Summit Recap: Bridging the Gap Between Corporate Development and Integration

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Hello everybody.

Our next discussion is Bridging the Gap between Corporate Development and Integration and our speakers are Kizam Patel, CEO and Founder of Deal Room Devera Virtucci, Director of.

Corporate Development at Microsoft Kim Jones, senior.

HR M&A Manager at Microsoft.

Great job. All right, joining me today, Devra Bertucci, Director of Corporate Development at Microsoft. Devra is an experienced M and A professional with a background in finance, law and a passion for technology and media. Also joining me today is Kim Jones, senior HR M&A Manager at Microsoft. Kim conducts due diligence research and all HR related integration activities as part of Microsoft's M and A programs. Today we're talking about making an acquisition successful and creating value for both sides isn't easy. There needs to be a partnership with corporate development and integration that drives negotiations to structure a deal for success. For this panel, I've recruited two industry professionals to share how they collaborate and explain why negotiation sets the tone for integration. Can you each give some background on your involvement in M and A at Microsoft? Deborah, I'll let you kick off so.

I am a director in our Corporate Development group and I've been in this group since 2011 and as a corporate development professional, I lead transactions end to end end at Microsoft in terms of both evaluation and execution. On the execution side, as part of the process, I lead negotiations from term sheet all the way through definitive agreements and I work closely with a lot of different teams across Microsoft to partner on both the evaluation and the execution. And one of the most important teams that I work with is the integration team. And one of the most important functions that I work closely with in that team is hr. I'll pass it off to Kim with that lead in.

Yeah, no thanks, Deborah. I've also been Microsoft focused on M and A or the people work stream in this team for the last five years. As Deborah said, we work closely with Corp Dev and they're great about getting HR involved early in the process so that we can really help identify and confirm talent as a deal value driver. Kind of how talent and culture play a role and really start to build the relationship with target leaders in collaboration with Corp dev. I think all this kind of accrues to ensuring like our talent decisions are reflected in our cost analysis and kind of the final legal agreements. I think one of the things that we really partner on is the discussions with the CEO and the target leaders, depending on who we're working with, kind of identifying styles and communication methods that we leverage in the negotiation. And because I think it's that connection of staying in touch, bringing people along in the conversation that really makes a difference and kind of ensuring that the leaders aren't playing us off of each other or that we're really aligned on kind of what we want to accomplish.

I want to ask how come you guys don't hate each other and where the fights break out. But we're going to get into that, we're going to get into that. What are some of the things that early stage companies should think about if they're considering M and A?

One of the things I always say when I'm working with Targets, both at Microsoft and outside of Microsoft, I do spend time working with targets and mentoring capacity with various organizations. What I tell them if they're approached by a company or as we're thinking through the process at Microsoft, is you really have to have aligned vision and a shared understanding of goals between the target and the acquirer. In most situations this means a shared view of how the product will be integrated, what the vision for that product is as it's Microsoft and how will the people work together to achieve those goals. A lot of this is integration planning and it doesn't get fleshed out fully until after the deal closes. But I think having that initial alignment as to what those goals are are the most important thing because it's about setting expectations. It's when those expectations differ between the target and the acquirer and nobody's upfront about that But I think things can go wrong. So I say think about that one click deeper into that. That I often tell founders is more so when I'm in a mentoring capacity, less so when I'm in a corporate development role. But I will tell founders in a mentoring capacity ask a lot of questions about what you're going to be doing once you're acquired. Ask what your role is going to be. Ask who you're going to be working with. Ask what will happen to your team now, will you be getting a bigger team? Ask all those things that you think of. And a lot of people maybe say, well I'll find out later, or afraid to ask because they want to make the deal work. But those are the things that are going to make a founder happy on a day to day basis. Similarly, if it's a founder who doesn't plan to see themselves long term at a big company and they're like a serial entrepreneur, I advise to be upfront about that. And frankly, when we're doing acquisitions, I like to just open up that conversation early on and say, hey, what are your goals to the CEO of a Target? Because again, that's something like if the person's super important to us and they're not planning to stay, better to find that out early on. And again that all goes to the big shared vision. Like what's the vision of working together and what's the ultimate vision for this acquisition and the product strategy?

Yeah, adding on, I totally agree with Deborah. It's the overall goal alignment that's really important and clear on. Like she said, is this an exit strategy for those leaders or are they really looking to grow the product and team within Microsoft? I would add to that like thinking through are they really aware of the time commitment that it takes to go through an acquisition and run the business? That can be really intense even financially. Is there money to get through the process or will that influence kind of negotiations, add stress to the timeline, you know, and kind of really impact kind of what we're driving for? I would say kind of on that people side kind of having strategies for ensuring you're bringing your talent and team along the process. Like when you bring them in, do you need special retention just to get it to that point? And like Deborah said, asking questions like what's the buyer of Microsoft's culture? Like is that aligned? And if it isn't then is that something that is a deal breaker or you can work through?

These are some great points I'm hearing. Thinking long term and putting some of those Considerations up front, just being upfront in general, if you're not going to stick around and make sure you're aligned there. And I think Kim just made a good point about what it actually takes to do M and A, because a lot of time that's sort of underestimated. Deborah, why is the negotiation stage your favorite?

I used to be a lawyer, so I like to debate and argue. That's kind of the humorous answer. I love both the strategy aspect of negotiation, so along the lines of debate and having that, that strategic discussion, there is a game aspect of it that I find really fun and it's energizing. That's a fun part of my, of my job. But I also really love it because I love relationship building. For me, in order to have a successful negotiation, as a corporate development professional, there's a lot of relationship building because you have to remember and keep in your mind that it's not just about winning the negotiation at all costs for Microsoft. Obviously my job is to do the best deal for Microsoft, but that while some of it is getting the best price and the best terms, and obviously I really enjoy doing that. At the same time, keeping in mind that the company and the people at the company are going to become part of Microsoft, you have to think of it all in that frame of, okay, well, I'm negotiating against somebody, but I'm negotiating at somebody who's eventually going to be on my team. The relationship you build with that person and making sure that you're building a transaction and an outcome that's good for not only Microsoft, but, but everyone such that you're going to have a happy, productive, successful team of people that come into Microsoft adds a layer of complexity that I enjoy. I really enjoy getting to know the people at the companies that we're acquiring. And that's a big aspect of the relationship building as well, getting to know the people. And it really changes with every deal as to what that relationship is going to look like. But it's a really fun part of my job.

So using relationships as part of your negotiation tactics, how does negotiation style affect deal terms?

So.

It can vary significantly depending on the flavor of the deal. Obviously in some deals, like if you're, for example, acquiring a company that's about to go bankrupt, where the management team is not coming along, you're just buying a tech, it can be a high pressure situation and a very different negotiation tactic. If, on the other hand, you're acquiring a company where the CEO is a huge Microsoft fan, super excited to become part of the team, you can take a very different approach. For example, in that situation, I often try to align myself with the CEO and think of ourselves as a team trying to get the deal done. That can really have a positive impact on deal terms because then they become an ally, even though they're not part of Microsoft and oftentimes present kind of almost a united front in terms of when dealing with the external legal teams because we both have legal counsel and oftentimes their role is obviously to negotiate the best deal for their client. That's what we're paying them to do. But it can help these founders see past what their lawyers are telling them they have to get this term and really think about how do we get the deal done in the best way possible. It can also sometimes help them with their investors and especially if they're not that serial entrepreneur who's thinking, okay, I'm going to do this deal and then I'm going to go start another company and I'm super concerned about what the VCs are going to think of me in the future because I'm going to go back out and raise money. If you're dealing with that type of person, you have to approach it in a very different way than if you're dealing with somebody who's like, I can't wait to get to Microsoft and have a long term career here again. In that situation you can. They're your ally and you almost have to coach them as to how to effectuate the deal despite what their investors are telling them. So you kind of give them the ammunition to fight for what they want in the deal, which is often aligned with what we want versus what their investors are telling them. So that's one little tidbit of an example of a way that the relationship I built with the person can affect how I can achieve certain deal terms. And honestly, which deal terms are important.

Now, how would that affect negotiation approach change based on the business leader in his personality?

So that is, that takes a lot of coaching too, internally and the business leader. I'd say the standard playbook with our business teams is I tell them you're the good cop, you're selling them and I'm the bad cop. So let me be the one to. If there is a hard conversation to be had or if there's some difficult or conflict that has to go through with the CEO, let me take that on because the business leader is the one. I'm not going to own this. Post close. The CEO is not working for me. Post close. But they are Working for the business leader at Microsoft. The business leader at Microsoft is actually critical to that too. And they have to do a lot of relationship building as well. I think that that is another relationship. It's a triangle relationship that also is important in terms of the business leader at Microsoft and their style and how that affects the overall negotiation. Because if they're not building their own relationship with the target CEO or founder, then that creates other issues, obviously.

Kim, when do you weigh in on this? When are you like, what the hell was Corp Dev thinking on this deal?

You know, we actually weigh in from the beginning, really. I think this is where the partnership of when you said when we don't like each other, I think, you know, our process and how we have things set up really works. You know, I think what Deborah was talking about at the end there, you know, we can really be the escalation point having the hard conversation with the target leaders, which as long as the business is also creating that relationship, they can focus on that new boss relationship going forward versus wading through all the angst to get there. And I think that kind of allows us to help coach the leaders to get there. But, you know, I feel like if we're there from the beginning, it works better because we have different insights and we can bring those viewpoints together and really ensure that, you know, they're saying, what they're saying to us is what they're saying to, like, Devra and Corp Dev, too, because we want to make sure that that's the same and they're not trying to drive an agenda through one of us or anybody else on the deal team.

So you're the backup sometimes.

Or, you know, I feel like escalation point can be another way to say that. And, you know, that's part of kind of what I also find fascinating is we get, you know, it's never easy, but we get to have those tough conversations. And I do think it helps the build trust with the target leaders that then we can kind of get down to, like, what's important on the deal terms and even down to kind of their offers and make that move forward smoothly.

How do you ensure a smaller company is a good fit for Microsoft?

I think there's a number of things I can say. I think a good fit, the product fit is obviously the first and foremost thing, is will the product fit into our product and our roadmap, and is it key? But the second thing is really people. And that's why I'll pass it off to Kim to talk about how we do make sure it's a good fit part I do bring in to answer this question and the last question a lot. I tend to bring in Kim and our HR people very early in the process because what I want them to do is again coach our internal business leaders on how do they think about whether it's a good fit for Microsoft. So again, the company's not working for me. I'm not going to be the one running this post. Close. My job as an advisor and why I bring in an expert in the subject matter area like HR is to coach the people at Microsoft who are going to be owning this as to what they need to look for when analyzing as to whether it's a good fit or not. And that can be with product, it can be with culture and team and all of those things together. Some of it is just spending time with the people and meeting them and seeing if their development procedures will mesh with whatever the, the product development leaders procedures are and et cetera, et cetera, et cetera, going from there.

I would agree. It just takes a lot of work throughout the entire process. And as Deborah said, it's not automatic that it works. I mean I think it does start with kind of ensuring that those clear expectations are set and that it's just communicated. Often it's the alignment it's then allows us to kind of get in and coach kind of each side of what's happening, how they're showing up and the impacts through that. But really we're looking at confirming through our due diligence process are there risks? Are we aligned on goals? I think this is the value of somewhat of the process too because it kind of tells you the reality. Is there enough that you would continue to go and you're prepared for what is to come? Or does that show you that there's too much risk or there's a mismatch that we would walk away?

There isn't a wall per se in your organization. Sounds like it's more of a free range. You got a lot of room to move around and get involved in the deal early. What are you actually doing? I know you're involved early and you're helping them sort of assess and prep the company. But what specifically are you actually doing?

Oh, there's so many things and there's no wall because I actually, me personally, I sit only a few doors down from Corp Dev, so we're actually all in the same hallway when we're in the office for those that are based in Redmond. But for me there's a lot that we're doing, from initiating conversations with our business side to kind understand really what they're wanting to accomplish. And in the meantime, kind of working with the target on due diligence, from going through all the data room, looking at the employee data, having conversations about their organization, really learning about their culture and what they're driving for so that we can kind of work through the rest of our process to get to integration, which includes offers, employee communications, onboarding, all of those types of things. Is that what you were asking?

Yeah, yeah. I'm just curious. Well, now, culture always comes up, and you mentioned you're learning about this company's culture. And we talk about that being a part of the fit with Microsoft. And this comes up often because there's always a variance in the definition of culture itself. But what would you actually do in terms of activity to understand that company's culture and maybe even what sort of some of the questions you're asking those companies?

Yeah, there's a lot of different things that we do that are subtle and overt. I mean, I think we do a lot of research on the company to see what, you know, what's their message out, like, what are their leadership saying that they're about and kind of the actions to support that. And we have conversations specifically about the culture in what we would call like an organizational deep dive where we bring the target together and our business together to learn they actually talk to their culture. So we ask them what they do, how they communicate, how they get things done, what are kind of some of their team norms, some of those things, and then they really go into kind of how their teams work together. And from that, you can kind of ask questions and dig a little bit deeper on what that really means, or is that kind of a facade or are there subtle things behind that that they're doing to support it? And in the meantime, learning from our business about what they're about and kind of the Microsoft value so they can kind of get a picture. And the conversations that come out of that day, I find super helpful of informing us and them. And then typically, if we can do engagement and in person things we would do, like a dinner where people can kind of get to know each other on a more personal and business level. So I think all of those things are some activities that we do as part of that.

What about when the hammer comes down? And certain things about, hey, you have to change this in your process because things are a little different at Microsoft. Do you start addressing that stuff earlier or later we can.

I think those are the conversations that I think the business leaders need to have. The target comes and the company acquired, company comes with work and how they get stuff done. And sometimes that can enhance what we do, and sometimes there's changes that need to be made. And I think those are conversations that just how work gets done. Maybe it's a bigger company, maybe it's something they need to learn how to do at scale. Maybe there's more security they need to put in the product. So I think there's just all part of the joys of integration.

All right, you're definitely the bad cop. You're not afraid to bring the bad news.

Occasionally I can bring good news too.

Deborah, how does your role in corporate development influence how you address culture?

There's a lot of ways that HR gets deeply involved in the process as we're assessing and doing employee assessments and offers. I actually try to bring HR in even earlier than the part of the deal that Kim described to help assess the culture, in part because then they can not play bad cop, but they can take ownership of that advice internally and ask the questions externally. So I often bring our HR team in even for preliminary diligence, where that's possible. So that. And it also helps with the hey, what did Corp Dev do? Because instead I'm bringing them along from the beginning, rather than like saying, hey, we signed a term sheet, now you have to figure this out. So I try to bring them in for the preliminary diligence, have them participate in that, if possible, so they can start asking the initial questions about culture there and again, so that they can ask the questions of our team as to how they're thinking about things so that we can appropriately also structure how we're going to do the deal too, in terms of in some situations where a company has super unique culture and team, for example, like a game studio, it might make sense to keep that studio intact versus fully integrating into Microsoft. And you're better off having those conversations early on versus waiting until much later in the deal to figure that out. So I think that the biggest thing for Corp Dev is to raise this early and often and to bring in the right people to have the conversations and advise.

Great. Kim, how does your perspective of company culture differ from Corp Dev's perspective when approaching potential targets?

You know, I think typically we're really aligned and as Deborah said, like when they bring us in, we show up as a team and we can partner then on kind of getting to know things. I think where the difference is They've kind of been mentioned a little bit earlier. Sometimes if our business is thinking about things differently or they haven't thought about culture or the roles that the target leaders are wanting to come in just don't exist of, hey, we want to grow our careers and run this business. But we have people that are doing that. I think, you know, that's where kind of we really get to explore where the differences are and kind of plan for how we're going to work through that.

How do you go about navigating the difference in perspectives?

Lots of conversations. I think Deborah said it well, like we bring people along, we bring people to the table. We have a lot of meetings. Believe me, there's a lot of meetings. I'm sure a lot of people on this call can relate to that with not only our own side and different people, but with the target. And a lot of times there's follow up meetings because personal to them too. And so there's, I mean I remember a time I walked for an hour around campus, coming back from one building to another, just talking to a Target CEO, trying to get him, you know, just listening to like what his concerns were and kind of working through that. So I don't know if there's any magic outside of the effort and willingness to kind of listen and really dig for what's going on behind that and what they're driving for.

Got it. I want to go to exercising your bad cop skills. What are the early signs of risk or a bad fit and your general advice about dealing with it?

Well, I can start, I mean, I think, you know, early signs are the values mismatch, documentation in the data room, not matching conversations. You know, I think target leaders telling different people that they're meeting with different things. I think, you know, if they're talking about the product being something different and how it's going to be at Microsoft and that's not what, what we're looking for. I think that can be things, you know, when we evaluate the talent that doesn't quite match what we're looking for, that can be kind of a flag to evaluate. Microsoft's really on a learning journey about how we're looking at our culture. And so we really do look for like we try to dig for similarities and differences to kind of, you know, we use that for framing for employee engagement and how we're bringing that along and also our Microsoft Teams. But what are the similarities and differences so that we can really kind of work through those and have those conversations. And maybe there's Stuff, you know, we're hopefully learning from them and that they can amplify our value. So I think it's kind of a give or take of, like, we evaluate the risk, but yet, you know, if this is something we want to do, we just have to be planful about how we're going to address it.

It seems like a lot of the rough deals are filtered out before it gets to you, Kim.

Deborah?

No, I mean, there are things that are filtered out before they get to the phase. We bring in our integration team and I see one of the questions in the chat that says, have you ever walked away from a deal because of lack of culture? If so, can you explain? I'm going to answer that, and then I'm going to answer as part of this and answer that is that I have not walked away from a deal that was already in motion because of cultural fit. But I will say, when you look at a range of opportunities and you evaluate them on a number of factors, if a company has a very different. It's not that it's a different culture, because as Kim said, we're open to a lot of different things, but. But culture can be one thing that you look at in terms of overall fit and ability to achieve the objective. So if it's going to be very difficult to integrate overall, and that's part of it, location can be another part of it, all sorts of things can be part of it. But a difficult integration can be a reason that we don't proceed with an acquisition again, not walk away from it, but decide not to even pursue something, because oftentimes that means delay in time, which then means a less effective way to achieve our goals. Like, often if we're looking to acquire something, it's because we're looking for quicker time to market. And so if it's going to be a long and difficult road or there's going to be a lot of bumps, it can be a reason that we say, you know what, that's probably going to be really difficult and isn't really going to achieve what we're looking to do. So I don't think walking away, it's more just an overall factor to consider when looking at a company across a number of things. And then in terms of what Kim said about risk, the last point you made is exactly on the nose. For me, it's identifying those risks, deciding whether to proceed or not, and how are we going to mitigate them in terms of culture and everything else. That's how I approach everything on the deal. If It's a legal risk. It's making sure our lawyers have flagged that risk. How are we going to mitigate it on culture and people? Again, it goes to the sponsoring engineering team. They need to be aware of the risk. And there are lots of early warning signs. Whether it's like a CEO that seems to have very different expectations that we have or is quote unquote difficult or one of the big risks that I've seen is, and you can see this sometimes in the preliminary diligence where you start to get the sense that the CEO of the target company and the rest of the team are not aligned. So when you start to see that there's misalignment between the team at the target and I find that happens often where the CEO isn't really the technical lead and they're more on the kind of business salesy side. And so sometimes they over promise the technical team. You can sometimes see a rift there. And that's one that I do like to really flag early and often. I mean our deal sponsors often see that, but that's one where we notice this. How are you planning to deal with it? And some of the questions to think about when you see that is like, well, what's really the role for the CEO once they come to Microsoft? Do they have a long term role? If they have a long term role, are they leading the team? Who is leading the team? How are you going to keep that team motivated at the beginning if it's not the CEO? All the questions we can ask of the deal sponsor to make sure they've thought through all the risks. And again, if they're willing to sign up for their risks, that's their decision. But it's our job to make sure that they've been identified and help them fully think through those risks.

That's pretty cool. I like how you dig in for the internal friction. Is there any key person or even thing to ask to help identify that? What do you think about the CEO? And people are kind of like I.

Think and that's one of the things it's not really something to ask. It's really a dynamic that you can often see in the preliminary diligence session in a room when there are a lot of questions being asked, especially in the technical sessions which half the time I don't understand anything that's being said. But because they're so technically deep and I'm not super technical, but you can observe who's answering the questions and like the CEOs jumping in and answering things like kind of at a gloss over high level. And you can sometimes see them, the like VP Engineering or the CTO getting frustrated or saying contradictory things or that's when you can kind of see the tension arise. I think sometimes tension arrives in those technical deep dives. That's super interesting because engineers like to debate too. So it's like oftentimes that's where the meat of the like kind of debating goes on in terms of the technical stuff. And so sometimes that's where I see it come out. It's not really a question you can ask. It's more just a sense you can get.

That's really cool. Pay attention to the details, look for signs.

And it sounds like there's, it looks like in one of the chats there's a question on navigating a situation when the target may have executive or senior leaders who may be stronger than you have internally. Like have we had to deal with that? I would say yes. And I think it's, you know, there's lots of work of when a deal lead that ends up reporting into it or we have some target leaders who kind of lead a new business. So that is absolutely a situation that we deal with. And it does take, you know, we typically will have kind of conversations on either side of how we're setting that up for success. But it can be challenging or the dealee very well knows that they're bringing in this person to help them grow and the the business which is the best situation. But that doesn't always align easily at the beginning.

That's an interesting point because I was going to ask about leadership. When you start seeing a signs of a bad fit sort of how do you manage that? Because if it's strictly on the leadership, do you have a plan around it or is it purely that becomes a deal breaker. And then in your case that you just mentioned where lining it with how they're going to fit post close as well.

I can lead it off, but I think Kim can probably answer it better. I think that where we really think a leader is not a fit again, it's better to be transparent up front. If we're clear that somebody and by we I mean really the sponsoring engineering team because there are times where I might and Kim might think together we think hey, this person's never going to last at Microsoft. But our engineering leader is willing to give them a chance or thinks they have a role for them. But there is this, if everyone's aligned that there is a person at the target that's not A fit. But the acquisition makes sense and there are other strong leaders. Just be upfront about that as much as you can. It's obviously delicate, but that's again, when we can, Kim and I can do the messaging and have the right conversations. And oftentimes that person then needs to be somebody who will have for a transitional period but isn't necessarily going to be long term at Microsoft. Again, it might align with what they want too because it's not that they're like some bad Apple or not a good fit. Oftentimes they're not a good fit because they're not somebody who doesn't wants to be at Microsoft long term. So it might work out that this is really just whatever you wouldn't want. And rather than dance around it, just be up front early on and proceed with that knowledge rather than trying to make it something it's not.

Deborah, you said it well, I mean, I think the leadership, both sides, if we identify that the leader isn't going to be moving forward, we do rely on having those conversations setting up like is it a time bound or transitional role that they're there to kind of help transition the team and then they can kind of exit to their next thing or you know, and we do ensure kind of that then our business leaders are ready to kind of have this conversation and address the gaps on expectations so that they're aligned and they know like when they're coming in, hey, they're going to be here for three to six months, here's what they're going to accomplish and then if they're looking for other things within Microsoft, how we can help support that. I think leadership on all sides is critical and I think the transparency on what that's going to look like is the best way to work through that. Because you don't want a leader to come in thinking they're doing something and telling the team what they're doing. And that doesn't work longer term.

Right? Yep. I'm seeing a theme here. Think long term. What are the biggest concerns for the company you are acquiring during negotiations and as you progress through integration?

Price obviously is everyone's biggest concern. Obviously what are they getting from the deal? Speed of execution and certainty of close are always very important things. The short term things, I would say those are obviously the three kind of negotiation terms that I would say are often critical to founders and their investors is what am I getting and how long is it going to take to do this because it's expensive and they are running a business and need to know whether it's refocused and is this going to close. So we like to do a good amount of diligence before we get to a term sheet to make sure we can stand behind that. On the certainty point, I usually like to walk founders through the idea that we do some work upfront and then hopefully that means we're pretty much certain to close a transaction and walk them through it that way. The other big piece is going back to the first question on what should people look out for? Is people are really concerned about what are they going to be doing, what's their role going to be. I find that that comes out a little later and that's why I advise people ask it earlier. If I'm having a founder comes to me looking for advice outside of the corporate development role and they say they've been approached by a company, ask those questions early because I find that what companies tend to do is they focus on those key things like price, et cetera, exclusivity, period, how am I going to get this transaction done? And then they start as soon as you sign a term sheet, really, like, what's my role going to be, what's my level going to be, how many people are going to be reporting to me, et cetera. Those are the things that I find are the next level. And that's to Kim. The next hardest thing to negotiate after the core deal terms is the employment offers. And that's what people get super, super concerned. I find in the second phase of the transaction, between term sheet and definitive agreements, there are obviously other things along the lines of certainty to close, like closing conditions, et cetera, that are hot button issues. But really the employment offers is. Is where I think a lot of the contentious conversations come up, which is why Kim and I need to work so closely together so that we're aligned. And there's no ability for anyone to have like a divide and conquer strategy to try to extract more value out of the employment offer. They don't feel like they're getting in the main part of the deal or vice vers. Those are the things that people tend to be concerned about, in my experience. Kim?

Yeah, I mean, I'm aligned with you of all of those things. And kind of how do I operate now? Like, how do I get work done within this new system and still have expectations to deliver? They still have customers maybe to keep happy. How do they keep the product on track and onboard to Microsoft? It's like a team that comes with work, but they have to do that work Differently. So I mean I think that can be very difficult because often we have onboarding for new employees and you get a chance to figure out the company. You're sometimes going right from day one to hit a product milestone. So I think that's hard. I think figuring out how to influence and how to scale at Microsoft can be really challenging. So I think those things people kind of as they start to get closer to day one and having those integration conversations really come up of whoa, it sounds fine like oh, we can keep doing the same work at Microsoft, but the systems are different, your logins, all these different things that you have to contend with come up.

How do you balance accommodating a company culture and uniformity across Microsoft?

Delicately? No, we do like to honor the acquired company culture I think we've been talking about and this goes to how we learn and how we bring those teams together. That also goes for Microsoft's been on a culture journey. But all teams operate differently within that they just align to the all up values. It's also our team's job too of working with them, of understanding how the Microsoft Team norms and what the acquire company and bringing that together to identify where are the rubs, what's good, what's different so that we can really plan time to be intentional about working through that. It's not a one time event, it's not like hey, let's talk about it and let's do all this. But it's ongoing work to make sure that day one 30 days in, you know how those things are working and coming together are still kind of top of mind because they can be critical to success of people, engagement and kind of the product as well.

And I think we've learned from our mistakes too. Like I think we do a good job of looking back and saying hey, if we did things a certain way or by a certain playbook, does that work? And can we really look at each deal individually but learn from each one too and integrate which worked into the next one. So one of the very specific examples I think that in recent years we've done a better job of like even when it's a team that needs to be fully integrated into Microsoft to achieve the product goals relatively quickly, we still try to keep that team intact when they come in. Things like that, for example, are a good way to make sure you're not like putting a team into culture shock and they're able, it's actually more productive to have them keep working that way in the short term sometimes. And then how do you Transition people into longer term, like more appropriate longer term org structure. So they're very tactical things that I think we learn from deal to deal and try to get better about our practice and really try to think uniquely every situation, well, what's the best approach here rather than just having a playbook that you do for every deal.

And I think Deborah, you had mentioned the games acquisitions. We kept a lot of what we bought, like the culture drives the game. And to kind of do that, we kept those teams intact in their location on kind of their terms and conditions of employment so that they could really foster their culture because it was so important to them. So I think it's anything from that to the little things of this is really important for us to keep, whether it's our office, whether it's a red couch that's in the office, something that kind of really is meaningful to the team. I think those things, we really try to be conscious of that and then if we say we're gonna honor that, that we actually do and be smart.

Enough to know that doesn't work on every deal too because the game studios are un and it's super appropriate in that situation. But on other deals where it's like a cloud deal and it's a tech and team buy where it's gonna be a feature and a product, you can't leave it alone and do that kind of integration. So like being smart enough to understand what the product driver is and to formulate around that versus again like say, oh, this worked here. Well, it'll work there. So I think that's also it's like really being smart about what are the drivers in a particular situation and defining the strategy around that. Taking all things into do you have.

Other examples of lessons learned that you think other people in corp dev would find surprising?

Find surprising.

Or if you have any cool stories about surprises, that's fun too.

I think that, you know, I think lessons learned that are particularly pertinent to this topic are that there have been a lot of lessons learned around structuring of price and then employment offers. Like if you're a big company, corp dev and HR should really work very closely together to make sure that all the values being counted across those things and understood in the same way. So I've definitely seen situations where if there's a disconnect between those things, you end up losing value in a deal because you're not coordinated enough, if that makes sense. And an example, like a generic example I give is let's say you have a deal where you know, you have a purchase price and then you have a retention pool that's being negotiated by Corp dev. You need to be super in sync with your HR counterparts to make sure they're aware of that and structuring all the employment offers with that in mind instead of basically doing the same thing on top of that in the employment offer. So that's something again, super specific, but an area where I think real value is at stake if you're not coordinated between those two functions.

On that topic, that's a really good point. As I've hear that time after time when you end up with overlap and redundancy. Yeah, you know, I'm going to jump into some of this Q and A, but while I get that queued up, what's advice you'd have for other folks in corporate development? Slash integration to develop the type of relationship that you have that you actually align working well together. There's no fear of getting integration folks involved early as a potential waste of resources, et cetera, I guess. What kind of advice would you share to get that right balance for other teams out there that are looking for it?

The advice I'd share is a few things. One, as a corporate development professional, we negotiate for a living and there's a lot of contentious nature of negotiations. Whether it's legal negotiations, whether it's negotiations with investors, there can be a lot of friction in a lot of what we do. I am much happier if there's none of that friction with the integration team who's on my team essentially not within corp debt, but we're on the same Microsoft Team. We are on the same team and we have the same goals. Our goal is to drive the best transaction for Microsoft. To me, there's no question of working well together early and often. One, to achieve the best goal for Microsoft, but two, for me to be personally more happy in my job because I don't want to be fighting or territorial with somebody on my team when so much of that energy has to be saved for external negotiations and getting a deal done. That's one piece of advice I have is just how can you go about that relationship in a positive way and just seeing it actually achieve goals better, like going through it. And when you do that, I think there's like a little bit of a flywheel effect. Kim and I have worked together on a number of deals and I can think back of the first time working with Kim being like, hey, I like to work really closely with hr. That means I'm going to tell you everything. I expect you to tell me everything right away and seeing how that plays out so that when a CEO, she gives the offer, he freaks out. She calls me before the guy calls me so I know what I'm doing. When he then calls me five minutes later we've all talked and you can just see how that helps rather than me being off guard. So having these experience to know, oh hey, and when we do that it actually leads to a better outcome and is more fun. Like that's a no brainer for me. So I think that's some of the learnings I've had over the years of why it's important. It also helps again on the internal front. Like the reason I bring Kim in early and often is because it's better to empower experts to like do their job than for me to try to do everyone's job. If I try to do everyone's job, then I'm just not going to have enough time. So again, talking to our internal leaders about what they should consider on people stuff, I'd much rather bring in Kim and defer to her because she's an expert in the area than for me to try to cover it. It makes my life easier because I can step back out of things and I also feel like it leads to better advice. So I'm a big fan of empowering others who are experts to really own their piece of a deal rather than corp dove trying to do everything.

And I would say that extends to our broader deal team too because if we're involved in some of the early conversations on kind of build versus buy and what we're to get, we understand kind of where we're trying to go and can help guide our practices towards that. I think on an earlier session somebody's mentioning just the importance of that engagement with the go to market team and really making sure that that's aligned and you know, those people are brought along too. So it's like it's holistic in the process that people bring their expertise and can kind of ask questions and it probably changes it for the better. But we also then get an understanding from the beginning and you don't have to have those additional conversations later. You can kind of form your own opinions too.

Very good tips. Collaboration is key. So I'm going to run through and.

Having a sense of humor about things that happen.

That's true too. Then it's also something commiserate with on Sticky Situation.

Yes.

So I want to try to grab a couple of these Q and A's before we Wrap up. Can we talk more about bridging the gap between corporate development integration to what Devra said earlier? M and A doesn't stop at the closing of the deal. Many integration teams have been built over years and they're deeply ingrained in the ways of working with a siloed focus on the easier functional integration topics such as HR and it. As corp dev leaders, how do you challenge your integration teams to go beyond and actually get their hands dirty in sales, product technology integration to actually drive the growth of acquired businesses, you ask.

Honestly, I really believe that if you ask people to do things and you give them more responsibility, they'll step up and, and do it. So like my, you know, Microsoft has been doing M and A for a lot longer than I've been there. And when I started, you know, I could see a separate track relationship between corp dev and integration and went through my first couple of deals on that track and I, you know, identified that this isn't really working for me. So I just said I'm going to change the way I work with the integration team. And so I, I started saying whenever I get an integration team on my deals, go to them and be like, hey, I really like to collaborate. That's the first step. And you start to say that. And then again, I think that we as an M and A practice broadly at Microsoft have tried to evolve our integration practice in this way, which is why, as Kim will tell you, it changed from the venture integration team to the. I'm going to forget what the exact.

Acronym is, of course, Microsoft Acquisition Venture.

Success, where our leaders like put it on again. They asked our integration team to step up and instead of thinking of something as an integration playbook, think about how can you make acquisitions successful. I think if something's deeply ingrained and siloed, that doesn't mean it can't change. And I really do think if you ask functions to step up, if you ask people to step up, if you give them more responsibility, more often not people will rise to the challenge and be more energized for it.

And we do have a scorecard process that we have like acquire companies and governance where we check in quarterly for two years. And we just recently broadened that to include all the teams. So I think that that kind of or the core teams to play a role like it's not just a business review, you know, it's everybody's included to kind of hear what's happening and engage on challenges and if there's a role that our team can still Play, post, close, then, you know, we engage that way.

I'm interested to know how much of your strategy has changed due to the recent Covid situation and people being remote.

So I was just talking about this yesterday in another meeting that we were talking about deals that had started wholly after Covid came up, because we have a bunch of deals in our pipeline that have closed and announced that closed and announced during COVID that had started beforehand. So you got to meet the companies in person, do your diligence, and it was just finishing the deal remotely, which actually isn't that different. I think Kim will have a different perspective because I feel like the HR team is later on the ground for all the in person and stuff. So I'll let her answer that. But from my perspective, a lot of my in person contact with Targets is really in the preliminary phase. So for those deals, not that much change. I did have one deal that we did preliminary. We scheduled the preliminary diligence before COVID but right as it was happening. And so we at the last minute scheduled the full day session to change to a teams call. And it was like eight hours of teams. And I definitely learned from that. Don't do that. It was fine. It was as good as it could be. It just was like somewhat draining and I don't think the most effective. So for the next time I scheduled a diligence session with a company that we engaged with after Covid, I decided to take a different approach to preliminary diligence specifically and do it more piecemeal. You know, usually I love to do the all day session, schedule a dinner, you get to know the people, you're in the room, you kind of observe some of the things I was saying. But in the remote setting, I actually found it was better to try to get more info via email first. So sending out a diligence list and getting info via email and then scheduling a series of calls like we did one and Kim, you were on that one where we did an HR call, then we did a three hour technical deep dive, but it was broken up on different days so no one lost energy. And I felt like it gave everyone a chance to meet the CEO in different settings and still have those conversations. I think turning video on is good. I don't usually turn video on, but I say with Targets, that's a good way in the COVID situation to adjust. So those are just tactical things that I've done to make sure that we're pivoting a little bit from our kind of standard process. But it's definitely a little hard, frankly. We do deals all over the world and we don't always travel. I know some corp dev teams like, like they just get on a plane all the time. We try to do a lot of the stuff remotely anyway, so it's not a huge impact to our practice. But I think that that is maybe unique depending on a corp dev group. So I think that for companies where corp dev usually is out there kind of on the road more, it's probably harder. But I think that it's that initial relationship building that gets a little tough and just getting good at doing that on the phone. So one on one calls with the CEO as well is also what I've added. Like in addition to kind of the breaking up the preliminary diligence session, doing a lot of kind of one on one just calls with the CEO is also helpful in place of like yeah.

I would say our practices have changed, but I think on the strategy stuff all up at Microsoft too, you know, we're still doing deals. I think our process kind of ensures that they're vetted but. But there are some extra conversations that I think are happening on the front end too to make sure that these are our priorities and align to what we want to do. But overall our strategy of acquiring companies is still in play and our teams are very busy. But yeah, practically on the tactical stuff like building trust over video, learning who they are, I think we're very lucky. A lot of our companies we acquire are very technical, so they also have the ability to engage with us that way. And we've even seen some new decks where the CEO is articulating the strategy on the deck versus just words. So, you know, we're seeing new ways, we're trying different things. And I think it's hard, I think on the HR team on onboarding, but also on our IT teams and getting all the new equipment to places and different things, that has been more probably of a challenge for them. Just in the COVID situations you're making.

Do and being agile and adopting.

Yeah, always trying new things. It's part of the job and part of the fun.

Last question. What's the craziest thing you've seen in M and A?

I've seen a lot of crazy things. I crazy in terms of what comes up again and again is crazy is that people get like attached to very specific things. So I think what is. You mentioned a red couch, Kim. I don't know if that was like an actual example, but they're like on deals a number of deals where there was like a specific thing that people like have to have like a car, they leased the car and they need to keep the car lease and how are we going to do that? Or on our side, like gaming is one where like we have to have this one piece of memorabilia come with the deal because otherwise the employees won't be motivated. Like random things like that are crazy. I mean as a corp dev person, a lot of the times the craziest thing I've seen is last minute negotiations as well. Like last minute renegotiation of terms always is is crazy to me and makes me crazy. But I can give you a million stories of those and it could be some random legal term or tax issues are always like a last. I don't understand why tax issues always have to be the last minute craziness. But in terms of fun crazy, I would say it's like the attachment to random pieces of memorabilia, motorcycles, cars, collages.

Yeah, I know we're getting at the end, but I think one of the coolest kind of crazy things I saw was it was myself, the target leaders, our deal lead and we were all at our outside council to do sign in person, but we were also like so we're trying to figure out the last minute sign things on the target leader side. They're dealing with a lot of personal issues just to get there. We're also prepping them for an employee announce but when we got all through it, they laid out the paperwork on this huge table and walked around and signed it and just to see it come to that place of in person and witness that. And it was pretty cool because there are so much emotions of relief, celebration, a little bit of sadness of like, oh, it's going to be different. But the excitement and all of that just happening in one room was pretty crazy. But it was very memorable for me too.

Wow. Probably a lot of paperwork too.

It was a huge table picture of the big table in the outside council. I mean it was crazy. It took I think 30 minutes an hour to sign.

Kim, Deborah, thank you so much for your time.

Well, thank you for having us on.

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