How to Execute a Balanced M&A Integration

Foreign.

Today's episode of the M and A Science Podcast is brought to you by insight. In today's rapidly evolving business world, staying ahead means embracing change and leveraging technology to not just meet but exceed your strategic goals. That's where Insight comes in. Insight is a comprehensive solutions integrator that helps organizations transform technology, operations and service delivery to future, proof the business and innovate the client focused approach to delivery. They combine the power of people and technology to turn the biggest challenges into opportunities. Learn more at insight.com leave-legacy that's insight.com leave legacy Emerson Block Cardinal Health Broadcom Toast, Energizer Jamf Treehouse Food Forum there's too many to list what do the best corporate development teams in the world have in common? They use Deal Room, add a crappy Data Room, and Excel trackers. In 2021, Emerson did an $11 billion acquisition on Deal Room, then this year, a $14 billion platform divestiture to Blackstone. Even with every big bank name involved in the deal, they all had to use Deal Room. Learn why the best in M and A combine diligence and integration into one workflow so they can get both diligence and integration done faster. To execute M and A like the best, you have to know how to use Deal Room. See for yourself@dealroom.net Again, that's dealroom.net let's get to the interview. I'm Kisan Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals. Foreign A scientists welcome to the M and A Science Podcast where we learn from the best in M and A to uncover proven techniques for enterprise value creation. If you're interested in learning more about how to optimize your M and A practice or want to get involved with a community of forward thinking M and a practitioners, visit mascience.com and subscribe to our free weekly newsletter. You want to keep up with us on the go? Head over to LinkedIn and follow M and A Science. I'm your host, Kisan Patel, CEO and Founder of M and A Science. Joining me today is Karen Williams, Head of M and A Integration at Progress. Progress Software offers software to develop, deploy and manage high impact business applications trading on NASDAQ under prgs. Today we're going to talk about how to execute a balanced and MNA integration. Karen, how are you doing today?

I'm doing great Kisan. Great to be here.

Thanks for Hosting we're here live at the global world headquarters of Progress just outside of Boston, Burlington, Massachusetts.

Thank you for being here. It's great to have you.

Can we kick things off a little bit about your background?

My background from M and A interestingly started that I've been acquired a couple times in my career. Was acquired years ago, very early in my career when I was head of sales operations and always been in the high tech and primarily software space. But this was quite a while ago acquired by GTE at the time and of course whenever you're in a role like that, your role really becomes to work yourself out of a job as you integrate in. And a big part of my job being in the sales ops team was around how do we build out the ecosystem. Then I've been acquired before, ultimately was with Rational Software and we were acquired by IBM. Since then within IBM I had the great opportunity. That's where I say I really cut my teeth on M and A because IBM has a program that they call the Integration Executive and you are responsible for acquisitions for two years generally speaking. And in that time not only are you responsible for the integration of the acquisition, but also for the P and L. It's a great learning and really development opportunity. And I was fortunate enough to do this several times within IBM. From there I really got my taste for it. I think once you've done M and A and the kind of role you're in, you're like how do I go back and just do one function? How do I go back and just be in sales or sales ops? How do I just go back and be in support kind of thing. So I really decided to make it a career ultimately went out and was doing some independent consulting. Did that for about five years on my own helping companies typically building out their M and A practices or building out a corp dev function. In that often my clients were smaller, they might be owned by PE firm and they didn't have a corp dev function and they would need someone to help manage and guide them through the diligence process and or then lead them through integration and then I'd build out Playbooks, buddy up with people internally to help them develop that capability in house. Progress Software was my last client and how I came to work here, it was such a great client. We both got to do the try before you buy. Now I've been in progress as an employee for three and a half years as a full time employee and been working with Progress for a little over four years now.

Wow. Got acquired as an Employee multiple times I did, ended up joining IBM, seeing pretty mature M and A program and firsthand accountability and P and L, and then went off on your own, built a consulting practice. How did Progress convince you to come full time?

It wasn't that hard of a job to convince me. Interestingly enough, I had said I would probably never go back and work for a company full time again. I loved being my own boss, as you probably know. It was really great being my own boss. But I worked at Progress and the people are so great. I believed in their mission, I believed in their vision, and the people were just fantastic. And when the opportunity came up and they approached me about joining because as a serial acquirer and they wanted to make sure they had this capability in house, I thought, why go out and each time have to rebuild those relationships and have to rebuild those connections and not know who you're encountering as an independent consultant? That's the other thing. Sometimes you get into a client and it's even up front, you don't get to figure out they're not going to be the best connection. And you get through it and you do the job and you do it well. There's no if, ands or buts about it. But to really know the people, believe in the people and the culture of the organization, their vision, the leadership team. And hey, I work for Jeremy Siegel and he's fantastic. I've had the opportunity in my career to wear many hats. I've been a seller, carried a bag. I've been in sales operations. I've been in a support organization where I led every aspect of the support and operations other than the people who manage the tickets and resolve the actual problem. I've sat in a development team. I was at one time a technical quality champion. I even did a major real estate initiative. And the fantastic thing about this is I have experience and knowledge across a spectrum of the functions that you deal with when you're managing the integration of an acquisition. And I'm not suggesting I am the expert in these. I rely on our subject matter experts and they are critical. But I know enough to help connect the dots and make connection points and understand the interdependencies and the impact of the decisions that we're making. That I think that has served me really well as I manage the integration of acquisitions.

Yeah, it sounds like that from that diversified operating experience that you understand how these pieces really work in detail.

It's played well for me.

Why is balanced integration important?

Balanced integration is really important because you purchased this company For a reason. You made the decision to invest significant portions of your financial aspect, your capital into acquiring this business. And you need to make sure that we're integrating in a manner that is going to achieve success, allow you to realize your business case and realize your not only your financial targets, but the strategic rationale at the same time is not adversely impacting your core or heritage business. So how do you balance it so that you're achieving both sides of the coin, so to speak? If. If you don't and you just go full bore on the integration without taking the peripherals into account and thinking about how the impact of these decisions and the timing of these decisions and the execution of them will impact other parts of your business, you will break something. You will either break the business you acquired, you will break something in your core business. Now you're in a recovery mode.

All right, so let's break this down. If we basically, I want to define what balanced integration is, because generally, can we agree that the goal is to get integration done as fast as possible?

Absolutely. That does not mean that you're not moving with speed and efficiency.

All right, we're on the same page. We want to move.

Absolutely.

Speed and efficiency here. We want to meet our objectives. Obviously, whatever the drivers are of the deal, we want to make sure we meet that. But we want to make sure we don't break the business.

Correct.

Do you have an example of like when this has gone sided waste, maybe just to have a real emphasis on.

Sure. It was a past life not in progress. I realized as the lead responsible for this acquisition, a big part of my job was to stand in front of the bus. Because the company we had acquired was so unique and so different than what we did in their operating model, how they did things, that it became a major distraction with the number of people from the core business who are reaching out because they wanted to introduce this into different parts of the business. Some of the things they were doing right. And big part of my job became to stand in front of that bus and say. And it became difficult at times because a lot of this was coming from extremely senior leadership because they saw doing this acquisition as a way of helping to transform parts of our business. And we got to slow it down or we have to prioritize or we will not realize the core reasons why we did this. You are going to erode the business case. We will have instead of our return on investment in the set timeframe, in our business case, we will extend that beyond. And so now that's going to impact our investment, our return on capital. And by the way, it's creating frustration with the employees, partners and customers because we're distracting the acquired team from the job they need to do to both execute on the integration and and continue to manage and drive business and service customers. Big part of my job. So it went sideways. We got it course corrected pretty quickly. But I will tell you, we were constantly trying to make up for that. And for that, how do you balance? Because we could also not stop the bus completely, so to speak. We couldn't say we're not going to talk to you for six months, we're not going to do any of this. But it was about balancing and it was about how do we manage it, what are the priorities and, and the timing in which we did these things and the impact they would have. It all goes back to what I said about why a balanced integration is important.

What happened?

Oh, we were able to course correct it and the acquisition proceeded. It was a challenging acquisition in general because so many of the things and the way this business operated were different than our heritage business. It truly was making changes through transformation of our core business to how do we do different things. Like this was quite some time ago and SaaS still new up and on coming and SaaS was core way that the acquired business executed their core model. Very little on prem as part of their business. They had already done the migration and the transformation and movement to SaaS whereas internally we were still very much an on prem perpetual business. So how did you move to the subscription? Your systems, your processes were not designed to take that on and there really was a transformation that we had to do. So it actually interestingly became not just integrating the business, but trying to help prioritize some of those transformational changes in your core business. And what do we need to do first to get the integration done and keep the business operational and not break that continuity. That became really interesting. So I often say M and A is often a forcing function to make changes in your core business because sometimes it highlights the thing. So what it did in this case is highlight that our operating model was not flexible and agile enough and we had to make some significant changes to it.

Good example. I was wondering if we maybe step back and just run it from the top. Give me the good playbook on how to do this stuff the right way. From the time you get involved, when should that be?

This is something that I'm pretty passionate about and you ask why did I decide to come to progress. What was really great is in Talking to Jeremy and having worked with him before, we were very philosophically aligned on that. I believe as the integration lead, I should be involved and need to be involved from the get go. And by the get go, I mean Jeremy and my colleague Alex are sourcing, working with the business on strategy to understand markets, adjacent markets and all that. But once we've identified a potential target and we're having even those initial management meetings where we start bringing in the business to say, could this be a viable target? Is this something we want to pursue? That's when I believe I should be involved and need to be involved. I'm a bystander, I'm observing, I'm learning, I'm listening. I'm not driving the process, I don't own it and I don't disrupt it. Although they're very open to me asking questions and everything else. But I really try to be a bystander to learn. And part of the reason is so I'm never behind the eight ball when we do. If we then move forward and formally kick off diligence with a cross functional team, I'm level set already. I'm not learning at the same time as them. And that even though I don't own the diligence process, that's owned by Alex, actually my counterpart, we always say we meet in the middle during diligence. So I don't own the diligence process. It does help me support our functional teams as I'm working with them as they put an operational lens on the business. Because to due diligence and to really do it well, you need to do that and you need to understand how would you operationalize the business. All of that will feed into integration, your preliminary integration plan. You need to come out of diligence with a prelim integration plan and understand what's your starting point. Plans change and they're meant to change, but you need to have that stake in the ground. And by being part of this from the early stages of the process, I'm able to partner with and help support our cross functional teams as they go through diligence.

And your goal is to have a preliminary integration plan coming out of diligence?

We don't get approval on moving forward with an acquisition unless we have a preliminary pen that demonstrates you need this.

Part of getting Loi out.

Well, Loi, you can move forward, I mean move forward on closing a deal. So that's coming out of diligence? Yeah.

Before you close, you want to, and you should.

Every organization I've ever worked with or for whether it be an employer, consultant doing M and A. That's one of our objectives. It is not the only objective and it is not the primary objective of diligence. Primary objective. We all know red flags. Does the deal make sense? Financial aspects, can you make it work? And my tone is not to minimize those things because they're important, but the reality is you can't do those unless you've put this operational lens on the business financially. Does it make sense? You need to have a baseline business case and a model that understands how you do that. How do you do that if you don't put an operational lens of the business and know on how you would integrate them, how they align organizationally, what the priorities would be and have that viewpoint coming out of diligence. You need to do those things to really validate if you're going to have solid financial plan and business case.

That's the value of having that diligence information so you can get a good head start on integration planning.

Now you always have to prioritize. There are times you have to prioritize and say we're going to have to punt on this one and wait for it for either that period between sign and close or if it's a simultaneous sign and close and you can prioritize and with that experience, okay, this would be nice to have, but we can wait if this is going to be a showstopper to get that data and that information. Particularly when you're in a competitive process, the seller is looking at the lowest common denominator, so to speak. What do they need to give everyone who's on from a buy side on the competitive process, you need to be able to prioritize and adjust and be flexible.

What's like the media information that you want to get your hands on?

Obviously we need, you need to dig in on their financials and you need to understand the customer base. And thankfully we have a great team for that. We do across the board, actually. I'm quite proud of our team at Progress and to be part of it and a piece of it. We also need a lot on the people front. When push comes to shove, it comes down to your financials, your legal and your people aspects. You need to understand, you need to have an understanding of workforce. I'm really conscious to use the word workforce because it's not just about employees. So many companies today use contractors as a core part of their business and as part of their workforce that you need to understand that you need to look at it holistically so you need to do your analysis and understand what the implications might be, what are the risk potential, liabilities. We need to do that. And then by doing that, you also start getting a vision of how would they align, where would they fit in, where you might have some redundancies, where you have opportunities because there's skill sets or resources for things you don't have or maybe gaps in your business today. You of course need to understand the other key piece is the technology, where technology comes. And you need to understand the quality, the code quality and the stickiness of the product and the development practices. Do they align with yours? What will be the level of effort to transform or to align and migrate to what we do today and our methodology? Maybe it's very little, maybe it's a lot. Neither of those would influence whether you do the deal or not. But you need to understand them because that's going to affect timing. How long would it take you to realize your return on investment, when you'd be able to get there, all those other aspects. The other big piece is culture. And culture's hard to get at during diligence. Thankfully we have great team in our people team focused on org effectiveness and they're really phenomenal at this. But everyone, that's the other piece, everyone who's working on the acquisition and particularly indelligence, owns culture. It is not a people or an HR function. We all own it, we all make it up. And again, it is not going to necessarily make or break whether you do the deal, but understanding what that culture is, how you might mitigate risks potentially because you have gaps or major differences in culture, how you could overcome those or work together and manage them and having awareness. Because the really important thing from an integration standpoint is how do we come out of the gate strong, how do we build relationships, establish credibility with all stakeholder communities so including your customers, your partners, your vendors and your workforce. And how do you do that? And if you don't understand the culture could be how they operate internally, how they engage with customers, how they engage with partners and vendors. You don't understand those things. How do you make sure you come out of the gate strong and establish that relationship and that credibility?

You're all over the place.

I am all over the place.

You got your hands everywhere. How would you define your role during diligence?

So my role during diligence is really putting that operational lens on the business, working with the cross functional teams to do that. And that's full spectrum of the cross functional teams. It's also about bringing together some of what would be our work streams that are cross functional in nature and start aligning. Because one of the things that I know you know that can make or break the success of an acquisition is the interdependencies and alignment. So if we only look at things in silos by function and aren't sharing that information or collaborating on what we've learned and how that might impact things, whether it be the operations of the business or the integration process and timeline, it's working with the teams on that kind of stuff. So we're doing this in parallel with diligence, but also making sure we don't disrupt the core priority of diligence, which is do we do this deal? Are there red flags that tell us we don't want to do the deal? Does the financial model not work per our criteria and does this deal make sense, the strategic rationale a good fit? Do we think going to market we have a good story to tell and can do that and do that? Well, all of those things are the priority. But again, I would argue that you can't do those things unless you're putting that operational lens on the business at the same time.

But then how do you tie this? When we go back to the original theme of this interview. Balance. Integration. Yeah. With all that, you're just trying to piecemeal and I feel like this pretty typical. Oh yeah.

I haven't. I don't think I've said anything that is so unique that anyone who's had a MNE experience wouldn't know.

You should define it pretty well. But I guess where does that real balance come in of you sort of define the objectives on what are the drivers of the deal, how are we going to go approach integrating it. But then you make sure you don't blow up the company.

I think the balance comes in as we get closer to the end of diligence and you can foresee successful outcome. You're really negotiating the terms of your agreement with the buyer and you know this is gonna be come out of here successful. I start formally kicking off integration planning with our internal team. The wonderful thing about progress is we consistently have continuity in diligence to integration. And I think this is another key success factor. If you switch out your teams, you say, this is our diligence team. They go in and do diligence on every deal. But now the integration team's gonna come in. First of all, they're behind the eight ball. They have to get up to speed, they have to learn about deal because typically they're not under the tent or haven't brought in. Secondly, they're now gonna be responsible for executing on preliminary plans or visions that they didn't create. So there becomes a lot of finger pointing. Like I would never have agreed to this. I wouldn't have said I'd do this. And we have continuity. So I'll formally kick off integration. And the first thing we do is because I've been part of diligence every step of the way and I'm working closely with the executive sponsor for a deal. Every deal is going to have should and have an executive sponsor and ours always do. We establish when we kick off that diligence what is the vision for this business, the operating vision and what are some of our assumptions that we've made based on the learnings of the full cross functional team? Some of those learnings are going to and assumptions are going to be based on timing of things on headcount strategy. It's going to be about product strategy. Maybe there's a product offering that you're going to end a life because their customer base is declining, they're not investing in it. You don't foresee it as future. So what are the timing of all these things and how do you do this and get around some of those baseline assumptions? And then we do a formal kickoff and to align this cross functional team on those assumptions, the priorities. How does this map back to the strategic rationale? That's key. I use a lot of these expressions. The right hand needs to know what the left is doing. Everyone's rowing the oars in the same direction in the boat, rowing the oars in the same direction. How do we make sure we do that? And we bring that full cross functional team together and align and then have each team work their way. Individual plans often working preliminary plans often working with counterparts in other functions because those inter go back to those interpendencies being key. Then we have a workshop where we come together as a full team to review these and say how do we bring this together and what is the timeframe and what is the impact? And we're doing that with the business. And when I meant the business, I mean if you think about front office and back office, so much of the integration falls on the back office. The actual integration, it's systems legal, tooling, financials, people, benefits, payroll, all those kinds of things. But how do we align with the front office on what they need to do to ensure we can achieve the strategic rationale and what timeline and Then how do you balance those two things?

That's a lot.

It is a lot.

I like the first part where you talk through enabling the integration leader to create the vision. I think that was a pretty powerful statement because they're not the ones that create a vision. They had hand me down vision. It's a little more challenging and maybe not as fun or motivating to take the role.

I've participated in some of the roundtable events from M and A Science and made some great connections and conversations and even some panel discussions. And when you do the networking, one of the things I always find amazing when I make that kind of a statement is the number of people who tell me I wish my company believed in that. I wish I didn't. Who's responsible for integration just get brought in just before a deal signs or right at sign or that kind of a timing and they're like I wish. And to me that is. And that was one of the reasons I joined Progress because Jeremy and I were very in sync about this. And I think that is important from a core philosophical operating model standpoint. And I'm always amazed when companies don't do that.

The other part you talk to. So create the vision. Operating vision get you involved early. Got a lot more learnings to help shape this out vision and the plan. Aligning cross functional teams. You mentioned that the cross functional teams are going to work with the counterparty on this planning as well.

We will ideally or typically once we sign the deal. So prior to sign of a deal we are doing that independently as an internal team only. But once we sign the deal and presuming we've been able to align with the seller on getting access to employees in that period between sign and close, presuming we have that kind of a period, we will do re kickoff integration planning, a joint integration planning where we bring together our internal integration leads for each function along with whom would be their counterparts from the seller. And we re kick this off. And again we go through the same thing around our baseline assumptions, objectives. Now we always have to balance that, what we're sharing and how deep we go. Because again they're not our employees yet. Presuming you're between this period and sign and close and you have to be very conscious that you are not giving direction to the business or operating the business or advising or guiding on changes to the business. And we are really strict about that with our teams.

But because they're public.

Because we're public, yes. Well that's one of the key reasons public Generally speaking, if they're not your employees, Net, you're not supposed to do that. But yes, I think there's a heightened sensitivity to it when you're public as a publicly traded company. And that's sometimes frustrating and hard for the employees from the seller to understand if they haven't worked in a public company before. Because there probably is more flexibility and leeway if you're private to private. So we'll work with them. We manage that carefully because we can do integration planning and work with them to validate some of our assumptions and the integration plan. Because we all know there's going to be stuff that comes up that you did not learn in diligence. There's always going to be stuff that may require you to refine your plan or make adjustments. Maybe there's something missing that's not going to allow you to do this as quickly as you thought. And that can be very tactical or operational. As an example, maybe your plan is to migrate all of their vendor contracts to our Centralized repository within 30, 60 days. Whatever timeframe you set. They don't have a centralized repository and that didn't come out very clearly in maybe some of them are in a centralized repository, but a good portion of them could be still owned by the business and sit within each respective function. So we just might have to revise that plan. That's very tactical in nature and something that's completely manageable. It could be a broad spectrum of things that haven't come out during diligence. But ideally it's not a ton of things and typically it shouldn't be any of major red flag times. Some things that really impact your strategic rationale.

That's a good example. The other piece you mentioned was realization versus timeline. Could you elaborate that a little more? Because I want to make sure I.

Got sure you come out of diligence. You validated your business case, you have validated your strategic rationale. You have an understanding or a point of view on how you want to integrate and align this and operate this business now as part of your organization. How do you balance that with the timeline in which you need to execute on things? Because some of those items are going to be integration in nature. Some of those things are going to be what you could call natural business evolution because some of it might be around branding, some of it could be around go to market strategy, what kind of marketing programs and tactics you're going to do. Some of those could be an. An alignment of sales model and sales strategy. Maybe they don't have Inside sales today and they do everything at a field level locally. But you see the vision how introducing a BDR inside sales model could be beneficial and allow you greater growth and expansion in certain geographies or whatever it may be. These are all like hypotheticals, but you also have some integration responsibilities. And out of the gate you have to prioritize. You have to ensure all legal and statutory requirements are met. And then you have the ME questions, the employees, the workforce, the contractors. Do I have a job? It's the first question we almost all get asked when we do an acquisition. People want to know how is this going to impact me? Am I going to put food on my table? The roof over my head, my family's head? How does that impact an upcoming travel plans? I've been planning this 25th anniversary trip with my spouse for six months and now are you going to say my PTO policy has changed and I can't do it? Are what do my benefits look like? I've encountered many times in deals I've done in my career where that becomes a core question. Because whether the employee themselves or partners, children, whatever it may be, have an upcoming surgical procedure, are my benefits going to change? This was pre approved. How does that impact me? All of those things? And we have to strike the right balance between those two. There's also only so much change. An organization can absorb it simultaneously. So we work very carefully across the cross functional team to develop a well integrated, to overuse a term integrated integration plan that we understand those interdependencies, timing, priorities, what can we push out? Yes, it's important, but does it really need to be done in the first 30 days? Because it could be more of a distraction and a disruption. And then from that we also develop an onboarding plan for the employees and the workforce to say what's going to happen when manage their expectations and really communicate and share that with them. So it's about balancing those things because you don't want to put integration first at the risk of achieving your business results. But you also can't just ignore integration because there are some things you have to do even from a legal or compliance perspective.

Realization versus time.

Yes, exactly. That's what it really does come down to. And it's all doable. It's just about managing it, communicating and partnering across the organization. And that's both from within the newly acquired team and internally.

Sounds like a big exercise around communication and prioritization.

It is something I'm incredibly passionate about. I think communication is one of the key pillars for a successful integration.

Oh, you're getting ahead of me. I was going to ask you to break this down.

Well, you talked about communication.

You're going to break this down to like what makes integration successful.

To me, that is one of the key pillars of an integration of an acquisition is communication and that's communication at all levels. That's communication up to your leadership team, your steering committee. Presumably you have one in place for this particular acquisition, your executive sponsor, managing expectations and helping them maybe understand why their vision can't always be achieved in the timeframe they would like it to be. Now. Sometimes you have to make adjustments in your plan because they have solid business reasons of why that needs to happen. And so you make adjustments. But it's making sure you're having those open two way lines of communication, it's within your integration team cross functionally, making sure all your interdependencies are tied out. It's communicating to your customers, managing their expectations. First thing customers want to know is how I engage going to change are my contacts. I have a customer success manager in place, Are they still going to be my customer success manager? I've had a vision of the product roadmap that was shared with me and I'm developing my internal plans for use of the product in house based on that roadmap. Is that going to change what's going to happen here? So how do you communicate with them? Partners, your third party channels and then of course your workforce. I mentioned it before and I'll stress it again because I really can't stress this enough. The reality is when you're in technology, and particularly software, people are core to what you do. You can't develop your software, you can't develop your offering, you can't deploy it, you can't sell it, you can't market it, you can't service it, you can't support it without people making sure you have that open and transparent line going with everyone. The workforce is really critical and they're not always going to like what you say, by the way. But it doesn't mean you shouldn't say it, it doesn't mean you shouldn't share it. It's how you do it. But it doesn't mean you should avoid it. You shouldn't go into a black hole. I'm sure you've witnessed this, but I've witnessed many times where companies will come out of the gate strong with communication. It's great. Day one event, they do the ra, they welcome all the employees and it's like silence. And employees have no idea what's happening. The workforce has no idea what's happening, what's next, what are my expectations, where do I go from here? And it's silent. You got to maintain that drumbeat.

Give me some tips of making good communication because you covered a lot and it's obviously going up the leadership and then you got employees, vendors, like what's. It's like a lot. I feel like how do you manage the details and make sure there isn't like a slip on this stuff and then other little things.

You need a comprehensive communication plan that really hits all those stakeholder communities. Big one with leadership up is really making sure you have a steering committee in place and that you're meeting regularly with them and you have a strong cadence in place and you have commitment from them. That's another thing we're very fortunate to have in progress. I've worked with and for other companies where a steering committee will come out strong and maybe the first month all those appropriate leaders and members come to every meeting, like a weekly meeting, let's say, and then they dwindle off and they deprioritize this because it's in their minds no longer the shiny new thing that doesn't happen in progress. And really making sure that they understand their role and the commitment required is key. I'm fortunate to have that vendors, partners and customers, you have to have a strong communication channel with them and a plan. What do you do at sign of the acquisition? What do you do at close of the acquisition? What's your message? How do you communicate? How do you make sure they know where to go if they have questions or need answers? And as part of that, making sure you enable anyone internally who is facing those communities, those stakeholder communities, so that they can respond to those. Making sure you have FAQs in place that are clarity, that provide clarity in the responses for the questions you anticipate will come up. But also having a channel, where can they submit questions? How do they get questions answered that you didn't anticipate, that weren't in your faq, that are a one off kind of thing to make sure everyone's comfortable with the response. So you got to have that engine in place. And then on the workforce side, it's really about making sure you have, like I said, you not only come out of the gate strong and you are balancing the message around why did we do this acquisition? How do you fit in? What do we see as key to success and how we move forward? And then keeping that Communication channel open. So we've done things like, because this is really important, like I said, in maintaining a drum beat and that you don't just come out of the gate strong in addition to a day one event or a welcome event, depending on which terminology you want to use. And then maybe having targeted roadshow for different functions or geographies based on the distribution so people are getting a chance that are questions that are unique to them based on their function or their geography. How do you help them understand and learn about your organization even if nothing is immediately changing? And that's the other thing I say is you never tell them things aren't going to change and it's business as usual. Never ever use those words because the reality is something will always change whether it's integration related or not. It will change, business changes and that will bite you in the butt. You will lose credibility if you tell them nothing will change and then something changes. But how do you keep that line going? So we've done things like we'll host sessions that are functional in nature that we maybe invite everyone to come to, like open houses almost where they can learn just about what does corp dev actually mean to progress software. That definition can be different. I've worked with and for companies where corp dev was not only responsible for AM&A, they were responsible for the channel strategy, partners, strategic relationships. Not every company does it that way. So how does corp dev fit in to progress and helping them understand that what all of our different functions are and who the right people are and where they can go, but also having more intimate meetings on those functional areas so the people who sit in that function can actually ask some targeted questions. Maybe there's unique aspects based on a geography, making sure you provide the appropriate forums that they can address that. And then ways to keep the drumbeat going are we've done things like we've done monthly sessions where we're using them as not only providing integration updates. Maybe once a month you do a wholesale integration update to the entire workforce. So you're telling them what's happened, what's next, how this impacts them and their customers, but also maybe using those as opportunities to learn more about your business and then give them opportunities so they're educating your core employee base or workforce on their business. One of the things that I find when you do an acquisition is both the buyer and seller workforces are really excited and anxious to learn about the capabilities and technology. I mean these are at heart technologists and they want to know what the capabilities are and how they might be able to leverage that in their world. So we'll do sessions around that product demos, informational sessions, providing information and resources on where they can get more information, maybe where they can get downloads as an internal employee now and use things. The other thing we've done, and I've done this many times in my career, is the concept of a newsletter, an integration newsletter. I call it an acquisition newsletter, actually, because it's not just about integration. While that is a key piece of it, because we also know that everyone learns differently, that everyone needs to hear things in different ways. Someone on a call, some people need to read it, and they need to hear it multiple times. So we'll cover integration. We also will include news, what's happening in the business. Because particularly if you're acquiring a company that's smaller than you, oftentimes they have an internal network that they're. They know if a key deal got one. They know if someone in product management had a great meeting with an analyst and a report's gonna come out and that kind of stuff. And people lose that as they get integrated into a larger company. They lose that network and those connection points, Particularly in the first 12 months or so. We try to keep that line of communication open by sharing that kind of news in a newsletter. And they make that newsletter available not just to the workforce of the acquired team, to also the workforce of progress or other companies I've worked in.

Does this become a playbook? Like, once you've done an acquisition, you're doing the next one to have this kind of.

So we have pretty robust playbook across the organization overall, and then functional team playbooks. We refine those playbooks with every deal. So we go back and say what worked well. Where were there opportunities for improvement? Were there new things that we introduced that we hadn't done before that were really positively received or had success? And we start refining our Playbooks to accommodate that feedback. So another thing that I'm incredibly proud and Progress did this before I joined. So I've just built upon this and the corp dev team as a whole has built upon this is we do a retrospective on every acquisition. We even do it in diligence on deals we've chose not to move forward with that we've walked away from. Because we're always trying to get learnings on what worked well and where do we have opportunities for improvement and what refinements can we make. How do we drive a continuous loop around M and a readiness. And the thing that I'm incredibly proud of is not just that we do that because a lot of companies do that, but progress follows through on it. A lot of companies say they're going to do it, they get learnings, then it always falls to the bottom of their list. We actually follow through and execute on those priorities that we establish coming out of a retrospective.

Great way to keep improving.

Yeah, it really is. It really is. We found it works really well.

We talk about employee experience. I got this note that I took from our prior conversation that says quoting you on this but capturing employees hearts and minds. I know I circled it. That was my favorite line from the last conversation.

It's very true. If you start out behind, you are constantly trying to recoup and recover. So how do you capture the hearts and minds out of the gate? And that starts with sign. If you have a signed close period, it starts with when you immediately announce, presuming you've announced the deal. When you announce a deal, it starts there. Part of it is helping them understand the vision. Why is this a good thing? What I find truly when you're in software, most of the employees are there because they're passionate about the capability, the solution that they provide to their customers, how they service their customers, how they support customers and the impact they have on the business. How do you you maintain that? How do you show them that? By the way, being part of progress is going to now not just maintain that, but enhance it. And now being part of a larger ecosystem, a larger organization with a broader geography and ecosystem that we can leverage. How do you do that? It's also about them as individuals and sharing why is progress a good place to be and what does that mean for them. But it also comes down to treating them with respect, not just saying things. Anyone can say the words, but it's following through. And that does get back to consistently being transparent and open, as open as possible in your communications. Sometimes you can't because you don't know the answer yet. And that's okay. Tell them that ideally set an expectation on when you believe you'll have the answer, but never set timelines that you don't follow through on if you erode that credibility. I'm telling you, if you follow through and you're consistent and you treat fairly and with respect, that builds such goodwill. Then their eyes open up to seeing the strategic vision and why this is a good thing. And let's face it, this is with everyone in the workforce, whether those people stick around or not for the long term vision of the organization, but helping everyone see that you're going to treat them individually with fairness and respect really carries a lot of weight across the whole integration process. And also just overall employee engagement. How do you do that and build that so that as you integrate them in, they really start seeing their progress.

But more than just sharing the strategic vision, it's about respect, transparency, being openness as possible inconsistency. I was saying all this themes up into trust.

It really does.

Building trust.

At the end, it really themes up into building trust. You got to start that out of the gate. You won't establish it out of the gate, but you need to start that and keep following through. Every step of the way you build more and more.

How's it working with the other leaders? There's got to be points of friction.

The acquired leaders or internal leaders?

It sounds like both. Okay, so there's obviously you have a way of dealing with internal leaders.

Yes.

And acquired. It could be very different and there could be very differences in the way they make decisions, the way they're just leadership styles.

Absolutely.

Talk to me about that. Give me the real gritty and friction that comes up and how you handle it.

It does come up. You're correct. Internally we have a way of working through it. We've built tight relationships and our core team that works on M and A, whether they sit in corp dev or not. We have a core set of folks. Most of them have day jobs too. But we have strong relationships and have built those relationships. And so we have ways of working through that friction. I personally believe always the best way is again, openness and transparency. So my style is if I have a frustration or I can tell I'm frustrating someone else because I'm not immune to that, I'll bring it up. I'll have a one on one with them and say, I think we just need to clear the air. Let's have this conversation, figure it out and work through it. That's my personal style. On the acquire team, on the leaders, the acquire team. The first step is really trying to bring them in and help them understand what the vision is and why. It's that way. This is the biggest thing I'll go back to too, on the communication. A lot of companies, even if they have good communication channels, they'll communicate the what. They don't explain the why. And you have to explain the why for people to understand. Why is this change being made? It wasn't just an arbitrary decision. What factored into this decision? How are we approaching it? Why are we doing it? I'll say it again, they're not always going to like those answers. But what I find particularly when it's changed, that impacts them personally. But what I have found is that people appreciate and respect that you're explaining it to them and it helps them move forward versus getting just bogged down on. They're crazy, they don't know what they're doing. This change doesn't matter. So the first thing is trying to bring them in and help them understand decisions that are being made, why they're being made and validate is there some and take their viewpoint or their feedback into serious consideration. It may not change that a plan or a decision. But again, I find most people at least appreciate and respect that you listened to them and you heard and you tried to account account for it. And it might be you can't do exactly what they're saying, but you can refine the decision or a plan when you just continuously butt heads. You just need to make the decision. So I'll give you an example of this. And again, this was past life prior to progress, I'll be very clear about that. But I did an acquisition where the CEO and founder of the business, so it was a private company, did not philosophically agree with our operating model and how we did things internally. When we closed the deal, they had to figure out commission plans and they were responsible for the payout. That was all part of the closing terms, et cetera, because these were all deals that were closed prior to the acquisition closing and that kind of stuff. And they were doing the payouts, final payouts. And I had a couple of folks in the sales organization come to me because they were being told deals they had worked on and successfully brought over the finish line they were not going to be paid a commission on. And the decision was being made that this was didn't fit into their plan, their sales plan. One, it did from a geographic standpoint. So that was an incorrect viewpoint. Just if you read maps, it's an incorrect viewpad. But secondly, it was such a short sighted decision for the impact it was going to have. We were literally at the time talking about $5,000 US per individual and there was two of them. So I tried to talk to the individual who's making the decision, the leader of the acquire team, and he just fundamentally disagreed and refused to do it. And I finally made the decision. I said okay, that's fine. One, it meant money out of his pocket because this is a private company. I said that's fine, you can choose to do that. But I disagree. And I have a budget, so I will be paying these. He's like, no, you can't. And I said, yes, I can, and I am, because all you're doing is creating a distraction right now that all they can focus on is they're being treated unfairly. And frankly, I agree with them. And so I moved toward and I did it. And that bought me immense goodwill with those individuals and their peers and the rest of the organization because they shared this. It spread like wildfire. And that's not why I did it. It was just one, it was the right thing to do, and two, it was just an unnecessary distraction.

Good example. So we have a conflict mitigation playbook here, which is maybe it's not the right word. It's not conflict. Let's figure out what to call it. I forgot to describe it. Okay. Emphasize the why, which I think is important. We forget this, we forget that.

A lot of people do. Yeah.

And then listen to their viewpoint. I think is really critical, being able to really listen, understanding where people are at. Sometimes it's not even clear if they're on the same page or not.

Well, that's it. Until you have that conversation, and particularly so much is done over like instant messaging or email, you lose part of the messaging in just the written word. So when it's clear there's a disagreement or there's it doesn't appear, there's alignment, have a conversation. Don't just hide behind the written word. I've also experienced that where I've had folks, and this has been like from the seller, that passive aggressive. And then they just hide behind an email and you try to get them on a phone or in a call to have the conversation and they just hide behind the written word. And there's so much that gets lost from both vantage points. You need to talk things out sometimes.

What's their alignment playbook?

It really is an alignment playbook. Yes.

All right, there we go. Our alignment playbook. Emphasize why. Review point. Talking about success. How do you measure success?

Well, it goes back to a lot of the things we've talked about. There is no silver bullet for success. I guess some would argue the silver bullet is did you get your return on investment? Certainly in the timeframe expected. Did you achieve your business case, Your financial targets, top line revenue, operating margins, customer retention. You have all those kinds of quantifiable measures that you need to track, report on and know how you're proceeding. And you should be doing that frequently because what course corrections may you have to make along the way don't wait until all of a sudden you're in a hole and it's impossible to recover. So you definitely have your quantifiable measures from a financial perspective. But then you also have employee engagement. Looking at your workforce and are they engaged? Do you have unwanted voluntary attrition? Are people that you clearly identified as being critical to the success, whether it be from purely an integration standpoint or long term vision and execution, are they exiting the business prematurely from what you anticipated and wanted? Why? Or if you're seeing high numbers of this and is it in a specific geography, is it in a specific function? The other success we look at is how successful were your integration activities? Not just did you check a box? So let's say you enable the workforce on how to get information. Most companies have an Internet site or a wiki or something where they'll have like information on benefits and policies and this and that and the other thing. Not just that you communicated that or even gave a demo on the system. But are you seeing that the workforce knows how to use them? Are they using the implementing them? Are you still getting one off questions? What was the effectiveness of your integration activities? Did they work? So it's a really a combination of things. And then of course you have customers, customer sat, NPF scores and all that kind of piece and looking at all those aspects. So there's no silver bullet. What I always say is when you're measuring and tracking during the integration process, you need to look at not just the integration, but the health of the business too. Because again, if you're integrating but you're compromising the health of the business, that's a problem. And what I tell our team all the time is, listen, all of us are here are to support our business and their ability to develop, market, sell service and support our customers and our offerings and customers. So if we're doing things from an integration standpoint that adversely impact that, what do we need to do differently? Because that's what our job is.

Good points. I like how you expanded it to the specifics of integration activities and measuring how successful they were. What's the biggest challenge when executing balanced integration?

The biggest challenge is timing. Because we talked about upfront. Your goal is to integrate as quickly as possible speed and efficiency. And how do you do this in a balanced way while still achieving that speed and efficiency? So that is probably the biggest challenge. And the other challenge becomes managing conflicting priorities. As I said, most of the people who work on integration, not just in progress, but that I've encountered In many companies. There are very few companies have wholesale integration teams these days and at least in my experience and my network. So how do you balance conflicting priorities, then manage those expectations? One of the things, sometimes you will readjust. Maybe you had some initiatives going on internally that now you're going to deprioritize. Because as an organization you want the focus on integration. Those have to be conscious, informed decisions and then communicated and consistent communication on those decisions. So you need that again, that solid communication channel that it flows down. We've all experienced like you'll be told something and someone else will be told something. Message came across slightly different. So how do you make sure you have decisions that are made? And what I always say is we have to make an informed decision because not making a decision is making a decision in and of itself.

Have you found any good ways to log decisions? I feel like that's an issue. I've.

It is an issue and I won't say we're perfect at it. I think we're making improvements. It's actually one of the things on my list. From an M and A readiness perspective, we've done things as simple as, like having an Excel, particularly on. As it relates to an acquisition on an Excel tracker or using some sort of tool like that where key decisions are made and then documenting the decision, the date the decision is made, making sure all the key people have access to it and everything. I don't think we have widely adopted that yet. But what I found is once you start doing things more and more you. It really becomes core to your operating model. And so there's probably ways we can improve upon that. But we've done some things like that. And it's an area on our list as it relates to M and A readiness.

But no, I. That was a great way to summarize our conversation. I got to throw in like a little bonus one. Can you teach me about vendor rationalization? Because somebody brought this up to me and I was like, I really don't know. And like this is like an integration thing. Can you teach this to me? Because I really don't know.

So it's interesting. It's tough. Every company struggles with this, right?

What is it?

Vendor rationalization is one, making sure you understand who all the vendors are. How do they align with your vendors, the vendors you use. So you have, you have two CRM systems. Do you both use the same systems? Do you have development tools? If you're cloud hosting, you might have AWS or Microsoft, you know, Azure. So how do you Rationalize this, what's the plan? And then you have to look at contract terms. You have to look at cost benefit analysis, getting out of certain contracts on either side. It's not always that you want to just get rid of the acquired team's contracts. Sometimes they're using tooling or they might have better negotiated terms than you. You have to look at that and you have to determine which vendors are you going to consolidate, you're going to try and merge the agreements or bring them in under yours, which ones are you going to terminate and in what timeframe. And to do that, you also need to understand what maybe exit criteria they may have to get out of that contract. Can you only do it at time of renewal? Does it have to be notification 60, 90 days in advance, or will it go to automatic renewal? All those different pieces, and you have to bring that all together and have a viewpoint so that you can execute on it and hit and prioritize. What do you have to do first and what timeframe? And then there's also a legal asp, not just a legal, but an aspect of this to understand what are you doing from an entity structure, a legal entity, and depending on where their contracts are, what entity their contracts may be under. And it could be a mix, depending on their structure and then how you do things. And how are you going to rationalize that? Are you going to move all of the contracts to entity within your structure? What are you doing around the entity structure of the acquired team? Will that drive a timeframe in which you need to move to the contracts or take action on them? And some of that might not have nothing to do with consolidation or termination. It just might be notification about your needing to migrate contract, you might have to change paper. It's all of those kinds of things.

This is a whole topic of its own.

It is a whole topic. That's how I define vendor rationalization.

Awesome. If anybody tuned in knows some SMEs on this, we're looking for speakers for the next M and A science fair. I think this would be a great topic to add in there because it's come up a few times.

It is. And we're doing some things to continually enhance and improve upon it. I'll say one thing is, so we have a procurement team who's responsible for the vendor agreements, but also the business, of course, plays a key role because procurement's not making the decisions on whether we need this vendor or not or how we use this vendor. But we're bringing procurement in now to the process Sooner than later. You can't get all your vendor contracts during diligence, nor should that be a priority. But you want to understand which ones are material, which ones are going to have a major impact. And even though, again, those contracts may not influence your decision to do or not do a deal, having an understanding around that and the viewpoint, and start building a repository of information that you can use to guide this process. Doing that earlier and not always being an afterthought is key. So we're starting to do that.

That's awesome. That's actually such a good idea.

Yeah.

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

There's a few of them. So one, and this was years ago, I'd like to think I would never encounter this again. Long before progress, I did a deal where the acquired team, we delivered new laptops to everyone. They were all excited and everything. And then we had people travel, particularly the sales team. We brought them together with some of our internal sales ecosystem to do some enablement sessions really early on, post close of an acquisition, and two of the sellers came back to their home base and said, our laptops were stolen. Stolen? How? Where? You know, because they came to me, they said, well, when I checked my laptop case, I'm like, wait a minute, you checked your laptop bag in baggage? Well, then, yeah, I didn't want to carry it on the plane. And I said, and you're surprised it got stolen? So that was crazy.

Yeah.

Another one was, this isn't crazy. This was unfortunate. I had an acquired employee who was traveling for us, doing great job. He was a passionate advocate and subject matter expertise on their capabilities. So we had this individual traveling around, enabling our internal ecosystem, our heritage ecosystem, so that they could go off and start selling and talking about the capabilities we had just acquired. And this individual was mugged in a park in Europe. Like walking through the park, mugged, beat up, injured, was okay, like, could walk and all that kind of standpoint, of course, contacted us right away. And having to get an engine going really quickly so that we had people locally supporting this individual, insisting the individual went to the hospital to get evaluated because they're like, no, no, I'm fine. And we're like, we want to make sure you're fine. You got to go. And really just spinning that up quickly. And how do you get that going? That was a big learning for me. I had never encountered something like that. I shared my example with you about a friction with leader, a disagreement with a leader. The other thing I'll say about leaders, and I've encountered this in several deals, is where a leadership team will make a commitment to employees, whether those be a subset of employees or all employees, like in an all hands meeting, and say, oh, upon close of the acquisition, this is what's going to happen. But they never bring it up during contract negotiations. Don't even mention it. So it's not accounted for. It's not. And is there always a financial impact to this stuff? Or they've made commitments on promotions that would happen post close or things like that, and they never mention it. And you're left with the aftermath to clean it up. Because from the employee's perspective, you're not following through on a commitment made by a leader they supposedly trusted. I'm always like, do you have it in writing? Do you have something that we can evaluate or look at? And generally the answer is no. If they have it, then we make sure we respond appropriately and we review it. Or I always have, but that happens often.

Oh, the fun surprises in M and A.

Fun surprise. But that's the great thing about M and A. It's never the same. That's one of the great things. It's one of the reasons I love my job. It's different every day. Every deal is different. I have mixed views on the word playbook because so many people think of a playbook as a checklist and it's not. A playbook is a guide. It's a tool in your toolbox. But you need to customize it, refine it and enhance it for every single deal you do. And then go back and update it appropriately 100%.

Every deal you have to do that.

Every single deal.

Karen, this has been a great conversation. I've learned a lot. You've helped me become a better M and A scientist.

This has been great. It's been great with you and meeting you in person. We've had several conversations before so the chance to do this in person was really great and I really enjoyed it.

Well, I'm sure going to find some more things to collaborate on.

That's great. I look forward to it.

Those of you still with us this far of the interview, you're also a true M and A scientist. I value appreciate you love to hear feedback topic ideas. Reach out to me on LinkedIn. 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 Podcasts. We'd love to hear from you. If you need help standing up an M and a 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 Kison K I S O N at, 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.

Foreign.

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.