you can kill the value.

And does that specifically shape your actual strategy with your integration model or is that sort of thought up of afterwards when you identify a target?

That's a very good question because in fact that Kind of goes back into the capability point what we are talking about. Take example, like the same example to say I'm going after this acquisition and say this is a capability I have out of it. I'll say I'm looking for a target to do always. I've said before like I need to filter. Any acquisition need to be filtered based on my internal capability. There are some acquisitions you can do and say my team is awesome, I'm acquiring. They know the business inside out and they can engage the new customers very well. They can tell the story. They can, they can engage the new employees very well. They can part of a combined organization. You know the business well to grow and first not to lose any business, then to grow and create value. But you can also make some choices to say you're not going to make acquisitions only in areas what you're good at. Like but you say now you want to stretch. I want to make a new segment expansion. But in that case you need to be really cautious. It's a new segment, but if I'm sure that my team is not good at it, but they do not know how to sell to the segment, they do not understand the segment, then the question comes in about who needs to manage who. Say so that's where it's integration is so critical. And in things to say at the time of buying, you need to know how you're going to run this business. What's the combined customers look like? Are they different or they have different segments? Who needs to be the market facing people? Who is the ideal people to run the organization? It's an old mindset to say I'm the buyer, I will run the business. But in new age business where technology is disrupting, that may not be the case. And you need to have a mindset. What's the incoming team? Who is best organized to run it? Who knows to engage the customers well and the business acquiring well? Who needs to be the front end team? Who needs to be the operating team? Who can create that value? And finally integration is about why am I buying this? What synergies? What's the synergy multiplier like? How do I define it right? How do I articulate it? What does it mean in terms of measurements? Who is having the responsibility and that responsibilities needs to be need not be assigned only with people like from the buying entity I'm buying like it needs to be from the people like who's best positioned to do. Then you get the synergies. I buy a business that I do not know and I don't have a plan and I go and mess it up and I drive out the talent. Then the business walks out. The day one integration plan is so much upfront because and that too in a new age areas upfront people asking to say what's your. It's the time about who am I reporting into? Like how are you going to run the business? How are you going to create value for me? So these are very critical questions upfront so you're clear about integration plan at the time you're prospecting a target, you can tell the story well and if you're not clear that comes out very clean because it comes out fuzzy and it comes out not clear in terms of organization structure or you're talking about how incentives are calculated and how what they can expect as a carrier plan. And if they are living their if they are rolling up their shares in the company, they need to have a conviction like the resulting company shares is going to grow in value. Right. So you need to tell a very powerful story and there the integration plan clarity needs to be there.

Sounds like you got some pretty early considerations in the strategy about integration but then as you identify targets it just keeps expanding and you iterate on it and really try to get more of those considerations throughout that whole process so that you're really prepared and don't screw up the deal and scare people off.

Considerations like the way to structure a deal. If that's what you mean to say, I'll say it's an art. And particularly if I look in the last three years money was cheap, it's available and it's a lot of growth. So many deals. And if you want to look in the digital tech always there are some best of you are aware of the term of Rule of 40. Like any companies with a 20% growth rate and a 20% margin and you are in the cloud tech space and digital enabled you are hot. There are 20 people chasing you. The moment you are 20 million in revenue, you have 20% in margin like you you'll be getting calls like crazy. That was the world. If that kind of an area if you need to go in and just differentiates it's about not to say this is the money I'm giving you, I'm acquiring. It's about a lot to say on the structure to say this is how you're growing on your own. Be a part of me now. I can put that catalyst in you and I can hyper accelerate. This is what you can get in advance and you can articulate like that's where you can differentiate against a strategic sometimes who don't have the ability to give shares and somebody to have the ability to give shares and somebody gives cash. You can understand and differentiate. To say if you have a powerful story, what you can get in cash receives a part of your consideration in my shares. But this is my strategy forward. I'm going to grow like this. I'm going to do this multiple acquisition. These are segments I'm going to do. Instead of you driving it on your own, be a part of me. We will drive together. And this is the path forward and this is what my added blocks forward. And this is a growth curve about and how this share is going to be and what's the value you can make out of it down the line. And you say that now it's better than what you can make on your own and better than make out of others. You can assess as who you are competing with. That's how you can differentiate. And more importantly to say we are the nice people to work with. Why we are the nice people to work with. When everything looks good on paper and if there's a one day of life is a tough life that can drive away people. Yeah.

So the integration thinking gets you bringing about the joint go to market, what's that going to look like? And then you're building that as part of your story when wooing this potential target. So what do you do when you have a business leader who wants to do a deal outside your M and A strategy?

Yeah, actually my question will be is this really outside the strategy? If this is outside M and A strategy but it's the core part of the strategy, then the question is if my amending strategy is right but if this is outside the overall strategy then you need to question sometimes. Yeah, the question is can that happen? Yeah, it happens in industry that can be always pet projects of CEOs, pet projects of both. Or that can be because there is big money involved. There can be some shady stuff like a transaction can be a part of moving money from one to the other. So you need to question the integrity part first. Right. What's the motive behind it? Transactions can be an easy way of havala there and moving money from one to the other. Or it's like a kind of bad leadership. What I call a strategy is something you go across the organization and ask people like what's the strategy? And people should say in two lines this is what as a company we are working. If a leader is making a choice to do something out of it, then the question is to say do you want to be a part of it? Like also what's the new strategy? And if it's not compelling, like it's a kind of distracted effort and distracted value, it's value killing. And you need to question the incentives behind why somebody is doing something. It can be a shareholder value leakage also.

That makes sense. Give it its own independent assessment. If I wake up and decide, hey I want to buy this oceanfront hotel, then it goes back to the thing. Is it really aligned with the strategy?

Yeah, there are very many stories like say one business here, two business here and suddenly that doesn't have anything in common. And today I want to say I want to combine both and put up a long fetch shot of why this makes a sense. Then you need to wonder like what's the incentive behind for the shareholders? Like whether one is bankrupt and one is making money one you want to save the other one and who is benefiting. And so there are questions behind on what are the motives and governance structures beyond and is this can be an I'll boil down to an integrity and incentive issue or is it convincing? It's a recalibration of strategies can change an industry. Like there are reptile industries like cement and iron and others and. But there are butterfly industries now, crypto and tech and changes. The strategies need to be redefined every year. And in that case this is a new definition of strategy. Then everybody needs to realign.

So how often should you reassess your strategy in a book?

You see, you do an annual strategy planning life cycle and you look into and see whether it's a kind of change in like ideally you define a strategy for the next five years and every year you really look to see the same inside out and outside in process and recalibration and the choices. You say is there any change? If there is any change, you articulate that again and articulate the initiatives to do. But you need to change in terms of like I said, this needs to be nimble. On new age industries you need to put. The planning cycle can be longer for certain industries. It can be shorter for certain ones. Because in some industries, like, like the commodities, like it's not going to change unless the geopolitical issue changes. That doesn't change in many years. But in new age tech it changes. It may call for a look in every six months instead of a year. So it's industry specific. I'll say.

Fair enough. We talked about relationships before. Does relationship play a part in formulating your strategy.

I'll say very much being nearly 25 years in the M and A space. I'll say kind of relationship as the core. I would say if you want to be a cop dev person and you have to invest your efforts is to proactively invest in the relationships. And finally, as much as the world looks much larger it's very small. Because the deal circle is known and very well known. And the way what kind of dealmaker you are is very well known. And good people to work with bad people. As a relationship can save deals. In a broader strategy framework. Relationship matters a lot because you get the truth from your customers stakeholders to get honest voice of feedback. And in any strategy process from an outside in your strength of relate people. Even the customers who are not happy with you have a great relationship. They can decide to stay with you and give a voice back in the process for you to make corrections and giving you an option to make the course corrections to define. And that's valuable from an organization strategy and from an M and a strategy aspects of it. I'll say relationship is very good. Like even if you start a deal I'll invest my time entirely in knowing the person other person and to see how it can be a win win and how I can make a stronger relationship. Because relationship can save deals. And however hard you define it, a transaction is six months or sometimes it can be a two month process. It can be a one year process and longer process. There are going to be curves in between where you need to have really hard conversations. And really these will be one of the some of the sensitive and so much relationships are on. You can pick up the phone and you can discuss and solve it. Things can be solved. And if people believe in you there are things always it can be resolved. So relationship you can call it a savior and it is worthwhile a savior in a big up. If you're making 100 million deal you're going to spend 3,4 million in your entire exercise. If relationships can save that into converting into a deal or not. It's worthwhile to have be good not to cut corners and think from other person's perspective. And always people are willing to give your ask of number one and but so far you are respectful of dear ask of number one.

So let's tie relationship to reputation. I think you told me about a situation where you joined and it was part of shifting that reputation around.

The very soon industry will call you out and reputation is. It is a lot. So if you are be on the buy side if you're only example, if you're only seeing deals, if you're not making deals and it's only a question of years, you'll be called out to say it's not worth spending time with you. And if you are a buyer like who are cutting corners and the buyers don't get to make money, you'll be called out. And the moment you are playing long in a segment for years like I played in the segment 25 years you have multiple acquisitions behind you. What makes precedence in the industry is that how will you handle those companies? How the sellers in the prior how they have done well and each of those acquisition what they cannot say about you and how well they have made their money up. Where you fair to you like you make deals and you make considerations of different kind. What they talk about you have they made their money? Have they enjoyed the time in the combined company? So that makes a lot of. And many times you can convert an opportunity where you come across into a new segment and people try to understand who you are and it makes sense in a new JIO and people have not known your brand and you say you are the acquirer and they do not know you. And then always this helps to say list of acquisitions I made. Feel free to talk to xyz. We made those acquisitions and they are with us. That can change the entire game. And how can you on the top spot among the other competitive offers they are doing that makes a big difference.

Have you done that where you went to? You're in a competitive process. And you said hey look, we have references talk to these other executives of companies we've acquired.

Yes, I've done it. We were looking into a target in Canada and then it's not a company marked for sale. And we wanted like proactively kind of prospect. And they had said yeah, we are not up to up for sale. And but we said yeah, we let's keep in touch. And over a period of time you do the dating exercise. Let's know each other, let's keep in touch and everything. And then for a period yeah you encouraged encouraged to say these are the acquisitions you have done and come let's meet at and had an opportunity to introduce one of the other acquisitions we have done in UK and to say you should some point of time you should talk to this person. So hearing from that that helped because to say yes it's a good exercise. These buyers are not after to mess up with you. And it's you can believe on that brings in to say oh yeah. That tends sellers to say there's a kind of certain opportunity and that shifted and we eventually made a transaction too. So it helps and whether you like it or not I'm sure any prudent seller they are going to take a reference of you and the bankers do a very good job. And nowadays as a diligence this is a standard diligence excise be as a buyer I take whenever I'm doing an acquisition the key players you do integrity check and people are going to run 20 pages on you and similar way any seller is going to run and because he's putting his entire career worth if you're a promoter you built your spent your lifetime building a company and it's worth 50 million and one day you want to say finally I'm good to do. He's going to take that time off to do a reference check on you and then so far you can proactively offer that that helps you for sure.

I have one question. Chat says hey Sree, are you able to share a checklist or playbook that can be used as the basis for specific deal strategies?

Yeah, you can definitely share and playbook always helps. This is a standard term to use like that helps you with you to set expectations with your internal shareholders be it be it your board or be it your leadership team or the external exercise on how do you play and what do you need as a resource to play what they can expect from a transaction and how fast you can do it and how well it is going to be done in different streams of it. There's a kind of a good tool to set expectations, to plan your resources and also to get your partnership ecosystem in terms of the planning and diligence stream and be it financial, legal strategy aspects left with diligence partners ready and relevant to a segment your areas of diligence ready and importantly how do you prioritize that segment ready. So it helps a lot.

Do you have a template for that?

There are many templates out there and we do have one and happy to share.

That'd be awesome. Yeah, that's what he's asking is if you're able to share it.

Yeah, definitely. I don't have it handy but definitely offline. If there's an opportunity to connect, let me know.

That's a whole other initiative that we have is we do a lot of open sourcing. We have a whole agile M and a framework and it's basically a collection of plays or artifacts building out practices step by step. So that could be an opportunity is actually build a little play and add a template to it.

Just when we Google it it's about like I'll say even when we google up both templates and queries like you always get a nine yard list and what's in it to customize what suits you. And the focus on entire playbook also has to be depending on how robust something you want to do and later you want to do so much you can prioritize the material on the materiality. Even you can do a very thin diligence but you can do a very effective diligence. And not necessarily when there are 50 people out in the field who are doing diligence is going to be effective. Right. Like it's even you can do a very lighter diligence and you can do an effective diligence. And the way you do kind of diligence for a startup is different from a bigger company. The art is customization on what your needs and the list and templates are out available as plenty.

Yeah, I think you got a fair point there. It's got to be a guide less of a to do list.

Yeah.

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

Yeah. Where money is involved you get to see so many crazy things. Like a crazy thing. My worst is where we missed a big $100 million deal. Like where everything is spent in nearly six months. Everything is done. It's a long weekend and Monday was the holiday and then wire transfers need to be done. But over the weekend the transaction was traded into a buyer. It's a hard reality because that's where you always you have a loss in any deal, no shop and it was like the belief like which expired just on Thursday and we believe we have the execution copies ready and do we need to do it like say so so far that's a big learning because never take the legal process for life because if you are doing a transaction and need to have the basic things like no shop clause extended till the time it's done. Like say whether that costs you a year of work and many millions spent and do you want to really fight the legal case or not?

You were literally two days out of exclusivity and you lost the deal and.

Somebody traded and yeah just can fight a legal battle but it's hard to prove unless the onus is on you of not doing what you have to do for sure. Wow.

I never heard of that one.

There are crazy things like bought a company in Chicago. Say go there and you're logged out because the existing CEO don't want to like wants to prove he's in control like you. You get to see the power games and get to see different styles. You get to see mismanaged incentives like when incentives drive everybody right? So if you have a bad incentive equation you are going to see bad behavior. So you have to spend a long time and when you're doing an integration plan like how do you motivate people and how do you have skin in the game, how do you have incentives align and how do you ensure that and how it is legally valid and.

You only try your best to minimize post close surprises. Sri thank you so much for the time today. Enjoyed the conversation and learned a lot about M and A strategy.

Yeah, so much as I enjoyed the conversation. There's so much to talk about. It's awesome to connect here.

Thank you. And here's to the deal. Foreign.

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