Transforming M&A to Improve Integration

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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 MA deals. This podcast is going to be unique, fun and interesting. It's one we recorded almost a year ago, but it got lost in our production process. This lost episode is too good not to publish. Since recording this interview, Javed is in a new role at PayPal in M& A Sales integration, which won't be a surprise after listening onto the interview. Hi, Today I'm here with Javid Musaji, Global Head of Partner Channels at Travelex. Javid is experienced transformational leader with a proven track record in leading large scale programs which deliver sustainable change, digital experience and M and A integration. Today we're going to talk about how M and A can be transformed to improve integration. How are you doing today Javid?

I'm doing great and thanks for having me on the show. Kiesten. I heard some great stuff about this and look forward to our discussion.

Hey, look forward to our conversation as well. Maybe we can kick it off with a brief explanation on your role at Travelex and a little bit about your past experiences.

Really essentially my role at Travelex. I've been with Travelex slightly over a year and I'm currently helping them out with their digital transformation with a particular focus on their digital channels and how they go to market with those channels and how they reach out to partners. So today Travelex typically sells foreign exchange trying to find new ways to sell those products through our digital channels and particularly through partners. There's a massive emphasis on partners so I'm helping them out with that transformation. But having said that, part of my previous experience has always been with MA integration. I've always straddled between product technology and sales operations. Overall, I tend to think about my roles as 10, you know, very go to market focused. So that's in a nutshell, my past experience.

You have a pretty extensive background with the integration side of M and A. What are the biggest challenges you face at that stage?

During my Last five, five, seven years, I've encountered a number of challenges and opportunities at the same time, opportunities to improve. Some of the challenges I think come to mind is quite often I find organizations have never really taken the time to understand their customer base and more importantly, capability gaps that they have. What you end up with is organizations that are acquiring a company and then trying to integrate them into potentially bad process. So if you think about organizations that haven't really understood their customer base nor their core capabilities, and the gaps with that, you could end up in a situation where you're integrating, for example, a technology or a platform into a very bad process. And that really makes for a poor customer experience further down the line. So it's really important, I think, for organizations to go through some kind of a process improvement event prior to acquiring a company. So do they truly understand their processes? Do they truly understand the gaps? Can they close those gaps before integrating another company? Because otherwise your baseline is not solid. And effectively you might end up integrating a newly acquired company who arguably may have a better process, but you may destroy that by putting it, integrating it into a very bad process. I think it's important to bear that in mind. And I've seen those challenges. Some other examples are obviously where integration leads are brought in a little bit too late down the line. They're brought in sometimes just after due diligence, when they should be not only brought in that due diligence, but I think in my experience it's even better if they're brought in a little bit earlier than due diligence, albeit at a small percentage. And we can dive into that some of that further down in our discussions. Some other examples probably of challenges. The classic one is around the value driver. So do organizations truly understand the value drivers and particularly the integration lead, do they understand the original value drivers? And the challenge is sometimes aligning those right. As an integration lead, your mindset is slightly different. Some integration leads come in with a very operational excellence and a transformation mindset. And they're trying to combine two organizations and really trying their best to ensure that the original value drivers that were identified during the targeting and the pre deal stages are maintained. So how do you make sure that those value drivers are the basis of your integration plan? You naturally come into these challenges because you are probably requestioning a number of things. That's some of the challenges that I face. And a lot of times it really depends on the type of organization that you are integrating and your starting point. Some other challenges I would say are poor product and Sales and go to market strategies. I witnessed this a lot of the times where you're almost looking at sales and looking at products and you're passing that on to the functional leads to go and manage, almost do what they feel is best with that. And what I've noticed is a lot of companies sometimes view acquisitions as we're just buying stuff. And if you have that mindset of you're just buying stuff and then you figure out, okay, how are you going to integrate these products? Or how are you going to integrate sales teams, you inevitably end up in a situation where you're going to struggle with real integration. Because a lot of the time your go to market strategies and your sales and product related strategies should always be at the forefront of your mind because the rest of the organization and their capabilities should in theory, support the sales and products. But if you don't spend time in integrating and understanding the products and the sales organizations, then the rest will, will always be secondary. And therefore there's a larger risk of you destroying some of the value over there. Talking about value, a lot of organizations typically think of the tangible asset when they're kind of integrating. How do you go out and cut costs? How do you do your standard revenue synergies? They're very much the standard things, I would say. And the tangible assets that you go about your real estate, where can you quickly cut costs? But there's less focus, Keesen, on these intangible because they naturally take a lot longer to work and to extract the value. Right? Because it calls for a lot more change management, a lot more transformation, and a lot more, I would say, leadership and a lot more radical decision making. But those intangible assets, in my view are. Should always be at the forefront. How do you look at your human capital? Look at some of the structural capital off your acquisitions, for example. You're talking about some of the people, some of the knowledge you're talking about, okay, the processes that are always hidden within organizations and those have those hidden values which you don't want to miss. I've seen a lot of organizations being challenged by that because you never go about documenting, particularly processes. I've integrated so many companies where processes have never been documented and therefore you don't really know what you have. And when you go into due diligence, sometimes nobody spends time documenting processes. So you don't always understand what you have out there. Another one is probably around poor communication. Typically, acquiring organizations are always fearful of communicating the intent of these acquisitions because they're always fearful that There is going to either be a flight of key personnel or they're just going to scare off people. The moment you're in a position where you're fearful of communicating because you just can't control the situation. Typically I've seen organizations disguise the okay, we probably need to not communicate something because there's a risk. The moment you're in that situation, then you're not in control of your acquisition.

This is great. You made the whole outline of the interview for us. I heard one, the lack of knowing your own organization. Two, we talked a bit. You mentioned bad processes and we'll get into that. The integration leads and aligning them around the value drivers, getting that alignment in general, the go to market strategy and alignment around that value in hidden intangible assets and then the general challenges with poor communication and the whole reason for doing the deal. Can we start with looking at your own organization? Because it's interesting to me and right away I start thinking about just human nature where we don't like to criticize ourselves. We always try to keep our mindset and look at ourselves in the most positive way. When that's not the key to developing and progressing ourselves, we need to find the flaws and acknowledge it and so forth. Can you elaborate on this? What does this actually mean to look at your organization in the deal process?

If you just forget about M and A integration for a moment and you raise a good point around organizations sometimes forgetting look at their own processes. Typically organizations, when they are performing, they see sales and they see growth there, albeit marginal or slight, and they actually see something ticking along naturally. They don't always have this mindset to go in and say, okay, can we do better? How do we improve our just our existing world? That's where you have a lot of organizations. Sometimes if they've got the right leadership, they go in and they look at okay, how do I optimize my own company? How do I optimize my performance? What can I tweak to increase it by 1 or 2%? If you don't have that mindset and a lot of organizations shy away from it because it's not a natural thing to do. When you want to improve an organization, you typically fall down, okay, how do I gonna improve sales? How do I get more business? How do I retain more customers? You tend to look at the sales side of things and the sales engine of the organization, but you don't always look at naturally, okay, how do I improve my operations? How can I tweak something? You just keep on piling on, the more mature you get at as an organization, then you tend to focus a little bit on. But even then, how many organizations can you go into today and say, okay, show me your proceeds, show me your value chain. Where is that? It's like a foreign language to a lot of these organizations. So nobody focuses on that. Where it becomes a lot more challenging is then, okay, now you want to go and buy another company. That's where you start to unearth a lot of the inefficiencies within your own organization.

Say I hired you and I said, hey Javid, come to my company. What's your like step by step process you would approach in terms of getting companies start thinking different about this?

The first thing I do is try and establish a value chain, different words around it. Some people say, okay, let's get a customer journey. You can start with your customer journey, map that out, then you can second stage, okay, let's get a value chain. Drop a value map around. Okay, in order to service this customer journey, what are the key components within your organization that's really valuable and that really touches the customer and creates value for a customer and creates value for a partner? So you map that out. If you can do that even at a high to medium level, then and you share that with your organization, that is a fundamentally great start. Forget about documenting the lower level going from level two and three, but if you can even do level one and two, then that's a great start because then you start to get everyone across that same. Not only same journey and customer, but getting everybody across. Okay, now I understand what actually drives the value of our offering. So once you get that, then you can start to say, okay, what are the start technologies? Do we need to start building this or do we need to go acquire some of these? And by the way, how do we improve the customer experience? Can we do something internal to tweak something? The more you can do internal, then that's great. And then when you go and acquire something, you actually truly know why you're acquiring. It's a great platform for you to understand your capability and more importantly to understand in the end how you're actually driving value for your customers, but also for your partner. I know we always focus on the customer, but I think in today's world, it's a very interconnected world, right? Especially if you look at this day and age and the strange times that we're going through, it's partnerships and the ecosystems are going to be increasingly important. And ecosystems don't necessarily mean let's go and acquire somebody. It means let's try and partner with somebody. Let's try and get the best deal that we can for our customers. And then if we have to go and acquire, then you can go through a slightly different deal type to go and acquire. But the starting point if I went into your organization is, hey, let's document the value chain. Let's document the value map. That's the customer journey map. And then where are those value points? Right. Are we doing something when we shouldn't? Maybe we should just give that to a partner and cut some costs down or go and acquire somebody. It forces you to think, what are you really good at? Or more importantly, it takes you back to why you started business in the first place. And sometimes that gets lost down the line as you're maturing, you're forgetting what is really valuable.

I think this makes a lot of sense. A lot of times we get caught up in the 30,000 foot view of the strategy and overall we want to expand in this other geography or so forth. But it makes a lot of sense to really visit the core of the business and as you mentioned, develop that or map out the customer journey and value chain. Because I think we always forget about it.

Yeah, I think it's a natural thing. A lot of organizations, once you're just in your BAU mindset, you're just thinking of doing the robotic things and you never go back to how can I do better?

It's weird because we're a small company, but we even we forget where we lose touch of it. It has to become this exercise that we paused to go back and pull people in to start doing that customer journey mapping. There's an incredible amount of value when you do do that because then you start understanding the exact areas where you can create values.

A few years back when I was actually doing a lean Six Sigma project, we came across processes that we got to discuss the whole methodology about process improvement. And some of the guys are thinking, hey, this process improvement is great only for large organizations because they have the money to go out and do this. And I found that extremely strange because in my mind, the larger the organization, the harder it is for you to go and do this, because they're very much embedded in their ways, particularly traditional companies. I mean, if you go to a traditional bank, you look at their systems, they're quite the legacy system and legacy process. And to go and shift that and change it is a lot more harder. I was just saying, hey, if you're a small organization and You've got a mindset around constantly transforming and improving your process. You can do it a lot faster and probably a lot better. A lot better because you just have your leadership, it's very flat and they bought into it. Then you can do it in the mindset. It's already embedded in the culture. Right. So you can go and do this really, really fast. I think it's important to constantly have a transformative mindset, particularly in this day and age.

It does really align people too around what's the actual value opportunities. When you mentioned processes, you had an interesting view because one side, I guess you can almost look at bilateral. One side could have the bad process, other side as good. Maybe the choir doesn't have as strong processes as the acquiree. But hey, they built this integration plan and that's what the plan is. So we're going to integrate and we're going to take those processes apart and make them confident, confirmed to what we have. Can you elaborate more about that? Like how do you get the understanding of what the bad processes are and so forth and approaching it in integration to take in and add that agility, I'd say to change your plans and say what? There's not value opportunity here to capture something where they're actually doing things better than we are.

I think the starting point is always around the type of integration you're doing. So if you go back to customer base and the products that you're selling, so if you're acquiring a company that has probably similar products or a similar customer base, then that obviously naturally calls for stronger integration. Now the sad reality is a lot of companies who acquire a target, they typically want to absorb it into their own process. So they view themselves as the parent company because they've got the mass over there they want the smaller organization to integrate in. So it's quite rare to have a reverse integration in those cases, which is sad. Sometimes you might find yourself in a situation where although the organization you're acquiring may have better process and maybe a better technology, what I've noticed is although you may see that the problem becomes with their ability to scale it. So I've come across organizations in my past who probably have better systems and a better process, but they just couldn't scale that up. And the systems that were employed weren't scalable, although they might be efficient, but they were efficient and really good for a specific purpose. When you make those decisions, sometimes scalability is a critical element. So if you think about why you're acquiring a company, you either want to get a better technology or you just want to get a customer base. So when you're just acquiring a customer base and you just want to achieve growth, that's the point where you just need to look at which system or which process is scalable. In addition to the efficiency of that, I think it's important things to bear in mind. Scalability. Yeah, integration. I mean, one of the last integrations I did, in fairness, the acquiring company probably had better processes and better systems, but it wasn't scalable. So if you had to suddenly go and put three or four companies on that system, it'll just fall apart. But what you want to do over here is understand those processes and those efficiencies and then try to see if you can mirror that on your scalable platform. But always keeping in mind, end of the day, how can you serve your customer, how can you serve your partners?

Yeah, that's actually a really interesting view. Even looking at our own company, we have a CRM system that's one of the smaller products out there. Everybody likes it because it's so simple to use. And we've always had this avoidance of Salesforce. But while the product we may look at is a better solution for what it is, but I think partly is what you're saying it's good. The problem is it's limitation. Probably up to like 50 people and then it's not going to work well. And that's where it makes sense to have something more of an enterprise grade like Salesforce. So that's a really interesting view that you do have to consider ultimately as that factor.

Absolutely.

Walk me to the integration leads. You said they need to get in earlier. I agree with you. I hear that about 90 plus percent of the time.

If you think about integration leads, I think one of the key things for me is actually defining really good integration leads and then that can drive what point do they get involved in the journey of that deal flow? In my mind, integration leads have to be mini GMs. A lot of the times pre deal guys tend to think of integration planning as purely a project management event or a project management phase. I think it's very important that integration leads are not just project managers. Moment you think of them as project managers, you failed. And if they are only project managers, then they're not the right people to be for. So integration leads have to be mini gm. They have to understand business.

Can you define that? Yeah, please. What's a mini GM or gm?

A mini GM is somebody who understands sales, somebody who understands operations, somebody who can understand the implication of technology in the business, Somebody who understands transformation, somebody understands people. So they have to be able to run a business. You have to think of integration of you know what, I'm combining two companies together and I essentially have to, I'm setting up a business. If you think about integration, you're actually creating a new business. You're bringing two worlds together and combining them to create a new business. So the mindset has to be somebody who can lead a business, who understands and is very cross functional, who can understand, has great business acumen, who can understand everything across a business. So if you keep that in mind versus just a project management or a project manager, then you start to understand, okay, where do they get involved? So if you think about the standard deal phase, let's say I'm cramming down pre deal is typically okay, identify a target, get into negotiation phase and then close the deal and then into post deal and integration. Then potentially innovation transformation after the integration in the pre deal phase. Most guys are typically in that are pretty much corporate development guys. So they go in and they think, hey, I just want to, I want to go and identify the value. They do some kind of evaluation on Excel sheet. They figure out the value, figure out the price and then they get into sales mindset. I just need to go and negotiate a deal and close it. So that requires specific skill set and do that and that's warranted. You need those corporate development guys, you need kind of P.E. guys, you need those kind of mindset to go and do that. Having said that, as you're in a targeting phase, so let's bring it back up to the original, some of the original discussion points earlier on be go to market focus, understand your customer base, understand what you're acquiring. If you get an integration guy, let's say 10% of his time or 15% of his time in the targeting phase, he can bring that value in and maybe challenge the corporate development guys. Have you thought about the customer base? Have you thought about what you're acquiring? Have you thought about that value? So you're arriving at some revenue synergies or cross selling synergies. Yes, but have you thought about the other angles? Have you thought about how you're going to go to that, how are you going to reach that market? What channels are you going to, can you leverage the same channels? What are the integration costs around those channels? They bring a slightly different angle so they can come in maybe 10% of the time in the targeting phase and then drop out and then Come back in maybe 25% of the time, 50% of the time in due diligence, and then come in maybe 100% of the time all the way through from integration into transition and transformation. Having said that, on a side note, I think there should be a true blend of transformation stage and integration stage should be bundled together. But maybe that's a separate topic.

Can you explain, like where this sort of GM mindset integration lead comes from? Because the way you describe it, it makes it sound like it's nearly impossible to hire a third party consultant firm to take that role.

No, no, I don't think it is. It's about skill set. So if you think about third party consultants, consultants aren't. They have to have a GM mindset.

Are we looking at somebody that already has a lot of existing knowledge about the business and how it works and the pieces, how they connect together, or is this somebody that does have that mindset, but they're going to have to go through this learning curve to learn that stuff and then that's fine?

No, no, I think it's the mindset. So GMs have the right mindset, but obviously you always need to go and hire somebody who can learn pretty fast and really good integration leads, have that experience and have that mindset to pick up things pretty fast. And basically, if you're a seasoned integration lead, you'd have the ability to do that. If you're just a seasoned project manager who's worked on integration, then that's probably not. Don't get me wrong, you need project managers there, but then that's not an integration.

It's interesting. Someone once told me that startup CEOs make Nashville good fits for this because they've built companies from scratch and understand how they mechanically come together and work.

Absolutely.

Sort of back that up.

Yeah. No, whoever said that, I actually 100% agree with that person because they already have that mindset because they're doing everything. They're a jack of all trades and they're forced to do everything and they're forced to think of everything because they just don't have the luxury of having all those functional areas supporting.

Especially when you get to around 20, 30 headcount and you actually start developing those functional leads, then you really get that whole sense of the picture and how those pieces work together.

Yeah. If you think about the natural progression of a lot of people who are integration leads, they naturally, if they don't want to continue in integration, they naturally float into heading up business units, they become general managers and Head up a business unit because they have a broad thinking. They're quite good at just managing business so that growing business. So it's a natural progression.

I got a good sense of our lead integration. Shouldn't be a project manager. They need to have the GM characteristics. We need to get them in early. And we talked about the go to market, right? So when we bring this person in early, are they involved with that? I guess I want to get a sense of exactly when they get involved and then how the go to market plan sort of unfolds. When I talk to some of the companies like the folks at Cisco, their integration folks are in really early. Depending on the deal, they may be in as early as before. They even talk to the target company and essentially they're there to help validate the value drivers of the deal. But I'd love to hear your perspective on where that person sits and their role and if they're involved with that go to market aspect of it too.

They should be involved really from the start when they're targeting. And if you can, I know a lot of consulting firms are moving towards that. They're getting integration teams to be embedded into their corporate development. They definitely need to be involved earlier. But it's about that going back to that level of involvement and the percentage of involvement, it shouldn't necessarily be 100% but I think they should go in like 15% of their time really when they're targeting. So when they start talking about targeting an organization. Because if you step back when you, for a moment, when you're targeting an organization, that's the moment you're actually discussing about really go to market. Indirectly you're going to acquire some company for a specific reason. Normally it's finding that strategic fit. The moment you start talking about a strategic fit and why you need to go and acquire somebody, you are indirectly talking about the go to market element. So it's really understanding, okay, I mean end of day what is go to market. Go to market is basically how do you go about leveraging the assets and the infrastructure of a company to go and sell your product.

You got a very different view on this. You want this integration lead to essentially develop the investment thesis.

No, not to develop investment. To validate, to help validate that.

Okay, they validate it. So the corp dev guy's got an idea and they can come in and say, okay, let's start thinking through what the go to market is going to look like. And that's probably more the point of validation. That sound fair?

Yeah, it is because you could have an investment thesis around that. But then how do you actually go and take that into the market? How do you bring that to life? The way you bring that to life will always be through some kind of a go to market approach. Right? So when you think about go to market, you're naturally going to think about customers and segments. So I can guarantee when corporate development guys are thinking about the probably targeting a company or thinking of thesis, they're naturally going to think about, okay, customer base and segments trying to extract, okay, what's the worth of those customer segments. But they won't necessarily go further down around, okay, how do I bring that customer base and those segments of that acquired company? How do I actually maintain that same, say sales and growth performance in the new world? Right. In order to do that, you need to have a mindset of how we integrate these two worlds together. Does it work or not? If it doesn't work, you could have the best thesis around there, but that whole value would have gone and been destroyed. The moment I've seen so many companies gone down and made a deal on the basis that, okay, I'm acquiring this company and this company is selling to this customer base with X amount of revenue and the moment you've acquired it, you start to see sales dropping, you start to see that customer base drop. So that's already blown out. So you need to be able to validate that. And that's where I think the integration guy comes in. If he's the right, he has the right skill set. Quite often you see a lot of organizations not pulling in integration guys because they think they have the wrong skill set. They might be right because you might be hiring or thinking of an integration lead in the wrong way. If you're just thinking of them as PMs, then yeah, definitely don't involve them because they haven't got the right skill set. To validate a lot of your go to market assumptions. To validate, how do you go about integrating these? Because there's a lot to it. There's a lot to it that's go to market looking at channels, looking at your customer base, looking at the people and the skills that are. It's looking at technology and really understanding where there's the hidden value in these. And it just helps validate some of the assumptions made very early.

Integration lead is actually developing that go to market from the beginning. Now I just had an interview last week with Carlos Esta who suggested that that integration lead should be doing that with the CEO of the Target Company. What are your thoughts?

Yeah, some good ideas. Carlos. Listen, I think if you take the trend of integration and just look at this across the last 10, 20 years plus, we all know that hey, whenever you acquire a company, you're going to destroy the value. It's just everyone you speak to knows that and we spend countless time and energy. How do we not destroy the value? Some guys just go to the extreme whereby they just buy a company and they just don't integrate because they know that whatever we do, we're just going to need to destroy value here. So let's just leave them on the side and hope for the best. But that doesn't work either. You call somebody who's arguably wants the support, the right level of support and that support could mean, okay, just go and just integrate the administrative burden areas, right, like finance, legal and some of the purchasing side of things and real estate, okay. And then leave the rest where that company is already, what it's good at. Just let them be. It's just finding that right balance. But absolutely, when, where possible, you have to get the right integration need in at the right time and very early, very early in the process to help challenge and to have more of a collaborative engagement with the rest of the organization. And including the targeting, the targeting company integration leads need to be very good all rounders.

Can you give me like a step by step in terms of what that. Because you mentioned a lot of things in terms of go to market, but the key points get us started and what they should be outlining when doing it.

So, so step by. You mean like when they come into the process?

Yeah, well, if we're talking about, hey, early on, you know, just building a go to market plan and getting a sense of what that looks like from both companies and what this looks like in terms of when we're going to close and we're going to actually have this plan to create. I guess just maybe if you had a sense of like what would be the specific steps to develop that kind of go to market plan related to M and A.

The start of developing. Maybe the go to market plan starts with the type of capability you want to go and acquire or the type of company you're going to acquire. So it starts with your strategic planning stage, right? That's where we're all go to market. New acquisition starts. Organizations during their strategic planning phase will decide on what it is they need to go on, which strategic initiatives they need to work on throughout the following year or what they need to go and acquire, where they Feel there's a gap. It starts with your strategic planning. That's where I think you should be getting the right integration guys in there to a understand. Secondly is go through a bit of a discovery around, okay, there's a perception that you need to go and acquire a company to close that gap. Let the integration leads figure out, do you truly have that gap or not? Quickly going around your organization, going back to that earlier point, do you understand your capabilities? Do you understand your processes? Do you understand your value chain? Yes, we definitely need to go and acquire. That would be one of the stages. If you're there, then you're okay. Let the deal flow through its normal course. And then they come back into due diligence to firm up even more the validation around the targeted organization. Because now you've gone through your target pipeline, you've narrowed it down, and when you're narrowing down, obviously you're using the criteria that was agreed during your strategic planning. So that's where you're constantly aligning that. Then you obviously, they go in integration guards, go in due diligence. They start planning that out. They start formulating the integration plan during the due diligence because they're a little bit under the hood. They understand the risks, some of the issues that they have on Earth, and then start moving into more fully baseline planning once they hit their integration phase. That's where I think now the point I raised earlier on is I think, I think integration planning should also at that time, have an element of transformation. If you've understood the value chain, you've understood the process, you will naturally pivot towards, okay, let's have a collaborative mindset around the two organizations coming together to form an end state as opposed to, let's have the end state, which is company B being integrated into company. There's a subtle difference there between those two end states. I think if you've got transformation components embedded within integration, you move faster to these breakthrough performances and your end state is already in a transformative mind. So once you've acquired a company, you're not always just almost thinking of integration. You're actually thinking of transforming. Because if you think about this core, why did you go and acquire a company? You're quite a company because you're not good at something. If you're not good at something, that means you need to go and transform. So sometimes I'm running the risk of being quite philosophical here. Sometimes integration and transformation probably should be one and the same. I'm exaggerating a little bit there, but if you think about it from a mindset perspective.

So I recently published a book called Agile M and A and it was really driven off of pulling agile principles and applying it to M and A. And a good case was around Transformational M and A because you had this sort of value in mind with the company you're buying and you're looking to transform your existing business model. But it requires this high level agility because there's just so much unknown that as you go through this process, you continuously get new information and you're going to identify new risk, new opportunities continuously. And that's the whole premise of having this adaptive process that allows you to keep after and keep changing your plans. When I interviewed Google, James Harris had a great example. They had a manufacturing company and they similar as your example, they found out their manufacturing process was actually more advanced than what they had. But they were able to quickly change their integration plans and start adopting their manufacturing process into what they had. Does that correlate at all with what you're describing?

Yeah, no, it does, very much so. I think you mentioned Google and companies like that. But the reality is if you take today's world, by the way, I do, I do 100% agree with what was said over there. But I think what I noticed is an interesting fact is we automatically jump to M and A these days. But I think we should pause a little bit, particularly in this era of digital transportation. And if you think about digital transformation world, it's all about relationship and collaboration and interconnection. Something that kind of caught my interest recently is this idea of partnerships. Do we naturally need to straightaway think of going and acquiring a company to go and solve a problem or do we think particularly large companies, a lot of large companies and large there think that they need to go out and acquire somebody so they can control the outcome and control the asset. So they're not great at something, so they'll go and buy somebody who's good at it. Great. They'll follow the standard M and A acquisition part. But one thing that I noticed, an interesting thing is particularly for large companies, it might and whoever strong customer base, large customer base, it might be more beneficial for them to think of spending an investment creating partnership in ecosystems because one is probably cheaper and a lot faster to go and do rather than going through full M and A. But even those ecosystems and those partnerships in some cases depending on the deal type could result in an M and A. You could go and acquire some of that. I think an important part of this in today's world is transformation is automatically happening whether we want that or not. We're just forced into that because everything around us, the whole environment is changing, industries are changing. There's a lot more concentration around that. Think about consumer behavior and consumer choices. Everything is forcing us to adapt some form of a digital transformation. Now, some companies are better than others at doing it and some companies might go and do digital transformation on one element of their value chain and not the entire spectrum. I think some guys refer to that as the digital lipstick symbol and therefore it may not capture the entire value. But I don't think it's overly important in an era where if you can develop the right ecosystems, then that's great. Google is probably one of them. I'm pretty sure Google's got like hundreds of partners and LinkedIn to an ecosystem. Similarly today, if you've got. Just think of a company today who wants to go and create a, I don't know, like a robotic vacuum cleaner. What are they going to do? They're going to go and partner with somebody that has maybe AI and somebody's got a sensor. So there's already three partners over there connected. They don't need to go and buy one another each. They can just create an ecosystem.

You had a good view. 1. This is trending, right? I think people are acknowledging this more and more and I think to the point where you need to start restructuring the way you have your teams set up. Because some organizations, depending on the organization, they'll have a completely separate strategy team that covers more of the partnership aspect. But then corporate development's purely M and A. Sometime partnerships are in M and A. Corporate development. You got the right thinking that is sort of have this more of a holistic view with that sort of drive that the partnership and that ecosystem around it could be much more of a better entry point than just jumping into the TIM and A right off the bat. Seems like it's so disconnected. It's just people are just purely M and A machine and that's it. But there's none of this holistic view of what we should be doing between partnering and looking at ma approach.

Yeah. And I don't know if that should be part of the continuum, should that be one of the phases of an acquisition? So maybe you start off with creating a partnership, creating an ecosystem. Because by the way, partnerships and ecosystem, there are a couple of deal types there. You just go and partner and create the right partnerships. But even within that ecosystem there is M and A activity. It depends where there's concentration of your industry, you might have less in one industry area than in the other. So maybe for example, in financial services, you might see probably less partnerships and ecosystems created, but at least more M and A there, even though it's part of an ecosystem. But you might have traditional partnerships and ecosystems a lot more in media technology type companies. So I don't know, I was hearing like that. To create Alexa, for example, there's probably about over 30 partners involved in that in an ecosystem and just gone and created that interconnected offering. You see these with smart cars and stuff like that. Maybe the new way of thinking around M and A is hey, where it's possible go and partner and create the ecosystem. If you're a large company, you've got the assets to go and do that, you've got a big user base. Create an ecosystem where you make it a lot easier for partners to connect with you and then better serve your customers. Then stage two might be out of your 30 or 40 partners, you might figure out that 10 of these partners are quite critical. Going back to the value chain discussion, let me go and acquire them so that I can have a bit more control over their assets and control over the strategic direction of. It's not a complete break from M and A. Maybe it could just be the first step towards acquiring. Maybe we just need to think about it in a more creative way, in a slightly different way. What's the purpose of all of this? Whether you're doing partnerships, M and A or joint ventures, in the end it should really boil down to how do I create value for a customer? And if you've got that mindset, then inevitably always going to have value drivers that the forefront, you're always going to achieve some form of value there. If you take that approach, it might be longer than expected, but in the end you're actually getting and you are driving and creating value. Obviously, if you're a P for doing this, your agenda and your mindset might be different than if you are a company that's acquiring for strategic reason. But even one could argue that P firms are quite good at driving value shorter and faster. At one point they want some form of an exit, whether they sell or they do an ipo. Right? So they might be a lot better at setting the foundations to go and do this. It's an interesting way of thinking about it.

I agree. I'm going to follow up with you after this to talk about our channel partner strategy.

A good topic could be around partnership and ecosystems versus M and A.

Hey Javi, can we Go back to hidden value and intangible assets. Elaborate, like give me some examples of that. How do you get to the point where you can really find it and act on it?

Some of the intangible assets for me are things closely related to human capital, closely related to people, closely related to knowledge. That's very hard for you to get a hand on, even during your due diligence. I would say even when you've acquired the company, you're way into the integration phases. It's very people orientated. It's all hidden in people's hands and minds. A lot of times companies, they don't go and document your real processes and your real knowledge because it's embedded within somebody's mind. And naturally you think about even old school ways. A lot of employees keep a lot of that knowledge to themselves because they feel that it's power. They don't want to relinquish that. They don't want to necessarily write that down. They don't put that on a process flow or they don't want to go and document a lot of that because it's their survival, it's their job. It's a very old school thing. Nevertheless, I still see that today. You need to be able to grasp that and understand that and make sure that that doesn't disappear. Integration, because that's a valuable asset. It's valuable up until you understand what it is. But for you to understand it, you need to be exposed to it, you need to just see it. That's one example of intangible assets. The other one is obviously in the structural side of it. The relationships and the collaborations you have with partners is extremely valuable. And again, that gets hidden and thrown. And I think that's probably one of the reasons why you start to see companies that have been acquired. I've heard, for example, and personal experience. For example, two banks. A bank acquires another bank and suddenly you see their customers disappear because they're not receiving the same level of customer. So those are just examples. But why does that happen? It's because they're not necessarily thinking about those relationships with customers and with partners. Again, it's going back into sales Guy. You just don't manage this the way you manage. On a personal note, I've actually experienced when I was integrating a couple of companies a few years back, talking about one of the craziest things I've seen. I've seen probably two sales teams almost coming to blows. It's a sad thing to see, but. But they're always coming through because they were mismanaged. But see, those are hidden intangibles. So it's around the people, it's around relationships, around collaboration, it's around knowledge, that capital within the knowledge. How do you truly manage that? You can't always put a value on it, you can't put a dollar on it. It's a lot hard for people to go and manage. It's a lot hard to create the right KPIs for it. What we typically go is to, okay, let's go back to the tangible assets which we start to measure. That becomes the basis of your valuation, the basis of your performance after your integration. So those intangible assets are really, really important stuff around your human stuff around structural and your customers. So customers, you could probably put a value on a dollar and all that. But the other two are what supports it. And I think it's really, really important to try and get a handle on that.

How though?

Tell me how the reality a lot of times is actually developing relationships with the acquired company. You know, going out and speaking to people, having the human connection.

Okay, okay. The human hidden value, you got to combat with more human effort on your end.

No, absolutely. The ways around doing it and having a human connection doesn't necessarily mean that you can't let go. It makes it a lot easier and a lot more respect. I've always respected leaders who have been upfront with teams, and I think you should never shy away from doing that. If you're straightforward, upfront and respectful, I think people understand and respect you for it. But relationships is a very, very important business when you're acquiring a company. Right. Particularly for leaders. It's very important for leaders to be able to lead from the front, take some time to go and understand the people that's there. It doesn't necessarily mean that you won't have to make the hard decisions, but I think making the harder decisions once you've known somebody in itself is a lot easier to do.

Let's take this even a little bit deeper into more of a tactical step. Are we talking about, hey, I need to just grab coffee with as many people as I can and do these little one on one chats. We're having more like open town hall meetings, group meetings. What does that look like?

The first step is not having town halls. Then if you can, moving down into the second leadership team, passing the messages down, becoming that agent of change, working with the peers to understand, okay, what, what type of messaging are we putting down there to people, how you're putting it it should not just be just email. It should not just be town halls if you can't personally meet people. It could be various things. It could be webinars, various social chat rooms and things like that where you can tactically put things in place. But leaders need to be seen. They need to be seen where they can also see the direct messages coming from, not only from the manager, of the manager. So that's the new leadership is being in the forefront of these things, trying as much as possible to flatten an organization. And leaders need to be approachable.

What are you saying to these people? Are you making your deal points? Are you asking questions? How are you making the connection?

One is being upfront around why they were acquired, for what reason they're required. I think an important thing to remember is people are a lot, especially in this day and age with information flying around left, right and center. People are a lot smarter than us and they know way before us on potentially why companies were acquired. Going back to that thing. If you can't have a discussion with them and understand them, you're not in control with what type of messaging or how they're interpreting a message. I think it's very, very important to be able to have a direct and upfront communication with them. Obviously they're within reason. So if you're a public company and there's only so much you can divulge, but you can nevertheless have a human conversation. So it's coming back to having a human conversation with the teams. Now you may not be able to go and do this one by one on everyone, but always make sure that leaders are actually seen backing up their strategic intent, backing up their decisions, backing up whatever they've made. Whether it's hard choices and things like that, they need to be seen be backing that up and being upfront about these things, sometimes being quite dramatic about some of this stuff, it helps to get through that, the change management challenges. Because I've seen a lot of leaders who shy away from communicating because they're fearful of having an impact on business as usual. And that's the worst thing you can ever do because it's worse to have your employees concocting something up in their own minds because that has more of a negative impact, an adverse impact on productivity.

Worst thing is to do nothing.

Yeah. Versus be upfront. And it might be painful for a few weeks or a few months, but you can then manage it a lot better because you've had that human connection. Right. I think it's about that. Fear is a. It's just natural psychological behavior.

Would you say those points you mentioned help overcome the poor communication challenges you mentioned earlier?

Poor communication is sometimes it's not so much in the frequency of communication, it's more in the content and the how. So when I talk about poor communication, the old statement, you can never over communicate, I agree with that to a certain extent. But the reality is me receiving two emails a week in my inbox, I just don't read it because the content is like, okay, the same thing. So over communicating is. I'm not saying it's necessarily a wrong thing, it has its benefits. But I think what's more important is grabbing your audience. You're better off doing a 50 second YouTube or some kind of social media thing or social chat to the entire organization once a week and having bite sized information that's meaning and that talks about, okay, what does it actually mean for me as an individual, how am I impacted by this information? And if you can just do that in 50 seconds, just have for example, go out there and say, hey, we've acquired you. I know you guys must be worried about what does it mean for you as an individual. Talk about that. 50 seconds. What are you going to do about that? How are you going to address those? Do you need to be worried or not? Functionaries are going to be worried. Okay, yes, they are. Then you start to dive into them. Then you hold different types of sessions that are addressing specific concerns. I think creating chat with social media technology these days could be great. You get to understand the pulse of an organization. You get to understand what is the general trend of thinking within an organization and addressing that. So leveraging some of the technologies today, you can do it because ideally, if you're a small organization, you're acquiring small digital companies, you could probably go and speak to the 30 people and that's a lot easier to do. I know I personally did that a couple of years ago. When you're acquiring small companies, a lot easier to do. Whereas larger organizations where you're talking about thousands of employees, start leveraging some of the technology tools there. Focus on content, focus on just short messages that are meaningful and meaningful because it's addressing a specific need of your employees.

Yeah, I like the example you started giving because it hit the tone of empathy, like I understand you guys are concerned and things like that. So that's, that's pretty cool.

But also focus on the positive, it's not always negative. For example, you might be acquiring a digital technology company, you're really interested. Start creating buzz around that is that.

Where you start building this grand vision of a beautiful, harmonious marriage together.

Yeah. Step forward towards achieving that, but address the good and the bad. So not always negative. I think leaders have to constantly share and communicate successes and communicate interests. What are they as a leader interested in? What is the organization interested in achieving? Don't have these long winded messages and very lost in the whole strategic stuff, but have messages that are powerful, that connect emotionally to people, to customers, partners. It's just going back to this idea of why do we exist, why are we in existence? Can you create these emotional connections, bite sized communication? And I think those are the things that a little bit more powerful and then it encourages people to come back to work, also encourages people to get out of bed, reminds them why they're getting out of bed. I think we always lose that and I've just noticed that a lot of leaders are losing a little bit of that and forgetting it. And I would argue it's probably a lot easier to do in this day and age of technology. The reach is a lot more powerful and I think there's flexibility there.

Oh, you got a really strong point. I want to step back a little bit. I like that we went through all these different challenges and built a whole interview out of it. What practices do you find yield the best results?

It's kind of a little bit tied to some of the challenges that I mentioned earlier on. I think one is let's not automatically think that one size can fit all. And having said that, I think you can create the right frameworks and the right guiding principles and those can be based around the type of companies you're acquiring. The reason why I talk about guiding principles and maybe frameworks as opposed to, you know, your traditional playbooks, which I feel are not always relevant in this day and age. Because when you're acquiring a type of a company in France versus the UK versus the us there are going to be a number of nuances there, both culturally, economically. So it's a bit hard to just throw a playbook. I think what's powerful is to have the right guiding principles, the right frameworks to think about some of the things. So guiding principles could be things like make sure you always have like an outside in approach to these things. So thinking about the customer first, thinking about when two companies are combined, you're going to create a new market condition there indirectly. So you need to think about what is that new market condition? How are you going to create value and integrate companies around that new market condition that you've just created by combining this company. So being customer led is one approach. The other one we talked about is ensuring you've got the right relationships and collaboration. So make sure that's a really strong guiding principle there because it helps you to address your internal and your external customers and make sure that they are not impacted in an adverse way. So always keep those relationships, that collaboration going, that maintains the right service levels. Maybe a third one could be around ensuring that you've got your integration plans are very, very tightly coupled and linked to the value drivers that we discussed. If you can't link them, then it's that old saying, if you can't measure something, then it's not going to get done. Focus on the right things to integrate. Maybe don't go and achieve everything. You're better off going, integrating and transforming a handful of meaningful things than just thinking about, okay, let me just go and throw a playbook and do my functional old style integration. Let's go through HR finance, all the usual stuff, which I personally I did in my earlier years of M and A integration. I don't think that that necessarily works in this day and age. Make sure your integration plans are closely tied to Value Driver. And again, when we're talking about that, you think about, okay, let's just create a new work stream. We're calling it customer value or we're calling it improving the customer journey. And that could be your work stream. And that work stream pulls individuals from both companies to work on a transformation work stream. And I think that's going to create a lot more collaboration, a lot more integration, but just doing that as opposed to talking about human resources, finance and sales integration. But if you're combining customer propositions and things like that, naturally it will naturally lead to sales position being integrated. Your starting point should be sales compensation and it should be what are we selling? Who are we selling to? That's just kind of an example. Another thing is best practice is make sure you've got the right integration KPIs there or transformative KPIs, whatever you want to call them. Make sure those KPIs are linked to your value drivers and you're better off having maybe four or five. Don't end up with like 20 KPIs. That means something's gone wrong. Have your big four or five KPIs. You definitely need some solid project program management there. If you can create an imo, that's great. If not, as an organization, depends on your maturity around project management and program management. But leverage Some kind of a PMO or an IMO support, but do it with an integration and a transformation mindset. I think we talked about ensuring we've got process improvement and transformation methodologies there. So get some people who understand that we have that mindset. So when you're looking at your customer value chains and all that, you're thinking about how you're improving the overall process of combined organizations as opposed to one company absorbing bad processes having the wrong baseline because that can take them years to fix. I think the other one is obviously trying to be as flexible and as agile as possible. In this day and age. It's all about. Everything is all about agility because we just never know how things pan out. We always work on some assumptions. We work on towards the North Star, but how we get there, we just need some agility in how we get there because you can't have that one size fits all. So being as agile as possible is critical in this day and age purely because our environment is changing, our customer behavior changes, customer needs change. So we have to be as agile as possible. Every industry is kind of hit by this and disrupted by changes. Right. So agility and flexibility is key.

These are some great tips anytime.

Listen, it's always a pleasure kind of bouncing ideas and having a discussion around these topics. As I said, I'm quite passionate about go to market and how you go to market and whether that's through partnerships or acquisitions. Some passionate topics that are on there. It's a lot. I think I was maybe throwing quite a lot out there, but it's just. I think it's going all right.

So to wrap up this interview, can you tell me what's the craziest thing you've seen in M and A?

Yeah, I think I mentioned one is so a couple of sales teams really close to going. It blows. They had territories that were their own acquired company versus the parent company literally coming to close to blows because they didn't want one sales team, didn't want them encroaching into their territory. So that was the one example where sales and product marketing was just left to a functional sales guy to go and manage. And let's face it, they're focused and their priority was morons going and selling. It wasn't about how to integrate two sales teams together and around what proposition. So that was an interesting.

So they didn't have a clear cut go to market.

Yeah, they didn't. No.

And now they're ready to beat each other up.

They were. And listen, and it's Understandable. I've worked with a lot of sales team that that's kind of a natural. The other one was undocumented processes, which meant that we kind of shifted a the thought is processed into a back office into a center of excellence, but we didn't quite understand exactly what was the value of that process. And shifting it into back office center of excellence meant that customers weren't serving the right way because we didn't quite understand that process. So back to whatever you're shifting first, take some time to understand not only what is that process, but what's the value to that customer because you can indirectly shift the process into the back end and assume you're going to make some savings over there, you're going to consolidate into a center of excellence. But in doing that you sometimes can destroy the long term value. If customers are disappearing and they're not serving the same way, then obviously your offering is impacted and therefore any savings you will have had in the long run is meaningless. So that's kind of a value distraction. That's a couple of examples of some crazy things I've seen. But yeah, but sometimes you just go ahead and do it because you kind of hit by a timeline which you need to try and hit and deliver on. Those are some things, some mistakes to learn from and not to repeat.

And no deal comes easy.

No, no, no, absolutely. And that's why I understand that most acquisitions you always end up destroying a bit of value. But I think the whole point of this is learning how we get better at not destroying the value.

I think we learned a lot today. David, I really appreciate your time and enjoyed this conversation and hope we have.

More of them anytime and look forward to participating in future discussions. Always excited to speak to thank you for your time. No worries.

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