Realizing Revenue Synergies in M&A

This is a conversation with Chris von Bogdan D the global M and A leader at Slalom. Slalom is a purpose led global business and technology consulting company with over 13,000 professionals around the globe. Salim has recently been listed as one of the top 10 best M& A Professional service providers by Deal Room. In this review, he'll walk us through how to realize revenue synergies in M and A. We discuss how to convert the Deal Thesis into a synergy model, understanding the customer journey of both companies, planning for revenue synergy, pre loi and the importance of a Deal Thesis refresh. This episode is sponsored by our very own business lines. The M and A Science Academy Elevate your team's M and A skills by signing up for the M and A Science Academy. We curate the best of the best M and A practitioners to give you the education you'll need for your next deal. Dive into lively courses that turn complex M and A concepts into engaging, understandable lessons. Visit mascience.comacademy to learn more. Deal Room the best gift you can give yourself this season is a streamlined M and A process. Say goodbye to the hassle of those pesky Excel trackers and hello to the efficiency with Deal Room. The ultimate platform for M and A success. Make this holiday season the best one yet with Deal Room. See why the best Emerson Energizer, Cardinal Health, Neiman Marcus Use deal room. Visit dealroom.net to learn more. Again, that's dealroom.net firm room in the world of M and A, data, security and compliance isn't optional. The best in M and A choose firm room for three simple reasons. 1. Top tier security while being dead simple to use.

2.

No per page billing BS. We all know it's a scam. Don't fall for it even if the bankers try to trick you otherwise.

3.

You can sign up in less than two minutes with a free trial and see for yourself why it's better than anything else out there. Get started with a free trial@firmroom.com Again, that's firmroom.com let's get to the conversation with Chris.

I'm Kisam 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. Hello M and A Scientists. Welcome to the M and A Science Podcast, where we learn from the best in M and A to uncover proven techniques for enterprise value creation.

If you're interested in learning more about.

The products and services we develop to support world class M and A teams or want to get involved with our community of forward thinking M and a practitioners, visit mascience.com youm can get started by subscribing to our free weekly newsletter to get the latest insights and events. Again, that's mascience.com I'm your host, Kisam Patel, CEO and founder of Mascience. Joining me today is Chris Van Bogdandy, Global M and A lead at Slalom. Slalom is a global consulting firm with 13,000 practitioners.

We are live here in the Slalom.

Office in Redwood City, California. Beautiful sunny day, beautiful conference room with a nice view overlooking the train station. So make a little background noise in this conversation today we're going to talk about realizing revenue synergies and M and A. Chris, how's it going?

It's going great. Thank you.

Kisan hey, thanks for taking time from doing deals to have a conversation. Teach me a few things here.

Oh, it's fantastic. I always like talking to you. I always learn about new things when I'm listening to your podcast. So thank you for having me back.

I got to hand it to you because there's a big ecosystem when it comes to M and A and there's a lot of providers in the industry, but you're of the very, very few that have actually had your clients recommend and suggest to have you on the podcast. That doesn't happen oftentimes because you always talk about what's ROI when you hire a consultant and people shrug and shake their heads but you're doing something right.

Thank you. That's the best thing I've heard the whole day.

Well, you have anything that you think is lending to that credibility for you because it sounds like a successful practice, especially with M and A integration.

I've been acquired in the past. I've done M and A for the past 30 years and M and A is something very stressful for a lot of people. So for me, in my engagement with my clients, it's important to not just deliver on the due thesis and the revenue synergies, but also take the stress out of the workload that a lot of these people have. Because very often you work with people that have a day job running the business and on top of that they have to work on an integration. We really try to take the friction out of the process and be there to help and not just to drive and to hold people to a deadline.

So experience and good culture.

Give me a little bit more about your background.

Let's kick things off there.

Originally, I'm from Berlin, Breckensee, deutsch, eich, breaker, gu. Yes. So I joined Anderson back in the early 90s. I did M and A there. I guess my bootcamp with M and a was with GE Capital. We acquired roughly 20 companies. It was absolute rollercoaster, fantastic program. And after that I was hooked on M and A. And I really like the velocity of these type of projects and I also enjoy that. Again, from a humanistic perspective, you are helping people go through a very rough patch in their career, quite often getting acquired. I also like that dimension.

That's a lot of good experience. I think a lot of this in house experience sounds like it lends to helping you develop that practice as well.

Yeah, that is true. Most of the people in my practice have an operational background. They have been through acquisitions themselves, either on the buyer or on the seller side. It certainly helps if you have that background and you understand what it looks like from the inside. And I guess that also leads to our clients enjoying working with us because we don't just arrive with a bunch of templates and methodologies, we arrive with real world experience.

How important is revenue synergies?

It's such an interesting question. Who are you asking that question, if I may answer my own question. If you're asking that question to corporate development, they would say, oh, the deal thesis, revenue synergy, that's the North Star. That's the most important thing. If I'm head of IT revenue synergies, that's interesting, but what do I care about? I care about data integration, system integration, I care about the IMO getting off my back to get back to business as usual. And that is one of the problems that I think we have to address in M and A. That there's a dichotomy between the goals that especially the integration will go about. So for corporate development it's all about synergies and deal thesis. But for the integration team leads, it's actually not. It's about returning to their normal day in their normal life where they're running their businesses and M and A is very disruptive for them.

That's a fair point. We have a lot of different Personas in M and A. They're all going to have different views on this. How about in the context of the overall deal thesis, how important is revenue synergy?

Well, that's why you're doing the deal in the first place, right? In most cases, that's why you're doing the deal in the first place. So I did a survey about four months ago and I was Asking my clients where they are in the realization of the deal thesis specifically around revenue synergies. And we had about 150ish companies responding, so we had a pretty good sample size. So we were asking, did you exceed your revenue synergies? Did you come in 80 to 100%, 60 to 80, yada yada yada. And then there was one category was we don't know. We don't know where we are on the revenue synergy side, 48% or 46% said we don't know. They completely lost track of the synergies.

Is it because they don't have a process in place to track it? Is that the main driver or is it one of those things that they just never really thought to?

I think there's a multitude of reasons. When I'm in an integration and we are like one or two months into post close integration and there are basically two dimensions that you're optimizing against. One is the operational dimension, where you're just making sure that the wheels are staying on so the vendors are getting paid, you can send your customers a consolidated invoice. It's not two different bills. The sales teams are working together. So a lot of operational stuff and a lot of that stuff you can take out of normal playbooks. And then on the other dimension you have the deal value realization. My argument is that in many cases for a lot of deals, you can actually accomplish operational stabilization and keeping the wheels on without even driving any of those revenue synergies or the better together deals or even cost synergies. So from an operational perspective, and I know that because I was leading it M&A for a very large tech company for a while. We acquired a company month, and when I met with my CIO on a weekly basis, her first question was how many systems did we end off life from acquired companies that week? I don't actually recall her ever asking about revenue synergies. Where are we on the revenue synergies? Her key objective was reduce operational complexity through the acquisitions. I think that's a valid goal. But at the same time, how do you keep the deal thesis at the center?

Are there certain strategies that you're executing against in terms of type of M and A, that this becomes more and more relevant. Because I can imagine if you're doing acqui hire who cares about revenue synergies. But is it, you know, is there sort of some view in terms of what drives a bigger emphasis on revenue synergies as opposed to IT integration?

You definitely need both. And you need an execution framework that allows for both to happen.

Is there a sense of prioritization of one over the other depending on the deal type?

Yes, there is. So in my mind there are three different type of deals. There are deals that are within your same business model and then these type of deals split into no customers, no revenue, small like an Acquihire Tech TAC. You're acquiring IP. When I was with Cisco for example, we acquired OpenDNS and OpenDNS was at the time the first true SaaS model. And Cisco wasn't in that framework yet. And we left them pretty much standalone, bundled them at the customer facing level into our products. But everything else was standalone because our Oracle system weren't even set up for that. I'm working with one client now. They are a classic SaaS model, annual subscription and they acquired a company. They are consumption based. So it's a completely different model. So we really have to think about how do we drive the revenue synergies while we can't jam them into their Oracle stack, ERP stack, even the configurator and the CRM stack is significantly different and it will take a year at least to get them into the same framework.

That's a big driver of complexity when it comes to capturing revenue synergies is if this target company is operating on a totally different business model and then you probably have the variables of is there overlapping customers or not, then their overall selling motion.

Yes, the operational complexity is a given in any company even without M and A. First and foremost, it's a mindset thing and you can do a lot of things without even integrating the system. So for example, the company that we are working with, it will take at least half a year until we have them in the same CRM system. Salesforce, however, we already enabled them to do joint account planning. So from an operational perspective we just said okay, what are the joint accounts? What are the key accounts that are driving revenues? Let's have the sales teams meet. And we established a framework of weekly meetings to drive that account planning. There were so many ideas that came out of that. That was the first thing that we did. The second thing that we did is we took an IPAAS solution integration platform as a service in order to enable the two CRM systems to start talking to each other, not being integrated, but to start talking to each other. So when one company got a lead or they create an opportunity for a client, it would send a signal to the other side. So the salespeople on the other side said oh, they just scheduled A meeting with my client. And so we basically enabled that collaboration and communication through tools. And there's a lot of things that you can do now in order to unlock, and we call it unlocking these revenue synergies. Because a lot of that is really collaboration, and a lot of that you can enable before you are in the same system. And being in the same system is just one aspect. Being in the same system also means that you're on the same process. So for sales, it means, probably means that they have a different selling process that's five steps or six steps. They have different ways that they account for a commission. They have different ways that they map their territories. The complexity is infinite, but you can bypass that complexity. And that is something. Again you ask, why am I in M and A? I'm in M and A because I'm an engineer and I'm a MacGyver. For those of you who don't know who MacGyver is, he was a TV character in the 80s.

Yeah. He come up with a gadget or some rigged solution.

Exactly. He's locked in a room, usually with another attractive person, and then he's got like, duct tape and he's got a chicken wire and like, perhaps one more thing. And then he has to figure out how to get out of that room. That to me, is M and A.

I never heard that analogy. I like it, though.

Our job in M and A is not to create a perfect solution and something that will run forever. Our job is to get to the synergies and to stay focused on the synergies. So our job is to drive that collaboration early and see how the market. And that's the other point, why I think you need velocity. You see how your customers are responding to that new offering that you're bringing to market, like two products bundled or a new pricing model, et cetera. And then you learn, and that way you create an agile framework of actually going through the integration rather than punting it out, having the teams completely separate and then driving this and waiting for perfect land to arrive until you are actually starting to see those revenue synergies starting to kick up.

All right, we got a good case on the value of revenue synergies and executing against it. Let's break this down for the layman Tech CEO here. All right, we're doing an acquisition, our flagship products deal room, lifecycle management for M and A that we sell to corporations. But we found a company that sells a deal platform very much focused in the government space. Their sales team selling on a completely different motion. Maybe we're seeing about a 15% overlap in our customer base. So they're about the same size as we are and maybe about 40% of our size.

So sounds like a real deal you have there.

No, this is a figure so makeup deal. Yeah. Say we're buying a company that's sizable. I want to understand the timeline from the very beginning of doing this deal and how I should think about revenue synergies from the very beginning. There's something here where it doesn't get thought up in the beginning is the big lesson learned from doing enough of these podcasts. I want to understand, like how do I start shaping that thinking from the beginning? And then let's just walk through the timeline of the deal to really understand how do you capture revenue synergies?

All right. We usually come in when the deal thesis has been developed and then LOI is established. So roughly, it sounds like that's where you are with your deal. Did they already sign the loi?

Just even from the thinking, I want to know the first moment I should start thinking about this, even pre diligence. Okay, let's look at even before the first conversation that, hey, I come across a company. I'm doing some initial review on it. This looks like it's in our criteria. We reach out to the company, we get a dialogue going and just getting to know each other. I want to get a sense of where do I start because at that point usually I get some ideas of why this is an interesting deal. This feels like a strong adjacency. This company would help us grow and I can see it not deviating too much. And it builds to. This is why we offer it. Hey, if you're a customer that our team encounters, which they already do about 15%, they can offer this upgraded enterprise offering at a much higher price point. That's why it's attractive deal and it help us increase our revenues 40% right off the bat. But I want to unlock this revenue synergy which you don't think about. You're just thinking a lot of times it's purely financial. Why this is going to make a financial sense to purchase this without throwing our balance sheet off too much. The revenue synergy part, like, where does that thinking get introduced?

El Thesis is something that should hook into your strategic growth path. So at some point you try to figure out how do I want to grow? Do I want to grow in my existing vertical, in my existing geographies, in my existing customer segments? Do I want to expand horizontally by adding more to My current stack, do I want to grow vertically and by integrating post and free value chains to my offering and services. That's where that thinking starts. And then you develop the deal thesis should hook into that. Somebody very intelligent once told me, you have to have a plan in one hand and the other hand open for opportunities. So if an opportunity comes along, and I'm not suggesting you should be an impulse buyer, but M and A is as much about timing and opportunity than it is about careful planning. And I see that all the time, where companies get acquired and you just scratch your head and like, why did they acquire them? They acquired them because otherwise their competitor would have acquired them. And that is that. And there was no. I asked my clients sometimes to show me your deal thesis. And then there's like a napkin, something like that.

Okay, so I got a frame that there is a strategy at play where we're looking at these, like, businesses to expand in new markets. And that's what we do because we're very much focused on this Fortune 1000 list. But we know there's a lot of the government entities that would be a nice market to get into. That's part of the plan. We found this company that services that government market. That's why we're pursuing that deal. And you start making some of these numbers up, we'll start building a model. And then there's a big variable in how we want to depict revenue synergies. And obviously there's other stakeholders that want to see a certain framing of a model to sign off and do the deal. And you tend to play with the model until those numbers match up and things like green, so you're comfortable presenting it to the board? And is there any thinking around that where it's like, hey, how do you start thinking about revenue synergies in a realistic way? Maybe. Where would you start?

So my thinking on that subject has evolved greatly over the past year. Prior to that, I was mostly working with corporate strategic buyers. And in the past year, over half of the deal that we have been supporting are in the PE world. PE does not lose track of their synergies and their deal thesis. And they put that at the center. And different PE firms have different ways that they create value and different type of companies that they buy. One PE firm that I was working with, they focus on owner, founder, exit. They look at companies that they're pretty much agnostic to what type of business they're in. They're looking at companies where there's a founder who is aging out the next generation doesn't want to take over the business, they want to cash out. And those are the type of businesses that they buy. It's very successful. They build a whole portfolio out of that, multibillion dollar portfolio out of just that. And then they go in. Most of these companies don't have foreign capital, so it's an old MBO play. But they bring in technology, they bring in modern management, and then they leverage that up and then they keep them five, six years and sell them again. That is one value creation model. And going into these type of deals, I had a playbook for every single time that I would go into that deal to figure out what are the things that we are going to do from a technology perspective, from a due diligence perspective. Having a very clear value case greatly helps anybody who is involved in the due diligence process because they know what to look for. It's not just the normal due diligence that you do. It's like here are all the things that in data room is filled to the gills with all kinds of data and nobody really knows what to look for. And it's like just trying to find the skeletons in the closet. But what are the things that you need to look at in order to understand what are the things that I need to do in order to accelerate the value case?

Is this what helps you ultimately better hypothesize your revenue synergies?

Yes, absolutely. And these hypotheses should be part of that.

So I want to make sure I nail these questions down because it sounds like this is the key, because I got to uncover this information, make sure I'm realistic about these revenue synergies. You mentioned selling together, like what's that going to look like?

Let's break that down a little bit.

Because I feel like all of a sudden I start thinking about each organization and they have their own respected ways of serving the customer, which essentially is its own customer journey. Now we're talking about selling together, which is essentially the combined customer journey. How do you think through that or ask the questions to understand all that?

If you can spend time with a customer, that's the best way. There may be a lot of antitrust issues associated with that.

Yeah, I guess. How far does that go? Is it kind of like doing a backdoor reference on someone before you hire them?

There are kind of regulatory things that may preclude you from going too deep onto a customer side as well as just in case the deal falls through.

But now there's these third party customer diligence firms.

Exactly. And we do this too. We call this clean team. So we bring a clean, clean team. We do the due diligence, we talk to the customers. We pretend to be a buyer of both services. We rate them. We look at the Internet, we look at social media. How is it being talked about? We look at G2 and sources like that for technology. So we do that as well. And you can see a lot of things that are. Where there are surprises that surprise both parties. And the way that there are differences in the way the service or products are even sold. If you compare the way that Slalom sells to other consulting firms, you will also see a lot of differences. The way that we sell and that other consulting. And I'm always joking when I talk to Troy Johnson, our chief strategy officer, I was like, if we would buy another consulting firm or a consulting firm would buy us, it would not be easy integration at all. We are so ingrained in our own ways of doing this, and it has been very successful. And I think at some point, you even get blind to the fact that you're doing it differently than a lot of other companies because you're just doing it the way that you're doing it, the way that you're cooking your meal, et cetera, at the restaurant. It's like there are different ways to make the same dish. And companies certainly do that. From a synergy perspective, figuring out where these synergies are and what the hypotheses are around them is critical. And something, if I may add onto that, it's three months after the deal is closed. Usually we do what is called a deal thesis refresh. So we go in, we bring corporate development into the conversation. The people that put the deal together, they may have already moved on and do other things. We bring those people in, we bring the people in the integration management office and the functional team leads. And then we go down and we revisit the original deal thesis, all the revenue and synergy models that were associated with that. And then we say, okay, where are we ahead and where are we behind? What have we learned and where do we find more value? And very often we find more value.

Chris, it sounds like you're coming in and fixing up situations more than getting ahead of it. In a lot of your cases, we do both.

The deer thesis refresh is something that everybody should do three months in.

It's fair enough too. That makes a lot of sense because.

At that point, the integration has found its stride. It's like the magic 100 days post close. I don't know who came up with that. That is a biological.1/4 and to see where are you at on this journey and not just completion of the integration because that is from an operational perspective is relevant. Because if I'm done with all my IT integration, I'm ahead of it. It's good because then I can focus on my other stuff again. But there may be still things outstanding. So this is really around the deal synergies and the deal thesis and focusing on that rather than how complete am I on my integration.

So let's go back pre loi we have some questions, key questions to ask. Getting a good understanding of the customer journey so you can shape what's that gonna look like combined and pre loi like what would be the other things you really wanna understand? You mentioned price points and clarity on why you're getting into this new market. Walk me through any other things that you wanna understand pre loi to help prepare to capture synergies.

When it comes to revenue synergies, let's focus on the customer. What we focus on is what are the moments? They're called so called moments of truth. It's a well established, I think that's like human design elements, customer success metrics. And what are the moments of truth? Where your customer decides to buy your services, your customer decides to renew your services. Where are those moments and how well is the organization positioned to deliver against that? So are those moments of truth really the key differentiating factors? So for example, for buying slalom services, what are the moments of truth for our clients? I bet I know that. So I know how to create these moments and make them stronger first. The second one is how do we measure those? What are the metrics that tell me how I'm doing with my customers? We're going deep into customer success now, but it really matters for M and A because you need very short feedback loops. And if you are issuing a customer a net promoter score survey once a year or even every quarter, that's insufficient for MA because you're moving too fast. So you have to figure out what are the we call them listening posts that you can establish in order to understand whether the value proposition and the hypothesis you have in your deal thesis are actually real or there are areas of more value or other areas where it actually doesn't materialize.

Anything else we need to keep in mind for pre loi it sounds like we're clicking at a lot of things and I don't think a lot of people do this. Chris, Last deal I looked at, I Never got to this level of detail.

A lot of companies, they look at net promoter scores and they also look at the employee satisfaction. What is their turnover? That's an indicator for the company climate. Is it better or worse than industry standard? What do people write on things like Glassdoor about the organization, about their leaders? That's an indicator on how they're serving their customers. Because there have been endless studies around. A poor corporate climate creates poor customer experiences. You don't have to be in a service industry in order to arrive at that conclusion. That is something that we do all the time. We look at employee feedback and we look at how those two things, the employee side and the customer side and the partner side, not to forget the partner side, how they come together. Because a lot of companies that we work with, they sell through a partner channel. And activating the partner channel with acquired company products is in some cases even more complex than it is with your internal sales organization.

Okay, Loi gets signed. Game time. I'm pulling everybody in now. It's we got a deal we're going to do. We got to get figure this out. We got to make sure we go through, do thorough diligence. We got to figure out how we're going to integrate this thing. And we know from the last deal that the integration didn't go too good. So let's talk to Chris and see what advice he's got for us so he can guide us and make sure we don't screw it up this time. Hey, I got you in early enough. I didn't close the deal. And then bringing you in, Chris, I got Loi just signed. Guide us through so we can maximize revenue synergies best we can on this deal.

So the first thing that we usually do is we ask you for your deal thesis that you got somewhere early on. We talked about that.

Yeah, we talked a little bit. That. Yep.

And then we have a generic synergy model that I wrote a blog post about having done so many deals. Now, for us, we developed a framework that helps us think through the value drivers for the deal. And we basically break it out into five buckets. So the first bucket is just, is there a spinoff that you want to do out of the deal? The second bucket is standalone business growth. What can we do in order to accelerate the revenue velocity of the acquired entity? Another bucket is cost synergies. Everything that can be done to do cost synergies, consolidation of functions or vendors or supply chain optimization, etc. And then revenue synergies and revenue synergies Basically break down into what you sell, how you sell it and who you sell it to. Again, it's a simplification. But the purpose of this model, and that's something that we basically develop for every single deal, is to show this to everybody involved and say, okay, for this deal, where are the synergies? What are the key drivers for the synergies? So we basically translate the deal thesis into a synergy model that we then use in order to further drive it down into what are the activities and the milestones that we have to hit in order to unlock those synergies. So, for example, we have to create an integrated roadmap and replatforming that tool, what are the key things we have to do? We have to hire 16 engineers in order to take them from Python to C. Okay, and then once I'm simplifying things here, but once we have established this causality, we can associate the integration activities and the milestones with these drivers. All of a sudden the path to synergies becomes very clear. It's not like you have a list of 800 integration activities and then let's say you have a thousand for math purpose and then 800 are done and you're 80% done with the integration. But what does that get you? And I see a lot of my clients, they don't establish that causality, that they don't know which integration activities actually drive the value. The approach that we do really associates the causality between integration activity and the synergy driver associated with the model that links back into the deal thesis.

That's a lot of planning that you're front loading. No, typical. I feel like a lot of companies, trust me, Chris, I do a lot of these interviews, don't do it this way. A lot of this stuff, they almost have no go to market plan till after close and they're trying to scramble and figure that out. What you described is quite a bit, and I want to take some of those areas from the standalone business growth, the cost synergies and the revenue synergies and break that down. I want to get a good sense of how you execute on this planning. Because I got my department leads I got to bring in because they got to get in. And I just want to get a sense because it. You had a good point of we're not trying to create this extremely cumbersome comprehensive plan and get completely distracted on that. I think there's enough of the thinking and questions to ask that sounds like it guides the leaders to be able to go out and Execute and if you got good leaders, it's what they're going to do versus you're strong arming, trying to tactically execute this plan that you're developing in. Am I right?

Or I would argue it's actually simplification because we are focused. Again, the job of the IMO is not functional silo optimization. My job as running an IMO is not to optimize the IT stack and system architecture. That is something that IT can figure out. And they can do it associated with a deal. They can do it in three years. I don't care. My job is to get the deal thesis and get the synergies outlined in the deal thesis. So in that matter, if I set up the integration focused on the drivers of the deal, that's more or less the only thing that I status against and that I'm driving.

Walk me through how you execute on it.

Okay.

We have a deal where we are acquiring another company that comes with a product that we want to bundle and sell it to our existing customers. We want to sell it to their customer and also we want to enter a new market. And let's say that there are some cost synergies by facility consolidation. They have a building, we have a building, they fit into our building. We have to get out of their contract or sell their building or whatever. So if we are looking at the synergy model that we have, it lights up those few boxes in that model. So now the model starting out has some 50 boxes. So we just scale that down. We reduce the complexity after that once we understand where the key elements are. So for example, for the cross play, we drill into that and say, okay, what has to happen? What can we do day one? What are the things that we have to do in the due diligence in order to really understand the cross selling? How do we do the cross selling? What's the price sensitivity of these customers, where are they on their renewal cycle, et cetera, et cetera. So we build a whole plan around that and we associate the milestones for day one exactly to that plan. And then we know what is our. And everybody says day one readiness. That was like a big thing that, that people want to know. Day one readiness. For me, it's more like synergy readiness. How ready are we to execute on the revenue synergies of the deal that is coming in? Is the sales team trained? Do they have the enablement material? Do we have the territory mapping figured out that we don't have two in a box, et cetera, et cetera. And all the solutioning focuses on that. And then what we do very often is once we have that established, we figure out how does this target operating model evolve from day one? What are the things that we have to do from a day one? What are the things that we do from an interim state and then end state? I know that you're also of the opinion that M and A is agile so you can't just day one everything is integrated. So you have to figure out what are your iterations. And once you understand what the iterations are, you have a very clear narrative that you can communicate to your customers, for example, and say, you know, at the beginning you're going to have two salespeople, you have Frank and Joe that are going to look after you and they're going to work together. Ultimately we're going to pare this down to one. We're going to bring you into the same, for example MSA or term sheet or whatever. So you are at the same legal platform. Or we still have two entities. But the narrative becomes very clear on what's the experience that you want to drive for your customers as well as for your internal employees.

Clicking into executing on this and the idea of cross functional work streams teach that to me. I don't quite get it. What's the big value of that? And just trying to get a sense of how are you orienting people to execute on this plan as it's shaping.

So pretty much everything that we do in that planning cycle is cross functional. So there are also functional work streams and companies that are accustomed to do M and A. We don't even deal with the functional work streams so they can take care of that. They know what they have to do. The synergy realization. There are very few things in there that are not cross functional in nature. Even, for example, facility consolidation, you need facility, you need finance, you need hr, you need it. Of course, all the telephony and systems and everything extremely cross functional.

How do you create these teams and how do you give them ability to govern themselves?

The first thing that I usually talk to companies is how do you bring a new product to market? Walk me through that. Your NPI process, new product introduction. Because it's always cross functional. So it goes from marketing everybody.

Yeah, you have it. So it's a pretty big checklist that ties together the different departments.

Some companies, they have checklists, they have like org charts around that, who's doing what and they have a very organized way that they go about this. And other companies especially, it's like all over the map. But that will teach me as I'm a consultant, I don't have a cookie cutter that I can just press into every single company. Then I have a better understanding of how they go about things and how do they collaborate? Are they collaborating like what's called swarming the problem. So just throwing people at it. And I worked a lot in tech and there's a lot of these companies were hugely overstaffed for a long period of time. I think that has fixed itself lately. But you get, you walk into a meeting that I believe could be easily done with eight people and you find like 40. At that point you have to figure out how the cake is baked in that organization.

Yeah, I like this. With this MPI model, having that understanding does that I'm trying to get a sense of here's how we introduce a new product versus we've acquired this product and now we want to introduce in our ecosystem. How much of a difference plan model is that to what's existing? Are you essentially modifying an MBI plan or is it enough to due diligence? And then you're creating something completely different.

So the NPI process teaches me two important things. One is how do they collaborate across functions? So what is the level of structure that they put in order to bring a new product to market? And then there may also be a lot of elements of that NPI process that I can leverage in order to bring the acquired company product to market. So for example, I may learn looking at the NBI process that they give their partners resellers a 30 day notice, right? So 30 day enablement period where they provide the enablement material and then the partner has 30 days in order to absorb it, to reorganize internally, to sell the new product or whatnot, until they will start selling it, for example. And then we have to figure out, okay, for the acquired company product, how would that translate for example, or for sales, you know, how do you enable sales for with a new product? What is your structure to get them out of the field and to learn something new? Or do you just throw it at them and there's like an email and here, click here. There's the description of the product and here's the pricing and then good luck. So different companies go about this very different ways.

Then ultimately in terms of assigning the accountability to the bodies is it, here's what that flow looks like. We need to build a team with these key folks and then this is what you guys got to do. Good luck.

How does that play out Putting these cross functional teams together. Companies are actually getting better at this. In my mind the most important thing is you have to have clear goals of what you're trying to accomplish. The milestone plan that we create out of the synergy model provides these clear goals. What are we trying to do here? And it is not descriptive because it describes what we're trying to accomplish, not how. For example, cross selling motions day one, there are 10 customers that we want to start activate. You figure out which 10, you figure out which sales teams you figure out how do you collaborate with these sales. Let's get it in here and figure out what type of IPASS solutions integration platform as a service do you have, can we do like opportunity mirroring or do we have to have somebody in sales enablement that has a swivel chair with both systems that that directs traffic, the MacGyver you call MacGyver. And people love that. They love that type of problem solving. What they don't like is when I load them up with here's your playbook for sales integration. 300 line items.

That's not the way you do it.

This is most companies, I agree, I.

Agree, I've learned that and I understand where they want to scale and they want to make everything a process. But this is like the real leadership to here's a goal we got to go after and enable people to do.

That and people know what to do. Of course we go in there and we say okay, here are the areas that you should look into and we look through due diligence reports to understand where the operational risks that we have to address, compliance or whatnot. But it really comes down to keeping that North Star let's talk about Agile.

M and A because I think this is one of the big things that we have in common. I've done a lot of research doing the case studies with Google and Atlassian and published a book in 2020 called Agile M. A book, very basic framework trying to lay in it down as much as possible for anybody in finance to understand Agile and how it fits into doing M and A deals. And I wanted to get your thinking around this because we've talked about this in the past. I think this is where we just discussed a lot of this is enabled through a real agile approach where you're creating transparency, you're empowering people to work more autonomously and get things done in these iteration cycles and respond to the changes as they're happening as opposed to keeping your head down to execute a plan and put your head up and realize Things are really going awry. Walk me through your thinking and how you actually put that in play.

So let me give you an example how it looks like when it's done wrong. We are brought in roughly three months post close, very large acquisition and they were already doing the requirements gathering for the consolidation of the CRM systems. So I just put myself into one of those requirements gathering sessions to just listen. How did that go? And they had the sales enablement or salespeople from the acquired company in that meeting. It was in that meeting and somebody from the sales enablement team of the acquiring company and they walked through the CPQ configured price quote piece of the configuration and they explained to them how a product that the acquiring company was selling drove complexity in the CPQ process. And it just, it didn't fit in there. They had to make a lot of changes with a very expensive, probably multimillion dollar changes to their CPQ system. Really push out the cross sell motion and combining the sales integration. The interesting thing was that the product that they were talking about was deleted from the roadmap. They wanted to end off life that. But they were just following their process. Yeah, they were just getting people in the room. It's like how do we recreate what you currently have in our systems now so you can run your business? We don't want any business disruption. And they had some 80, 90 requirements that came out of that meeting alone. And at the end of the meeting I just talked to the IT guy and I said, you know the product that you are trying to configure here. And I was in the back texting to the IMO guy confirming that product. Yeah, we're going to end of life that in a quarter or two.

It's expensive and a waste of time. This is the old school waterfall approach.

That is the old school waterfall approach. But that is what happens when you have disconnected teams that just run in their functional silos and they're trying to recreate what they had before without having clear objectives. Imagine that would have been the other way. The meeting would have not been how do I recreate whatever I had in the acquired company sales organization. The meeting would have been how do we bundle this set of products and how do we drive this through the current system configuration? That is the going in assumption. It would have been a different meeting, would have been less people. It was also a very large meeting. Coming back to Agile, how does Agile look like? Agile incrementalizes the change and that is something that you need to do because there are so Many things that you learn during the process while you're starting to work together with them as well as your environments will change. Your competition is going to react to what you have been doing. Your customers have different opinions on what they need tomorrow than what they need today. So to go through this process in a waterfall way is just, is really a setup for failure in many ways. And I've seen it fail in many ways. And a lot of these old school playbooks, they give you an illusion of safety because they just have these long lists of activities that you status against. And once these activities are done, you're done. That is just a false security that you have. And you should really keep the acquisition focused on the D thesis and the synergy model.

Keep iterating as you go and you.

Keep iterating as you go. Day one when does it end?

When do you sort of say, hey guys, trying to disband this team and work streams that we created move on?

That's a question I get all the time from my clients. Here's my answer to that. The first answer is when you no longer fund integration activities through the deal, but it gets into the normal functional budgets. That's the first one.

Is there a protocol to hand that back off to the business and say peace out, good luck.

Usually the IMO disbands that governance forum disbands after a period of time. They are the steward of the investment. So the functional integration team needs like it. They go to the IMO and say, hey, we didn't plan for this acquisition. We didn't know that it happened when we put our IT budget together and when we put our IT portfolio of projects together. Now I need money from you in order to drive the integration. You know, it's like Salesforce integration, for example. That is one element. It's like, okay, then the integration management governance process goes away. Doesn't mean the integration is done. There are still long tails. And sometimes the IT organization may decide we are not going to integrate them like we did at Cisco with OpenDNS. We're not going to integrate them at all until we go to the next iteration of Oracle because it has the functionality already built in that we would need in order to process the SaaS model, business model. So in that sense, you may decide to keep the facility open for three years until you consolidate it so you're not fully integrated. It doesn't matter. It really doesn't matter. What matters is how much are you actually paying out of the integration budget. That's number one. Number two is what is the capacity for the IMO to actually execute? Because you may actually have multiple deals. When I worked at Symantec, we had three or four deals that we would work on at any given time. We couldn't stay with these deals for extended period of time. And then the third one is the synergy realization. So I have worked with some organizations that want the IMO to focus on cost synergy realization and the rest is then dealt with with the business. And lastly, one more way to structure this is driving the integration in chapters. The first chapter is the operational stabilization, making sure the lights stay on, onboarding of employees, getting all the customers on the same legal paper, et cetera. The second phase is cost synergies. So where you're consolidating your GNA functions, for example. And the third, third one is revenue synergies and product integration. You have like four chapters. So you can figure out what are the chapters. And then you say, okay, chapter one up to go to market integration. That is something that the IMO leads and very often that is also associated with the integration of the lead to cash process. So once lead to cash is integrated, the go to market functions are integrated, the IMO goes away and the product integration comes later because maybe replatforming of the product rewriting code, et cetera. So that can be something that comes at a later point, but that is another way that you can define your endpoint. And when the IMO talks to the business and says, okay, at that point, I'm going to hand that over, but there's still things left to do.

A lot of moving parts before you can declare it's time to peace out.

And a lot of companies, they report on the synergies of a deal two, three years post close.

Quite normal since we're on the road and I got my guest co host, Shaila Patel with me, I'm going to have her help wrap up this interview.

Hi, it's me, Shaila. I'm interviewing Chris. So the first question is, what are your top three principles to success?

One is simplification, trying to simplify rather than create more complexity. The second one is focus, focusing on dear value and your value realization. And the third one is make it fun. Try to make it fun. M and A is a hard time for a lot of people. And try to figure out how to make this a good experience for anybody involved.

How do you make it a good experience?

Small stuff and big stuff. Sometimes we start meetings with music, something small. Sometimes we do a little raffle where like a scavenger hunt where one company finds out things about the other companies. And is this true? Is that true? We encourage people to do personal integrations. We also encourage people from the acquiring company really sympathize with the stress that the acquired company is going through.

Can you also explain more about focusing?

Focusing in MA is very hard because you have basically a project that engulfs every single function in the organization. It's the most complex things that you can do. The problem is that very often you get a lot of noise in the system. People complaining, I've got too much to do. Customers complaining, partners complaining, employees complaining, everybody complaining. There's a lot of noise in the system. You have to figure out what is important, what you have to listen to and do something about it and what's the stuff that you can deal with later or just ignore. So there's a lot of experience that kind of teaches you to differentiates noise from signal and the things that you really need to focus on and really need to action at the end of the day. If you understand the experience that you want to create and you understand how to measure the experience and how you're doing against that will be your guide.

What advice would you give to the next generation of young leaders in M and A?

Get acquired. Go through the process yourself. Until I got acquired, I really didn't know what I was talking about in M and A. It's the first thing that I ask in an interview. It's like whether somebody's gotten acquired in their past. So from a people perspective, it's very difficult. If you are choosing the consulting route, which a lot of people do, it is very difficult to really understand what M and A is if you haven't gone through it yourself.

I'll pass it back to my amazing father.

Okay, I like that story. Hey, thanks for sharing, Chris. This has been a good conversation. We had so much. We were off script nearly the whole entire time.

It was great talking to you. It's something that we are very passionate about. Always great to be on your program and hopefully somebody can learn something out of this and have some takeaways.

If anybody's got follow up questions about revenue synergies, don't email me. I'm not the expert. Send that stuff over to Chris directly. Go harass him on LinkedIn. He's easy to find. If you end up engaging with slalom, let him know there's a 10% coupon for M and A Science. Just mention M and A Science. Thank you so much Chris. For again for this time. I really appreciate it. Every conversation helps me become a better M and A scientist.

Thank you Kisan.

Those of you still tuned in, thank you for getting this far. Till next time, here's to the deal.

Thank you for taking the time to explore the world of M and A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help, send us 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 by 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.