How to Stand Up an IMO

Hello Ma Friends. This podcast is brought to you by Firm Room, an M and A Science company. Twenty years ago, virtual data rooms would come to your office to scan documents to put on servers. That's why they charge per page. However, now in 2022, with everything in the cloud, it makes no sense to charge per page. That's why we created Firm Room, a virtual data room that's intuitive, built for public company security standards at a fair price. It's only $500 per month. Check it out with a free 14 day trial. Visit firmroom.com again that's firmroom.com 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. Welcome to M and A Science, where leading M and A practitioners share lessons learned from their experience. If you're interested in keeping up with the latest from M and a science, visit mascience.com and subscribe to our free newsletter. Every Monday we share highlights from our interviews and publications so you can continuously improve your M and A skills for free. Again, that's mascience.com I'm your host, Kisan Patel, CEO and founder of M and A Science. Joining me today is Ian Burke, EVP of Integration at Upland Software. Today we're going to talk about how to stand up an integration management office. Ian, how are you doing today?

I'm great, thanks. Good to be here.

First of all, I just want to thank you for taking the time to do this interview because I know I reached out to you out of the blue. I had a great interview with your colleague Austin and we kept plugging in the importance of integration. Your name got dropped a few times and thought, hey, why not see if you'd be up to do an interview and continue the dialogue so we can get your perspective and maybe give some tips on how Corp Dev could do their job a little better.

My pleasure. Austin's a great partner and we start integration planning when diligence happens. And every once in a while he calls me right before that. And so it's a great partnership and we've come a long way.

What's the one piece of advice you'd give to Austin to do his job better?

I have to give him credit. He always asks, hey, for the next one, what do you think we could have done about X or Y? Because six months later I'm going to have definitely unearthed some problems thinking about Corp Dev as a Function that just flips things to a team that will go run it. It works. But I would almost think about what's the right way to your integration team. Co author or at least co pilot your diligence process. And I think you get a different outcome. And I've been really pleased. Austin took that feedback on and we rewrote the diligence process a couple of times. A good example is when we do customer calls, we have multiple people participating. It's not a banker function or a corp dev function. And so the advice is integration is there to protect the investment. Corp dev is there to make the investment. And so you just want, you want both people riding along.

That's it right here for anybody in corp dev listening. One, get feedback from your integration lead and two, have them jointly collaborate on diligence. Should we do the rest of the interview?

You got a page 4 and 6.

Let's kick things off with a little bit about your background.

I've been working about 25 years, interestingly enough, split about 5050 now in other stuff and M and a related. I'm 36 acquisitions in and interestingly enough about split 5050 between my time at where I spent 20 years and at Upland Software where I am today. So precisely 36 deals and 18 on each side. Interesting. Like now I think about it, it makes perfect sense with the benefit of hindsight, but in 2009 I was just a guy with a sales and marketing background that had decided to pivot and work on strategy. And as Dell changed our focus and thought about inorganic as a key driver of value, I was in the right place to be a part of that. And boy, was that a lot of fun. Now it makes perfect sense. You have an operator sort of sales and marketing background. Add on some strategy stints. Of course, that would be an integration person, right?

Yeah, it's a good point there. The question is, what makes up for a good integration background?

I remember at the time we had just started building out as we pivoted and said, all right, so M and A is going to be a big pillar of how we grow. And I remember this friend and mentor said, well, you don't know what this is yet, but you're going to be a thing called an integration executive. And he said that two years prior to that being true. It was so much fun to be thinking about. Dell was really strong and still is really strong in the mid market. And so I was on this very small strategy team, not so much thinking about traditional matters of strategy, but more where the intersection between the go to market and our reach and our distribution could have an impact different than corporate strategy stuff. And that led into what products could we think about with that lens instead of a traditional product market fit. And by the way, what partnerships could we have? And so that was really neat to be a part of it. So that's how I got into M and A. Started out on the deal side as we thought about other levers to pull, moved into integration and then was on the team that put together the software group for Dell. So that was entirely inorganic. 8 acquisition, call it what you want, platform retrofit combination. But slowly put together a number of deals and then fully together into a multi billion dollar business unit. So I was on the team there in the early days and had a lot of fun, wore a few different hats in that. But ultimately we decided to make that unit reach its full potential, that we should spin it out. And so I was there to build it and I was there when we decided to sell it to private Equity back in 2016. And after a little time with my family, a little break, which was really nice. In 2017 I joined Upland Software, which was a scrappy firm of a smaller size a couple of years after ipo. The entire business model is how to create value through M and A. And I said that is extremely interesting. So that's how I got involved with Upland. It was a few years back and 18 deals later.

Did they find you or you find them?

It's a small network of M and A practitioners and I was talking to a few folks. I was doing some consulting and I originally was just going to come on and do some advisory work to help them stand up in imo. And I was so intrigued I had to join. I had a connection from Dell days but mutually talked ourselves into it.

I think that's what's interesting about your background is the strategy component. Thinking about that, that really would help an integration practitioner. Maybe we can get into what's the primary role of the imo.

The boring answer is governance. Having seen both sides of it, it's so interesting to be thinking about what's the deal thesis, right? What are the drivers, what are the synergies, who's going to run it afterwards? What is it going to look like? That's all really fun but a lot of the details are done in the day to day. And so the IMO is a shepherd through that process to make sure the intersection between the strategy and project management and the people that are in it. I find some of the best IMO practitioners, they can hover up and down, but the work they're doing, even if it seems really granular, it ties to the strategy. And so the idea is a program office that's nimble enough and connected enough to the strategy of the firm and understands exactly what you're trying to accomplish and can keep you on the tracks. So governance is the boring answer, but really day to day management of really important topics and then a lot of things that are really small that won't matter one on one, but in aggregate actually sometimes either create or destroy a.

Ton of that, then probably reporting it's really exception management.

If you think about it, if everything is going great, you get your summary and you go, this is nice, it's all green. And the question is, what happens when you have a date slip that has a prerequisite? What happens if you have a small decision that impacts a value driver? What's the escalation process like where you encourage people to raise up something you should collectively put your heads together on versus some governance might be like, I hope nobody notices. Right. And integration management is about let's collectively stare at our problems, look at them, talk about them, and then figure a path forward. And if you've got a really nice central group that can do that and create trust and realize we're all in it together, that's a really nice part of the secret sauce.

I like how you use the phrase exception management.

Ideally it runs great, your dashboard looks good, your work streams are on track, you're hitting your drivers. Yeah. If you think about the depth, the hundreds of items and the hundreds of people that are in play, you really just need to be thinking about how do I break ties, what are my early warning signals, and how can I learn from whatever won't go right? Something is going to go not the way you designed it. And the question is, how are you going to react to it?

When do you think about building out an imo? How big do you need to be? Or what sort of things should you have in place before you really need to stand up in imo?

Interestingly enough, Upland had done a number of deals before I even showed up, so they were pretty good at it before me. And really I joined to help think about how do you do more deals, how do you do them in parallel? How can you do bigger deals with bigger outcomes? So it's like there was not really an IMO before, but there was an integration function. It just happened to be scattered and maybe not so well thought out. There was not an IMO in the early days of Dell and we were a huge company, interestingly enough, through some experience through IBM and GE and a few other practitioners, that team stood up from scratch. And IMO pretty quickly got very big. And a big part of that was how do you go find the right talent? A lot of those people came through the finance track. Not unusual to get somebody either in a rotation or somebody that's got a long list of experience in finance to then move into. That's a step closer to operations. But it depends on the sort of deals you're going to do and how often you're going to do them. It's a lot of work to stand up in imo. It's even more work to stand one up and then wind it down and then stand it back up and keep repeating that. So I think if M and A is a core part of the strategy, you should have at least a small core team that's evergreen. And then you should be thinking about how you can flex up as the deal activity really picks up. And one way or another you want to lean on that next level of folks that are out distributed through the company. And then also who are the third party partners that you can lean on to bring more expertise. I've just worked with so many great consultants and advisors and having a deep bench of those partners also helps you not have to have a sort of IMO on the shelf all the time. Lot of overhead if you're not active.

So potentially you could outsource it starting out before you really need to build one in house.

I had never thought of it that way, but I think that it's probably the right way to do it. In fact, I guess I was outsourced. I was brought in as an advisor. We drew out a framework, we talked about a playbook, and then I just said, wow, I like this so much I think I should stay. But I really think getting a couple of key consultants right off the bat is a good way to think about it.

I've noticed there are companies that don't quite have a standalone imo, but they have a central PMO function that maybe is broad. And does all these special projects and M and A will be part of that and they'll manage the integration. When does an organization like that evolve into standing up their own imo or does that PMO function work as well?

I think it does work. It's as long as you're disciplined about how you go after it. A lot of the best practices in running an IMO are in Fact, project management, best practices. The differentiator is the experience in the throes of a deal and the deal cycle, those lessons learned and that scar tissue and that pattern recognition to see the gotchas before they're coming. And if you're going to be active enough, it doesn't even have to be large. In fact, maybe one small part of the PMO is dedicated to integration. Could create a lot of value. The overall structure, you can borrow it. I've seen a number of people coming from traditional PMO backgrounds, and they step right in and they're so interested in driving process and the rest they just soak in and next thing you know, they're like a very disciplined IMO person. So I think it could be an evolution there. It all just depends on how active you're going to be. And the more parallel processes you have, the more that's at stake, I think the more that dedicated function is really helpful.

So you could evolve and actually separate that PMO resources doing M and A and allow them to create their own dedicated function.

I think that would make a lot of sense.

Let's get into the steps to set up an imo. Can you walk me through those?

Sure. At dell, we stood one up in early 2000s, and so I got to see some early drafts of it, but really I wasn't an author. I was more of a putting it in play and evolving it over time. My time at Upland was really interesting. I had to go around and basically figure out what was there and then start to evolve the formal, structured process. And so the first was go in and listen. One piece of advice is it's really hard when you say, how do you all think we should do integrations? Nobody has an answer for that. What's the right way to do whatever this topic is? That's a hard question for people to answer. If you go back and you say, okay, let's talk about some deals that happened. Really helpful if that's true. What was the best thing about that? What was the worst thing? What advice would you give that deal team? If you've never done M and A, I think it gets a little more tough. But you can use a product launch as a proxy. And I find that if you ask people for their advice and what you should put in a playbook, it's tough and you'll never get it, never get it perfect. You essentially want to encapsulate lessons learned and outcomes and then try to reverse engineer why that outcome got the way it was. So in my early days With Upland, I asked a lot of questions. Questions and I just asked, take me through some of the prior deals and more specifically. So when you were thinking about the product portfolio, who did you gather, how did you do it and how did you think about it? And at that point I had the benefit of looking at some outcomes, so I was retrofitting. The other thing is to find the pockets of real skill that might not even know they're going to be really talented in M and A. So when you ask people a particular topic, you say, that's great. Sounds like you really rationalized the roadmap really well. Who are the key players in that? And if you click down a couple, you'll find there's some next generation leaders that can really thrive in M and A. So that was like, okay, first question is, what outcomes did we have? How does that tie to the results? In the retrospective that I looked at and then asking people just in interviews, I just got here, I'm new, I've done a couple of deals before, but tell me about this deal or this process or this person. So I think the first is just doing a little bit of a survey and acting like a consultant the best you can, because you won't be able to stand up. There are some templates and there are some really good frameworks, but the key of what makes it work in your firm comes from a bunch of conversations. Now, I wouldn't take months doing that, but there is a lot of looking back in time and asking what the differences were in particular outcomes by topic, in product, in facilities, in sales, and finding the people that really contributed to that. So I think that's one of the earliest stages is figuring out, okay, what am I going to go do and what might an outline look like before you even set up a framework? That's kind of early stages.

So first step is getting the lessons learned, understanding the outcomes, and basically reverse engineering that so you know how things are done today.

I think it's less about how things are done today and it's more about. You can see where you ended up and you just try to wiggle through how things got there because no one will tell you directly. And it's really even hard for them to think about it that way. So interestingly enough, there was a deal done just a few months before I joined and so it was in progress and that was such an interesting time to be there. So I was spinning up a new one and then I got to watch this and I purposely didn't interject a whole lot I just watched it. Then when I go and I start doing these interviews, I was getting real live. Like I would have done that differently. I would have thought about this differently. And I used some of that when we stood up the framework properly.

So what comes after that? What comes up next in the process?

Next would be thinking about who the core team is. My preference is to have a very small core IMO team and then think about the project office itself as a pretty distributed function. What's the right archetype? There's a certain type of person that has that project management bent and they're excited in the details and extremely tenacious and want to be part of something truly transformative. Getting those few people together, making sure they've got the right sponsorship. One discussion with the senior management team that's really critical is how do we make sure that staff members that get drafted into the IMO are widely looked at as okay, that's a collection of talent right there. How does their leader interface? Making sure you've got sponsorship at the senior level. So we talked about structure and organization, both where the head of the IMO reports and also where the talent comes from. And you definitely want to just show up with a whole staff of people that came from somewhere else. So you want a mix of new talent and people that have institutional knowledge and form a core team that will drive the imo. So I think thinking about that core intersection, for me that's three people that sit at the center that will help manage the larger function. Your next step would be, well, how do I do the alignment? Is it by product? Is it by business unit? Is it by leader? That's the next question I'd be thinking about once I have my core team, how do they interface with the deal sponsor and how do you make sure that relationship is really trusty?

Start off by finding a leader, ideally a type A person.

You need to have somebody who is ready to drive. It's totally required. There's lots of types of talented people, but I've not met IMO leaders that are bystanders.

Very often the executive team's got to like them.

They have to like them even when they're delivering bad news or they're having a tough conversation. Because that honesty, that transparency is going to get you a better deal outcome.

So I get a leader, I start from there, build out that core team with some additional in house or new folks. Then what happens?

Then the next is I'd start thinking about that extended team. So I like to align. Most people do I think Align by department. So you start thinking about who could lead accounting integration, who can lead product integration, who can lead R and D integration. What I often find is a lead for each one of those departments. They're probably going to have a day job, but somebody who understands as a practitioner what it's like to go drive that outcome. They're going to inherit new team members. That's the person that's going to go co drive with you, that's your copilot with the imo. So then you start building out a candidate list that can be a really large list. And then depending on the deal and where it sits and geography and timing, you draft them in. And sometimes that drafting would be really quickly. We're like next Tuesday we're going to announce a deal and I'm excited to have you on the team, but I think having those layers of people, if you're on a weekend before a deal announced and you don't have your team ready to go, you're going to miss a beat. Hitting the ground running right at day one is really critical. So there's that next level of team, which I would just call as like a stable of people that will go help you drive the outcomes. So I'm just talking about arranging resources and being ready and then you got to manage it from there. I think this, you know, sounds almost small, but what tool are you going to use or tools are you going to use to drive your integration outcomes? What's the project management tool? What is the governance mechanism? What's the stand up cadence? To think about each of those drivers. And I think setting that rhythm is a key part of making sure the IMO is successful. And it's going to feel probably like overkill. I would prefer speed over perfection and I would prefer more people in a meeting than less people. And so then you're going to put together, for example, a weekly standup to borrow from our development friends, weekly standup across all functions that you have your IMO lead. And that's like I said earlier, exception management. What's on the dock? Where are we heading? What's yellow, what's red? Who needs help? What's that going to be like? And I've said this to many people, it's going to feel like too many people in a meeting to be productive. But you never know because if one or two topics trips another colleague from another department, that was value created there. And that way you also don't have 16 meetings across the week. So I think that structure and that cadence you stand them up right off the bat. Calendar amount for weeks would be the next phase.

So we covered a couple of steps here. We have an extended team where this is where you may be using shared resources from a function to execute on these integration activities. Maybe as you grow bigger, then you start getting dedicated in the function and then also defining your project management approach, including a tool that you may use to enable the collaboration between the parties. And then you're essentially your operating model, defining how your teams are going to work together, share information, conduct meetings and those fun things.

Part of that process too is what's your management review process? So I'm talking about the IMO standing up a large meeting with all the stakeholders. You're not going to do that every week with the senior leadership team. So often that's a monthly review. Exception management. That's the thing about the IMO is it's often in the process. The process will drive clarity in the particular outcome. And so you stand up and make sure that you've got time with the right leaders in the right cadence, and they know what to expect. When that helps, you just constantly be looking at what could be going better.

What do we do after that?

After you've gone through a few of these deals and you've got an outline, you've got the structure of the IMO and you've got the cadence and you've got the meeting rhythm, then you're going to be driving through your project plan. Project plan starts out as an outline, but you're going to be constantly feeding back into it. So we're version four of our playbook and the project plan is 1,000 items deep, and that just comes through time. So after a while, you can onboard new team members a lot more easily. So you're thinking about this as a development opportunity for people. They come in, they do a rotation, they move on, they get promoted. For the new person, you say, okay, perfect, let's start here. That playbook process is then going to put a little more discipline in the exception management and the tool starts to drive some of that for you. So it sounds trite to be talking about the particular tool, but I really think how you govern it makes a ton of sense. And then, okay, what happens when you've got a disagreement or something's not going well, and you've gotta make sure that you've got the right sponsorship, not just at the most senior level of the firm, but also the subject matter experts that are in the, for example, in the business unit that you're working with, you don't want integration happening to someone, you want integration happening with someone. So I've always found it really important to pair up the acquired team, lead and expert with their new sponsor. And sometimes that's their manager and sometimes it's a coach and sometimes it's a partner. And you should be thinking about that a little bit because you have to. How are we going to go? Are we going to sell together? Is that team going to sell while we sell? How quickly are we going to talk to customers about our portfolio in an integrated manner? Chances are you're not going to have any wins on the actual product roadmap in the first few months. So how do we coexist in a way that makes sense for our team and for our customers? And how do we make sure that if you're going to stay a little bit separate, that everyone understands that you're still one team and you don't find out 18 months from now. Folks say, I don't really know. We were operating in the marketplace next to each other, but never really on the same side. I think that's a real shame.

I like that the two in a box approach and then using that as a means to get the go to market alignment.

The other thing is the two in a box alignment makes a ton of sense and everybody has a partner from the acquired company and the sort of acquirer. The other is there's a more informal thing which is a buddy system. I'm still struggling to find a better name for it because nobody likes that, but they know what we mean. Who do I call? That's not my new boss or who do I call? That's not the IMO to help me a little bit how to navigate through things. And oftentimes that's people in the organization that have a really high eq, they were often acquired and they can have a little bit of no problem, give me a call whenever you can. Any other way you could set up an informal listening list. You go back and you pull those folks every once in a while. They're really rich sources of lessons learned. What did you hear and what could we have done better? And oftentimes we find ourselves tweaking just language in like newsletters for example, based out of some of that feedback. So newsletters is another way. It's not for everybody, but if you work at a firm like ours where M and A is a core part of the strategy and sort of is the major pillar of the strategy, that communication is so important and so it's going to come from the leadership. It's going to come from management, but we actually push out an integration digest as well. And it's more information than you could ever want to know. But it's published in partnership with that core team that I talked about. And it helps keep the folks that are two or three steps away from that epicenter. It helps keep them really informed. And you never know. Sometimes you get really good replies and really good engagement from that. And maybe that's a blog post or maybe that's intranet or it's a ribbon or whatever it is. But some way to internally work corporate communications to make sure people are well informed. It's almost like good news is fine and bad news is fine, but not being sure of something is like a killer. And so people just don't like this, the silence. And so even if they have a question or they want to artfully disagree, oftentimes they don't have a. They don't feel like they have a forum. So the more you push out proactive communication that makes it clear this is a dialogue. Sometimes you get real gems back.

Who reads that?

We send it literally to every employee of the new acquired company. If you think about it at our scale, these aren't the largest companies. We're talking about a hundred or two hundred people. But we track readership, so we track all of that. In fact, one of the benefits of owning an email program is I can send internal digests with our own product, which allows me to see what the engagement rates are and find out if tweak the content and make sure that it's getting looked at. Not everybody has that lever, I understand. But yeah, it's really, it goes out to the entire team. It keeps you from having an all hands meeting every other week.

You had a good point about keeping people in no good or bad. As long as then they're no they can handle it. It's when they don't know is when they freak out.

Even if the decision isn't theirs, they want to be involved. And so it's about a lot of communication flow.

We get that going. Are there any other steps?

This is not for everyone, but another thing to be thought about is the overlap in your deals. And so if you're going to have two deals happen in short succession that has a different integration plan and IMO plan versus if you could space them out. The unfortunate part about deal cycles is they're unpredictable. So sometimes you'll end up two deals on top of each other or a wide gap in between. And so Back to that topic of having the stable of people be thinking about how those communication cadences lay into each other. And if you've got to do two deals in succession, is your stable big enough and how do you manage that process?

Can we talk more about broader best practices for integration? Like how do you structure your playbooks?

One thing we've arrived on is called the integration commandments. We have a set of always, do, never do, try to avoid that, tend to be pretty firm specific, but they're the things that matter most. And then we ask each of the chapter owners, each of the department leads to author their own commitments. Now, to be fair, they don't all have 10, but there's a few of those. So just be thinking about. I don't want to be absolute, but I think there should be a few. You should always and you should never. They're not going to be for everybody. But over the first few months of the firm, we authored a couple and I think having those guardrails is really important as a signpost. Oftentimes they're a connection to the financial outcome or their connection to key talent. So you think about how you're going to manage the key people that you know are going to drive value in this particular business for you. How do you have the right side steps to assess that? They've got a role and a scope and a decision making remit that is in line with what they wanted to do their best work. You should never come in and say, hey, congratulations, it's your first day at the new company and here's your new title. There's a nuanced way to go do that. Titles are really sensitive to people and by definition, if you're coming into a larger firm, there's going to be a title releveling and there's a smart way to do that. There's not going to be seven CFOs at the firm, but there's a way to go through that. So we ask people to never be cavalier about job roles and job scopes. That's part of the HR chapter. And the other is making sure that the right people are having the right conversations or people fill in the gap. As I mentioned, good news is fine, bad news is fine. Indifference or not knowing is really the killer for folks.

A lot of this is basically defining the operating model with some commandments of here's how we operate, here's what to do, not to do, and general thinking to help people get aligned.

The IMO is just a giant alignment machine and so to the extent you can get everyone in the company to write down exactly what good looks like in your department, you don't need one. But extracting that and pulling it out is really tough. And we have a few departments talking about answering the bell. They did an outstanding job. We said, let's line out the do's and don'ts and things that matter to you most. And they went all the way down to what's called desk procedures. You're brand new, you just started. This is all the things that you do in your job. It's incredible. Those end up being amendments to the Playbook chapter. But that's really extra credit.

Does that help you have a resource like that for people you pull in first time doing M and A to get them up to speed, not only about M and A, but the way your company thinks about M and A?

Definitely. There's a process we typically call show and tell. So in the first three days of the transaction, we ask very specific people. They have a getting to know you introduction. And so they turn up and they say, welcome to the company. Here's what we do, here's the team, here's how we're aligned. If there's any changes, we typically say finance is an easy example. So here's how we're organized. Here's the accounting team, here's the FP and A team, here's treasury, here's tax, and here's the people that you're going to be working with. And they do a personal interest. So it's a bit of a getting to know you session. And then they start to ask their new counterparts, how do you think about this? Here's what we'll do. So every other day between now and this time, we're going to run through trial balances or whatever the topic may be. It's almost like an instruction booklet on how we're going to work together, which is extremely valuable. Hey, my colleague over here in this department didn't hear from so and so, but we got to know the whole team. We met on Tuesday. It was neat. Everything's virtual these days. We did a virtual brown bag or whatever it is. But that, that intro for us, that's in the first three days. So everybody should get some introduction to their new colleagues in the first few days. That's got a little bit of here's how we do it, here's how we thinking about it. And then it's both directions, show and tell. A very common track here is you'll be acquired and then later you'll be the acquirer. If your experience was only what happened when you came on and who knows when that happened. The reminder the task list is really helpful so you remember the context. You've got the task list and now you're part of the team. That's a really exciting thing. It's a cool evolution for people. But yeah, if we just bring somebody that's fresh to the company, I can think of a few examples in our communications team. So we hired a few new team members in communications and they immediately got to look through the comms playbook. And that starts from we walk through the messaging with the CEO of the acquired company. Before the deal is announced, we co author an email. Here's where your quote would go. And it's actually built out minute by minute on the first day. So the comms flow of exactly what message goes through what vehicle and in what order. We were able to just take her right through that. And right off the bat, like a couple weeks later, she was on a deal and she did a great job.

It's a good way to get somebody up to speed quickly. So we have defining this operating way of working. We have the documents to help people really get up to speed on the way they do things. What about the real nitty gritty to do list? KPIs and things like that?

The nitty gritty is just honed over time. The thousand plus that I mentioned, I mean that's when a great project manager is going to get it done for you. And it is just a task list. If your playbook is just a task list, you're probably doing it wrong. But you have to have the task list to support the things that create a lot more value. And the work streams or the departments that have the most success, they put somebody on that as a day job. Their entire job is to be thinking about that to do list. And sometimes it's really small. I'll use a great example like you have to redirect the mail. There are clients even in 2022 that still send you a physical check. And so you've got to make sure that it's going to the right place because the bank accounts are going to change. And so that's on somebody's list. And it's probably not going to be the VP of finance. And so somebody's got to make sure that gets done. And there's hundreds of examples like that. But those that have a dedicated department lead, they don't miss those.

How long does it take to stand up in IMO a few months.

It doesn't need to be a super protracted amount. And if you wait for it to be perfection, you'll never quite get it. So you just need the outline and you have to get it running. But I think a few months, if you've got somebody that's really done it before, if you're dealing with a project management office, maybe a little bit longer. But I think from my first day's consulting to deal time, we're talking about a few months.

What happens is you start to scale and you have multiple integrations going on at once.

Yeah, we just tell the deal team to slow it down. That works perfect.

Just pump the brakes real quick.

It's a real pressure. I mean, as we think about some deals, they drag on a little bit, and so we're constantly trying to orchestrate, but oftentimes we'll think about one of our large milestones is when key systems cut over. So a good example is we run one instance of Salesforce for the entire company. It's an important way to make sure that all of our sort of client accounts are aligned. And also every sales team can see all the history, all the notes and what every sort of customer has. And so part of the promise for them is you've got clients that have already tried at least one of our products. They're familiar. It's happy hunting. So there's a single instance that's a big deal to move CRM instance into hours. And so we rally a bunch of activity right around that particular milestone. And we did the same thing for netsuite and the same thing for our JIRA stack. And there's a lot of key tools. And so the question would be, okay, if we had to do them at roughly the same time or within a month of each other, would you do anything differently? And oftentimes we'll pull one milestone up and push another back because it's the same core team that's actually executing that. But you have to have the playbook and you have to have the calendar to be thinking about those dates for us. I know that Salesforce is typically cut over in month four. And so then I think about my deal cycle and trying to get 80 to 90% of the work done in the first 90 days. I know when that cutover is going to happen. You can lay those calendars on top of each other and start looking for the problem spots.

It's a balancing act always. I want to back up to the early stages. When we first decide to do an imo. Who's involved? Is that all like a C suite decision? Where's that thinking evolve? What are some of those early steps that happen from that initial thinking?

Definitely it's an executive leadership team ELT level discussion. In the few that I've been involved in, it was a sort of ELT sponsored decision that went to the board to make sure they understood what was involved and everybody was on board. We talked about sponsorship being so critical. So the sort of making sure that the top management team not just is behind the investment that you're going to make and the time you're going to take, but they're going to put all of their support behind making sure that that team is successful. Most groups, most departments will say, the higher in the organization I am, the more successful I can be. And I guess in a way that's true. But if you think about if M and A is a real pillar and it's going to drive a core part of the strategy, that's what determines if you're ready for an imo, which means you need the same level of sponsorship. It goes part and parcel with M and A is a key part of our strategy. The way that we'll protect the investments in that strategy is governed by the elt and the IMO is one of the ways we'll protect that value.

When do these executives give in? Do they look at their results and saying, hey, we're not getting the value that we anticipated on these deals or our shareholders are really kicking hard for us to produce better results. What ultimately drives them to saying, it's time to set up an imo.

It's time to do M and A. Because many firms, it's infrequent. It's not a cornerstone of the strategy. It's one of many levers they have. I think when M and A becomes a cornerstone of the strategy, then you say, great, what's the appropriate investment that I have to go make? It'd be hard for me to think about how the board would get a signal that it's the IMO time. If M and A is a cornerstone of the strategy, we're going to go invest millions and billions of dollars to go do this. What would be an easy investment to go make to protect that? And when I frame it that way, it's of course we need an imo.

Yeah, I agree. I just seen it time after time where there wasn't a big investment in how things are integrated and just high failure rate. Integration failed. Why? We didn't plan it early enough. We didn't have the right people in the right seats. That's where I was curious. If there's more of this big failure that prompts, hey, let's really start investing in our integration function.

Interestingly enough, people are great at M and A. Once they've tried it and did it poorly, that is a good way to look at it. The issue is how will the strategy drive M and A. And if you're not immediately saying, what's the right level of governance? What's board level governance for M and A? I think that's maybe part of the issue. Maybe what you're thinking about is if the sort of deal process is pushed too far down in the organization, you're almost setting yourself up for a bad outcome. Some of the best practitioners, you hear them say things like deals are sponsored in the CEO's office. It's impossible to mistake the importance. Or an ELT member not only has to be the champion of a particular deal, but they're responsible for those results as well. When it makes the list of the top four or five things that a top leader will do in a year, then you start to get the right level of intensity and you have to be thinking about it proactively. Hopefully, if it's on that agenda, if it's made it to the board agenda, the question is, how do we protect ourselves? Because really it's an insurance policy to make sure that you protect your outcomes. And after the fact is, yeah, a.

Little late, that'll help somebody out there sell it to their board.

I've been in an environment my entire M and a career where that was a pivotal part of the strategy. And so it was like, of course you're going to think about it this way, but how do you know that's true before it happens? I think that's the board level and the ELT level decision is don't stand it up from scratch. You need somebody who's been through it. So hire a trusted consultant, hire somebody as an advisor and just maybe just walk through those steps. How prepared are we to build a core team? Once you get the core team and the right sponsorship, you can probably figure the rest out.

So we'll run through the steps real quick of setting up an IMO and make sure I didn't miss anything. We want to start off with, understand the outcomes and then work your way backwards. We talked about identifying who's in charge, getting that type A person that business executives like, building out your core team. Then we have your extended team because you may be sharing some Resources within the functions, building out your operating model. And for you, a playbook goes beyond the checklist. It's defining how your teams are going to share information, how they're going to work together, conduct meetings, manage dependencies, the tools they're going to use, and then we review process. The next step would be really flushing out the governance for your exception management.

Right.

We talked about some of your approaches like using two in a box to help your target acquisition employees get better acquainted in the new company and also help the different functions align better around their go to market.

The two in a box helps get co authored solutions instead of it feeling like heavy handed. And it happens across all the departments. But a consequence is your go to market team will be way more aligned because they'll have a joint outcome for product sales, marketing, et cetera. It'll feel a lot more cohesive in the marketplace.

Is there anything else I'm missing? Does that cover most of the steps?

It does.

Let's get into the best practices.

Right before you sign an loi, you should tell the buyer not to enter into a new long term lease. Here's your tip. There's your best practice.

I want to start with how does this evolve? Can you walk me through that? Because there's companies out there that are going to stand up there. M and A function, then it turns into now what? And here at M and A Science we always talk about agile and how do you be agile and never settle, continuously improve. So how would one go about assuring that their IMO function would properly evolve?

Part of that for us is making sure that there's a cycle. So there's a few different informal, I mentioned listening posts, but in each department we do a sort of end of integration review. We go back to that same team and we basically ask what went best, what didn't go well and we're asking the acquired leader in that particular department. So a giant source for us of lessons learned which all get folded back into the playbook are these debriefs. And they're done in various small forums. They're done. A great example would be the integration lead for product management and the product manage, the product management director or VP at the acquired company plus the IMO listening what went well, what didn't, what would you do differently? We do that across all of the work streams. That's oftentimes we find where there's there was gold that we missed it. So that closed loop is a. It's one of the reasons why the task list has gotten so Long is there's a ton of those lessons learned. We take those that are really meaningful or really impactful and we put them on a slide called stubbed toes that we show to each new team as they're acquired. So we obviously can't say here's all the things that we've done wrong over the years, but really here's some things that are top of mind and fresh of mind. And we also explain the playbook. I think a big part of continuous improvement is signaling really strongly that you want to learn and then you're open to it. And so we describe, typically on the second day, sometimes the fourth day after a company is acquired, we hold a session with them and we say, what do we mean by integration? And we actually describe some of what we just done. Here's who's going to do what. Here's the two in a boxes. These are all names that you know and recognize. And so this is how they're going to work together. Every week we're going to get together and we're going to run exception management. If you've got a question, here's who you can go to. Almost just describing the discipline in which we're going to go integrate is a big part of it. So then when you go out to your listening posts and we hold those sessions or we send a survey or we do some of the other things I talked about, they sort of understand there's a humanization on the other end of that and that's always got to be folded back in. And then in our monthly executive integration review, we'll float any of those lessons that are meaty up to the top team to make sure we can have a dialogue.

That learning retention model justifies standing up an IMO function right there.

I like to think it's been pretty helpful. Sometimes it's a little bit depressing. You look at all the things you're like, why would I done that differently? The reality is every deal you get better and you learn something. And if you didn't learn something, you probably didn't ask enough questions. It's a pretty interesting process.

What's like the harder thing to do in corporate America than integrate a company? Obviously there's some size to it, but you do a large integration. It's the largest magnitude of change management that organization is going to go through.

I'm obviously biased, but it's truly disruptive and it's incredible for people that are excited for the battle. If learning and constantly figuring things out is not interesting, it's not for everyone, but not. I love it. And the team that we work with, the idea that they put their fingerprints on something that creates long meaningful value that's tied to a big check the company wrote is really helpful. But the exposure they get to how companies run is incredible. And you find over time people that have been doing integration, they can go on a wide range of topics. They can talk about dev team cycles, they can talk about lease management, they can talk about ARR and calculations. The amount of tax tips and tricks that I've picked up just through osmosis over the years, it's probably numerous.

Cool. It's like a CEO but you actually do work. Let's get into what are your top lessons learned along the way.

I have such a hard time. There's thousands of them. I have a hard time really floating them up. The macro lessons learned for sure are there's a lot of value in telling people what you're going to go do, describing a process so that there's something to fill the void. I encourage everybody to put yourselves in the shoes of an acquired company employee. Their whole perspective just changed and maybe they just foul out about it that morning. And so sometimes silence is really tough. And maybe their CEO is the one that came in that morning before the team showed up and packed their boxes and isn't to be seen again. You don't really know what they're going through over communicating and telling people. I'm just telegraphing. So speed over perfection. We're a learning organization. We're not going to get it right. But if you don't tell us how we can do better then you own in that outcome with us. To really sharing your tenants and sharing what you're about. The question we get all the time is what's the culture like? The culture is whatever we go build together. And when you do as many deals as we do, the culture sometimes is region or bu specific. And so let's go define it, let's go figure it out. We're just sort of over communicating. My biggest lesson is assume that you're going to get it wrong and over communicate. Tell people what to expect and make sure you follow through. Which feels not like integration best practices but more just sort of some good advice. A lot of lessons learned come out of not doing that or assuming that someone else was handling it. You should not assume.

I like that. If you can keep a people focus and also a feedback loop inviting them to create transparency in return.

One is around financial metrics. So I think you should define terms that you use often. And so it sounds really simple, but I've heard profit defined a lot of different ways depending on the way the firm was run that you acquired. And sometimes we're talking about smaller firms or maybe 100% of the equity was owned by two people. So there was no participation for the team. So when you start coming and you talk about, all right, top KPIs here, organic growth, retention churn, sales and marketing as a percent of revenue, EBITDA, you might have lost half the room. So defining those topics and making sure you're not talking about something that's not relevant probably sounds small, but I think goes a long way.

Really good point. What's the craziest thing you've seen in M and A?

Okay, so in this deal, the CEO drove to the office at 7am before the team showed up to go do the welcome to the company presentation and boxed everything up and was never seen again. And so the team that was on site was left to answer what happened to so and so? That's pretty wild.

So he had a CEO just disappear basically on the first day they were supposed to welcome. Was it announcing the transaction and welcoming or. Yeah, wow.

It was on the day so the news broke and that was it. That's pretty wild. While this thing, this is more of a positive. There are all sorts of I can't believe that person did that. I'll probably not share them all here, but we had one founder who didn't bring up the funds flow. The equity flow was really straightforward and so transaction was really smooth and never mentioned to us. But we actually found out from an employee that this CEO, this founder cut personal checks to the employees after the deal closed as a thank you gift. That was so neat. It wasn't for the credit, it wasn't for any of that. It was thanks for everything you've done for me. It was not about did Upland calculate the funds flow properly? I thought that was really cool. And then another time we spent hours perhaps talking about whether or not the gas in an Aston Martin was a benefit. So I mean, that's pretty crazy.

Thank you so much for the time. I enjoyed this conversation and learned a lot.

Thanks Kisan. I really enjoyed the chat.

Here's to the deal. Thank you for taking the time to explore the world of M and A with our podcast. Please subscribe for more content and conversations with industry leaders. If you like our podcast, please support us by leaving a five star review and sharing it. I enjoy hearing feedback and connecting with our listeners. You can reach me by my email. It's kisan k I-o nealroom.net M&A Science is sponsored by Dealroom, a project management solution for mergers and acquisitions. Additional educational content is available on Deal Room's blog@dealroom.net blog. Thank you again for listening to M and A Science. See you next time. 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.