Virtual Summit Recap: Why Everything You've Been Told About Integration is Wrong

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Day two of M& A Science Virtual Summit. We are going to start the day with Zoe Bogan, M and A Integration professional, Diversity inclusion champion Ben Haldivank, partner at the Agile Gorilla David Boyd, partner at the Agile Gorilla and we will be discussing why everything you've ever been told about integration is wrong.

Thank you so much and I am a fan. It's always a pleasure seeing you. So thank you very much. As mentioned, my name is Zoe Bogum, I'm with kpmg. I'm part of the corporate development team with a specialization in integration. Also passionate about diversity issues. And now I will turn it over to David.

Thank you Jerry. So introduction for me. I started emerging active integration around 20 years ago. Trained as an engineer. Since then I've worked across steel construction, a period of management consultancy before I moved into advertising and marketing and I focused on M and A across all those different kind of aspects and industries.

Perfect.

And yeah, me, Ben Deholdervang, I've been in the same space for about 20 years. I grew up as a bit of an expat brat so I spent a lot of my youth living in Australia and Egypt and all over the place and that probably had a big bearing on what I did post. Then came back from Asia in 2016 and I've done a whole range of program director roles and integration projects. I like a number of the people on these calls. I'm writing a book currently on transformation and what goes right and what goes wrong. And in particular the challenges between strategy and implementation, which I know we'll cover a bit today. And I'm doing some lecturing as well at the London School of Economics, currently working on a big regulatory change program which is part of a large integration project.

We're excited to have a really great discussion today. And to kick it off, we are going to respect the title. So why? Everything you've ever heard about integration is wrong. So after all of these years, what are people doing wrong in integrations and what are some tactical things that people can do to adjust?

Okay, so I'm going to choose two things that are sort of key assumptions that people continue to make and I think continue to get wrong. Some of these things were covered last night. For example, I know that Carlos was talking about this yesterday's whole issue of the challenge of cost over revenue synergies. Right. I think that's a complete myth. I'll tell you why it's a myth. I think where it's coming from, it's coming from US external advisors because it's an awful lot easier for us to find cost synergies than it is to find revenue synergies. Revenue synergies need to be found from people internally within the businesses, and they need to be able to respond. Respond to those things. The reality is you can find revenue synergies in all sorts of different places. It might take a little bit longer. It might take a bit more of a discovery process to get to that point. But the potential benefit of that is huge in terms of the engagement of the key employees and that exercise. The second thing that people get wrong is we still talk about integration from a functional perspective. I think functions are the sources of much evil in corporates these days. They generate silos, which we all struggle with. They generate very narrow thinking. They don't connect to those corporate goals that I know Sean was talking about yesterday. And they create this sort of narrow space. I think that a lot of the benefits that sit in integration come between functions. They come between a product development function and a sales function. They come between the HR and the facilities function. When they're thinking about the new office space and where it looks and what it does, they come in all those interesting spaces. And so the children of the integration, which is the benefits that no one ever thought they'd get. But the reality is what they often they find those benefits those children come from in those in between spaces. So I think we need to change the way that we think about integration from a purely functional perspective to much more of an outcome based type perspective. What are we trying to achieve? Do we have a single target with regard to sales and customers? Do we have a single target with regard to the product development part of the world? And how can we create an alignment across lots of different functions around those specific targets?

Okay, David, what about you? Two things.

Thanks.

Two.

For me, there's a phrase that is so common in integration, it's almost as though a professional knows it. It's taking control that day one, taking control over the first hundred days. The problem there is that is what you're leading in with you're leading in the first experience of a lot of people in the management team and the target will be taking control and you're doing it on a basis of very limited knowledge and what you've gained from due diligence that due to the space, what you're really looking for is transparency. If you're briefing the team who are doing the integration, both the tug and the choir together, it's about briefing them to say we don't necessarily need to control everything the target's doing, we just need to make sure we know what's going on and we can react if we need to. So I've switched taking control to transparency. The second for me is this concept that I come across so often that MA integration can be preplanned. You do due diligence, you do your planning probably with some consultants and then day one you go in and the project team are all about delivery. That's completely false for me. Problem there is you're basing your plans on such limited information understanding of the target. What you're really looking for is an agile emergent way of managing the program. And one of the practical things I'd do there is start off with a discovery phase to start with and say actually what do we really understand and how does this target really operate?

Awesome. Now in previous interviews you highlighted that it's easy to change people post deal. Now some may disagree. Can you please kind of like explain that approach a little bit more? Is it easy to change people and what are some of your strategies for doing it?

So I'll start off with that one. For me, you've got to put it into context. So all the integrations I've worked on probably for the last four years now have involved an 18 month transition service agreement so you're talking about being tied into the vendors, systems and processes for 18 months. You can change people if you give them clear direction, clear information within days. I mean, that's the reality of human beings. We're extremely adaptable in many situations. I understand it. You've got this status quo bias you have to overcome. You've got the cultural norms within the organisation, but if you put enough effort, you can overcome those biases and that status quo situation and really drive change.

Ben, what about you, Zoe?

Let me add one thing to that. I think we're living through the most extraordinary period of change that we probably have ever lived through in terms of COVID 19. And if you look at the behavior patterns of people in the workspace, how they've adapted to that, how they've responded to those challenges, it's extraordinary. I think one of the things that people get incredibly wrong, and I have to say I do put this slightly at the strategy guys, we'll have a discussion about it, but I do put it slightly at their door, Zoe, and I know you're one of them, is that there's a perception that productivity amongst people is staffing. Right? No. I don't know if you ever. I'm sure you haven't, Zoe, but if you've ever woken up with a hangover, certainly I have. My productivity is nowhere near as good as it is without that hangover. Right? So the concept that in a period of incredible uncertainty you could have a static productivity is completely crazy. Now it can go two ways, right? If you have an authentic leader, if you have people who communicate and you trust them and you believe them, your productivity is infinite. You could come up with the next great solution that's going to solve the problem of your company. Agreed. On the other hand, you live with people that you don't trust. Your productivity can go down to zero. Okay? So this concept that we don't change is something that's very convenient from the point of view of someone trying to model what the future looks like. Right? But it's just not reality.

You know what, that's a really interesting question and I'm going to have a follow up to you, Ben. So a lot of times we talked about, to your point, creating the right environment in an integration so everybody's comfortable. What is the right environment? What is the right environment? How do you go about building that?

One of the things, I won't plug this again, I promise you, but I am writing a book on transformation. So one of the things that's come out of that book is. I basically interviewed about 100 or so program directors from projects all around the world. I talked a lot about the ecosystem because I want to talk about a broader thing than just culture. It's around everything goes into processes and systems. It goes into the environment they work in. So what comes out of that? What do we hear from those people in terms of successful environments, ecosystems? The first thing we hear is that we hear about empathetic leaders, right? They're not people who are sitting in a box somewhere with a great strategic brain. They're people who can communicate and who can engage with people at a very deep emotional and psychological basis. That is a very different skill set perhaps from some of those people who we might articulate as being great leaders in this space. The second thing that we see is we see a very open and honest environment. We talked about it a bit before in lots of the great transformation examples that I've heard. There is a black hat, there is a role for someone who can say, this is bullshit and we can't do it this way and that person is accepted and allowed in that environment. The third thing that we see is that the functions I talked about earlier, there are no boundaries. So people are breaking down boundaries wherever they find them. And I think the final thing that I will talk about is that there are very small, very visible signs of change. Humans have got this extraordinary ability to think long term, but they also have an ability to pick up on very small nuance and very small change. And that makes a huge difference in the process. There's the whole toxic environment too piece. We can talk about that as well. But that's the good side.

You know, I have a follow up question to that and then I want David to chime in too. So you talked about empathetic leaders. Now from a tactical perspective, because people have different processes. Are you suggesting a leader express empathy? Is it just through a written communication? Do you suggest that a leader do one on ones? Do you suggest they do team calls? How is a leader really showing empathy to highlight to those employees that yes, I care, what does that look like?

One of the funniest moments I often have when we look at integration projects is we talk about the communications effort. And more often than not, people talk about the fact, oh, that'll be half a day, a week for one person. It'll be fine. Normally they bring in external people, external communications people rather than internal communications people. And within about a week or so they work out that that is not resource and not the right resource. Right? So One of the case studies that I heard when I was doing this is an incredible company in South America that turned itself around from being six months from going bust to basically beating the competition within an 18 month period. Extraordinary story. The CEO of that business committed himself to 15 to 20 meetings with a range of different people around the organization every month. These are not just little 20 minute chats, these are like two to three hour sessions where he was taking them through that process in every possible form, in every possible channel, from happy hours to town halls to specific agenda meetings. Right. The whole range. So he was touching a huge number of people all the time. It became basically his job. It's not a part time thing. And for an empathetic leader, it's absolutely core to what they do.

Interesting.

There's a quote by William Gibson which is, the future's already here. It's just not evenly distributed. So we talk about the right environment, we talk about moving from pure strategic change through to cultural change and using culture as a driver for change. There's some great examples of what people are doing out there. So I don't think we're having to reinvent something new. It's purely about spotting what's going on and doing it in the right way. You talk about authenticity of leaders as human beings being very sophisticated at telling. Actually if somebody's being authentic about what they're talking about in terms of purpose as well, this idea that purpose has come along and being a key driver rather than profit, what's the purpose of the business? But you can't impose purpose. People have to discover the purpose of the business for themselves. There's so many out there, there's just two. It's about finding what works and what will work for your organization.

And you know what, you mentioned something interesting. Culture. And culture is a hot topic. Right. So we have another segment on culture later today. But culture is a key part of integration now. We, prior to this had some very passionate conversations about culture. I'm going to dig into that a little bit deeper now. How important is culture to a deal? Right. And how have you seen culture evolve in the past 10 years? And why is it so important for us to focus on.

So let's talk about culture. So I think let's go back to the subject. Why are we getting things wrong? Okay, so there's two things that we're getting wrong in culture, right. The first thing is we're stopping at Diagnostic, which is my friend David often says is a bit like going to a barber and getting a haircut when you get that moment when they show you the back of your head, which is deeply interesting. But there's bugger all you can do about it at that stage. Right. That's what diagnostic is. And that typically is where the process ends for a lot of organizations. And it's a sort of bit of navel gazing piece. Now the reason why it ends there is two things. One is that people think it's a work stream. It's not a work stream. Right. It touches every part of the business. It touches the processes. I work with a rubber manufacturer in Singapore, their trading operation in Singapore. There was one woman there who basically had a sort of 3D brain. She could map the growing cycle, the transportation cycle and the demand cycle. And she had these massive sheets of A3 paper that were basically a myth and a part of the legend of the business that she could do this. There was no technology involved in this. They were shipping enormous amounts of rub around the world based on these A three pieces of paper. That is a process, right?

Yes.

But it's also part of the culture of the organization. So if you think that you can go into a beautiful office sometime, get some PowerPoint slides and that's going to ultimately change the culture of the organization, that's complete nonsense. It's the problem is that changing culture is a lot of little steps. It's not some silver bullet. It might be taking the doors off the CEO's office, it might be moving the claims function next to the sales function insurance area where actually you're getting much more client communication through those pieces. It might be changing the floor plan, it might be changing titles, it might be the CEO wandering around with client experience data for 3 months as opposed to normal financial MI to change the culture of the organization. These are not huge eye grabbing things. These are things that are little and they start to impact very quickly on the way the acquisition works. I worked with a bank which was in dress stand mode six months before the new CEO came in. He was actually the cfo. He'd worn a suit to the office all his life. Everyone started wearing a suit. Right. Six months before he came, everyone started wearing a suit again. That's a culture change. That's the challenge for us.

Right. I do agree with that point and wanted to add something that we're going to go to. David. But with the culture work stream, I agree that there need to be interdependencies and you need to understand how culture hits all aspects. However, if you don't have a culture work stream who's accountable for the delivery. Who is doing that intricate work and executing on it?

Well, David, maybe you can start that and I'll respond as well. But you answer that you.

I suppose it goes back to the heart. That culture is everybody in the organization. So the idea that you can delegate it to somebody else and cascade for small team to work on is wrong. It is everybody in the organization but then it is more important with a select few. So for me it comes down to who are the people who are seen as authentic and who are the people who are the key influences in the organization. And actually I copied this from Ben, just going around and asking a random self of the people in the organization who are the key people who influence the culture of this organization? You'll get the same list of 10, 20 people. So those are the key people you want to target. They're the influencers. They need to do it in a very authentic way. And that's, I suppose that's a practical thing and it needs to drip feed into all the small actions that every single work stream is doing. How they go about what they're doing, how they talk about what they're doing, how they communicate what they're doing.

Look, it's really easy to be honest, right? Every work stream meeting you have, every work stream you have, you can have a little culture segment in those regular catch up situations where people get to talk about what they found, what they've heard, what consistencies there are around language, what processes people rave on about, what things they've observed that are completely unique and remarkable. You know, it's very interesting when you open your eyes you see the most remarkable stuff that's taking place. I remember going into an oil and gas company in an office building in the middle of Kuala Lumpur working with them. And I thought I walked in the door, I hadn't worked in the sector before. I walked in the door and I had a meeting perfectly an all office building. And they started with a fire briefing. I said that's really nice of them, I appreciate I've never been here before. That's great. Literally every other meeting I went to had the same fire briefing. That's unusual in most corporate life. That's pretty unusual. That's part of the culture of that organization. It goes to the whole issue of risk and everything else. You're spending the first five minutes thinking about the fire briefing, right?

I suppose I chair a lot of meetings and I found it's crazy how you can influence the meeting simply by writing the agenda, just flipping the agenda around and changing what the first item of the agenda is on every meeting, that has a huge impact. You want training to be a key part of the organization. Make training the first thing you talk about in every single meeting. And it slowly catches on.

Right? Awesome.

I'll give you another example. I work for a very large airport terminal services business in Singapore. You know what was at the top floor of their building? Beautiful building, very close to Changi Airport. The training center. Not in the basement. Right. The CEO wasn't in the top of the building, he was on the first floor. The top of the building was the training center. That tells you everything you need to know about the culture of that organization.

Interesting.

Did they do that on purpose or not?

Moving along to something that is really interesting for integration professionals is the infamous business case. In a situation, when you receive a business case, right, some integration professionals are part of the strategy, others are not. But if you receive a business case that you deem unreasonable, how do you still have a successful integration?

If you're able to explain to the team that came up with the business case the simple mechanism that the information that they had during due diligence is materially different from the reality you're facing in the organisation. Different data, you need, a different outcome. Equally, you need to show that the way the business operates, the process, they're tuned, the kind of formula for how the business works is fundamentally different. And if you can get that information and explain it to people, it's important to keep the business case because you're not trying to get away from things. You're saying that's a perfectly valid benchmark we want to measure ourselves against. But the question is, how do we beat that? It may be through driving revenue synergies rather than cost synergies, maybe vice versa. But purely use it as a benchmark and explain to people, because there's a lot of commitment to that business case. So we can't avoid it, but explain to people why it was wrong and help them understand in a way that they don't feel their egos being effective. As you know, you did a bad job, right?

Ben, what do you think?

So again, back to some of the research that I did. There's people who seem to be really good at this stuff, without question, involved integration early on, right? No debate. And they've all involved them in quite a deep operational sort of sense, and they got them involved in that project and they got them involved in what the cost of delivery was and they got them involved in what to do first. That so I've worked on a situation relatively recently where this organization is going to go through exactly the same process as it's gone through before, but because they're buying someone else, they're about to fire half the people that we're going to need for that program. So what are we going to do? We're going to rehire them back as expensive contractors or find people externally who don't know what they're doing? I mean, it's just completely mad. Now, it might make sense in the context of a financial model, but it doesn't make any sense in the context of an integration program. So that's the first thing. It is terrifying when you see a business case, as I saw one relatively recently, five years out, with revenue synergies and cost synergies down to the dollar. Now, that would be understandable if that was an entirely complementary acquisition process. In this case, 80% of the business they were buying was nothing to do with where they were currently. So where the hell is that information coming from? Is that some crystal ball they put? I mean, it just doesn't make any sense. Right? So that's when you've got to challenge the business case. Now, I agree, Dave. David, if you committed to the market, you're going to do something in certain ways, that's fine. And that's. That's what we have to live with. That's the reality. I think the question of how we do those things, how we deliver those benefits, has to be to some extent within the core of the integration program to make sure that we're capturing the right things at the right time and getting to the right place. Those children, the integration I talked about, those benefits, they come when you approach that in that way.

Great point. I now want to move on to utilizing the target employees. Is that the correct thing to do in an integration? And also highlight that some of our participants highlighted that. So, for instance, Christina's interested in methods, successful methods, to kind of build alliance with the target. Larry, how do you tell if someone is a cultural influencer? Right. Those target employees and incorporating them are really important. Can you talk a little bit about that?

Cultural influencer? I think David talked about it before. Everyone knows who they are, right? So the first thing you do is throw out the org structure because it doesn't tell you anything about cultural influences. The person at the bottom of the organization could be the biggest influencer ever. I've come into many organizations where they've told me that the person who sits on reception is more important than anyone else in the organization because if they've got a smile on their face, they're going to have an impact on the business. They also know what's going on. They also know what's happening around the corridors, around the chat areas of the organization. So org structure tells you nothing about cultural influences. Everyone knows within the organization. And it's relatively easy to draw that list up and pull out 50 people that are going to really change the way. Now, the interesting thing about those 50 people, it comes back to the question of why are they cultural influencers now? Maybe sometimes they're cultural influencers because they don't always believe all the bullshit that's coming out of the CEO. Right. That role of being a naysayer, of being a critic, of being someone challenging, is a very powerful role in an organization. And it's an incredibly powerful role if you can turn those people to a neutral or to a beneficiary situation where they believe what you're doing and they're involved in that process, rather than try and get rid of them, because that's the biggest mistake, want to bring them into the process.

And that flips for me into the whole concept of what's the purpose of the deal? Is it cost? Is it revenue? If you're thinking about growing and you're talking about revenue growth, who are the people who best understand the product? Who are the people who best understand the customers in the market? The people in the target. So going further, why is it even the acquirer who leads integration work streams? It should be the target who is leading each of the integration work streams. The target understanding how their business operates. And then you can learn quite easily how the acquirer, operations, processes, organization structure works. So I'd actually fit things around.

Yeah, it's a really good point, David. The issue of integration still being perceived as a bit of a battle where the person who's bought is the winner. That is a binary load of nonsense. It's not like that. It's not like that. Just because I got access to capital doesn't mean I'm a better manager of a business or a better person of running clients, whatever it is. Often I think you're right. I think often the only thing that's important from an acquired perspective is the integration. From an acquirer's perspective, they could have a million other projects going at the same time and they're trying to split resources across that space. I think that's really interesting. I think the role of the outgoing CEO is also something that we shouldn't underestimate. I think there's real power in the relationships that he or she has in the organization, in the influence they have, and if it at all is possible to bring them into the process in an open and transparent and authentic sort of way, I think it's a really useful way of taking that integration process forward.

Absolutely. Should integration professionals not feel bad if the CEO leaves after six months, a year, two years? If you plan for it, should you be comfortable with it? And also how should you be comfortable being uncomfortable? Say you don't plan for it. What does that look like?

Not all targets are doing the preparation you'd like them to do. I've worked with a client recently where really the CEO should have been planning 12 months, pre completion, pre close, exactly what they're going to be doing next. They were unable to make that transition, unable to do that planning, which means that actually post deal, that had to be something that was put into place and so keeping them on board, making it transparent so everyone's clear what's going on. So there aren't any rumors. For me, that's key. What we were just talking about goes back to what Gustavo asked about a question. He's talking about the chemistry between target and acquirer and how that changes once the deal is signed and it becomes a boss subordinate relationship. For me, actually, if you can try and break that down. So it's not all the acquirers are the boss and all the targets. Actually there's a variety of different roles being taken in the organisation and you make it transparent about why you're making those decisions. I can try and help break down that dynamic.

David, I have a question for you. In terms of M and A integration and the impact of diversity, specifically what we are seeing now, how should we have that discussion with a targeted inquirer? And what are some things that we should consider specifically now, as most corporations are talking about diversity, most corporations have a chief Diversity officer. How is that kind of implemented in integration? The culture discussion, how should we start viewing it?

It's a really good question, Zoe. I mean the reality. I've been thinking about this for a while and I've got no answer to it. The closest I can get is I heard something Professor Francis Frey, Harvard Business School professor, said a couple of months ago. She was talking about how when she goes into a company with a gender issue, she'll find a 360 degree survey and actually 360 degree appraisal process is normal. It's taken for granted. That's something that works. And she's saying Actually, that's the first thing she dismantles when she finds a gender issue. It makes me question all the different processes and standard tools and templates we all use in M and A integrations. What are the hidden biases that they're creating in an organization that actually probably are creating diversity issues? And I just don't know.

There's a very interesting book by Matthew Said called Rebel Matters, which I think I recommend people to read, and it talks about cognitive diversity. It talks about the fact that when you bring people from different backgrounds and different education and different nationalities into a room, you get very different answers. Now, it's not always a comfortable experience, but it's a much more holistic and much more real experience. And it's probably one that's going to solve a lot more problems in that way. I was just going to pick up on one question. I saw that Stan asked a really good question around how do you create outcome based programs from functional leaders? It's a really good question. The key thing for me about that is you need to identify obviously what the purpose of doing the deal is. That's got to be the starting point. If the purpose of doing the deal is that you're going to bring together an incredible product capability across the two different businesses, then obviously that becomes a really key focus. Now there needs to be a business element to that. So often I say to organizations, who are your business leaders that are going to run or that you think are most capable of running something that looks like that. And then effectively you bring hr, you bring finance, because they're all going to have a bearing on that process. You bring some of the other functional support functions into those areas to support that process. They become people who are delivering something to a specific outcome based program as opposed to doing their own thing. I don't see much value in HR integration from a cost and revenue synergy piece. We might become a bit more efficient, we might be able to reduce some of the workload a bit and we might decide on which system to use, but it's not going to drive huge amounts of revenue synergy out of that process. I do see some benefit from HR coming into a product or a sales led outcome strategy where we're talking about revenue cost sharing, we're talking about revenue split, we're talking about the way the organization is going to be organized or that sales organization is going to be organized. We're talking about the way that we're going to engage with customers. Those are all great subjects that someone with a solid Communications, HR culture background can really contribute to and make a huge difference on that is a very different story from deciding which HR system to use.

Perfect. And listen, thank you again also for your responses in the chat. Love that Dennis. I always start with the teammates on the shop floor to get the true sense of how things are going. Love that point. Because we all know that the CEO, middle management and sometimes other individuals have a different perception of the company. And in integration is always great to understand that. Now I have a very interesting point and I love this concept of Black Swan. So Black Swan is so interesting to me because it's either something small or large, some information that can kind of really impact the deal. And I would be very interested from the two of you, what is your famous Black Swan story? So as you finished the integration and didn't realize that the coffee machine was the key to the culture and you got rid of it and all the employees like just an example, funny example. But I would love to hear what is your Black Swan story that you would love to share.

So I'm going to go back to my tire manufacturer in Singapore. So this is the trading arm of a very large global tire manufacturing. You only employed about 40, 50 people. Most of the people there had been there for at least 15, 20 years. Long time, long service. The entire organization was dependent on their ability to manage the sourcing transportation of rubber as a primary ingredient to about 28, 30 different manufacturing sites around the world. They recognized that there was some serious risk in that process and so they thought, well, the best way to deal with that risk is we'll put some technology in place. That's the usual solution to come up with. We sourced the right piece of technology that could do that difficult thing and move from those big A3 pieces of paper. I always find the amount of paper that companies print is quite interesting and revealing sign as to how much they use the technology about. We started setting out those requirements process and all that good stuff and we set ourselves a sort of three months task to get the requirements down. Now the problem is if you've lived with a process like these guys had for 20, 30 years, it's a bit like trying to describe how you get dressed in the mornings. The reality is I couldn't tell you whether it's left sleeved first, right sleeve first, whether I put my left sock on, I have no idea. Right. I would have to iterate that process a number of times in any sort of workflow exercise to get to the right place, to get to the right answer. That process, we hadn't built any of that iteration into the program at all. So when we first sat down with those people and we said, okay, so which bits of this process are you responsible for? They gave us a decent answer. We came back, put that into our requirements process, started to build a software on the back of it. Guess what? The answer was wrong. The answer was wrong because it was impossible for them to describe that process. A bit like describing how you read right. There's no way you could do that. So what we had completely failed to understand is that when something is so embedded in you as a human being, describing that in a logical way is just not the right way to do it. You need to iterate. So we finally worked out that we would have to take the same piece of paper back to the same groups of people at least four or five times. It was going to be more like six, nine months or so before we'd actually get to a point where we captured the key aspects of each of their processes and understood what they were looking at, basically. So that was a really big learning.

All right, David, what you got?

For me, it's my first one. This is going back 20 years. It still sticks in my memories. It was quite a powerful learning experience for me. It was in steel industry. A UK business bought a French business that manufactured rails. So the steel production line, making very long rails, high speed railway lines. The people who were doing the deal and coming up with the Synergy plan basically assumed you could move the product in the uk, which was manufactured at a certain length, over to the French production facilities and manufacture it more efficiently because it was a more efficient mill. What they completely failed to realize was that the French mill was optimized for certain length of product 120 meters. The UK market was all 80 meters. Actually, as soon as they went and worked through the plans with the French management team, French guys said, actually it's going to be extremely inefficient and costly to produce your product in this mill. Partly that would have been really hard. The way that's actually succeeded was two things. One, the French guys were the ones that had produced the first ever rails for high speed railway lines. They had a huge amount of pride. So there's no way anybody was going to come in and tell them what to do. So that strength they had in their own beliefs of belief really was powerful and gave good resistance. And the other thing that really helped for the management was the market dynamic completely changed. Basically the demand in the UK tripled overnight because of some Rail issues, which meant they could actually say we need to keep the UK mill open to continue to service the UK market. So. So we were very fortunate. But actually, if those things hadn't happened, we may have done something crazy which is moved the product over.

Wow, those black swan stories. We have a really good question I.

Was going to respond to. What? So I just jumped in. I don't want to take over this conversation, but I was going to jump into one. There was one question that was asked about what about buying Japanese companies where something's been done for the same way for decades. Basically, that is a great how do you change the people in that process? I think that is a fantastic question and my immediate answer to that question is look and see how Japanese companies buy businesses overseas. What do they do? I tell you what, they don't jump in and try and change things. They send people across, they observe for a hell of a long time. They see how organizations are starting to work and they start to work it out from that perspective. Time is a very different thing in a Japanese environment to a UK or US or European type environment. If you want to get the benefit out of the process, it's worth paying attention to that. That's the first thing I'd say. The second thing. Sorry, there was one more I was going to quickly respond to. Lynette asked a brilliant question. In my 10 years of doing deals, I've never seen a separate culture work stream put in place. Rather, I've seen it as part of the HR workstream or change work stream. Another big bugbear I have. Anyway, separate issue. One of the detriments I've seen on the buyer side is it turns out they're not aligned on their own culture and even what definition of culture is. Don't you think that ensuring alignment of what culture is on the side of the buyer is important to do in parallel with assessing and understanding targets culture? That is a fabulous question. I'll tell you what at the heart of that question is, is a perception, and I think it's false, that there is a single corporate culture. It doesn't exist. How could it possibly exist? You've got people from different backgrounds, different things are important. Scientists, you've got accountants, you've got people who've grown up in entirely different places. You know, there may be some core tenets that we all believe in, but the concept you've got single corporate culture is complete nonsense. And it's been proved so many times in the world of academia where they start to challenge that process So I think you have to break it down. I think alignment is a good question. I think you have to break it down into functional or into the little work streams that you're putting together. Each of those work streams acts as an opportunity to align culture, to agree on what the best way to operate is amongst that group. Whether that's in the communication process, whether that's the responsiveness, whether that's in the language that you use. Part of the reason why I do this job is because there's an incredible opportunity to create something that's very unique in the context of an integration process. And if you do it well, you'll start seeing some of those tenants that you're seeing across a joined up integration team, start to play into the BAU environment, start to play into the other parts of the business as they start to see the benefit of that process. That's fabulous.

Okay, I have a really good question. I want David to take this one specifically with what we're dealing now. So Rozi sent this and said, what are some ways you can address the face to face restrictions which is so important in addressing culture during the COVID 19 time?

It's interesting, I was actually asked the other day about remote working. Business was preparing for sale and the board were asking, actually we need to stop this remote working as soon as possible. Because for an acquirer, they're going to be really worried about actually having to take over a remote workforce versus a centralized workforce. And that kind of blew my mind a bit. There's so much in terms of understanding research that says people working remotely can be more productive than they are in the office now. Equally that's balanced with the fact that you've done it for three months. People actually prefer the social environment of going into an office. So there is that kind of okay. Productivity overall can be better. It does vary by role and vary by industry, but overall can be better than people working remotely. But equally balanced by the social impact of people being in the office and that collaboration, the serendipity you get from different organizations. For me it comes down to how you treat people. Covid is, you could say it's an impact on a company, really, it's an impact on the individuals of that company. And people are having to make huge changes to their own personal lifestyle. They're working in their own home, with their own materials, using their own broadband connection, often with their own IT equipment, just to keep the business going and to suddenly turn around the next day and say, actually we're taking all that away again. Now as soon as things are off you can't work from home anymore. We've decided it's office only. Culture just fails to value the people in the organization. For me, every single deal I've done, whether it's steel industry with heavy assets or construction, manufacturing or advertising, marketing, it's the people in the organization that deliver the synergies and it's the people in the organisation but ultimately they value your eye.

Absolutely, absolutely.

So Leon asked a good question. If we don't use the terminology battle, what's the right narrative term to use for an integration process? That's a fabulous question. I would say we talked a bit about marriages before and that's a well trodden path that people think about partnerships. These are all much less pejorative type terms and they get to the heart of what we're trying to get to in terms of collaboration and cooperation across two different businesses. I know Joseph, I think you're based in the Philippines and think I spent a lot of time working over there and those are terms that I know are much more familiar and much more relevant in that marketplace. The issue of buying something cross border and that integration process is a really good challenge. So I'm sure that's where you're potentially coming from. There was one other good challenge in here which I was going to respond to. Go for it and I love it. It's a great question. HR is very relevant in people businesses plus 100,000 employees. HR needs to align comp and incentives. If not we do not integrate the businesses. Okay, so. So I am not dismissing HR's role at all in the context of integration process at all. I think they play a critical role absolutely without question at all. However, I think they could play more of a critical role. I think they could do more around change and around culture. I think they could influence every other stream in this process if they were part of an overall effort around an outcome based exercise. I think integrating comp and target incentive processes and is a critical thing but it doesn't happen in the absence of everything else that's going on. It has to be aligned to something else that we're trying to achieve in the process. It's not just the best of both. I'll give you an example. David's heard this a million times so I apologize and there's a few on here that know me from the past. I may have told you this story as well. I did a bank merger in Egypt. What was the most fascinating part? It's another little black swan moment Basically this bank merger had a European bank and an Egyptian bank. The European bank was desperate to align the comp structures, in particular the benefits part of that and in particular the health insurance part of that. It caused the biggest problem you could possibly know in the Egyptian organization because if you're in Egypt, if you're a mid manager in Egypt and you are contemplating the possibility of taking your children to a public hospital because they're sick, the likelihood is they will die in that hospital rather than come out kill. So the impact of any change, any level of uncertainty around health insurance for them is a gazillion times higher than it would be in the UK or in France or any of these other markets where the likelihood is that you're going to be cured. So the value of that benefit suddenly becomes exponential because we're not talking about me anymore, we're talking about our kids. And so it's an emotional subject. It's a subject where value is received in the eye of the beholder and we have to deal with that in that emotional way. Now that is not a. Let's get to a level playing field in terms of the amount of money we're spending from a benefit perspective across two different businesses that has to be dealt with at a different level.

David, I want you to take another question and we're going to let Ben highlight his book again before we go, but I definitely wanted to direct it to you.

All right, we're almost out of time, but I love Stan's question about how do you organize the integration stream based on objectives, when the power is held by the functions and the functional leaders are so powerful, it's really, really hard. But that's why we're doing it, is trying to break down this idea that each individual who's on the board can do a certain amount of things independently and not talk to each other. Actually, how you negotiate that, I mean, that depends on relationships. That depends on getting the CEO to understand why you're doing things a different way. Ben, do you have any ideas?

I think you've touched a lot of it. I think there is a strong connection to the strategic rationale behind the deal. Right. You and I sat in many rooms where we've had 25 people sitting around the board table, each of whom got their integration update. The four streams that actually represent the value of that process are part of a 250 minute type update. It's bonkers. You basically lost all the value in that update by incorporating everyone else. We need to start to become really clear about where the value sits and drive towards that. The people who own that value are the ones who should be owning those work streams that shouldn't sit between different functions. It needs to sit, sit squarely in the middle and at the heart of an outcome based approach to having that.

Power at the board level. If you're not able to influence that level, then you're not going to be.

Able to do it right. This has been great. I have thoroughly enjoyed myself learning new concepts, getting to know the two of you. Each of you give two minutes of, well, two seconds of closing remarks and then Ben, you're going to close out with your book. We're going to go to David first.

Closing remarks.

For me, I think M and A, having said that, everything is wrong about how we do things. For me, the reason why I've just stayed doing it for 20 years is I think M and A is amazingly powerful. So I'm hugely optimistic. I just think we need to challenge ourselves about everything we do and how we do it.

Sounds good.

All right, Ben, my closing two minutes. I'm not going to talk about my book because it's not come out yet. It'll come out in about three or four months time. It's about 75% written and it's a set of stories around successes and failures and processes and it probably challenges certain things that we've talked about today. I think David is right. I think M and A is the single biggest opportunity for organizations to change the way they operate and think about their organization in a completely different way. It can engage people from the very top to the very bottom of the organization. I think one of our biggest challenges in corporate life these days is that the people who come in you are not engaged anymore. They're not involved in the process. They don't understand the strategic rationale and they certainly don't have anything to do with who sit at the top of those organizations. The gap is too big. This is a fabulous way of engaging those people. I said it at the start. You can find people in your organization who will have the solution to every problem that you could possibly ever have. It's a question of whether they're prepared to give it to you or not. I think the opportunity in M and A is to really mix things up and change that and bring some of those ideas and some of those challenges to the top of the table. So let's not minimize, let's maximize the base benefit, the opportunities that come out of the M and A process.

I love it. Thank you. Thank you.

Thanks so much for listening to this episode of M and A Science. If you want to stay up to date on the podcast and all things M and A Science, including our events, make sure you sign up for our weekly newsletter@matt science.com M&A teams that use proven techniques deliver better outcomes. Agile M and A is a science based framework that focuses on responsiveness, adaptability and continuous improvement. You can view the whole book online for free@agilema.com and if you're still using Excel trackers and Goal School virtual data rooms that chart charge per page. What a rip off. I highly recommend taking a look at Dealroom. Dealroom is designed for collaboration with internal and external teams. Visit dealroom.net to learn more. You'll also find lots of free resources, templates, ebooks, guides. Thank you again for listening to M and A Science. See you next time. Views and opinions expressed on M and A Science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual. This podcast is purely educational and is not intended to serve as a basis for any investment or financial decisions.