Setting M&A Governance Up for Efficiency

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I'm Kisan Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals. Welcome to M and A Science where we curate knowledge from the best in M and A to continuously improve. If you're interested in keeping up with the latest from M and A Science, subscribe to our free newsletter@mascience.com Every week we share highlights from interviews, invitations to events, M and A role openings and other resources as we build the greatest community of forward thinking M and A practitioners. Again, that's mascience.com I'm your host, Kisan Patel, CEO and founder of M&A Science. Joining me today is Guy Fisher, Head of Corporate Development at Suncorp Group. Suncorp is one of Australia and New Zealand's largest financial services groups offering personal and commercial insurance, banking and life insurance traded on ASX under sun. Today we're going to talk about setting up M and A governance for efficiency. Guy, how are you doing today?

Very good, Kison. Thank you for having me. It's a pleasure to be here.

Hey, thank you for taking the time. Early morning in your time, not too early 7am yeah. From Sydney. So what is the reference? Did we ever figure that out? It's not across the pond.

Down Under.

All right, Guy Fisher from Down under, can we kick things off with a little bit about your background?

I out of university, went straight into investment banking as an analyst in Sydney, Australia, spent nearly 10 years in investment banking and then moved up to Brisbane, Australia to raise our kids here. And at that point I got a role in Suncorp Group in the M and A team. Been there for nearly 10 years and now I head up the function. So I've been hitting up the function for about four years.

What was the path like? What were the roles you had to get up into? The lead corporate development role.

Yeah, it was really Straight up the middle. Came on as a manager, then executive manager and then head off. So really just stayed in the team and really enjoyed the culture of the place, really enjoyed the people. The work was dynamic. Being in house, really enjoyed being in the in house. Corporate development slash M and A function. A lot of interesting work. It goes from typical M and A to maybe strategic investments, joint ventures and other corporate finance valuation reporting to the board on the valuation of our shares every year. So it's really enjoyed the function, really enjoy the team.

How much activity have you had? Has it been pretty active in the past four years in corporate development?

This will color and give context to the conversation we're about to have around setting yourself up for success internally and that can gain wins and provide a competitive advantage externally. I believe we've been on a path of the past four years of simplifying the organization. We've announced seven divestments in that time of just over $6 billion of assets we've divested. While the sequencing wasn't deliberate because there's an element of timing, the simplification strategy was very deliberate. For those who know the Australian market, a lot of financial institutions are simplifying their activities. Back in say 20 years ago, a lot of the big banks acquired wealth businesses, superannuation businesses, life insurance businesses. And then over the past decade we've had a lot of regulatory change and so everyone's divesting and really focusing on the core. So simplification is a key thematic in financial institutions here in Australia. And we're the same. We've been shedding those businesses where we don't have the capacity to invest. They're not core and we don't feel we can grow those businesses and be competitive in terms of investment, retaining talent and the like.

And so you did a lot of simplification, divested seven business lines for 6 billion. Do you buy anything that's good?

I get that all the time. My CFO says to me, you're a one trick pony. No, look, we've fit a craft and we're always looking. When you're in M and A, all the M and A teams will have files on those targets. They'll be well followed. Understood. We've been opportunistic but we've been unlucky today.

Okay, what are the biggest inefficiencies in corporate development?

Inefficiency in corp dev and this is based on my experience, diversity in assets. You can see the behavior of bidders. You can really doing a number of them. You can see how A lot of bidders interact. How a lot of bidders organize themselves. You won't see directly behind the curtain, but you can get a feel for how they're organized. I've got a number of items here. The key to really lack of preparation. If you're entering in a process, you've really got to stand back and be well prepared across a number of work streams and other facets. One of those is governance. It's really under debate in terms of making sure the key decision makers, the key committees. There may be a number of subsidiary boards that you need to deal with. So making sure you've really thought through all the key stakeholders. So you're very deliberate around engaging with committees, giving them what they want, you know, the decision makers. Some executives might not want to be on the journey. Some may want to. Want to check in once every week or once every two weeks. Others may want to. They might want a phone call when there's a key issue that you're working through. Some executives don't want to be on the roller coaster and nor should they. Some executives do want to be in loop and understand the key dynamics that you're wrestling with. So there's a fine line. As an owner of the process, which I would be. I am. There's a fine line between bringing that executive on the roller coaster and giving them what they need. Governance as well as due diligence or vendor due diligence, set yourself up for success. The other one is M and A teams, and this is how we operate at Suncorp. I've seen a lot of M and A teams who obviously are running the deal. When I say run the deal, they may not really fully have the organization running at the speed that they are. That's important for decision making, especially when you're in negotiation. You need to make sure that your organization is the board, senior executives, business sponsors, all running at your pace, being organized for a negotiation and having buy in from key stakeholders. The other one is aligned to that is making sure senior decision makers are aligned in terms of objectives, what you're trying to do, what you're trying to achieve out of a transaction, whether it's a divestment or an acquisition, making sure you've got buy in, the support. It sounds obvious, but you'd be surprised at how many times you'll see it run into a process where either if you're selling a business and there's a bidder on the other end and they will take a while to come back.

On certain elements, would you consider that Part of governance.

Yeah. So when I say governance, I mean the management of the project from what the typical governance, which is the oversight function and the approval, decision making, assessing risk, to actually the nuts and bolts of the machine that you're driving that get the outcome.

So would that leadership alignment be part of it?

Correct, Correct.

So I have preparation or sort of the inefficiencies or lack of preparation. The way your governance is set up, which would include all the key stakeholders, the leadership that's going to be driving the actual deal, and then the other you mentioned is around the speed that you do want all this stuff in sync so you can be able to act fast.

Keystone. That's a really good point. And at the heart of it, that is really what this is all centered around. And that's the thematic. The old saying, time kills deal. That is certainly true. It can be a competitive advantage. In an acquisition, you may have a bidder who wants certainty, they want execution certainty. And if they can see that you are moving quickly, you're diligent in how you operate, obviously professional, but you can move at pace and swiftly, then that could give you a competitive advantage. If it's a shootout on price and it's marginal, then that could be the swing factor when you're selling a business being one step ahead or as many steps as you can in front of bidders. In terms of turning around the Q and A and the due diligence process, making sure that you can deal with issues that pop up quickly, making sure you can facilitate a swift, efficient due diligence process is absolutely paramount.

How do you set up efficient governance?

What I would say before we get into the how do you set yourself up? It's. There's always constraints to how you build the process. From an internal perspective, we're insurance in a bank, so we're a highly regulated entity here in Australia where you've got licenses to both carry out insurance activities and banking activities. Our regulators give us the license to operate, give us the license to be in the market and so very key stakeholders. And we're very sensitive to our regulatory obligations and our stakeholders, people who are not in the financial services industry listening to this, may think that I'm over governing and the way that I think about is heavy. But the context from my perspective is there's certain aspects I need to be. We need to make sure decision making is clearly articulated, clearly documented. The subsidiary trustee boards, we need to deal with them in a particular manner because they may have a very different regulatory requirement. Their duty may not be to shareholders, they could be to members in a superannuation fund, for example. Confidentiality, we all deal with that. We need to retain confidentiality that is internally and externally. So we need to make sure that we've got the tight protocols internally. So we can't. That's a constraint and then minimize business disruption sometimes in the divestment. We obviously want the business to continue to grow and create value. We don't want the business to stop through this process that would be disruptive to the people, our people, but also to value. So you've got to think through who you bring in and how you bring these people in. So they're the kind of key constraints at a headline level. Couple of thematics to set up. Preparation is key. You can't under prepare for M and A and with experience you forward look and you can see the potholes. Then you steer the ship around them or you lay something over the top of them. So preparation is key and spending the time to sit back and reflect and build this before you jump in is paramount. Set EM and a function on for success. So for example, I have the right capability in your team. I've got an individual, he's non M and A so he comes out of a non M and A world, comes out of change, project delivery world. I'm lucky because he's one of these individuals that enjoys the intensity, the ups and downs, the fast paced nature of M and A, some don't. What he brings is really disciplined project management skills. So for me when you've got a thousand things to think about, he will lay out the key stakeholders, the consultation process, who do we need engage with, how are we going to do that? Milestones, timing, puts a really military esque framework around how we execute and it will change. But as long as you've got that pathway and you know who your key stakeholders are, how you're going to consult, engage. So I think set your M and A function up for success and they might not be the typical capability which you think that could round valuation contracts. It's a large project that you will be running. You need the right project management around it, have the right advisors for the situation. So you know you've got legal transaction advisory which would be transaction services, finance, accounting, maybe actuarial. Make sure you've got the right individuals for the situation and then obviously your investment banking M and A advisor make sure that's the skill set that advisor brings to the table is going to be incremental to whatever situation. If it's a bilateral if it's an auction process, there's number of so really think through that quick, timely decision making. I've been around in my organization long enough to really understand the delegated authority limits, really get across those but understand who at the end will need to make certain decisions and plan backwards from that. So it happens all the time. When you will need approval, you need to put something in the data room or you need a certain sign off on an agreement and then you're throwing that on someone the night before, the day before, an extreme. Make sure that you're free, thought those and think back so that you can facilitate quick and timely decision making. Consult with those key stakeholders. So make sure this can be resource intensive but it's worth the investment. Make sure you talk personally to those key stakeholders and understand how they're thinking about the process. Are you aligned on objectives, are they fully briefed? And then at the end of that process that set up everyone should be well informed, well aligned. Make sure some key executives who haven't been in M and A may struggle with the pace, may struggle with the fact that things change quite quickly matters, issues will spark up and you'll need something to a decision or input quickly. So make sure they're aware that that's part of the process as well. Don't assume that's a given. So set up your M and A function for success Quick and timely decision making. Make sure when you're it may be a large team in terms of due diligence, so you may have a number of work stream leaders across all the disciplines. They'll be running teams. Whether you're due diligence in a business or feeding into a vendor due diligence exercise. Make sure what I call the threads and streams are part of the whole. And what I mean by that is to the extent you can make sure people understand what's required of them. So there's. I was talking about managing upwards now want of a better term, think about managing downwards. These are the key work stream leaders, the people inputting into your process. Make sure they get it. Make sure they understand what you're trying to achieve, what their role in the big machine is, what you're going to be asking of them. And what we do is we template as much as we can. I know a lot of this won't be new to practitioners who are listening to this, but DD reports, for example, we have a template which provides materiality thresholds so when they're conducting their DD procedures and activities they know what to focus on, what not to focus on down to the detail around meetings. Make sure there's clear purpose to meetings agendas, people understand what they're doing and just being respectful of other people's time. Pre briefs for any bidder interaction. Make sure people when they're in front of bidders from a divestment perspective, they know the do's and don'ts. They're well briefed around what they should be delivering, what the information that they're handing on and from an acquisition. When you're part of advisor meetings and management meetings, make sure you understand what it is you want to get out of that session. What are the key thematics that questions that you don't know, areas that are unclear. So it's people really know line of questioning and you kind of don't get stuck in the weeds and focus on what the material items. And then I think lastly and I've had some, we've all had bad experiences but I've got the wounds licked, my wounds and I always look back at processes, always spend the time to understand what went well, what didn't go well. So PIRs, post implementation reviews, really important look back at your own performance, talk to your key stakeholders and that always look to continually improve your function and your delivery.

Could you maybe click down into some steps on how to do this from scratch? I guess like what order would you do that? Maybe even who do you get involved at what time as well, when you're.

Not in an active process, I. E. You've got board approval to, to push forward and prepare a business for sale, get a process set up or if you're looking at an asset, you're. You're about to step into a process. At that point the clock's already started to tick. So you've got a mandate, you've got instructions and at that point it's hard to really get deep into thought around process development and get the stuff really well considered. So ideally, if you've got the time, if you're in a lull if you like, or you think something's coming up and you want to prepare for it, I would first and foremost look back, I'll talk through this case and then we can go into if you've got instructions and you're moving, what should you do? But if you've got time, I'll look back at past processes that you've run. I'd run a pir. It doesn't have to be a formal process implementation review. Think through what were the. Be honest with yourself, what were the areas of agitation, friction. Put your ego to one side and really listen to your stakeholders, I. E. Did you give them enough clarity on what they needed to do? Did you give key stakeholders enough time to review information and absorb and consider, to make decisions quickly in a considered manner? So I'd look back what's gone wrong. I would then start looking forward and go, okay, what would the ideal process look like for me? And really map out committees, stakeholders, look at your own. So there's sort of the governance. Look at your own team. Have I got the right capabilities to deliver an efficient process? Really consider the project management aspect. Typically that's a side thought. You'll have an analyst or something running a Gantt chart or a key actions list or a work stream by work stream. Key actions list and that's in my experience is not good enough. It has to be really well thought through. How are you going to conduct vendor due diligence? What does that process take? Give enough time to be able to do that properly. What are the key issues in the business? Understand the business that you're obviously the commercial value drivers, some of the key risk elements and set your team up around that. If you've got time, really start to develop templates so you can move quickly. Due diligence reports, templates for key work stream leaders, steering committee update, risk status Update report, obviously NDAs, which everyone's got a whole bunch of artifacts that you use regularly. Make sure that's off the shelf and fit for purpose and aligns with how your organization thinks about a transaction. How do you report risks? Make sure that aligns with your sort of risk function and the like. So that's if you've got time and that's a big chunk, there are services out there that will independently run pirs for you and what is best in class. Have a think about. There's a lot of people that say they can do that. But think about an organization that's really got a good sense of what best practice looks like. That's kind of if you've got the time, if you've got instructions, the clock's ticking and you're running hard. I would focus on really on two things. I'd focus on your M and a team. Have you got the capability? I'd focus on your internal team and how you're going to execute and your panel of advisors. And then I'd spend time thinking about what we spoke about previously, which was the approval processes, the key stakeholders and making sure you've got the governance set out. One thing, because you can work all night on an issue. If you find an issue in the business or a due diligence issue, your team can do what they need to do to get across that issue. But what you can't control is a stakeholder who may be on annual leave, a key stakeholder who may be uncontactable, or a senior executive who just doesn't like to move quickly, likes to be considered and will say something like, kiss on. Oh, you've just put this on my plate. This is six o' clock in the evening. You're asking me to turn around this overnight. And that will create agitation and friction. Try and avoid that type of situation. So understand who the key stakeholders are. It's kind of managing downwards, so making sure your team's in place, you got the right capability and you've thought through milestones and then your stakeholders are well managed, if you like.

Can you walk me through the different governing bodies that exist and throughout all this?

And this is suncorp. This is how we execute due diligence. So at the top end, you've obviously got the board, you've got the main board, your group board, or a subcommittee of that board.

Wait, that's like three different boards right there.

Yeah, yeah. So in our world, our board, the group board, for transactions over a certain value, the board has will need to approve. For transactions under a certain value, our CEO has a delegated authority to approve. Most of the time it's above the line, the CEOs delegation. And we also like to bring our board along the journey. At times it doesn't matter around the actual size or materiality of the deal. It can still have significant risk attached to that. So we always like to keep the board informed if you like, even when it's out of there, when the CEO's the delegation. So our group board and they can convene a board subcommittee that will have the weekly, the regular frequent oversight and then they'll make a recommendation to the group board. So that's the key. In our world, we have a, what we call a Mergers and Acquisition Steering committee, which is our CEO, cfo, CRO and General counsel. Everything needs to go through that committee. So before I can allocate a budget, before I can allocate resources, that committee needs to approve the activity, if you like. They are my key stakeholders. That's my committee that I manage. It's under my responsibility. They are the key stakeholders directly for me out of the executive leadership team. Now, the way that we also do it is I need to have one business sponsor for every transaction from our senior leadership team, we have this concept of a business sponsor. The M and A team can't champion a deal. It needs to be sponsored from a senior leadership team member, which I think is really important. It goes back to. Sometimes M and A teams can operate in a silo. They can run five steps ahead of the organization. And the way that we try and control for that is to have a business sponsor who will be presenting at times the material at the headline. They'll be responsible and accountable. Then under that, you'll have your working group and that will be all the classic disciplines. Finance, accounting, tax risk, legal, commercial, it could be pricing, could be from a general insurance perspective, claims, whatever it is, you'll have a working group that will have the leaders, the key subject matter experts, and that's the group that will be meeting frequently, dealing with issues and you'll be guiding along the journey.

It's a lot of layers. The board, the group board, the M and A steering committee, business sponsor working groups.

And again, what I said at the beginning is some of your listeners might think that is heavy and it is. However, that really is in place to manage the risk around M and A, to make sure the key people are well informed, the organisation's well informed, the board's well informed, the appropriate oversight governance is in place. We can meet our regulatory obligations as a licensed, insurance, licensed bank. Clear decision making is documented and process is documented.

How do you do deal deals without all this slowing things down? I know you referenced decision making earlier, but how do you build that into a framework that you can actually execute it on deals promptly, that's it.

And you need to be able to get this group, and it could be a large group of stakeholders to move quickly. That's how M and A works. It's either you do or you don't. And processes can fall over just because it's this whole process mismanaged, you know, back to somatics before being well prepared, Understanding the layers, understanding when you need to go to the layers, when you need to go to the governance committees and what you're asking and mapping all that out in advance and spending the time to forward look so you're not running and muddling your way through, you're actually really forward looking. What are the potholes, what are the milestones, what are the approval points? Mapping out those key milestones, approval points. And then who do I need to be there at that time? But as we know, M and A is not rigid. It's not a Gantt chart on An Excel or a PowerPoint, it's dynamic, it moves. So making sure those key stakeholders are aware that this is how you're going to engage with them and keeping them along the journey. Small things like understanding, annual leave for the key stakeholders, understanding are they going to be on road shows, are they going to be offshore, where will they be? That detail, as I said, you can't be underprepared.

I still can't wrap my head around how do you keep things moving around quickly. I like the part about mapping the process out and really understanding where those key events happen. When you talked about the decision making, how do you define how decisions get made? Or is it more about just documenting them and having that move through faster.

So decisions are being clear on what it is you're asking? Giving the right level of detail. Some board members will want to see transaction documents. Not a whole lot, but some will. And you put them on the platform they have for reference. But making sure the papers that go up are succinct and really clear on what you want. So making it easily digestible for a board. So when you're putting a transaction document, key terms, here's the key terms. This is what it means, this is a risk. If you're in a negotiation, for example, and it's moving, I make sure that I've got the right delegated authority. I know my limits, my guide rails, and then I'll make sure that I'll have people on the phone, I have the right people ready to go. So that could be CFO or CEO, could be the chair of the board subcommittee. The CEO will manage the board. But making sure that the CEO knows that the right board members are ready to join a call or consider an item, really, having the right decision makers at your disposal and ready to go is key. And knowing where your guide rails are and having a guide rail don't have a point estimate, you know, number of times when I've been engaging with bidders and they'll say, oh, they'll put a position on the table, we won't be able to accept it. Then you hit a brick wall and then you have to go, okay, we have to take that to one side. I'll go back and to their machine, get the right approvals and come back. Make sure you set yourself up for success. From a negotiating perspective. You've got the guide rails, you know where you can go and you can't go. And that's not a point estimate. You have your position, and if it is a point estimate, then it's a point estimate then hold onto it. If there is latitude, make sure you know where the top end and the lower end is.

We're getting some negotiation approaches here.

It's so important as a M and A practitioner to really be very clear around how you attack your negotiation. But a book that changed the way absolutely changed how I do things is never split the difference. Chris Voss yeah, that book really changed my my absolute approach. It's very valuable, made the organization a lot of money.

You're right. Actually a lot of it does apply to M and A. Maybe a good speaker to get on the podcast.

If you do that. I'm the first in line to listen.

What about accountability? How do you maintain accountability in this type of governance structure?

Being clear around roles and your ask of individuals so for example work stream leaders I'm going to ask you to sign off on the pre completion conduct section clause in the sale and purchase agreement so this individual knows that we're selling a business and the bidder wants to be very clear around the activities that you undertake while you still control the business up to completion or settlement. And as they do they'll put certain guide rails could be capex spend it could be employees, it could be executing to the business plan, all that kind of stuff. So make sure you're clear. There's an executive the way that we do it in cycle is the M and a team doesn't just agree to that in isolation. I don't want to have an agreement that I put on the table that needs to be operatable and then people once it's signed go how did who's responsible for signing us up for that like that is a bad scenario. So making sure people understand what you're going to be asking of them in terms of accountabilities but giving them the right support so they completely understand what is required. Clear sign offs on separation integration synergy realization plan synergies this talk so synergies for example making sure that you have the people that are going to be responsible for extracting those synergies assigning off on the quantum the source and have thought through how they're going to do it before you sign a contract before you put a bid in again being clear around the requirements and the asks don't just think okay well that synergy number fits into the precedent percentage of operating costs make sure that the right person signed off on those synergies. So clear ask clear sign offs and what we also do at Suncorp which is is becoming I've really learned to Love these sessions. We call them the risk moderation sessions. So what we do is we will have led by, we've got a given a regulated entity. We'll have either have prudential or a risk team. We have a risk individual, so it's not the deal team. And you create a risk template that will have itemize the risk. It will have the owner of that risk. What are the controls you're going to put in place to mitigate the risk and then if there's any residual risk, what does that look like? What it helps to do, and it can be done pretty quickly, is you're not only identifying problems, issues, risks, but you're assigning an individual in controls to mitigate that risk so that person is accountable for those controls and making sure that those controls are operable and alive.

When you do that meeting, we'll run.

That session prior to steering committee chickens. So we'll do it up front and it'll develop. We'll do it up front and sorry, they'll have a risk rating. So the risk is either severe, critical or moderate. Sorry, that was important piece of the puzzle. So we'd have it prior to our steering committee meetings. So then we report the dashboard or the five key severe or critical risks and the controls report that to the steering committee. That keeps you honest, it keeps you accountable, keeps you constantly thinking about are the controls effective? Is that risk so severe? Should it be moderate? Are we doing a good job of managing that risk? And then if you've got residual risk where you can't control for or mitigate, that's then reported and transparently reported up the chain. So we're either comfortable with accepting that risk or we're not.

Who's involved in those meetings?

I typically have a small group. So you don't want to cast the thousands because it can run away from you. I'd have a risk individual who's independent, objective, the M and A team, maybe advises and then some of the key people from the future judgment. Some of the key people that know the business know the situation. Maybe not the business sponsor, their right hand person or someone who knows the business knows the issues. It's more of a commercial discussion.

It gives me a good sense of who to have in the room. Not everybody, but the key people. You mentioned earlier about talking to each stakeholder. Can you walk me through that? I feel like there's just certain things you do at M and A that really make sure things come out well. And I think that's that extra effort. I'm Curious if the way you're approaching relationships individually as part of it or is there anything I'm missing in terms of a secret sauce to make all this work?

Well, one of the last ones we'll get to was one of your, you know, what's the craziest thing you've seen in M and A? I'm always not. It's not crazy, but I'm always surprised at how importance is put on relationships both internally and externally. So building connection and building trust, even if it's with a bitter or counterparty, making sure there's an element of trust there. But internally, more importantly for me, it's really internal trust and understand the individual. We don't all think the same. And when M and A can be intense, it can be stressful, reputations can be on the line. People can be really conscious of what this means for them and their career. And so you've got to be empathetic to that, you've got to acknowledge it. So I spend the time to. If I don't know the business sponsor. I've been around Suncorp for 10 years, so I've got a good sense of the individuals. You may have a new executive come in at the senior level, so making sure that you book time in with them, you brief them on what you're trying to achieve, the objectives, what's important to you. Ask that question from an M and A function. How do you want to be engaged? Some people like phone people, you can call them and they'll pick up. Or some people will prefer emails or book time in with me. Make sure I'm a busy executive. I can't just jump out of a meeting. Make sure that you book time in with me. So get a sense of the individual. It's really the investment in getting off your computer and on the phone or in person or VC and just understand what's important to that person.

That sounds like a big part of it is doing almost that one on one development of the relationship to make sure people are there when you need them.

Yeah. And sometimes M and A teams, M and A individuals can. So when I came from investment banking into in house, it was a massive transition for me because when you're in an advisory in M and A, you'll have instructions to do X and you'll get about to do that. And if you have a blockage like internally, if you're not getting the right information or someone's not putting the weight, you can typically escalate and unblock that. When you're in House. It's all about trust. You have to really build the relationships. Sometimes you're not invited into certain discussions or you're not invited and someone might come to you late and say, oh look, I've been talking to X, Y and Z about buying their business. Can you execute for me? And typically they don't know that they've already negotiated half the deal and they've negotiated poorly. So you've got to unwind all that sort of stuff. So having the trust that people come to you early, people trust that you, you're thinking about them, the process, thinking about the governance, the risk elements, building that trust and making sure that they feel like part of the process and inputting into it.

Easier said than done. I'm wondering about a couple of other things you touched on earlier with having a clear purpose and then also when you do your reflections to revisit those deals, one, is there anything that you do to. To make sure that purpose is sticky? Because I often hear that, especially in the latter part of executing on integration, purpose can get pretty foggy pretty quick. Especially a lot of people doing a lot of things. Anything there that you do to rein that in and keep people aligned, we.

Actually had that problem a lot. Purpose or perception of purpose would change, so people's priorities would change and that necessarily wasn't aligned with the overall objectives. So what we started to do, and we started doing this a couple of deals ago, was when we report to the steering committee, the first thing we do is we have our key objectives on the table on the left. So that's all the classics. Shareholder value, minimize business disruption, minimize execution risks and maximize deal certainty. So you might have three or four at that level and then a bit of a description around what does that mean for this unique situation? And then are you on track? Sort of like a traffic light. Red, amber, green. What are the issues? If it's red or amber, what are the thematics that are holding that back? For example, deal certainty. There might be an issue with a bidders proposal. So what just there's that item samba. This is what we're working on. This is how we're working on it. This is how we're going to try to get certainty on that. There could be an element that's fallen under due diligence, which goes to value. That could be an issue. Like it's very simple, table at the front, objectives, bit of a description around how that relates to this unique situation and then how you track against those. And I find when you keep it that simple and you roll all the detail that's sitting under here when you elevate it up to this is what we're trying to achieve. And you keep reminding, you just got to keep reminding people of those objectives. That really helped because you could always, when work stream or individual, something's veering off, you can just bring them back to those core elements.

I think more and more companies are doing that. Similarly, you described like the 2023 KPI. That seems to be the new standard. But I think you're right, it is building around that because then you can expand to those tasks that need to get done around those okrs.

Correct? Yeah. It should all roll up to that kind of anchors, if you like.

Our COO is very big about OKRs. If you ever need somebody to talk through about that, he definitely knows his okrs.

Yeah, yeah.

You've done a number of divestitures. How critical is speed when it comes to doing divestitures?

Absolutely critical.

What's the benefit of that?

Simply to increase the probability of executing successful deals. It's achieving your objectives, getting the right outcome for your stakeholders, doing a better deal, doing the right deals, doing great deals. It's like a Formula one driver. Right. And a Formula one team. You talk to the Formula one team and they'll say, so what are you working on? They'll say, we're working on making the car go faster. It's very simple. Speed and efficiency creates better outcomes. It reduces confusion, it reduces the time for external factors to impact the value of the business or the deal. Could be macro, whatever it is, and it increases certainty.

That makes sense. You got to pull the potential things that are going to thwart to the deal and the faster you can get it done, the less likely. Does that sound right? Is there such thing as going too fast? Where?

Yeah. Really? Yeah. So going too fast and skipping corners and not being well prepared can be terminal for a transaction.

So it's possible without skipping corners. Yeah.

Well, this is where preparation comes into it. It allows you to go efficiently, maybe fast. It's not maybe, it's efficient. You know, being efficient. Good example is if you don't undertake the appropriate and robust rigorous vendor due diligence when you're selling business. So you're looking to understand everything about the business, the proposition that you're selling. So you skip corners. You don't do a good enough job. You don't really understand the business. Due diligence is putting a magnifying over every element of a business and the managers that run that business and bidders Find an issue that you haven't found and you're getting it through Q and A. Requesting management meetings on the topic and in the background you're trying to solve, reconcile, do whatever it is to get your head around that issue. That will create distrust in the process because they'll request a meeting or a Q and A will come in and if you can't answer it quickly, your Q and A turnaround times will blow out past 48 hours. Then credibility starts to get impacted. Maybe efficiency is the right terminology here, but it needs to be swift. You need to make sure that you understand the business, the material set outs that makes it easy for people to due diligence and get their heads around it. If you're due diligence in the business, the data room scattered the information's, the information's all over the place. Then you get to draw conclusions immediately around the quality of that business.

What are you doing though to foster that speed and keep things moving along at that pace while being efficient?

It's all coming down to the aspects we've talked about. The governance, how you structure yourself, how do you set up yourself. So making sure that you've got all your stakeholders aligned with you, everyone's running at the same pace, they're running as fast as you are. Making sure that you've set your team up for success. You've got the right capability. For example, when you're running Q and A in a due diligence process, making sure team members understand that they've got to turn them around straight away. There's got to be a 48 hour, 24 hour for our turnaround and Q and A. That means that this work is always on top of their BAU work. So they've got to create capacity in their day to be able to respond quickly to Q and A. It's all those elements have just been well managed and thinking through what it is you need to set up to execute a successful transaction. Clear governance structure, know your decision makers and consult forward look part of the preparation. Look forward, look for potential issues. Try and anticipate issues on your approach.

For reflecting back on your deals and capturing some of those lessons learned. Is there a format or specific approach you follow?

We do have a format and we're building a bit more sophistication into that format. What we do is and we typically get an independent. I like to get an independent. We've got a really good relationship and I like to use certain individuals. But really the process is we look at our objectives. Did you hit Those objectives. So what I said before, around the table, how well did you do against that scorecard? And then there's an interview process with all the key stakeholders. And that's why I can't do it. I need an independent individual, maybe someone from an organization outside to come in and then interview all the key individuals. Were you clear on the objectives? Do you think you hit those objectives? What were the key issues? What agitated you? What did you like, what you didn't see? Interview process and then going back and looking at all the artifacts, the board papers, steering committee papers, were they clear? Did you appropriately canvas issues? That kind of stuff?

Is this independent person having these conversations one on one and piecemealing it together?

Yeah. Correct. Yeah. So it would be like what a conversation we're having here. It'd be typically one on one. You don't have to get everyone who participate in the process, but those people that were heavily involved. And I think one on one allows for the truth to come out. Yeah.

I guess I was wondering if you do, because there's the idea of retrospectives and part of an agile model and you would have meetings essentially with your deal team to reflect back on what went well and what didn't. What you're talking about. It's a little different. And I do favor in a lot of ways because I think the individual attention adds more of that, of the openness and details that you can get into. And then also having a third party can help remove some of those biases of what am I telling my boss here?

That's right. And if you keep in the deal team, for example, key feedback from us was we're not clear on the deal objectives. So people were in silos. Workstream leaders were given instructions to do stuff from us, but they weren't clear around how that all fitted into the big picture and what the objectives of that transaction were. You get quite defensive. Right. So I was clear, I thought I was clear with all these interviews. I thought I did my job, I thought. And then you got to take a step back and go, if that person feels like that, then you haven't done your job. Or I'm saying, well, actually we were bound by confidentiality, so I could. There's only some of the big puzzle that I could bring them in on, which is a legitimate point. But then maybe you need to make that clear with the individual so we can't talk about the broader picture with you. This is how I need you to fit into that guy.

What's the craziest thing you've seen in.

M and A in general. The majority of participants in this industry are high calibre and highly professional. So I haven't seen for example someone turn up to a negotiation wearing a clown suit or anything like that. But. And I haven't seen anything that has. There's been plenty of walkouts in negotiations. Not. I don't want to make it seem like that's how I operate but sometimes there are. And that's just way of life. But a couple of things I'm surprised with. I'm surprised with people's resilience. Right. And perseverance. And not just M and A professionals but people work stream leaders. They really love these type of processes. They really want to get involved and they typically go above and beyond when you've got a common goal. Surprised with how much ego and emotion quite unquote. Deal frenzy can influence decision making. That surprises me. Undervaluing relationships. We spoke about that. And then something which is in the Australian market we've got two M&A gossip columns. So leak, leak, risk and deal leaks constantly surprised me about how inaccurate they could be or how did someone get that information? I don't know. It's a function that if you know the Australian market. But we've got two M&A gossip columns embedded in quite reputable business papers. That's a real issue for executing M and A here in Australia.

That's actually funny. The broad newspapers have a M and A gossip column.

It's always been a function of this market here in Australia. In M and A you talk to any M and A practitioner here in Australia. I won't name them but it's sort of ingrained in how we do things. It's not great because a lot of it is obviously speculation.

Yeah.

Can be absolutely inaccurate. Off the mark. 90% of it is totally inaccurate. People can trade the information. It's part of the market.

It could be an investment strategy. We messed off of gossip.

This is the thing. Right. It's not great. It's really a weakness of our. In my view of our. Of our market. But it is what it is. So that just creates a certain focus and a challenge that you just got to deal with.

Yeah. That's interesting. That's pretty crazy.

Guys.

This has been great. I enjoyed this conversation. I learned a lot about M and A governance. You're helping me become a better M and A scientist here.

Thank you. Kison. Awesome.

Hey those of you still with us, cheers. And until next time, here's to the deal Foreign.

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 Podcast. We'd love to hear from you. If you need help standing up at M and A Function 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.