Proactive Deal Sourcing

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Good. Thanks for having me today, Kisan.

Hey, my pleasure. Can we kick things off with a little bit about your background?

I am a consultant by background and training, so I'm not a recovering investment banker like many of my peers. I have been at Amex for 20 years, predominantly in a corp dev or a business development type of role. And for the last seven years I've been leading the corporate development group.

I think you worked on a variety of different types of deals in the role of amex.

A few here and there, a bit of divestitures, a bit of acquisitions, the whole gamut.

Wow. Okay, let's jump into it. How do you look at M and A strategy?

So first I would say strategy drives M and A. It's not the other way around. Just because something's interesting or hot in the market doesn't mean that we would be a better owner of the company. So we spend a lot of time with our business partners talking about what we what is the Strategic intent and the strategic theory behind the acquisition. And that really culminates in where we believe there's synergy value.

Don't just chase around shiny objects, really clarify the strategy. Do you ever get the view around? Because I take it there's proprietary deals and then stuff that you get pitched, proprietary, probably lines with the strategy, otherwise you wouldn't be going after it. But the stuff that you get pitched, is there ever that gap where it's not quite right in their strategy? But do we shape a strategy for doing this deal or is it just very black and white?

So I go back to strategy shapes, M and A. It's rare that we are successful with the transaction in search of a business strategy. A lot of times we use our pipeline to help inform where the market trends are going, get a sense of where might be interesting spaces. But at the end of the day, it starts with strategy.

Okay, so really stick to the strategy and have that clear as your drivers for growth. Make sure everyone's on the same page. Then as you get that clarified, what does that look like when it moves into sourcing? How do you define your criteria?

We rarely buy something that sits outside of our core as a standalone business that's like an island apart and separate from American Express. We focus on what are those products, services, capabilities that will add value to our existing card member merchant network participant relationships. An example of that would be like Arezzi Dining is super important to our card member base. The dining merchants are a big segment of our merchant base and it's a platform that allows us to connect people who are making reservations with the restaurants they want to enjoy. And we can do that and offer some unique services to Amex card members along the way.

That's interesting, but you would look at that as part of the core.

It is part of the core because it's providing value added services to our card members and to our merchants by bringing them high quality paying customers.

And they like that because everybody loves their Amex perks, which is what retains them or gets them to tell their friends about it.

Exactly. It's actually a great card acquisition channel for us as well.

It goes back to avoiding the non core. So when you're going through this process and identifying companies, are you taking that approach of building market maps and segmenting things by specific verticals? How do you start shaping the different types of strategies you're executing on and then going out and actually identifying those companies?

So as I mentioned before, we spend a fair amount of time with our business partners really understanding their business Strategies, what their roadmap look like and where there's gaps. And so it's in that definition of there's gaps. These are the types of companies they're looking for. These are the types of technologies that would fill the gaps. That gives us our basis for going out and screening potential targets.

Now we say business partners. These are your business unit leaders.

Business unit leaders. And we also sometimes acquire capabilities from a servicing standpoint or fraud and a risk standpoint. So it is both the business unit owners themselves as well as some of the functional groups.

Okay. Who would control the pipeline? Would they have their own pipeline or is it here's our company that we centralize it and you're executing against it.

My group centralizes all of your process and management. It doesn't mean we centralize all of the sourcing. So a lot of times what happens is we get investment bankers, vc, private equity firms will come and say, hey, I've got an interesting company. And we educate them on our priorities so they generally have a good idea of the types of companies we're looking for. Our business partners are out in the ecosystems. Some of the companies we acquire we've had partnerships with and we know well other companies, our business partners have met through business as usual type operating agreement introductions. And so it's a bit of both our business units coming to us and saying, here's three interesting companies and us saying, great, if those three are interesting to you, let us find four more so that we have a robust list.

Seems like there's a lot of people involved. This is where it really gets interesting, that it goes beyond your team as a centralized M and a function, working with the business unit leaders, even sometimes the functional leads. How do you roll that up and not let things slip through the crack?

I like to say acquisitions are a team sport, because they are, but you need a coach. My team controls what goes out as an loi and there's a very standardized approval process for any Lois that would get sent. And that's how we manage ultimately when the conversations start and who gets involved.

Okay. And then it really depends on what we're doing with the deal. You get a good sense of who to get involved, going back to existing relationships with partners, stuff beyond that, is there any research you're doing out of the existing relationship to identify some of these companies that would fit in your strategy?

My team does a fair amount of desktop research. We attend a lot of conferences. We do interviews like this so that people understand that we're acquirers. But there's Really a bit of a being in the flow type of process. And that's a pipeline that has been cultivated and developed over multiple years and being able to tap into some of the industry experts who know us well. We frequently have companies approach us because they've heard from other founders that we're a good acquirer and that means we take good care of the people when we acquire them. We are respectful of how to integrate companies in a way that generates value for Amex, but stays true to the culture of the company that we acquired. From an innovation standpoint, our reputation in some cases precedes us.

You don't destroy companies.

Try not to.

So we do some research, find an interesting company, maybe they got a unique technology or capability that would complement one of the business lines. How would you go about approaching the company?

Those approaches start with business discussions not led by us because outside in it's sometimes hard to assess fit. And so we like the folks on the business side to start with the first conversation of is there something there that we could do together? If the answer to that is yes, after a conversation or two, then it changes to a and should we think about a different structural alternative. And at that point my team myself would get involved. I also say to my business partners, if corp dev is the first one to show up in the room, everybody just sees dollar signs or they're too afraid to talk to us because they're not for sale. Neither place is a good start. From a corp dev standpoint. You really want the business to vet the company and the capabilities and the technologies before we show up and say how would you like to think about an acquisition?

It's like very bottoms up approach as opposed to what I often hear where it's very much top down. Through head of corporate development. We know the CEOs love to do this as well. Go talk to their CEO and spur up that conversation. And it sounds like you got some pretty good points. I want to expand because you've probably seen the other way around. What are some of those key differences? It sounds like there's validation about how the companies are going to work together as opposed to like you mentioned, seeing the dollar signs first.

Again, I would go back to we tend to buy products, services, capabilities. By definition, they're smaller companies. The CEO top to top is when two public companies decide to buy each other or there's a scale sizable transaction that's happening. Our sweet spot tends to be capabilities, acquisitions, buys. And that allows us to really do that from a bottoms up perspective. Perspective. Those capability Acquisitions is more of the business unit, how to make my business plan more effective and how to accelerate my strategy. Not I'm transforming the company.

That makes a lot of sense because of the size and scale of it. And then what you're trying to achieve. We got the team getting the conversation going. When do you get looped into this?

Once the company's been vetted and people think it's a real acquisition piece that, that you haven't asked about, but I'm sure we'll get to is the culture piece. There is a little bit of the assessment of is this management team ready to be part of American Express and all that. That is the vision for what we're going to do with the capability consistent between the business unit stakeholders and the company that we're going to acquire. And so I step in from a early relationship standpoint to start to suss that out. And then obviously, if there are thorny issues that require either drawing a line that says we will or won't, or trying to figure out how to resolve inside our four walls, that's where I get involved.

One question, Leisa. I've heard this before. Situations where a business unit leader can go pretty far in a transaction, maybe even a little too far, where they're really starting to negotiate deal terms and then you sort of come in and maybe in a tough spot. How do you keep that from happening?

Perhaps it's the benefit of being in role and in the company for a very long time, but I think we've got a pretty good relationship across multiple levels in our business. And at the end of the day, the first question that people will ask is, do you have someone from the corp dev team involved? Very little when it comes to capital transactions happen without me and my team being involved. And that's just organizational training. And it's also a bit of living with the consequences. If somebody gets too far over their skis and it's not the right deal for amex, I have no problem stepping in and saying, okay, well, now we're going to back it up and start at the right place. There's a bit of being the bad cop or the control function as well. That comes with the job. So people have learned over time not to get too far ahead of that function.

Is there maybe expectations you set? Hey, if a conversation is going towards our companies coming together, that's the right time. Make sure we're aware of it. Or do you just already see this stuff ahead of time? Because that's planned outreach.

So we know a lot of our counterparts in the business who have that business development function, who are out talking to the companies. And we have a shared understanding of the general script of you can ask questions up to this point, but the minute you start talking about acquisition and price, you need to bring somebody from my team in. We have a super clear rule. Nobody gets to negotiate price but me and my team.

Okay, fair enough. That makes it very clear. We mentioned there's stuff that you get pitched from third parties. Companies will come directly to you. I wanted to get into the culture piece because that's a critical factor in teams working together. How does culture matter when you're sourcing deals?

It's probably the hardest thing to define culture, but it is very important. Like I said at the outset, you want a management team that first and foremost has the same value that Amex has. And that is things like operating with integrity, operating with transparency, respecting their teams. And so when you go into diligence and when you have conversations and share a meal with someone, you get a sense of both. Are they being transparent with you? Do they have a good employee culture? Do their teams feel valued? Do they talk to each other with respect? And that to me is first part of culture. The second part of culture is this a group of people who are prepared to be part of a large organization and have the ability to not just navigate the small entrepreneur world where there's a lot of degrees of freedom, but come into a big company where relationships matter, checking with people across multiple functions matter. And you get a sense of that as well when you start to talk to the CEO, the founders, the management team, and get a sense of how they're going to operate within our four walls.

We got some as the real nitty gritty of culture, of the values, identifying that within the companies, seeing how they relate to yours. And then the other part is looking forward in how this company would come together or fit well with yours. I wanted to get an example of that, is that, hey, this company's maybe so ingrained with startup culture that they kind of anti large corp culture there. Is that what you're picking up on? And then it's like, all right, maybe this is going to be a tough one, or what would be the red flag around that?

So I'll describe it in two ways. The first is we are a bank holding company and so there is a control compliance regime that we follow and we expect all of our employees to follow whether they're issuing payments, products and services or not. So that's an easy definition. I think the second is a little bit more what is the vision of success? So we bought Resi and the vision of success is we want a platform that anyone can come to to reserve a restaurant, but we also want a platform that can provide unique and special value to our card members. If they said to us as a founder group, we don't believe in unique access to any group of cohort, we believe everybody has the same access for reservation. We have a philosophical or visionary difference about how to use the capability. We acquired Meze, which is a chatbox technology, and they were thinking about standalone business model and we said we'd like you to become part of our servicing infrastructure and create better user experience for all of the Amex card members. If there's a vision disconnect, you need to know that before you buy, before you sign. Because then when you ask a group of entrepreneurs to come in and help you execute on your strategy and your roadmap, you don't want them saying, but that's not what I was bought for or that's not what you acquired me for. You need to have that alignment up front.

So two big pieces. The control compliance, that's almost where you're at now, where you need to get to be to operate within our large public infrastructure and compliance requirements and then the vision of success. And it sounds like you're pretty transparent about how you see organizations coming together, where the value add would be and seeing how well that aligns with them. How do you know, you look for a giant grin, that they're as excited as you are, or is there like that little uncertainty you're trying to fish out? How do you know if you're misaligned with trying to get that fit of the large corporate.

So if I could get it perfect, I would be a mind reader. That doesn't happen. It is honestly through repetition and passage of time. And if you think about a diligence process, it's a 60 or 90 day process where you are deeply involved in their business and you've got a lot of people from Amex asking questions about their business. And when you funnel all of that back, you get a sense of do they buy into your vision based on the questions? Like, yeah, the grin, the questions that they ask, the way they make themselves available to talk about potential roadmap ideas, the resistance that they have to change. When you say, okay, your infrastructure is fit for purpose for a small startup, but we're going to need to upgrade infosec and compliance and if they balk at that, it's a indicator. There's very little that's like the big red waving flag, which is why this is hard. It's a lot of little indicators and a lot of judgment.

Yeah. So the questions, there's things that you ask to set expectations, see how they respond with additional details. Then there's questions that they ask you to get a sense of how interested they are. Any like little hitter questions that you asked to cut through some of this? It's like the job interview, right. You get some people have the right questions that they ask that give you some scenario based does this person have good morals or not? Do you have anything like that to start getting a sense of culture?

I wish I did. I would take suggestions for questions like that. No, I don't have a secret stash of questions.

I remember one of the CEOs of a mid sized company and his thing was walking around the office. I could walk on the office and tell if there's a culture fit. I don't know if the beer test comes in play here, like what other things that you would do to get a good sense of culture to forecast how well it would fit well together.

Sharing a meal. Covid made it hard because you couldn't share a meal. Sharing a meal is always very informative. And that I would say is that's the same for operating agreements, investments, acquisitions, business relationships. Sharing a meal, establishing some common ground. Super helpful.

I want to go back to the general stuff we talked about. The values, things of that sort. Is there anything specific you do to facilitate that conversation to better understand how they think of their values? Leadership styles.

Our HR team does a fair amount of diligence and there's a lot of review of employee handbooks, vision statements, mission statements, communication styles, mechanisms that they use to communicate with their team. It gives you again a lot of little data points, but it gives you a very good sense of how they run the company. Do they do regular performance reviews? Is there a documented process by which they assess their team? Things like that big companies take for granted. Small companies that think with that level of discipline tend to have a higher cultural fit because they understand why it's important. They might not do it to the same degree or standard that we would as a large company. But if there's a shared understanding of why it's important, that's a better cultural fit.

For example, that's a really good way to look at it. Working with your HR team is a good one. Do they do anything unique? Because it's just hard. I feel like there's stuff you can obviously look online Glassdoor reviews, things like that, which are always fun and interesting but then early stages, you're pretty limited. Does a lot of this stuff magnify as you continue through diligence? I guess post loi is that understanding of culture still apply is a big consideration.

I have a small integration team that helps with the PMO part of integration and the simpler pieces of getting emails hooked up and general ledger systems hooked up and things like that. But they also have playbooks that we sit with the business and discuss around what is going to be important from a long tail integration standpoint. And part of that is how do you assimilate cultures and how do you continue to reassess what you learn about the company, what they learn about Amex at regular intervals so that it's not a one and done. Sometimes people think about oh we closed the transaction, we paid the money, we integrated. Everybody has an email address that says Amex on it and we're done. But there's a long tail to making sure product roadmap gets set. Cultures get integrated. Employees understand vision and how they fit into the Amex ecosystem. We take for granted. I'm a 20 year employee. I take for granted that I know every acronym and who sits where and if I need to get something done I know who to call. New companies need some help figuring that out when we acquire them.

This whole emphasis on culture and people is the new M and A thinking. Lisa. Like the traditional, it's very much in the finance and the thinking is that these companies have different cultures but they're going to get together and they'll make a new culture. It's not so much the emphasis. I'm very curious about the situations where you've identified. There wasn't a good culture fit and you actually walked away from a deal from that.

It happens. Here's what I would say because this is something we think about early and often. It generally means we can't align on price or we walk away really early. We walk away before there's a serious amount of diligence. Culture is something that's table stakes for playing. It's why I like when my business partners come and say to me, hey, we've been working with this company, we think their technology is great. Are they a good acquisition position candidate? Because they've already done the culture assessment. They've already decided they like to work with a company. They have the same values that we do. The do they want to be part of a big company culture? We can assess but they've already done the basics of the integrity, transparency, respect through an operating agreement.

Okay, so you get some of that upfront determining how the deal comes in and then you get like the probably the key thing is the friendly versus a hole culture. You can't have some extreme opposites and expect it to mesh well together. So at least some of your teammates have had conversation and they've sussed some of that stuff out.

But entrepreneurs by definition don't take no for an answer when you work in a large company. People are used to my boss says and therefore we follow. And it's not like the a hole culture as you said. It's just a bit of the meshing of very different styles of working. Part of what we acquire for sometimes is a little bit of that edginess and a little bit of that. Let's push our business thinking beyond the bau. Figuring out how to navigate an organization is important. We're not asking everybody to show up and be a replica of an Amex employee day one.

Sounds like you're putting thinking and effort around preserving those parts of this company's culture. I think it startups with the stereotype, right? Big corporation, top down management startup, bottoms up management. How do you put that together?

It goes to expectation, setting and vision. If there's clarity on the vision then there can be clarity on this is what Amex brings to the table and this is what you newly acquired company bring to the table. And if we get the best of both worlds, it's a success. And that's the way the conversation goes a lot with these newly acquired companies in that you figure out okay, they have a way to more flexibly update products and services and systems than we do. Let's understand how they do it it what they do. Can we adopt their policies, we have great risk and fraud infrastructure. Can we add what they already do to make sure they are making better decisions post close of an acquisition with our data capabilities embedded in their products and services. So it can be a win win. But again I go back to starts with vision and alignment on the vision and then you can decide what is that best of breed mix that we're.

Looking for, where it's the hard part, where's the biggest challenge? It's almost like role playing this out as the founder of the business you're acquiring and obviously there's the financial considerations of it. But some of this stuff you coach things earlier about getting the leader ready for doing the deal and understanding those changes like advice you'd give me As a founder to make sure I don't screw this up.

The hardest thing is you only know what you have experienced. So founders who have worked in large companies before and then have decided to go start their own business and or founders who have sold a business before worked for a large company. Those founders have a way more internalized understanding of what it means when I say to them, are you prepared to be a part of American Express? So that is what we're assessing. When we understand the founder group or the management group, and if it's somebody that's always been a serial entrepreneur, never worked for a large corporation, you start to have some different conversations around. Have you thought about what it's going to be like to have a boss? You haven't had a boss for the last five years. You have board members, you have private equity guys breathing down your neck for results, but you haven't had a boss. Have you thought about that? That's best done over a glass of wine or a dinner.

Okay, fair enough.

Not in a diligence session. This goes back to where I started.

Bring it up at the right time. That's a tough one. I think of myself running a business. That would be the hardest thing for me to deal with is the bureaucracy having to say, hey, I got to get things checked off on some of these expenditures or decisions to make. Do you see people panic? I'm the entrepreneur that doesn't have the big company experience, hasn't sold one. So when you bring it up, it starts freaking me out. Do you see that? Do you see a lot of that? How do you respond to it?

The other thing I would say about this is we also try and understand the depth of the management team because it's very different if there's a founder or co founder that says I'm a serial entrepreneur or I want to make sure my company gets a successful home in American Express. But my intention is not to be part of a big company over the long term. Fine, we can make that work. You never want to be in a position where you buy a company and 90% of the talent leaves the day you close. So somewhere between recognizing that there is a group of folks who super happy to sell the company, buy into the vision, understand the benefits of being part of Amex, are still going to look and be like, but I'm not prepared to have a boss. That's great. I'd like you to come for 18 months, help me manage the transition. Then you're free to do what you want, making sure you understand what is motivating, not just the founder, the next level of management and sort of the general employee population. Because again, I go back to some of what we're buying is people and talent and you want to be confident that you're retaining enough it. Or if the tech stack is the most important thing to us, can we retain the CTO for at least two years? Not if he's saying, I have no desire to work for a large public company. And the day you acquire my company is the day I start looking for a new job.

Sounds like you're pretty direct about understanding this.

I've been doing this job more or less for 15 years and I have seen the movie a thousand times. So yes, directness is the only way to have the conversation.

Sounds like the right approach. I'm thinking of different scenarios where the power dynamic, are they very motivated to sell versus not motivated and you gotta influence them to sell. How does that usually play out when it's these kind of proprietary deals?

We take a very disciplined approach to price. So people are selling because the price is fair and they want to sell. We're never going to throw so much money at a problem that someone who doesn't want to sell suddenly changes their mind because of dollar signs. Whether you want to put that in the culture bucket or not, if it's not a willing seller, it doesn't feel good to us. The management team has to believe that Amex is a great home for their company.

You're painting the vision. You get the clues or the response whether they're on board or not and move accordingly. There's not, hey, I'm really going to be persuasive to get this person to make this move. It should be apparent to them just as well.

Yes, I use a terrible dating analogy. You can convince someone to go out on a date with you, but if they really don't like you, it's not a good date.

Very fair. What about when. When people are talking about M and A with Amex, there is. We talked about dollar signs earlier. There's a lot of dollar. There's like the restaurant rating. We got five dollar sign tickets going on it. How does that work? Do you ever find that challenging, balancing expectations in terms of how you price deals and whatnot?

Again, I think we've got a group who spends a lot of time in the market and understands valuations, current market conditions, how hard it is to raise around, how easy it is to raise around what the alternatives are to selling. We believe in paying a fair price. We are disciplined when it comes to price and valuation. Because at the end of the day we have to make a synergy case work. We have to be able to say, brought the company in. We have three or four sources of value, whether that's through customer acquisition, whether that's through increased spend or whatever it is deeper engagement, less attrition, and those are the levers that we justify the purchase price for the acquisition. If you don't have that synergy, value can't pay the premium. No matter how interesting the company is.

Sophistication in terms of how you're valuing the company, you're not trying to come in and get every company for a song and a dance, you're putting a lot of consideration in how you value that business. Are there any like red flags that really pop out at you in terms of lack of culture fit?

The biggest thing that has caused questions is if there's inconsistencies in what we find in diligence, Company tells us it's going to look one way and then when we get in and pull back another level, we find out that it's not exactly the way that they described it to us. Those are the types of things that we find in diligence that you've got to go back and question was it a miss or was it purposeless? I go back to the integrity and the transparency piece which we expect to flow through a 90 day diligence process.

You start tampering with your trust, that's not a good thing. Doesn't get on Lisa's good side here.

That is what the Amex brand stands for. Trust, service, long standing commitment to our customers. We'd like to keep that.

It is true. Like doing diligence is that exercise of understanding, that culture and way of working together. But you've probably seen some of that in just the early getting an NDA signed and you're just going back and forth and this is already a bad.

Sign and I'm sure you've seen it when you're involved in a diligence process. The more someone doesn't want to show you something or the more someone argues about what they need, you start to say what are you solving for? What are you so afraid of? I can imagine a lot of terrible things and if any of them are true, it wouldn't put us in a good spot.

That's true. I mean there's obviously some circumstances where it's warranted, but I think of early stage startups with the entrepreneur that doesn't want to share his idea because he doesn't want anybody to steal it.

That's different. That goes back to the tell me. That's the issue. I'm not prepared to share my source code because I am worried about who sees it, what they do with it, where it goes when I don't have control over it. Okay, I can solve for that. We can get a clean team. We can get a third party to validate. I never need to see the source code. I have a lot of tools in the toolkit to solve for problems. But if I don't understand the problem that you have or you're not, being transparent makes it more challenging for us to get through diligence and feel comfortable that we know what we're buying.

Yep. And then when you start seeing that as being challenging, that sort of gives you a lot of those indicators. Have you ever had that where during diligence that was the big issue and you said, hey, we got to end this, because it's not so much as early, but even post loi. Whereas culture friction ended up moving the.

Deals apart in circumstances like that where you've gotten a little deeper in, it's rare that one party ends unilaterally and it more is a conversation around, are you sure you're really ready to sell? Sometimes when you say that to the founder group, they'll be like, you know what? We thought we were, but the longer we're in this process, we're not sure. Okay. And I do believe that when you exit a transaction because it's not working for either or both parties, you made the comment about being direct. There is a direct way to do that that preserves the relationship and preserves the respect and the trust that doesn't feel like anybody got abused in the process or did more work than they needed to do. We have stopped transactions very quickly when the technology feedback is not great. And I'll call the founder and be like, look, this was our threshold issue, didn't work out. Don't want to leave you with expectations that we can't fulfill on you need to solve for yourself and it's time to call it. And that is generally after the initial disappointment wears off. Met with, thank you for telling me, thank you for the transparency. And then sometimes it translates into 12 months later they come back and they're like, hey, we're in a different spot. Should we have another conversation? Maybe the answer to that is yes.

Yeah, I like your style. Very disciplined and straight to the point. When you have a deal that comes in through a bank process and then you have all these challenges of is it an auction process? Are they artificially compressing all the timelines? How do you deal with, with that and try to get that culture sense.

So auction processes are my least favorite way to buy a company.

Oh, me too.

If you're in an auction process, I think the first thing to figure out is what is the criteria that drives the decision. Because I will say frequently to my banker colleagues, we're not going to necessarily match prices. We're not going to continue to escalate price. If at the end of the day top price wins, tell us what the number is, we'll tell you if we can do it or not. But price shouldn't be the reason we win or lose. There's a lot that goes into the okay, but do they want to be acquired by Amex? And I'm not asking someone who sits on the selling side to say I'd give up $100 million of purchase price to be bought by American Express. But at some point, if you've got somebody who's willing to pay $100 million more than I am, go.

I was just thinking about the boutique banks that come across deals and they want to get something in front of you. This is like the opportunity to give them advice. What's the ideal way to do that? What do you typically see? Is it. Here's a teaser follow up with some phone calls, emails, make sure you got it or beyond that, obviously it changes on sophistication of the deal and the institution you're working with.

Email's the best. The hardest is hey, do you have five minutes for a phone call with no contact and no subject line? Because the answer to that is I have no idea. Or maybe in three weeks. It doesn't need to be a full teaser, but the email, that's this is the type of company, the space some size metric, does it fit with your strategy? We can answer that question in days. We have a process. We go to our business unit counterparts. Sometimes we know the companies and they've been on our screen. So it's an easy yes or no. But the first inbound, if it's an email, put some details in it so that we can run the tracks and efficiently and quickly get back.

So you got a little business mini little outline of a business case, it's straight out pitch you and be point blank about it.

That would be super helpful.

Anybody catches that, that's the pitch to pitch Amex. You know Elisa, at least integration planning. The ultimate to creating value is making sure you can execute on all those synergies. How early do you start integration planning?

It is never too early to start integration planning. If I could start integration planning pre loi that would be perfect.

How do you do it? And I'm curious. There's business unit that's on the receiving side of executing on integration and then the CEO, maybe other members of the C suite on the target company. How does that start shaping of? Okay, we're excited about the vision, but how do we start thinking about what it actually is going to take to make this happen so that we don't think about these important things too late and stumble to get it done.

One of my colleagues in technology I think said it best. They have a framework for T shirt sizing so I can tell them company type of business, whether they have PII or not, number of locations, number of employees and they can come back and give me a small, medium, large, extra large from a integration and uplift standpoint. Or they can give me four questions to ask so that they can better size the T shirt. That gives us a leg up in both how we construct our business cases as well as what questions are most important to answer early in diligence so that we can get to a fast go no go.

Interesting. So use that to basically weighting system which is like a very agile thing too by the way. So it's cool to see this in this application for the things that need to get done. But it also sounds like you're doing that with risk as well.

We do it with risk, with technology and with our control and compliance teams. Here's the way to think about it. Companies that work with other banks generally understand what we're going to ask about when it comes to control compliance risk management. Companies that don't work with banks have a different understanding of what that is. There's some things like that that we use, like I said for the T shirt sizing exercise of how big of a lift is it going to be from an integration standpoint?

You might have some pillars around. Here's a compliance track. Here's it. And then go to market, then build in. Okay. If there is this big gap, this is going to be more of this extra large T shirt effort versus if they're in that example already used to working with banks and whatnot, then there isn't as much of a lift needed and then risk that same thing where here's a huge risk we've identified. This is like a double XL T.

Shirt size double xls we try not to buy.

Does that come up where you are doing diligence and you do have a huge risk that causes you to walk away.

I think it depends on how fundamental the risk is to the business. If we're buying a technology company and we're not comfortable with IP rights or validity of source code, maybe it's the reason we don't do the deal. If we see a company that's worth $200 million and we believe if we spend 20 million, we can get it onto our technology and product roadmap from an integration standpoint, if that number turns out to be 50 million, does our business case still work? Maybe not. And so that's the iteration that we will go through, starting with the basic T shirt sizing. But then it flows into the deal model, flows into the questions that we ask from a diligence standpoint and how we continue to iterate on the value creation case.

I'm curious about the relationship between yourself, integration leader, business unit leader. What does that look like as you move through the stages of the deal through close and post close and how do you keep them all synced and committed to what needs to get done?

We all hold hands and walk forward together. In all seriousness, we are a threesome, which is the business unit sponsor needs to add, advocate for it. I need to show up and say it's a good solid transaction and we need to have a person who says, and I know that I can integrate the company after we close. If you don't have that alignment across all three parties, I'd be the first one to say we need to sit and have a question as to whether or not we should do this deal. Because if you can get one piece of it done, but not the other two, I will tell you, long term value creation does not happen.

All right, that sounds like the whole leadership team, yourself. Between them and really getting the right planning and getting the alignment, there's a lot of details we can get into, but I don't want to get too much onto how to integrate companies.

We'll save that for a different podcast.

Exactly. With your integration leader, of course. And how about steering committees? Do you use them in your process?

We have an executive committee that approves the LOI and the transactions pre signed. And that level of consistency as we go through standard deal processes is super important. It also creates a common awareness about what is coming. Because to integrate a company, you need risk compliance, technology, hr, controllership, tax, treasury, you need an army. I go back to it's a team sport. But then for every specific deal There is a steering committee that is post close. They usually are stood up for 12 to 18 months to make sure that we're getting integration, the bits and bytes, the emails and the office locations and the general ledger systems done, but also making sure that product roadmap starts to happen, synergies start to be realized. Those steering committees are sort of customized to the transaction.

Okay. That's like a whole other talk track about how do you build out the governance and really make sure you got the right people there. On a different topic we talked briefly about before was around diversity and inclusion. How do you think about that and.

How does that fit your strategy from a company standpoint? We have a diverse set of customers, merchants, card members. We want to make sure that the companies that we acquire reflect the diversity of our constituency. That is super important to us. Again, it's a cultural element. When you look at management companies about do they embrace differences of opinion? Do they embrace different background, different life experiences? That is a cultural pillar for us. And then I think about it from my team's perspective and there I want to make sure that my team has a diverse set of backgrounds and experiences. Because think about it this way, if all I hired was former investment bankers, they would all have one way of doing a transaction, one lens to look through a transaction. I like to have my team that reflects some people that come from Amex, some people that have a non Amex background, some are investment bankers, some are consultants, some have done startups themselves. Right. And so their deal perspective is just very different. It's through that diversity of thought, perspective, experience, experiences that you really end up with the right set of questions and the right answer at the end that contemplates more than a single point of view.

That's such a great case of just even looking at your own team of having diversity with different backgrounds. It's not just all bankers. I've seen those corp dev functions. But not to knock the ones that might be listening. It is really interesting when you do have the. I mean it's just ideal in a lot of ways.

It surprises no one who knows me when I say I was a psychology major in undergrad. This was not my intended career. But I think about things a little bit differently than people who had corporate finance backgrounds.

Absolutely. How do you delineate diversity from culture? Because it's a very fine line. If you're open to diversity, shouldn't you be open to all types of cultures?

It goes back to what we were talking about a little bit earlier, the non negotiables on culture are the integrity, the transparency, the respect. Sometimes we want a culture that's a little bit edgier and is a little bit more entrepreneurial and that's different than the AMEX relationship. We've all known each other for 20 years and we're kind to each other. You can mesh those two cultures together. So diversity of cultures is fine as long as you understand what the baseline is for values. So to me it's super clear. Culture doesn't mean the same culture means. Let's make sure we have the baseline of values correct and then let's figure out how to mesh differences of opinion in a way that's going to allow us to create something truly unique.

I like that diverse people come up with more diverse views. Lisa, what's the craziest thing you've seen in M and A?

So there's a long list of crazy that happens at M and A because everybody knows it happens at weird hours of the day and the night and weekends. 24 7. I don't know that I have a specific. The one thing I will say though, is it is never over until the money changes hands and everybody says to me, oh, we signed an loi. We sign the transaction. And anyone who has done this job for any period of time knows a lot can go wrong between signing and closing. I do not celebrate until we close.

I'm sensing you've had a deal. It killed at the 12th hour.

There's any myriad of things that can come up and some of them are in your control and some of them are not. But I try not to be surprised.

All right. I can't get a story out of you. You're holding on. The gangsters don't tell tales really true.

Why would I give away my secrets of bad behavior that I've seen?

We do these roundtables under Chatham House rules where maybe I could get you in a spot that you'd be comfortable sharing a story off record.

I'll take you up on that.

Lisa, thank you so much for your time. I enjoyed this conversation and learned a lot.

Thank you. It was so nice to catch up today. I hope it was informative.

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