How to Efficiently Execute M&A Integration

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Good, how are you? Thanks for having me.

I'm doing great. Thanks for taking the time to come hang out. I'm excited for our conversation. Can we kick things off a little bit about your background?

I lead end to end Global Mergers and acquisitions integration at HPE. I've been with the company since 2016. I almost exclusively worked on M and A. I spent several years leading the HR, M&A and management of change work streams for deals and then came over to Corporate Development to lead deals overall. And I do that all the way through Business Day one. I have had prior careers in the nonprofit and entertainment industries and I think probably the through line in everything I've ever done is I'm always trying to get something new and exciting off the ground. So that's what I'm passionate about.

How's the nonprofit entertainment background? Give you a twist on how you approach things today in your role the.

Nonprofit space I just got really used to being Rejected. So you're asking people for money. It's a really tough battle. And I think in many ways integrations can be similar. There's a lot of really tough challenges and you get told no a lot in a lot of different ways. And so you have to persevere. Entertainment industry dealing with a lot of different personalities. Again, integration is very much about that. You're navigating a lot of personalities and relationships and having to partner and collaborate and build consensus. It's all relevant.

I also find it interesting. It came up from HR integration specifically and then the broader integration. So it'll be great because it seems like people tend to be a pretty challenging part of doing M and A.

Yes. And the people side of deals is what jazzes me most. I wish people put more importance on it. I think generally we're trending in that direction.

So how can a company perform better? M and A integration?

That's a giant question. There's a lot of different things we could cover there. Maybe. Let's start with the connection of the deal team and the integration teams. These can be really siloed. And the best model is to have a close alignment between those two teams. Really, you want to be side by side on the front end. So all the integration learnings that are building over many deals and all your experiences can be woven into what the deal team is signing up for on the next round. Also, strong BU leadership. You. You need them to really engage and be aligned with what you're doing. A lot of leaders, I think, are really excited to get an acquisition, but don't necessarily realize how pivotal their role is in ultimate success. And so you have to have leaders who will really actively participate, who will agree to provide top talent, dedicated top talent from within their organization to work on the deal and then accept accountability, real accountability for the future state.

How do we do that? I always like thinking of the deal in the timeline to get a sense of when do things start happening, when do you get involved? Especially when you're responsible for executing and delivering all the intended value.

When you say you, I assume you mean me. The integration part of Corp Dev.

Yep. Correct.

We're involved earlier and earlier, which is great. We have a view of everything that's coming in the pipeline. So these are all the things that we're looking at. These are the companies that we're evaluating and having early conversations with. And so it's really nice to be there that early and help provide some context and recommendations in the early negotiations or. This seems a lot like this deal that I did a few years ago. And here's where I think we need to be careful or here's what we need to press that's helpful. But I think the earlier you're involved, the better, the more you can achieve.

So pipeline, which is interesting how Here are some real early thinking. We've done a similar deal. You know, example of make sure we think about this.

Yeah.

And then from identifying it, conversations happen. Folks get to know each other. They're starting to drum up evaluation. And especially the part where we're creating this model to convince our board to put a thumbs up and go ahead and do the deal, but also balance it out where we can actually execute and deliver on it. Do you have any say in that or is that pure corp? Dev does that and then hey, here's what we agreed to. It's your turn.

So yes, we have say in it. It's always interesting to see how all of those pieces come together. You can give recommendations and guidance. At the end of the day, it's up to your partner team to take it and run with it. So yeah, it's different with every deal.

Okay, is there certain things that weigh that. They're like, hey, here's a lot of big assumptions that depend on how well we integrate it. Then they lean on you more for context on it.

Everything at the front of the deal is assumptions. You just don't know what you don't know. That's why having context of we've seen this or we've acquired in this particular region or country before or this type of employee. Say if you're looking at strictly engineering talent and you have insights that are relevant. So your assumptions are going to be more data driven. And that's a good thing.

That makes a lot of sense because then they can pull some of those data insights that you may have better access to. That's what I was curious about. Like how do you get the most accuracy? And it seems like there's gotta be connections with the details, especially when you've gotten experience delivering on it.

Yeah. Unfortunately a lot of people are in this position where they're so acquisitive that deals are just coming left and right. You don't really have time to take these learnings from the last 5, 10 deals and apply them in real time. But it's, it's important that somebody is looking out for that framework and getting the house in order so that we're not making the same sometimes mistakes as we've made in the past.

What's that partnership like with their deal team. How do you set that up to be successful?

It's evolving in my company. I think a lot of it has to do with how does the reporting structure look. You might have teams that sit in completely different organizations. Obviously bringing them together under one leader is helpful. And then you have to figure out a cadence of how are you going to share information? Is it direct outreach? Is there a structured meeting every week? Are you all going to review retrospective data over the last five, 10 years together and pull insights out? You have to be really deliberate in how you want to partner.

Those are interesting examples. Have you found anything that just works ideal like having one leader run both corp dev integration or any structure?

I think it works really well. That's my opinion. Anytime teams that have such dependencies on each other sit in disparate locations, it can get messy. Unless everyone's really uber focused on staying connected. Having the team together and also having a very clear plan of how you're going to partner is important.

Tell me more. Like how would you structure that to work?

It can work in a variety of ways. Our team at one point was in the same staff meeting every week. The deal team is talking about their prospects and then the integration team is talking about the activities of the integration, whether it be ED1 or BD1. And you're getting both sides of the equation. So the folks on the front end can really see what the folks integrating or dealing with and vice versa.

I like that a lot. Like really tying it together with a single meeting. Is that the same thinking or approach when it comes to rolling this information up to executives or others that would actually want to get a sense of what M and A activity looks like.

Again, it's different with different leaders and in time. But yeah, there's typically some type of cycle where you will review deals overall and what stage they're in and the peaks and valleys of how that's going. And hopefully folks are listening and learning and next time around everybody is ready to come together and do things a little bit differently if necessary, or continue to do something that we got right.

That reporting would include here's previously deals we've done. This is how the integration went and what that looks like.

So this depends on how your company does reporting. So it might be every business unit has a quarterly review cycle where you're just talking about the state of the business in general. And that would include any acquisitions that are coming into that business, cover them there. But then there might be other audiences at the C suite level of the company. Who just want a readout on deals. So it really just depends how you choose to do it in your organization. But certainly that's a critical part of getting M and A right is making sure that you're regularly reviewing and talking about stuff and having the difficult conversations that you need to be having in order to grow and get better.

That seems to be the theme with you, is the mantra of just continuously improving.

What are we all doing if we're not trying to do it better the next time?

I agree. I'll help me think through that if I'm standing up an M and A function. And then my goal is to get to the maturity at a level that you're familiar with now. And what's the approach? How do you use braid that pace to keep improving?

I have to have a culture of continuous improvement at your company. Generally, you have to understand feedback is a gift. And I know some people think that's cliche, but it's really true. You should always be seeking feedback and you should always be sharing feedback and just always make time and space to review what happened. That includes the high fives and also the ooh, we could have done that a lot better. You have to be willing to be transparent about that and you have to be willing to do it in a respectful, professional way. And we're not trying to throw anyone under the bus, but we're trying to really get down to what went wrong here. And there's no blame, but how can we make it better next time?

Is there any, like, mechanisms or tactical things you've found to help foster that?

If you mean how to have a respectful conversation around difficult things, yes. I usually use a slide or some type of framework at the front. This is the ground rules for this call. It's all in the spirit of improvement. Nothing is personal. We want to talk about data and facts. You don't ever want to a particular individual or assign something bad to a person. You want to keep it high level. And here's what I saw and experienced and tell me if that's what you saw and how can we do it better.

This is good. I'm learning people skills out of this. Tell me more about these ground rules. Sometimes you go about doing this and you consciously have good intentions, but it could be that defensive or creates some of the tension that may be unexpected for somebody. I like how you sort of face it with here's some ground rules. And this is setting the rules for this conversation.

Yeah, you want to create a safe space. We're all here to Try to do things better. And we're not here to tear each other down. We're actually here for quite the opposite intentions. To help each other lift each other up. I saw this. I think maybe you could do this better. At the end of the day, if you are a serial acquirer and you are not focused on this type of thing, you're not going to do M and A. Well, you have to be willing to talk about these things and to keep improving. And the landscape of M and A changes constantly. Even if you're improving all the time, what you did last year might not be enough for what happens next year. It's not a linear path. We're not just going to keep doing things and getting better. We're going to have to keep adapting and changing. Covid's a great example of that. You might have rocked integration. Before COVID you had a lot of in person touch points and big parties to celebrate the integration and lots of activities and processes that relied on that face to face interaction. And so when Covid happened, we all had to switch it up, throw everything out the window and figure out how to do an integration completely behind your computer, wherever you are.

Those are good examples of putting up front how we're going to actually objectively do things, because that's what we need to do in M and A. Yeah, Covid went well.

I think we were all a little worried about what is the experience going to be like to do a deal without getting everyone together, without building those relationships in person, without walking the offices and absorbing the culture of the company that you're acquiring. But honestly, most folks would say it went better than we expected.

Did you get a big win out of COVID Not to like make light of COVID but just there's one thing that changed for a greater good ultimately that you noticed.

Yeah, I think we got more humanity. There was a period where we all knew each other's spouses and dogs and children and we'd see them on the screen behind them. We're all working from home. So you actually learned a lot more about a person's life and family and you connected more. You sort of forced to. And I think that's really good. I don't think we should have a work self and a home self. We need a lot more humanity generally at work and probably definitely during an integration because it's long hours, really complex, challenging stuff.

That's actually interesting. I never thought about it that way. I felt like the interesting autonomy about how remote works and they don't really Matter where you work from.

It matters to some people. But for a lot of people it's been a win. I agree for myself, certainly it's been a win. I was able to move and be with my partner who lived in another state, get married, and it's always good to be in the same place as the person you love. So the whole switch to working wherever you want was really beneficial for me and I'm a happier employee for it. So then the company wins.

See, there you go. I like that. Which is a whole other topic of how do you manage sort of your remote versus in person policies, which is a. We'll save that for another HR discussion. I want to go back to the business unit leaders because that's a critical component. Right off the bat. Do you find they're super on 10 about doing an M and A deal and adding more headcount revenue or is it more of I'm already doing stuff, I got enough on my plate. I'm not trying to be part of this M and A stuff.

It's really variable. Some business leaders will be the ones to suggest that we look at a certain target so they're leading out front. Others will say, hey, we think this would be good for your particular business. So how it originates can be very different. And that has an impact sometimes on how involved they are. But then there's also just who the leader is. General, what is their work style? Are they really bifurcated or can they focus on something that's really important? Do they have bandwidth? Do they have resources? You never know what people are dealing with. You can get all different levels of participation and engagement from business leaders.

Where's the thinking around this? Like through the deal process. Get alignment earlier or we just get them through LOI and saying, look, let's just get this done.

No, we want them there the whole way through. That's the thing. At the end of the day, those receiving businesses are accountable for the success of the deal and they need to own it. Would I love to get them to write that in blood? Yes, I would. But there's other things that you can do to support that. Something to the effect of having some thresholds. Right. These are the things that are kind of deal breakers for us if you're going to get an acquisition. These are the commitments that we need you to make and the resources that we need you to dedicate to it. And we want to understand how your business is doing generally. Do you have a senior leader who can go in bed with this new acquisition and really Be on the ground, wherever they're located. Maybe it's multiple locations. Every company will have a list of criteria and hopefully have really good candid conversations with business leaders about their capacity to take on an acquisition.

Got it.

In an ideal world, this ultimately goes.

Back to the commitment. It goes back to having it in blood. I think that's what the goal is and that's what I'm curious about. Do you validate that? Because it is. It's just hard to do M and A. Right. And you got folks that may have never done it, they're ambitious to do it or some that really don't know and don't care. How do you sort of really make sure you're going to work with somebody that's committed and they are the right person to see things through?

Again, you have to really have your set of criteria. These are the things that we must have in order to be forward and then whether those folks live up to those commitments. I don't know how much control you have over that and certainly be checking in regularly and you can have a governance model that hopefully supports that, but it's a little bit out of your control.

Yeah, it is.

And that's anyone at any role in any company. You can't necessarily control someone's commitment to the work at hand.

I was looking for a better answer, something, you know, here's an M and A ready test that you could take and know if this person's really ready to do M and A.

If you're talking about work stream leads, that's a different animal. So I was talking more specifically around business leaders. But if you mean the leaders of individual work streams, like your leader for legal or tax or finance or sales ops, companies who are doing this well are selecting top talent for those positions. So it's not somebody who has not done M and A before. It's not someone who has 10 of the things on their plate. It's a subject matter expert, ideally at a certain level. This is a top performer. How you resource M and A is really important to the outcome that you're trying to achieve.

That makes sense. Anything else to tie together working with a business leader through integration, making that a successful partnership.

Cultural integration tends to be relegated to that's HR owned and certainly HR plays a role in that. But I think it really should be owned by everyone working across the deal and especially the business unit. Because even within a company, different business units have different cultures, different ways of doing things, different operating models. It's not exactly the same across a Company like mine, that's 60,000 people. You can't expect every business to be working in the same way. The acquiring business should really own and drive big chunks of that cultural integration. And I don't know that every company is doing this yet. I think they're still thinking it's an exercise that comes out of hr and you need really senior executive support for that cultural transition. Like I was talking about, embedding someone, a senior leader in with the acquired company, that's all part of that. They really need to see and breathe and live and hear how things work at that company and then help share and reinforce the way things work at our company and talk about how we're going to come together and keep the best of both.

That's an interesting perspective. Yeah. Because a lot of people do think HR just owns all the culture piece. You send out culture surveys.

Any type of cultural assessment you can do is good. Many times on deals, there's some standard cultural assessment that's in due diligence. You've only got two or three weeks to complete due diligence. It's very hard to get down to the level of understanding that you need to. So the cultural assessments should continue much longer than that. It should be ongoing. And you need to get down to the things that aren't readily observable. Real culture is in the nuance. It's in the things that you can't necessarily see when you're first looking at a company. And so you have to have commitment, quite a lot of leaders across different functions and roles to be working actively on this cultural assessment. And then how are we going to integrate?

Do you have any examples of how you think of or look at culture on the deal?

We look at culture in conjunction with operating styles. Things like how does work get done at your organization? Is it top down? Is it very collaborative in terms of your competitiveness? There's all these different elements that you can look at. And many of our surveys have gone out to both the target leadership and then separately the target employees, because you'll find you get different results. A lot of the time if you do a cultural assessment on the leadership, they'll say, we believe this is what our culture is. But then the employees down in the organization are saying, actually, our culture is this. The answer is somewhere in the middle there. What the leaders aspire to have their culture be and what it actually is. Today, there's usually a little bit of a disparity. So that's one way you can look at things. But there's other levers. You can launch an ambassador team. We've done this on deals. You can have the target folks nominate individuals who are just natural influencers, change leadership, open, collaborative, willing to provide feedback. And you launch an ambassador team where you meet with them regularly. You say, what are you hearing? How are employees feeling? What are their misconceptions? What are the open questions that we haven't answered? And all of a sudden there's really perspective that you need to have.

I like the idea of creating the ambassador team because that gives you that feedback like really directly in from a trustable source in that company.

And external, really objective cultural assessment is important. I'm not saying that companies can't do this well themselves. If you're in your company, you're already biased. It's your company. There's a little bit of we're doing things the right way or just we're doing things the way we're doing them and that's it. And so you want to make sure that you have a neutral party in mind you that comes in and can assess both cultures. So it's not just an assessment of the company you're acquiring, it's assessment of both. And then help give you some advice that maybe you wouldn't have thought of because they're an outsider.

Do you ever find culture varies quite a bit within an organization?

Yeah, I was talking about how the business unit has a little bit of a different culture.

Yeah. I think in Even your organization, 60,000 people, it's a lot I've seen in a lot of other industries. They've seen with investment bank, different offices, completely different culture. We're 45 employees and even different functions. Our marketing team and engineering team, very different cultures. I guess there's some commonality you have across the board. Everybody's like, nice. When you add that complexity to all of this, does that get you to start focusing in certain groups or areas of culture within to say, hey, let's really think through of what the engineering part of this looks like and base it off of where value drivers are. Or is this still more holistic in a broad view of understanding culture?

It's both. Definitely. You want to understand overall, how does this organization function? What are their norms? What are their habits? What are the things they hold dear? All of that's important. But then to your point, yeah, your marketing team might have a really different dynamic than your engineering team. Likely it will. In due diligence. You want to try to understand what are the things going on. On a team level, there might be radical attrition in one area and then everywhere else is pretty stable. So you're like, okay, what's going on over here? It could be a lot of different things compounded. So it can be this snowball that just gets bigger and bigger. It's really hard to understand culture on a really granular level. But to the extent that you're able to do it, you should try as it really is such a crucial part of getting a deal. Right. Your financial model can be great. You can have great leadership and sponsorship and an awesome plan. But if you don't get the cultural part, you're in real trouble.

What's crazy drama. You had to sort out things where you had to really get involved and solve people problems.

You have to really get involved wherever the problem is. So part of being an integration lead is understanding that there's one team over here that might be struggling. Why are they struggling? And let's get in there and help them. Are they struggling because their leadership isn't giving them the bandwidth and resources to work on this deal? Are they struggling because they were assigned to this deal but don't have any expertise? I get down in the details based on whatever is going on. I say whack a mole. You'll solve a problem over here and then another one will pop up. So there's not really any one thing that goes wrong, but you run to every single buyer and try to figure it out.

That's what makes M A fun.

It is fun. I love it. It's why I do this work.

You got a problem solving framework. You go default to.

I don't know that I codified it or anything, but it's actually really simple. You need people to articulate the problem statement. And you would be shocked at how many people will escalate up the chain and come to you and really want help and support, but are not able to actually clearly concisely tell you what the problem is. That's step one. So as far as the framework, it's helping people articulate that and then beyond that, what is actually the ask, like how can I help? So we've established here what your problem is. How can I help or who else do you need help from that I can facilitate? It's really pretty basic.

I like it. It's easy to remember when things are simple.

Yeah.

What's advice you would give to business unit leaders, even corp dev that's working with integration lead to be able to support them on their end to make things more successful for integration, be available.

That'S a really simple one. Be available. So these leaders are usually stretched in a million directions. They're flying around the world all the time. They've got hands in a lot of pots, they're under a lot of pressure. They have to meet their numbers and they're working with our CEO. So really just be available and be willing to not only be brought up to speed on the acquisition, but be taking an active role in it. It's that simple.

But you made it sound so hard. You don't have any time. And then you're expecting me to give you time.

This is the rub. Right? And they will tell you that this is the problem. And so that goes back to what I was saying before. You need to have your list of criteria. I don't expect this particular leader of a giant business who has no bandwidth to be meeting with me every 48 hours about this deal. But I do expect that you have some leader on your LT who is going to be my doer, my day to day person that I can communicate with regularly, who is looking out for the interests of the deal and doesn't have 40 other things that are competing priorities.

Time commitment. You got to commit.

Yeah. And resources. If everyone's overworked, that's going to be a problem. I need a warm body to really be able to focus on this. So it's about reprioritizing work, delegating the appropriate resources, just making sure that everybody can do the care and feeding that is required in an integration.

We haven't talked about fostering the speed or the real management of integration. I was curious if you have thoughts on that. If there's anything that you've learned that really helps foster good management, keeping everyone on the same page and moving things along.

So speed is an interesting topic on an integration because you're balancing wanting to do things deliberately and properly and with data behind it. But you also want to get them integrated as quickly as possible because that's where you derive the value. So there's always this push, pull. I don't think there's one answer for how to move it faster because every deal has its own issues. They might be in an interim operating model for a year or two before you can actually integrate their systems and their tools. You can't necessarily rush that because there's a reason that it's going to take that time to integrate. Maybe they're doing things and using platforms that are just very different from ours and we have to figure out how are we going to get everything to talk together. And function. And that takes time and planning. Generally, if you're able to move fast on an integration, it's a solution, smaller, easier deal where there aren't so many disparities in how you're doing things and then you can push faster. Anytime you need to do that, it goes back to the same stuff. You need commitment, you need buy in, you need good governance, you need everybody in the boat headed in the same direction.

A lot of consideration and resource management. It sounds like, yes, moving fast without destroying stuff. Let's switch gears, go to the other side of the deal, the people. How you handle incoming people, how we handle incoming people.

From a people perspective, again, diligence tends to be quick. You're trying to get as much information as you possibly can and it's the most critical information. So there's a lot that you leave off the table for now. But you're looking at publicly available information a lot of the time. And certain platforms like Glassdoor and indeed actually do give you some really rich insights. You can't trust all of it, but there's typically some common themes that might come out and you'll learn a little bit about their culture, about their leadership, about how things are going generally at the company, how's morale? Is everyone in good spirits? Does everyone believe in what the company is doing? That's all really good stuff. But then you want to just understand who they are and why they're different from say the last group that you acquired. Because a lot of the things that you do can be rinse and repeat from a process and tools perspective. But you need to leave room for 10 to 20% customization based on who these people are and how they're unique, different, how do they like to be communicated to? Have they ever undergone large scale transformation? Maybe they've been doing the same thing the whole time and the change is just going to be super stressful for them. Or maybe you've got a company who's been rocking and rolling in different directions and they're super ready to change. So all of that stuff is really good to understand. You want to. We deploy pretty early survey to try to understand what are the things that you really value about your company. What do you think is the special sauce? What are those two or three things that if we broke them or removed them, it would really derail your view of the integration. You want to try to get at all of that stuff as early as possible and then hopefully close the loop. Meaning here's what you told us and here are some clear actionable things that we're doing about it. Don't launch a survey and get the information and just talk amongst yourselves. Definitely come back to them and say, we heard you, we listened. Maybe host some town halls, Q and A's, things like that. Here's what we're going to do based on what we heard.

That's a lot of activities that you're trying to do in a short time frame. I'm trying to think through how do you shape that into a game plan on your approach and model, you analyze.

The results, you're listening to the things that are most important to them, you're listening to what they're most nervous about. And then you're trying to really directly address those things. For example, if it comes out, and usually does, one of their biggest concerns is job security. If you have already made the decision of what's going to happen with offer letters, are we taking everyone? Are we taking some people you don't know yet? You want to make sure that you proactively communicate as much as you possibly can at the time because people are worried about this. I'll say this is pretty much every integration. You don't need a survey to tell you that, do I have a job? What does this mean for me? These are very standard questions, but there's other things that you might want to understand. So right now, last couple of deals, people have really wanted to know, where does my company stand on work from home? Because they're thinking, oh, am I going to have to go back to an office if I've been at home for a certain amount of time? I need to understand what your strategy is because that's a big factor for me. So there's all those things that you want to try to understand, then work with the business leaders. So here, for example, we heard from folks that they don't understand how they can grow and develop their careers at our company. Okay, so what can we promise to do for them from a upskill perspective, from a career pathing perspective, from a training perspective, so that they know and can see a future here at the company. And then hopefully you'll get folks to sign off and say, yeah, we'll support that. We'll put some structure around it. Maybe we'll have some brown bag sessions, talk to you about where you could possibly go based on the role that you're in.

These are a lot of good things. We do these like CX exercises to get it from the customer's perspective. Can we do an ex employee experience? Walk me through what an Ideal employee experience would be from the target side, open communication.

You have to make sure that you're talking to these people and that you're listening to, as I said before, both the leadership and the employees, because the leadership might think things are a certain way, but the employees are actually the ones who are living that. And so it might be a little bit different. So you have to come together between those two.

It sounds like a lot of this, you're working with the leadership on their side, and then ultimately they're the ones that are more directly providing experience. Here's a communication. Here's some of the questions that you want answered about what the big changes are. Who's got a job, who doesn't have.

A job, depends on where you are in the deal. So before deal close, yes, a lot of that is going to fall to the target company because we can't technically directly communicate with their employees. But then after that, really, deal close is when the floodgates open and we're allowed to communicate. And that's when my company at least launches an onboarding site and we host webinars and we really begin that communication plan and start regularly communicating. Here's the roadmap. Here's where we are along the roadmap. Here's what you can expect in the next week or two. Here's what we need from you, et cetera, before close.

Mainly planning, working with that leadership team, gathering the information you referenced, be able to have that, and then comes close. Essentially, you're working with the leadership team around a lot of the components of what they're communicating about the deal. And then how you bring those people over is a whole other thing. Depending on the structure of a deal, you may have to do a whole HR exercise and rehire them.

Are you talking about if you're going to do a standalone or a partial integration or a full integration? Is that what you mean?

Yeah, I was even thinking of even before that, if you have a stock purchase versus an asset purchase, I guess that makes an impact. And then you're right, that determination of, of partial versus full or not integrating.

That'S an important question that companies need to ask more, particularly if it's a large global corporation acquiring small startups. If things are just very different between the acquirer and the target, you might want to think more about how can we leave them alone longer? It tends to be an unpopular idea at many companies, but I do think people need to think more about it because you want them happy, you want them functioning, you want them delivering on Their business goals. That's why you bought them in many cases. And we need to have more consideration of whether we're going to fully integrate or some other level of it.

Sounds familiar. Let's not destroy the little startup.

Well, I mean, I don't know about destroying, but I just mean maybe they need to stand on their own for certain reasons. And I do think there needs to be more consideration around that.

That sounds fair actually, because then you get a better understanding and time to put more consideration, especially given the size difference and what your goals you may have we talked about before. I think of like an adaptive approach. I can use the word agile, but then it just references stuff we've done in the past. When you come across these things where the target company is doing better than your current company and having a model that you can pick up and find what's the best out of the two.

Type of thing, I think you're talking about what can sometimes be a dirty word, which is reverse integration.

Exactly.

Companies should think about this more. Obviously it's a lot harder to do and that's why people tend to not focus energy there. But sometimes, yeah, the company that you're acquiring is doing something better and you should pay attention to that instead of just trying to get them to do things the way that you're doing it. You need to understand the context. So maybe it's not scalable. Maybe they're only able to do it because they're a small company and it wouldn't work at your company. But there might be other reasons why this is actually better. And yes, it will be more work to switch a giant company to their way of doing things. But you should certainly be thinking about it because again, growth, mindset, constant improvement. If we're taking a company that's doing something better, why are we not thinking about that? At least ruling it out as part of the process?

That's a tough one. That's a big change in thinking of.

Yeah, it's a lot of work.

Does that happen? Do you do that often?

I think we should be doing it more. And when I say we, I mean as an industry. Integrations generally are complicated and it's quite hard and bore work on top to try to do something that's transformational like that. But it might be worth it in certain cases. And at the bare minimum, we should be evaluating these opportunities a little closer than we are.

Let's do it. Advocate for reverse diligence. It's got to define it really well. If you were to give a light framework the 1, 2, 3 steps on how do you approach reverse diligence and getting your team to. To think that way?

Oh, boy.

You have to find the thing that's just better. Wait a minute. They're doing this better than we are.

And that's the hardest part, right, is are they actually doing it better or are they just telling you that they're doing it better? So first you need to figure that part out. If they are, if you agree, yeah, I think they're doing this better. Again, are they only able to do that as they're a smaller employee population or because they're in a specific country and this is not something that you could scale globally for a larger population? And then would you have the support if you pursue this and the resources and the funding to consider such a big change at your company? And then if all of that falls in the line, you can check all those boxes, then, yeah, pursue it.

Let's use a simple example. I'm thinking of one. I actually was working on purchasing service for the company and the seller recently got acquired by a large multinational company. In the process, part of their integration plan, they took out their Slack and replaced it with the one the big companies standardized on. Didn't go well. They weren't happy about it. And I asked just a bunch of questions, I always asked everybody questions. And they pointed to a lot of deficiencies in their productivity because of this change. So it's almost like here's one option of leave it alone. Like that's one of the things we talked about, the secret sauce thing, that they communicate and operate so much of their comm through this Slack thing. But now it's. Maybe that's actually better and for our organization to look at, we're still using whatever, not the alternative, but we're using Skype maybe or something.

Well, so I have a great example of that is a few years ago, you're five or six now, when we were starting to see Slack in the companies we were acquiring, we would ask to be. We, the integration team, would ask to be added to their Slack channels so that we could get in there and start communicating with them and start learning about how they do things. And we actually really love Slack and we made a recommendation several times to our corporate communications team and we should implement Slack at our company. And I don't know if it was ever that we said that, but at some point our company did implement Slack. And so that is a good example of we saw other people doing it and now we have it at our company. You Make a great point, because the collaboration tools are a really tricky piece of this. You have to be very careful with those tools and have a very serious conversation about what you are sunsetting, what you are switching them to, and what you're going to keep alive for maybe two years, maybe in perpetuity to it. Because to your point, people are really bonded to the certain ways that they are getting work done and communicating. It's important.

So we went back to the reverse diligence approach. We have this identify but validate what may be a better process. Once you validate it, it's like there's a whole other thing of championing it to build a case on why the parent organization should adopt that way of doing things, which that's the work on top of the work.

And that's what I mean. This is hard stuff. And it's on top of the already difficult integration work that you're doing. It's a decision at the senior leadership level at any company. Are we going to pursue this? And then if you are, you're going to assign a team and resources and funding and hopefully then you'll be able to work on it. But beyond that, you're really biting off a lot more than you can chew.

It sounds like it could be a role of its own. There could be a dedicated resource.

It could be a transformation office. Yeah, if I think of traditional transformation offices, this would fall in that bucket.

Okay. I mean that's a new IMO model. We integrate a transformation component right into it to have dedicated resources that are really looking for the greater upside opportunities to the super synergies. I like that we got a trademark it, then we market the model. Before we do that, let's talk about the founders and that leadership component. Because I feel like, like that gets tricky during integration when you're dealing with CEO founders. I'm curious of your experience there and what are some do's and don'ts with.

Founders, it's really important to understand motivations. Why are they doing the deal? Yes, money can typically be a really big part of it, but some folks are also just motivated by leading a company, by having innovated something, built it from the ground up. There's lots of different motivations for founders to sell their company. You have to really understand fundamentally what those things are. And then you have to determine if you have a role for them that's going to meet their needs. But you don't want to take somebody who is super innovative and creative and then bob them down with a bunch of tactical integration tasks for two years, but they're not going to be happy. So you have to make sure that whatever role you are going to offer them plays to their strengths. And then if you don't have a role, you can't craft one like that. Then you need to think about are we going to have them stay around and then if they're staying around, what are the do's and don'ts for them? If we're going to keep you through say, business day one, here are the things that we expect you to do and here's the things we expect you not to do. And let's make sure we're all on the same page.

It makes sense to understand their driver of the deal because that gives you such a good perspective of how they would or how they should be involved going forward. Do you prefer doing integration with or without founder CEO?

That's really specific to the company and the founder. I know you're gonna love that answer, but it's honestly the truth. Every acquisition is its own unicorn and it really just depends. I'll tell you what I don't like is when you have a founder or any senior level leader who doesn't want to let you into their staff meetings or into their town halls with their employees. To me, I don't know that they're hiding anything or that they're saying anything bad about the integration. But I would like to be welcomed. I would like us to all be on the same page. We're doing this acquisition and we're sharing information and we're a team here. So that's something that I don't like. And again, I don't know if maybe they just are used to having a small family dynamic and they don't want to let anyone in. Like maybe there's nothing subversive going on, but I definitely prefer when the founders are open and welcoming us in from the start.

It's a big change. I try to imagine it sometimes and don't know how I deal with the shift in losing a lot of the autonomy. It sounds like a lot of autonomy, but is it trade offs? Thinking of the leadership in general, the retention of them? There's defining what that post close role is going to look like. But are there other approaches you're taking for the retention strategy?

In the last few years especially, it's a lot bigger than just money. Money is always great, money is always motivating. But there are bigger things going on in the world. People, especially younger generations, care about where you stand on environmental and social issues. That's really. I was talking about career pathing. A lot of folks want to know that they have a path and it's actually laid out for them. It's articulated. They're not going to have to try to claw their way to some next level or new role. There's a lot of levers that you can pull that are not financial. And so you need to make sure that your strategy includes a lot of those things. Trust is a big one. If you have leadership that they can trust, right off the bat, they feel like they're being candid and straightforward with them. They feel like they're bringing them in on this shared vision of the future that's really important. I was talking about communicating your expectations around offers. Who's going to have a job if you wait too long to communicate something about that, people aren't going to stick around to see what the offer is. So there's a lot of things that are really important that I would say are more on the soft side than getting people to stick around.

Are there any big company perks that incentivize leaders to really stick around?

You have to be able to communicate those. At our company, we have an amazing maternity and paternity leave policy. We have six months for both moms and dads. At the time we rolled it out, not many companies were doing that. So that's one thing that we really push. But you want to kind of gather what are those things about your company that are value add for a small company? Because we already know there's some things that are not going to be so great for a small company coming into a large company. But what are the things that you can really offer them? And career development and growth is one of them. So it always stresses me when people say they didn't, they couldn't see a future at the company. And I'm thinking you definitely had a future at our company. There's more job opportunities at our company than you could have ever imagined. So that's on us. And not communicating it and not hosting sessions where you were able to get the information in the direction that you needed.

What's the biggest challenge during integration?

We have seen a lot of turmoil just geopolitically in the world in the last year or so. We had Covid, we had the war in Ukraine. That's adding another layer of complexity to integration, especially cross border integration. That's very challenging. You have to be anticipating what might be happening in a region. We never would have thought that, that we would be unable to get parts for laptops last year, just supply chain issues. We never would have thought about that. And that did impact our ability to get new devices out to our acquired employees. It's something we hadn't planned on. We had some contractors in Ukraine when the war began and we hadn't anticipated having to support them or help them in very serious matters and figure out how that work was gonna get done while we were helping them. And one major challenging thing in the last couple years is trying to anticipate what's going to happen and what the contingency plans are. That's huge.

Yeah, a lot of big changes and dealing with unpredictable. Kara, what's the craziest thing you've seen in M and A?

Not aligning your inputs to the outputs that you hope to achieve. If you're acquiring a lot and you want to do it really well, if it's the crux of your go forward strategy, M and A is just a massive component of it. And you're not structuring M and A in a way that supports that. Meaning you don't have enough bodies, you don't have enough funding, you don't have enough of anything to get the results you're looking for. That just doesn't make sense to me. Oftentimes there's a big misalignment between how we hope to do really rock solid M and A and how we are structuring things to support that.

Have you seen that where a deal goes sideways just because it was that under Resourced?

Yeah, definitely. A lot of. Lots of folks and lots of different companies who will talk about this. It's really important and I'm not really sure why. Again, you've got this misalignment. I'm not sure where that comes from. It's probably just being cost conscious, I don't know. But at the end of the day, again, if it's super, super important to your company that you drive really successful M and A. We already know that doing successful M and A is very hard. So why not put your best foot forward and give just a rockstar team, make sure that that the incentives and the structures there are supporting good outcomes.

That's a good point. I'm publishing a book closer to the end of the year on standing up an M and A function. So you'll have to give me feedback to make sure I got the right perspective on how you staff a deal and incentivize it. And probably need to revisit our current manuscript. Kara, thank you so much for the time today. I enjoy this conversation. I appreciate you helping me become a better M and A scientist.

Absolutely. I enjoyed being here. Thank you.

Till next time. Here's to the deal. Thank you for taking the time to explore the world of M and A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcast. We'd love to hear from you. If you need help standing up at m and a 5 function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email kisan k I-s o n a science.com or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter. Again, that's mascience.com here's to the deal. Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.