How to Run an Integration Led Confirmatory Diligence Process

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Hi, I'm your host, Kisan Patel, CEO and Founder of M and A Science. Joining me today is Jim Buckley, Vice President, Mergers and acquisitions integration at VMware. Those of you not familiar with VMware, VMware is a cloud computing and visualization technology company. VMware trades on NYSE under VMW today, trading around a 46 billion market cap. Today we're going to talk about how to run an integration led confirmatory diligence process. Jim, can we kick things off with a brief on your background?

I started off at Sun Microsystems way back in the 80s. I was an operations guy, actually ran their stockroom, Shipping and receiving. That was my first job in high tech. And then I got into finance there. Cost accounting specifically. And I was a horrible accounting student in college. So good. Go figure. You never know where life's path's going to take you. I guess. So I was at sun and then I moved around. I went to Slick and Graphics. I was at Mentor Graphics. While I was at Mentor Graphics, I was an FPA Guide Control Finance Controller for one of the bigger divisions. And that's where I got exposed to mergers and acquisitions. I learned how to do valuation modeling. I learned how to do due diligence. I learned how to integrate businesses with zero handholding. It provided an opportunity to step on every landmine you possibly could. In M and A. I was voluntold by my boss. I was the guy that was going to do this and happily went about my business and learned how to do it. And from Venture Graphics, Microsoft found me and recruited me up to Redmond, Washington, where I was part of the venture integration team there. I was there for almost six years. In that six years, we did 99. 0 transactions. So we were very acquisitive. 2008, we did 28 deals, closed and integrated 28 deals. And then from there VMware found me and asked me to come down and lead and open basically their IMO practice. So their integration practice. So I was there for five, almost six years. And then PayPal found me, asked me to do the same thing for them post ebay split and then 2019, VMware asked me to come back and lead their two largest concurrent public transactions, pivotal and carbon black. So I'm back at VMware for the second time and I'm still not sure whether I run M and A or M and A runs me, but it seems to work.

You had experience across the whole life cycle and somehow you stuck to probably the least fun part of the transaction where you tend to become the scapegoat for everything that goes wrong.

Yep.

So integration led confirmatory diligence approach. Not a lot of companies do this. In fact, I've asked a number of practitioners and nope, not, not a lot. So I'd love to get the background. And how'd you get exposed to it? Come up with it?

So I'll go back to when I was at Mentor Graphics. We had no corporate development team, we had no integration team. Mentor has since been acquired by Siemens a few years ago. It's a CAD company and the division I worked in was the systems design division where we built this software that routes components on PC boards. It's a bunch of really complicated math and things that 90% of the time I had no idea what they were talking about. While I was there. We acquired six companies. I mean, I eventually I got out of finance because I just wasn't that good at it. It was, I wasn't. I didn't like it. I didn't like the rinse and repeat every 13 weeks, do the same thing with budget, forecast, actuals, everything and do it again. It's not my thing, as I found out the hard way. I had to pretty much just learn on the fly how to do due diligence and also how to do integration. And what I realized in due diligence was you got to figure out what matters, what are we going to offer the company for their assets or for their stock, which includes assets, their equity and is the valuation right? And then how do we accrete the value into 1 +1 +3? I'll be honest, the first couple were more lawyer led due diligence processes, outside counsel, which is more just some. You can go online on Google nowadays and download a due diligence list. It's just, it's pretty prevalent out there. It's not that complicated. But what's really complicated is figuring out how do I drive a process that identifies where the real value is, Are we able to maximize that value? And finally, is there anything at the target company that might suggest this is not the right comp to acquire? A lot of times confirmatory due diligence is viewed as we're looking for the ticking time bombs, but it's also to support like, all right, did we make the right offer in the LOI process? Should we have offered less? Are we actually getting everything we think we're getting? That's kind of where the fun begins because then it becomes a scientifically led part process.

So real value and making sure it's the right deal.

And a lot of times the harder challenge, quite honestly, Kisan, is have we come up with the right strategic rationale? That's actually where the real due diligence starts is before you even identify a company, it's what are we trying to, what are, what's missing in our business that we can acquire that will accelerate X, Y or Z, whether it's revenue, headcount, product, LED technology, all the above, Some of the above, whatever regional location. We're not in the Nordics, so let's go buy a company in the Nordics and be there day one. You know, have a footprint versus hiring a country manager or regional manager and growing the business organically, which takes a while really. To me, due diligence starts with those early discussions with the execs are saying we need this, whatever this is, should we build it or should we acquire it? And if we're going to acquire it, what are the likely candidates or victims that we can put through our process?

What does it mean when the integration team leads a confirmatory diligence process? What's the difference?

It took me A while to really figure this out and really what it is. Having integration lead the process more firmly assures that you're going to create value. Close to close. So corp dev acquires value, the integration team creates value. I think it's just that binary. You can spend $10 million in a company and say this is what it's worth. And that's all the math that's in the valuation model. You've made certain assumptions, you valued it, you've done the cash flow. That's like buying a house. There's no guarantee that house is either going to increase or decrease in value. You just don't know Econ101 at its most basic form, having the integration team, maybe not the whole team, but at least the lead, the integration lead, and maybe the BU finance person, or any finance and hr and certainly the bu. You're privy to those early conversations. Okay, I know what you guys are trying to do with this. So this is what I'm going to ask and this is what I'm going to listen for. And now I know what to do. Assuming we get the close, I know what to do to accrete value out of this assets.

Looking at the specific differences between corp dev running the diligence process versus integration, you got some clear goals that you're after because you have responsibility for creating the value. But anything in terms of the approach itself, that's different.

Corp dev rarely ever gets the company to be acquired logo tattooed on them. The integration team gets the logo tattooed on. They're going to live with that thing for a while. So short of getting it lasered off at some point down the road, Corp dev is largely not exclusively transaction led. They go from deal to deal to deal and that's what they should do. That's what they're supposed to do. They're always looking out for that next deal. Integration team. It's a bit of a long truck and you got to live with it. You got to realize it. You got to drink all the Kool Aid and say, this is what we're doing. This is what the North Star looks like. This is what creating value looks like. Now let's go do it. Do we have all the pieces to do it? So that's where the difference in my experience is, or death typically will hand off. And I'm not saying it's a throw it over the wall process, although I would imagine some people have experienced that. To me, it's not that technical, but I think electrical engineers understand how to continue to drive power through A process like the power to your house is regenerated. Right. It's not consistent from the point of generation to the end point. Right. It has to be regenerated along the way, kind of kickstarted. The more handoffs you have in a process, it's that same sort of analogy. You. You can lose a lot of the secret sauce from handoff to handoff to the point where if you started a hundred percent at the beginning, you could only be at 90 or 85% by the time the integration team gets what they need to understand and know and do something with. And 15% on a big transaction's a big number.

We have the continuity of the process. Essentially, knowledge transfer is the big benefit. When we look at what diligence is ultimately a series of requests for information clarification questions. How is that different?

That, I think, is the interesting part. Due diligence is all about stitching together the why to the what to the how. Why are we doing this deal? That's the strategic rationale. What problem does this solve for us? Does it give us instant revenue, great ip, some great talent? The what is the ask a question, get an answer. The integration team's role is to drive. I get the why. I have read the what in the virtual data room, how do you sell? But you don't ask that question in the due diligence list, typically, because it'd be. It's either going to be a n a response or it's going to be like seven volumes of the Encyclopedia Britannica. What you really want to do is sit across the table from the head of sales or somebody that's really in the know, their proxy, their chief of staff or right arm, so to speak. How do you sell? What drives you to be able to hit your revenue numbers? What does that process look like? How deeply embedded are you guys in the product development saying, hey, our customers are asking for, I could sell a lot of this, but we don't have it. The integration team being part of the how and understanding the how and asking the how, that's where you realize, now I know what to do with your business and our business. I know how to insert tab A into slide B because it's all about.

The how, then you can better connect the dots.

Yeah.

What about any other benefits? Getting into the technical details. I'm looking at my notes. I don't know what outcome versus output we referenced before.

Outputs are something that are driven at a tactical level. You ask a question, you get a response. You ask a question, you get A response. You understand the why, but how do you plug the what and the why together? That ends up being an output the integration team is trying to drive to an outcome based on all those outputs. So the North Star is an outcome we're going to fully integrate, we're going to partially integrate. What are the drivers of those decisions? Is it cost benefit analysis? Is it like we just don't have those systems so there's no there there to plug into? So that's where you and I think have talked about in the past. The thing I don't want to lose is the opportunity to suggest that some of the most important due diligence to be done is on the organic side, the buyer. You actually understand how your company works. I would say most people, if they're rigorously honest, they don't really fully understand how their company works. VMware is a very complicated technology and selling process. And so for us, what I need is a bunch of really dedicated, curious individuals on my team that actually understand I know how VMware works. So now I understand how to plug the target company into VMware or if it's not going to plug in, there's going to be a gap and then how do we solve for that gap?

I'm thinking about alignment between the companies. Is there a difference? There being an integration lead, running confirmatory diligence where you can get aligned on these goals, what it's going to take to make integration successful and then I think the trust factor is a big one.

I've worked around some really awesome, some corp dev teams and they're very clear about what their charter is like. They don't, their charter isn't to have a long term relationship with the executive team or the board and the target company. They're there to drive the transaction as the buyer and the buyer side. The integration team absolutely has to have a working and workable relationship with the target company. Teams from the CEO on down, certainly all the C level folks, but then really say broadly sometimes get side eye on it, mostly with the level of where the real work gets done. The people are actually doing the day to day work to make stuff happen. Those are the people you want to have the working relationships with because they're the ones you're going to go, I know you've got a day job, but I need you to do this. And you've got three days and it's usually an integration task. Again, if you have the working relationship, you can say, this is why this is important for you and for Me, not just me. You are now a shareholder of this company, assuming you got equity at close. Most people are pretty good about it. They want to be helpful, they're curious. They want to be good stewards of the legacy company. But it's an art form, right? It's all about working relationships. And that's where I think the integration leads are the ones across all functions, not just the IMO are the ones that really have to have that really healthy relationship with the folks from the target company.

Integration leads are responsible for creating value for them to build these key relationships early adds a lot of value to position them.

It's interesting because people. I say it a lot. I think others say it. I don't know if they say it as much like Switzerland, sort of revered globally as like this little country with awesome. It's just a really happy place, right? It's. I've seen it put in, like the top couple of countries in the world. The happy quotient that's way up there. They're just happy. Like, they don't go to war with people. Their economy's pretty darn healthy for a small country. They've got mountains that people climb on, mountains that people ski down. They just want to do their thing. They don't take sides. They just kind of march down their path. Integration teams should be like Switzerland. I'm just here to do the right thing. I have very discreet experience around working with CEOs and CFOs and CTOs and every other C. IO sometimes having that relationship, you have to get them to do really challenging things and they have to trust you. So I think the whole aspirational trusted advisor moniker is really a big deal for integration leads. But I also think that they have to trust when you say you're there to do the right thing and make sure the right thing happens. I'm not here to force the target company to drink a bunch of my company's Kool Aid. If I can convince them, look, this is just the right thing to do. And here's why. Because sometimes it's me going back to my exact same. You know what? This isn't the right thing to do. We're not going to do that. Well, no, but this is what we do. Yeah, most of the time. But in this case, this is different and this is why. And those are really hard conversations. But again, if you're sort of in that position where you're agnostic in the process, other than just trying to drive the right outcome, and then it goes back to output and outcome, people start to go, okay, I understand your role and now I trust you.

We built a good case on why it makes sense to have integration lead confirmatory diligence. We talk through what that actually means. Let's talk about how. How do we actually do it? Where do we start? From the beginning, I think in the timeline of the deal process. How do we start doing this stuff?

So there's multiple phases to due diligence that lead to integration. So there's PLO I due diligence, which in some cases I've actually been a part of. And it's really helpful. But that's less typical when the integration team is involved that early. But it's helpful when you do get in the room and understand those early conversations.

Why, though? It's interesting because there's. There's not a lot. Here's another minority of bringing integration lead in before loi. Why would that add value and so early and what difference that would make? Cause there's always that, hey, am I wasting your time as a resource? Here's this deal that we're still. That percentage of likeliness to get done hasn't been defined.

Well, there's a couple things there, at least in my experience when I have been involved for pre loi there's the opportunity to hear the dialogue between the two sides and they don't really want to sell themselves that somebody's forcing them to sell. There's something going on there because there's an advantage to being the quote, unquote fly on the wall and just observing, which actually I think there's a huge part of that. We can talk about that if we have time. But there's a lot of observational opportunities where you're more passive in the engagement. But watching. I watch people very closely in due diligence conversations. How are they reacting? I've been in meetings where like the CFO is on, but he's on his phone. He's probably sitting there going, okay, this equity times this. He's probably trying to figure out self worth or something. I don't know. And then there's the exacts or the proxy, their proxies that are really leaning in. I'm really interested in this. I'm really excited about this opportunity that matters. Right? Because as you go forward, the CFO is probably doing that because there's only one CFO and it's not you. So that, you know, he's. I'm out of here at close. So I don't, you know, whatever. But I think too that there's the opportunity to then also hear the responses and start to synthesize very early in the LOI discussions. We can or cannot do this. We can or cannot do that at a really high level because it starts to indicate I'm going to have to dive deeper into that in confirmatory due diligence. And the how is going to be harder than I thought or it's going to be easier than I thought. But just even those little glimpses into the future are huge. Because, Amy, let's be honest, most deals make it to close. Like, I've never done the numbers, but I got to believe it's a huge percentage that once you engage, I'll bet you it's over 90% to make it to close. And so all of that is predicated on those really early conversations. It's just people get emotional about it, they get emotionally invested. Maybe it's just because I've been doing this for decades, if I don't get emotionally invested, I've been a blunt force trauma instrument. I'm just here to make sure the right thing happens. I don't really care about you or what your net worth is going to be or anything. I'm just here to make sure that what we're going to pay for, we're actually going to get to do something with. That's hard, but there's a lot of people like, oh God, we got to do this deal. Why do we have to do this deal? They've got some great ip. Okay, but what are you going to do with that ip? We're going to, we're going to add this functionality to this product. Is it going to drive more revenue or you just get an IP like again, that's where due diligence is in my opinion. And experience is really both sides. You got to maybe be a little more gentle with the people that are actually paying you directly into your checking account or savings account. I'm not trying to career limit myself necessarily, but it's taking those early conversations and really I got to dig deeper into that or wow, that makes a lot of sense actually. I don't know if they know what they just said. There's more value there than we're ascribing. There's so much that can happen in those early conversations and they don't have to be big, long, drawn out conversations either.

Okay, I got it. So pre loi you're in observation mode. This is enabling you to get early intel or refer glimpses of the future which help you identify areas to focus. A lot of times this is where a lot of the certainty of the deal ends up happening is this phase. Why not? Why wouldn't you want to have your integration lead involved? Ploy.

Trust, I think is a big thing. Not every Corp dev team and integration team have a wonderful relationship of trust. Some of it's just company culture. It's not because they're bad people. Nobody's a bad person typically in terms of trust.

Have you leaking the deal out to the street or.

So I'll go back to Microsoft. So I was the only non exec level person that was part of the Yahoo project when Microsoft was looking to acquire Yahoo. It was a bunch of very senior execs, very senior legal people and others across the company. But all of them had R VP in their title somewhere. General manager. And here's the scraggly integration you've sitting there. My role was to build the integration approach and to drive the due diligence process around Yahoo. So small job but it was complicated because of the secrecy. There was no way it could just. It would have been disruptive to the entire tech industry at that, you know, for three days because everybody has short memories and they go Microsoft, Yahoo. Whatever, big numbers. But so what? So there's that aspect to it where you need to be respectful of. Of confidentiality when things to leak. A lot of companies, they have the little like iPad or whatever outside the conference room that says what are the meetings scheduled for that conference room? And that's why a lot of teams use project names. So all of a sudden people are looking at like Microsoft, Yahoo discussion on the conference board. There's that aspect of it. But then some of it is just some people just don't think there's value in having the integration lead there. They'll figure out what they need to figure out in confirmatory. I don't agree with that, but I respect it. If that's your approach, that's your approach.

So we could agree in the sense of confirm integration led confirmatory diligence. Ideally you'd want integration lead involved pre loi.

Yep, I'm a huge believer in that. Some of it too is the integration lead needs to bring something to the party though too. You can't just say I just need to be invited. Why do you need to be invited? You have to be able to attribute what that process helps downstream and informs downstream.

What should that introduction be like? It's who's Jim over there? Well hey, here's Jim. He's actually our lead integration and he's the one that's going to create value.

That role probably understands more of how the two companies might fit together than anybody in the room. That should be important to the target company as well as, oh, that's the person that's going to walk us down the red carpet post close and that's why that role is so important is there's trust. This is somebody I can trust. This is somebody that's going to know everything about us, literally. And this is somebody that can help us realize that they're about to pay for us.

Is there an area of preparing executives for what's going to happen post close or does that come later when it's too late to turn around?

I've made jokes about this at every company in our workforce we say that we communicate a lot, but sending an email doesn't mean people read it. There's no conviction that all of this was ready. The same as trying to help an executive understand what is going to happen post close. My experience is there's some great execs that are hugely invested in the entire process and there are others that are just get it to close. Tell me what when the close date is, tell me if you need me to talk to the employee base. Then I'm moving on to the organic business and my next project. That's not exclusive to Exact. That's everybody at some level. Part of my job is to get the you Exact deal Exact invested in the process. This is why your visibility is important. It doesn't mean I need 10 hours a week out of your time. If I ask you to come present to the commingled teams, it's going to be really important that they see you, hear you. So I'm not the only talking head. This is why we acquired you guys. This is why we're so excited about having you join us. That sort of thing carries a lot of weight and it should happen more than once. It shouldn't be just an annual state of the Union kind of thing. It should be like, how's it going? What can I help you with? Because then that way it also helps the acquired business and the team, the organic team, hear the exec hopefully say similar words and phrases that the integration leads saying so it's not separate. And they're like he said Friday, he said Monday. What is that all about?

Better alignment overall at the end of it.

Totally.

Let's go down. We got Loi sign what happens? What's changing.

Loi gets signed. You send the list over the wall, say here's 800 of your least favorite questions that we want you to answer. Good luck. You've got two weeks. Let us know how it works and if you got any questions. One of the reasons I was asked to join Microsoft's team was because I had done a lot of very grassroots due diligence question error development when I was at Metagraphics and when I got to Microsoft they had a raw list. I think there was well over 800 questions. And there was a guy that I that was working with EY at the time who was there was doing some other projects, this guy named Mike Price from Cisco who he and I took that list and started to really segment what should happen, where the interdependencies were and we were able to build. Well, I'm going to be really honest. Mike built a macro. My ability to build a macro in Excel is like 0 to 2. Like it just. That's not my thing. Back to I wasn't a very good finance guy. I think you're supposed to have some really great Excel skills if you're in finance. That wasn't me. I knew how to go sell plus sell equals kind of thing. So Mike built a macro. We were able to then in the macros it was basically international business, yes or no, Domestic business, yes or no, meaning revenue or presence. Employees, yes or no. IP yes or no services, yes or no. It was more complicated than that. But it was literally like 10 macros that when you went in as the integration lead driving the due diligence process would just really simply answer in the one tab in the in the Excel spreadsheet those questions and that 800 plus questionnaire would get called down to something between Our goal was typically fewer than 300, 350 questions and no redundant questions. The easiest part in the whole process was every function needs your org chart, I need your org chart. I need your org chart, I need your org chart. Ask for it once, then parse it out to the functions. But there's a huge amount of redundancy a lot of times in those questionnaires, which is a little abusive quite honestly because you got a team of 20 on the buying side talking to like three people on the other side. The last thing you want them is answering the same question more than once.

That's a big point of burnout. But I like this kick things off with tailing your questions and essentially right sizing the diligence process.

In the beginning, one thing I really was pretty consistent. I said look, this is probably your night job. On top of both Your day jobs, just recognizing like you probably weren't asking to do this a month ago. You didn't know this was going to be on your bingo card of to do's in the future. So I understand that this is going to be hard and challenging. I'm here to answer questions or try to create efficiencies where I can in the process. Things like they'll come back and say of these two questions, and it's more than two, but of these two, just as an example, do you need this one first or this one first? Just tell me which one is more important to you in this process. And that's when you start to build that trust. Because you're like, yeah, you know what, great question, do that one first, the other one can follow a few days later.

Can you tell me more about working with your functional leads? Because there's the typical confirmatory diligence. But if you're integration lead running confirmatory diligence, I would be inclined to assume that you would want to do more preparation for integration or even have some of these integration leads start thinking more about the how to prep for the integration. Is there anything around that?

So there is, but I think the other thing is it's not just the integration leads. With the integration team leading the confirmatory due diligence process, one of your clients in that process is still also the corp dev team. You still gotta inform them based on the findings, but your valuation assumptions remain true. Or it's getting a little sideways here. We need you guys to look at this and inform them because ultimately the integration team is going to have a valuation debate with the target. It's going to be the corp dev team. But there's others too where legal is also there's the big confirmatory questions that drive supportive valuation. Supportive key assets, support of do they have any toxic agreements, toxic employment agreements at the very senior levels, or commercial agreements? Those are the sort of things like, yeah, the acquirer has to make a decision, do we want to bring those over and remediate them or not? Or do we want them to remediate them before close? There's people upstream in the process or clients. Well, but the functional leads, the sooner you pull them in because there's an opportunity to keep the team small in the early stages, meaning the early days literally or hours of the due diligence process. And then you start to bring in people that over time again, so you don't overwhelm the target company. Because I've been on teams like 75, 80, 90 people all up involved due diligence and integration planning. It's like a 50 person company you're acquiring. You're like one time at Microsoft I actually went to the exacts, the CFO and the head of legal, which is Brad Smith at that time I said, you know what, if you guys will give me the opportunity, I will prove to you that I can do a full blown due diligence integration process with one sheet of paper as the due diligence question. So less than 50 questions, two sided, 25 on each side and five people pull up. They would laugh because they were like Tammy Reller was. I did a lot of the online business deals at Microsoft when I was there. She's, you know what, Jim? If there's anybody that I think is nuts enough to try to do this, it's you. So that's not what it is. But there's just too much risk. What if it doesn't work and we've got egg on our face like you guys have a great rep out there for due diligence and integration and deals. Why would we want to risk that? I said, I'm just telling you I can do it. I convince you that I can do it. But they never engage.

You got to get there at ground zero when they're just ending up the corp dev function and they don't have people to do any of it.

Yeah, I mean I still think it could be done. Who knows what's left of my career path. So I might still have the opportunity to do that.

We brought in functional leads, but also partnering with legal corporate development, getting them understanding of the findings as they're coming up. Pretty typical. Anything different with maybe the way you're working with the target company. Again, I'm just kind of curious more if there's thinking around the integration planning.

Again, back to the how the how really leads itself to the integration. How do you sell what platforms? You know, what are your platforms in which you start lead generation, to quotes, to bookings, to the whole lead to cash life cycle. At some point you do have to in the how figure out the platforms, the policies and the processes. One of the things that I'm pretty adamant about in VMware is really nobody gets to say the word platform unless they include policy and process because those three have to travel in unison. You know, everybody's got some flavor of salesforce.com nowadays, but it's the policies and the processes around the opportunity management that really matters. The platform. At the end of the day, it's just a Big database. It's great technology, but the process and the policies around opportunity management are what really matter. Who owns the opportunity? How is that determined? Who gets to value that opportunity? What are the approval steps from finance and or legal? Make sure that opportunity is identified as it goes, becomes ultimately a booking. When does that happen? How does that happen? Who's involved? That's the sort of thing that's hard to get to in a due diligence process. They're like, hey, you know, that's way downstream. I'm like, yeah, until it's not. Until we realize that you don't have very many policies or processes and your sales team is going to come in and start selling both your technology and our technology. They're about to get an onslaught tutorial of what our policy and processes are. At the end of the day, the opportunity management system is just a system. It's how is it set up to support the processes involved. So that's an example of how important that is to understand that in due diligence, then apply that to your integration plan. Like two shifts pass in the night. We're never going to get these two to collide or collude or both. But how do we get them closer or do we keep them separate for a while? That's always an option, but it's never in my experience, the desired option.

Yeah, it's identifying some of these issues earlier.

It's really. And that's what due diligence is. It's like the easy stuff's the easy stuff. That's not your challenge. Your challenge is those 3, 5, 10 things are like, I don't know how to fit that into that. I don't know yet.

I just don't run this through, get to close, announce all the same, anything different.

I like my teams to build a preliminary integration plan as they're doing due diligence. It doesn't have to be complicated, but one, it helps me understand that they understand what the goal is, what the ultimate output is. So there's a preliminary integration plan that is developed during as early in the due diligence process as possible that gets further informed during the due diligence process. So that when you get to close and then maybe close plus 30 days and again depends on size of deal complexity. Deal. Right. There's a lot of variables that inform this, but within 30 days, ideally you have an agreed upon confirmatory confirmed integration plan. And then people are hitting the road out of the gate. They know what to do, they know who to talk to, they know where the challenges are, then they run with all the HR person on this side, the HR person on that side, the head of product on this side, the head of product on that side, the head of platforms infrastructure on that side, et cetera. You connect all the dots and all the people say, go do your thing. And then we meet and check in on plan development and execution against plan. I think it's too easy for people to kick that can a little bit down the road and it's 90 days later and then you're a third of the quarter of the way through the year. I'm a firm believer that the agreed upon integration should be executed in under 12 months. That's pretty aspirational in a lot of companies. It doesn't include things like legal entity consolidation and things that just regulatory or otherwise are just really long tails. I'm not talking about that. But in terms of running the business as part of your business, it shouldn't take more than 12 months to do that.

You're in their teams, better prepared to execute.

Yeah. So again, the more, you know, to the left of the process helps you shorten process to the right. It's pretty binary. It's simple. If I can do it, anybody can do it.

So what if your company doesn't have a dedicated imo? Is this still possible? Does the integration lead alone enough to lead confirmatory diligence?

The caveat is size of deal, complexity of deal, size of business, complexity of business on both sides. I think it can be done, but I think those are unicorns. And I don't mean in the valuation perspective. It's got to be a pretty awesome problem solver to be able to do that. A lot of companies outsource it to like one of the consulting firms and they have really great processes, but what they don't have is that DNA of the buyer. Due diligence is on both sides of the process. Quite honestly, bringing in one of the consulting firms, they don't know much about either company and they're just, this is our process, this is how we run it. But it's so sterile and so agnostic, it can be a challenge. I think an integration team being augmented by one of those firms works really well. The quote unquote arms and legs thing. But as an integration lead, I think it's really hard to come in from the outside and say, oh, I know exactly what to do. You know how to follow your script is what you know how to do and that's okay. But you need to refine it to this Project specifically I got.

I'm curious to just experience. Open question here. What are some do's and don'ts?

So this is like going back to kindergarten. Don't lie, raise your hand, ask questions. Don't lie is a big thing. It's easy to get caught up in lies. People start hand waving.

What's an example of that? Like what kind of things that tend to be a lie that blow up later.

I'm not going to name the company or the project because that person still is in our world. Some very senior exec once said in a very public forum with a lot of employees from both sides that we will fully integrate your opportunity management system in under six months. And I was in the meeting and I was like, don't make a face, don't say anything. It's one of the hardest things to do is the opportunity management stuff like how do you marry customer? The old adage like at&t can be represented in the installed base about 875 different ways. Uppercase, lowercase, ampersand, no ampersand kind of thing. It's a. I don't know. It's a standing joke. It's an example I always use. Like AT&T can be permeated about numerous ways like an opportunity to customer base. So how many AT and T's do you sell to? Is it my billing address? Whatever. I think there's too much that could go wrong by saying too much too soon. And that's where again, alignment and trust is really key on both sides. Like a big part of my job is to advise exacts on both sides. Buying side. Here's the things you can say, here's the things you can't say. And especially if you're involved in a regulatory process where it could get into some legal kind of schemes where they're doing discovery on. When you guys wrote this email that said this and that's an issue for us from a regulatory perspective. I've had some of those experiences that were really unpleasant, quite honestly. And that's where again, integration leads. Should have that relationship and capability to go buy an exec selling exec. Here's what I need you guys to know. Say these things, you can say these things. Don't say these things because we're not ready to support these things yet. If you say them, it sets expectations. So a lot of it is like coaching. And back to the kindergarten thing. Don't bite your friend's ear and don't swear too much. Although I violate that all the time. We have the Opportunity to drive how complicated it can or cannot should not be. And I'm a big fan of simple for as long as possible. For that reason.

You have that creating simple rules of engagement, the go to market thing. I talked to you about this. I'm really interested in doing a whole series on go to market integration.

You should talk to somebody that knows how to share how to do it. Not me.

Nobody knows. That's why it's an interesting undertaking. I have not not met. If anybody listening to this knows of a corp dev team integration team that is incredibly good at go to market integration, please reach out. I'd be really interested in having that conversation because I think it's more of a broader problem solving effort to take and aggregate a bunch of best practices and see, because it's so unique too because there's different companies have different go to markets, then you're acquiring them for different reasons. Is it close to the core? Is it further than the core? There's so many variables that come in play. They all factor into things that can go wrong. But given our topic today, is any of that help with the go to market integration?

Yeah, it does actually. Because the thing again that took me a long time to learn and sometimes it was by making big mistakes, was the more you treat go to market like a unicorn in the process, the more it becomes a unicorn. My approach is you treat go to market exactly the same as you treat the rest of the process. What do you sell? How do you sell? I don't, you know, I don't care about your terminally unique comp plans. I really don't. We have people that will deal with that, but that's just math. There's incentives and salespeople are wired differently based on comp structures and all that stuff. But when you boil it back down to the basics of what due diligence is supposed to find out, how you sell, do you sell nowadays and what business isn't largely SaaS and subscription. Do you actually. So you sell SaaS and subscription, yes or no? How do you do that? What are your metrics that you drive to? You have dashboards you can show us. We want to make sure your dashboards look like our dashboard, but not so much the optics, but the metrics that are included in them. Do you look at monthly, recurring, annual, recurring consumption metrics, et cetera, all that stuff? Those are just industry standards. So when you keep it at the industry standard and less about this. We're very unique in our selling approach. The minute I hear unique, I just like, oh, this is going to be really hard. I don't like unique. I don't want unique, I want vanilla. Let's just make, can we make it vanilla? Just vanilla. Not spamoni, not some weird kind of mixture of all kinds of flavors. But you have to distill it back. You can distill unique back down to baseline and then build from there. But if you start it unique, that is complicated. The process self complicates over time already. So you go from complicated to super complicated to I have no idea what's going on complicated. You hit buzz saws at that point where you're like, I don't know how to solve for this.

Make it as simple as possible. Allow you to get aligned on the fundamental of the strategy, how this go to market is going to come together. Is customer journey a part of that? Do you sit there and really get into, hey, what's customer journey look like from customers perspective?

For me, integration is all about. You only have to solve two things. Employee journey or experience. Customer journey or experience. If you solve for those two, knowing that you can double click really deeply on both of those and that's where the secret sauce is as you double click through all those. But if you think about what you're trying to achieve and especially if the deal has revenue, the best employee experience or journey that you can drive, and the same for the customer, the partner of the channel, whoever's driving your revenue stream. If you solve for those two things, again, simple. If you keep those two simple concepts in the front of your cerebral cortex for as long as possible in the process, it just really makes it simpler for longer. Those are the principles you drive back to us like, okay, and what I'm about to do next, is it going to make the customer journey better? Yes or no? It's almost binary. Okay, got it. That's part of the integration plan. Next goal, you just keep it bouncing back against that. I gotta believe, at least in my experience, the right answer will be extended for as long as possible. Through that, we uncovered everything we need to. We integrated everything we need to. Yeah. Kept true to that one principle about the customer journey. It's pretty straightforward. Then you get out of all the permutations that can happen when this zip code in Brazil, they sell this way. And you're like, I'm not trying to solve for that. That will get solved for. It's really about staying, as our CDTO says, my case at the end where it's like, stay at the systemic level for as long as possible. Create one solution that addresses the most possible outcomes in your work. Your life is just better because of that.

It's a lot easier to communicate the goals and align around how decisions should be made.

Yeah.

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

The fact that I'm still doing it. M and A sort of at its core, is crazy to begin with. If you just think about, we got a lot of money, we want to give you a lot of money for what you've built. To me, that's think about at some level, M and A, although it wasn't called that, has been around for a very long time. Someone to buy your farm, how much you want to give me for my farm, what comes with the farm, what doesn't come with the farm.

Right.

If you think about it, is it most basic levels. Kind of that thing so crazy in terms of a challenge because that stupid runner guy, right? So to me, crazy equals biggest hair challenge I can take on. I think some of the regulatory processes that I've been involved, those to me are just crazy because it's a whole bunch of economists, lawyers, regulators, all trying to tell you what you can and can't do. And you're like. And they don't really care what your business premise is. We did a process at a prior company where we, like, literally we were in the UK going through a CMA process. And what I was led to believe, whether it was a very long standing regulatory process that we were going to deal with. But when you hear about the process, you're thinking about, these guys are going to come out in powdered wigs and black robes. This is going to be really weird and feel like I'm back in the 1800s. And it wasn't like that, but it's just where my brain goes. So you asked what was the craziest thing I saw that was? I didn't actually see it. Well, I saw it in here. I didn't actually optically see it.

Getting the regulatory approvals is pretty intense. It can be crazy.

It's pretty amazing. I probably learned more in that process about critical thinking skills than I have in any other part of my career.

Jim, thanks for the time.

Yeah, thank you.

Yeah. No, this has been great conversation. I always learn a lot from you.

Thanks. And I learned a lot from you. I really appreciate the conversation. Anybody that's still on, I haven't bored to death has a question. Just reach out to me and happy to engage and go. Let me know if you come up with any other topics.

I want to say that I get a lot of people actually message me asking for a contact. So if anybody wants Jim's contact, it's for sale, it's $500. Just let me know. I'm People want to know how we monetize these podcasts. That's what it is. We sell contact information for our speakers.

I'm happy to engage. I get a lot of scar tissue from M and A and happy to share at least my learnings. Maybe not scar tissue itself.

Thanks again Jim. Here's to the deal.

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