What is Rebadging and How it Works

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I'm Kisam Patel and you're listening to M and A Science, where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals.

I'm your host Kisan Patel, CEO and Founder of dealroom. Joining me today is Sachin Kumar, Senior Director M and A and Regional Lead for HR North America at Conduent. Today we're going to talk about specifically what rebadging is and how to do it. Satchin, if you wouldn't mind kicking off with a description about your experience in the M and A space.

Well, oh yeah, sure. So good afternoon everyone. I am Sachin Kumar. As Kesan said, I lead the HR Mergers and Acquisitions practice as Conduent and have been a part of the M and A world for a little more than a decade now. Initially when I started off many, I started off as part of strategy and mergers and acquisitions, more on the business side of things. And I wanted to specialize in a book stream. So I, around 2012 ish, moved to the function side of things.

Right?

So I've been doing deals both on the buy side sell side since 2012, specifically in the functions and HR area. I'm close to 75 transactions, over 50,000 employees, and as part of my experience I also work on deals that are similar to M and A but slightly different. That's rebadging and that's what we'll talk about.

What is rebadging?

All right, fantastic. Let's get into rebadging. Rebadging is a term that most of the HR practitioners in the M and A field are aware of. Fortunately or unfortunately, it's not all that. That term has not caught on outside of the HR people function community as it relates to mergers and acquisitions. So in simple terms, right? Rebadging is the process of transferring people from one organization to other, but it happens outside mergers and acquisitions deal construct. It's more on the organic deconstruct side of things. Not sure if many people caught onto the word rebadge itself. If you look at it, it says rebatch. So you're actually changing the badge of an employee, one organization to the other. So strictly speaking, again, only from a people, functions perspective, all the processes and activities that performs in the HR function or rebadging is very, very similar to the asset transfer, asset purchase side of mergers and acquisitions. It's not mergers and acquisitions, but rebadging deal can potentially become an asset purchase transaction. And you're doing the due diligence process.

Right.

So again, it's a transfer of people. If you look at the playbook of an asset purchase deal and a rebat, there's going to be about 85%, 90% overlap between the two. There's a 10% difference, but I would attribute that more to the difference in a deal construct itself.

That makes a lot of sense. Fundamentally speaking. You wouldn't contrast it like a stock sale. It's more of an asset sale because you have to re onboard all the people.

Absolutely right. And that's why there is a similarity between a rebadge and an asset asset purchase, if you look at it. And now let's look at stock purchase and the asset purchase. Right. In a stock purchase kind of transaction, again, purely speaking, from HR perspective, you're not required to roll out an offer the employee.

Right.

You may or may not practice best practice because you have actually bought the company itself. If you look at the asset purchase side of a transaction as an HR person, you will be rolling out an offer and the employee has the choice to accept or reject or decline that particular offer. And that's very similar in the rebadging world.

Right.

And we can get into the details when we look at similarities and differences between these transactions. But essentially that's where you kind of compare rebadging and asset purchase.

Got it. Can we talk about the industries? Does this sort of happen in some industries as opposed to other?

If you would have asked me this question maybe 10 or 15 years back.

Right.

I would have probably had a different answer. But now I can almost tell you that, you know, if it cuts across all industries, because we are at a point right now where all the industries have had some sort of an exposure to outsourcing. And that's the key word here, Right. It's a way you're outsourcing your processes, your technology, you managed or maintained by a partner.

Right.

So this, this is currently, you know, it cuts across all industries. Companies that provide outsourcing services are the ones who are catchers, if you will, and the outsourcers.

Right.

The company that's Outsourcing is really the client here. And that's where the difference lies between M and A and rebatting kind of thing at a high level.

Gotcha. So it's really not particular to any industry. It's more about the outsourcing aspect, which can essentially. Now it's any industry.

Yeah, exactly. It cuts across all industries. Now it's a different question. If all the companies that outsource, would they actually take the rebadging route? Well, yes and no. I would say most of the large organizations have had some sort of an exposure to rebadging.

Right.

Auction is available to all industries. It really depends on the size of that particular organization and their willingness to go ahead with rebadging.

That makes sense. What about functions evolved when you're taking this rebadging approach?

In order to understand the functions that are involved. Right. Let's just press a pin there, take a few steps back because we need to understand the deal construct.

Right.

How do we start with the process? Rebadging in typical M and A transaction is an organic strategy, right? That's what it is at the end of the day, Right. Rebadging generally is associated, depending on which side of the line you are, whether you're on the client side or the partner side, it's either margin optimization thing.

Right.

If you're a client, that's why you're looking to outsource. Or if you are on the vendor partner side, the. You are essentially the revenue stream.

Right.

It's an organic growth opportunity for you because you are taking over the process. You will build the client back. So if that's the case, your stakeholders change.

Right?

So whereas an M and A transaction is largely driven by the business supported by corporate development, and then you have other work streams that support an M and A transaction, in the rebadging world, you have the business function obviously and your internal client either be a business unit or it could be any of the enabling functions themselves. This process is being outsourced, so that's one. And the second is HR really moves from an enabling function. In the M and A world, you're still enabling and rebadging, but you move more towards the core because you are pretty much managing most of the project management office because employees are at the heart and center of this particular process. So to answer your question, which are the functions that are involved? It's definitely the business side. It depends which process is being outsourced. Is it say a procure to pay function within finance? Is it an IT services function within ip? So that will Become your client that will move to the center that's one of your stakeholders. Procurement is a major role. So if you look at it in an M and A world, you have the corporate development team pretty much driving the deal, right? So you're looking for the target company or you're looking for buyers. Here it would be vendors who would be release, sorry the procurement team who would actually release an RFP and drive that process. So there is a difference. But again, I need to restate this. It might start off as a rebadging deal, but at some point it is possible that this transaction change into an asset purchase kind of a transaction. That is a rebadged deal during due diligence could become an asset purchase kind of a transaction. And that's what makes it very interesting if that happens.

Because it's interesting how this originates a little bit. Well, completely different than the M and A deal and how it kind of basically comes up through the business. But now if it does switch over to an asset purchase, does Corp dev then get involved? Or it's just sort of same process, just following a different approach.

Ideally corporate development should get involved, right? Because it is their area of expertise. And if you leave it to the business teams or the support functions to drive this, there are going to be a lot of steps, right? You move ahead because they don't have experience in managing asset purchase kind of transactions.

It's a divestiture at that point.

If you look at it from a client side, it is a divestiture, right? At the same time, if you look at it from the vendor partner side, it is an asset acquisition, right? Ideally at the moment you know that it is taking the asset purchase route. Corporate development teams from both sides should get involved. That's where you know corporate development and we can talk about that is important even in the asset is even though there is this intensity not get involved right from the beginning, of course you can stay, you know, keep distance from that. You should be aware of what's going on.

When would a company use this approach?

So let's look at it, right? Let's look at outsourcing itself. Now again, I'll talk about the client side first. Outsourcing company, right? And then let's talk about the vendor partner from outsourcing company's perspective. Firstly it is outsourcing. So there is margin optimization involved, right? So they are looking to who either improve their margin so they are outsourcing. There's a cost arbitrage involved. Or they could be might be looking for process improvements which Find that there is a particular vendor who can offer better value and be able to provide better quality services. So you look outsource when you look out source this process. Let's take accounts payable within finance, all right. And you have a large team, say and I'm just making this up, maybe about 200 people performing this role for you, this job for you. You might want to consider a few things, right? As, as the company that's outsourcing. One, is the vendor capable of ramping up resources in that short span of time so as to not disrupt my day to day operations? Is there going to be a drop in SLA as a result of this? Because if you are outsourcing, your outsourcing partner is going to hire from the market, right? And there will be a learning curve out there. And C, once this process is outsourced, what do I do with these 200 odd employees, right? Are they going to be in the riff bucket that's being made redundant or reduction in force? All these three things considered, rebadging becomes a good option and an opportunity, right? If I am outsourcing, if I'm outsourcing my function, I would say, look, I can rebadge these employees over to the vendor and I have a few positives there, right? Firstly, I know that my process is going to be managed by people who already know, have the tribal knowledge, manage that process. I don't have to lay these people off, technically speaking, right? So my market reputation, so there's that reputational risk that's covered. And I'm ensuring the employees that work with me for X number of years are being taken care of. Because in the agreement that I order contract, I negotiate and discuss with the vendor, I would put in those clauses just like an asset purchase about what happens to the compensation benefits, so on and so forth. All right, so these are the circumstances under which a company would look rebadged on the other side on the client side, same benefits, right. I don't have to spend those extra dollars going through the recruitment life cycle, right. I have trained people come over to my organization who understand the processes of my client who already have rapport, know how to get things done at the client side, so might as well use these resources.

But primary drivers are going to be improving margins and process improvement.

Absolutely. Again, so it's process improvement and margins from the client side, right? Those are the drivers really?

Well, real quick, I'm curious to know sort of do you see this use case and more so offshore employees versus onshore, is there kind of it's everywhere, right.

It could be onshore, nearshore, offshore. I mean, so many of these deals actually happen onshore, right. In the US Itself. Because certain industries and certain companies would like these employees for call it cultural reasons or message to the market.

Right.

Want to keep it. Sure. On site itself. That being said, right. Rebadging, and that's where it differ is that some of these companies, after they have rebadged.

Right.

Brought these employees into their organization, partners could in future look to provide that cost arbitrage and productivity improvements to the their client and look to offshore is a possibility.

Right.

And some of these rebadging. You bring up an interesting point over there. Because there are typically, there can be three types of rebadging. Okay. So one is what you call a client to partner. That is from a client, you're rebadging to a partner, right. Your vendor partner. Second, I have seen where the client wants to bring these processes act right from the partner. So that's called partner client employee transition. There's a third model, because this is outsourcing. It gets more interesting, right. The most of these contracts are signed for three years, five years, seven years. Right. But there is an end date to these contract. So once the contract ends, client is free to evaluate how well the partner has performed and choose to change the partner. And can in the agreement include terms which requires the partner if the client wants rebadge, partner with a new partner.

Oh, wow.

Right.

So if it is from a partner to partner, given where we are in the outsourcing industry, offshoring industry, it could happen at an offshore location from one partner to the other, which is very complicated, by the way, because it's not just, you know, the M and A side of things. There's a lot of organization politics involved because obviously the partner doesn't like to lose people to the other and there are costs involved. But yes, this is the third model.

How would all this fall under the company's overall strategy again?

So overall strategy will have to go back and we will have to look at the margins, right. At the end of the day, that's what it is. If you are outsourcing or offshoring, you're basically talking about margins. You're talking about ability of a third party, an external or a vendor to be able to provide you services that both in quality and technology be superior to yours.

Right.

I have even seen in the aeronautical industry, right. Aerospace industry, some of the design work being outsourced, right. So you design the new things and the components and all of that. So it depends if they think that there's a talent pool available somewhere else you can outsource as well.

Got it. Well, let's get to the fun stuff. Walk me through the steps of the rebadging process.

All right, sure. And this is again, so the HR practitioners specifically in the M and A world would, if they have not done rebadging.

Right.

Would be able to identify and understand how close or you know, that the level of overlap between rebadge and asset. As I walk you.

So HR people, this is where you start taking notes.

So. Yeah, so and probably corporate development as well.

Right.

Because during the process you probably see why certain pre badging process changes.

They're never off the hook. They should always have their notebook out.

Always. Right, yeah. So the rebadging deal as such.

Right.

It's. You have to look at this. It starts like a typical sales life cycle kind of a thing. Right before an RFP is released, probably a corporate development team, someone has, you know, from the strategy team, has taken a decision that margins, you know, there has to be. Margins have to be improved. There will be some targets given to the businesses and businesses may decide or the functions may decide that, you know, the best way to do this is actually sourcing or, you know, if they have experience, they'll probably take the rebadging route. So the first thing is procurement gets involved, works with the enabling function or the business, whichever wants to outsource an RFQ or an RFI or an rfp.

Right.

And it's released to the vendors on the vendor side when an RFP for rebadging comes in and their HR specialists. Almost day one.

Right.

Because there would be questions in the RFP around timelines for transitioning of people. Right from the time that you do due diligence and all of that stuff in rolling out offers, onboarding, integration.

So just to back up, this is a pretty strategic decision that we're gonna run this rebadging process because we see an opportunity to improve margins.

Yes.

And then from there you may actually run an RFP process just to. This isn't. Hey, we already have this established relationship. We're going to work with them. But you really want kind of a typical procurement approach.

Yeah, exactly. So there may be these vendors bidding for this. Right. Vendor partners actually bidding for this particular deal. So you have multiple solutions that are brought onto the tables. And at times I have seen in fact 70% of the deals.

Right.

Ultimately become rebadging. Wouldn't have even started as rebadging. They would have just said that we want to outsource. And there'll be this one vendor who comes in and says that why don't you consider rebadging and then list out the advantages of free badging. And then the client is like, great, let's go this route where they do that.

Or they still go back and say, we're going to run an rfp.

No, they will still run an rfp. Right, they will run an rfp.

But I guess the thing I see is when you run an rfp, I can see that easily becoming an asset sale because you're creating that competitive.

Exactly. Driver, yes. So that's where, you know, it slowly starts moving towards the asset in some cases.

Right.

Asset purchase. What happens is corporate development has. Our strategy team has just made a decision about, you know, margins or the teams are taking position. It is being outsourced. It is so far there's no asset involved. Let's just assume it's just people right in the rsp, not talking about any assets here. They're just saying that this is the process I need to run and these are the people and you need to take over these people and continue to support us from wherever your location is. Now, what happens next? HR has provided the solution. I mean, responded to all the questions that the client has. Think of it more like a ploi stage, even though it's not exactly that in the M and A terms. But you have actually had those discussions. And then the client says, okay, let's go ahead with the due diligence. Due diligence is interesting in rebadging again template that I use to collect data, employee data, more or less. It's exactly the same. I will look for employee details, compensation, benefits plan that the client has. I look at employee benefits contribution, employee by employee.

Right.

I'd look at all their vacation and PTO plans. I would look at what the severance details are. Is an in depth side by side comparison, just like what you would do for M and A. And based on the side by side comparison and the discussions and the negotiations you would have had with the client, you might actually even choose to grandfather some of those policies and processes over for us for a period of time. So you can actually see how similar this is, even keeping the asset aspect out of this.

Right?

Similar this is to M and A from a HR perspective. So that is your due diligence. Once you have, you are through with your due diligence. In a typical M and A scenario, you have a sign close, right? Be simultaneous or you have time between sign and Close. But this probably mimic the sign to close phase because once you sign roll out the offer letters employees will accept the offer letters. You will have all the change management things that you usually do in terms of employee town halls. You may have one to one discussions with the employees in countries outside of the US Specifically if you look at Europe continent ARD and two will still apply there. May still apply there. Let me just clarify. And you'll still need to have discussions with the work council. You are required to have employee consultations. Once the employee accepts the offer and you have the onboarding process you have to do the i9 again. You have a town hall new hire orientation session and follow it up in most cases for large deals. We have also done post 60 day survey the employees and I can get into the details but I've even implemented some of the change management tools like you know the mind mapping and all of that you would have otherwise done in an M and a transaction in a rebadging.

Right.

But that's. That's the overall rebadging approach kind of end to end and in terms of similarities friends. However what one needs to take into account account is from a client perspective if the client is letting go of X number of people specifically in us about the War act threshold warn which is because adjustment and retraining notification. Right. So it's generally the league. It's it's legally spiel. It basically says that if you have more than 50 odd employees and if you have made X number of redundancies in a 90 day rolling period you need to give employees certain notice period. It could be 60, 90 days depending on whichever state these employees are based in. That could impact the timelines between the time you roll out offer and the time you are able to onboard these employees. So that's the slight difference and that's a nuance and that's a good nuance and a good experience and exposure an HR professional to have.

Yeah, that's a good one to point out. I want to go back to the ones you mentioned that are a little bit more centric for Europe because I'm familiar with 2P and then you mentioned another one was Ard.

That's right.

Ard. Could you talk a little bit explain those two?

Yeah, sure. So yeah, I'm obviously not an expert in that field. It's a legal domain. I can talk to you about that in a 30,000ft level. Right. So in Europe most of the countries that are associated with European Union in specific even though you know even the non EU Countries, some of them have something similar, have ard, which is the Acquired Rights Directive, and UK has something different called, which is Transfer of Undertaking Protection of Employment. Both these directives were put in place to ensure that the employees are taken care of whenever there is people transition situation.

Right.

So whenever there's an acquisition or an employee is asked to transfer from one organization to another, there are a set of rules.

Right.

Or principles that need to be followed. The legal team will actually go in and have a look whether ARD and to BE apply this particular transition or not. So what exactly is this?

Right.

It simply put, it means that if an employee is transferring from one entity to the other and his or her liabilities may carry over the new organization contract, may carry over compensation, benefits. All of these may be protected in the new situation.

Right.

So it's kind of ensuring that the employee is not adversely impacted because of this transition.

Right.

So a lot of policies and processes will just transfer over as is. Unlike in other countries like us, where the acquiring company or the vendor partner, the people will transition over and decide what compensation and benefits should be. Obviously it is in contract. There is that flexibility in Europe. You do not.

Right.

That's. That's law there. And of course, as part of erd. And there's also discussions that need to happen with councils there. Right. For every transfer that happens, there have to be employee consultations as well. So it's a far more complex process in Europe than it is elsewhere.

So in Europe it's a lot harder to squeeze people and go on a firing spree than it is here.

There you go. You can put it like that. Absolutely.

They have certain regulations to make sure Big Corp plays nice.

Yeah, exactly. Exactly. Right. And that's where even in an M and A situation, Right, or rebadging situation, the moment you know that there is a people transfer involved, you need to let councils know that it is going to be a people transition and they will obviously come back with you with a set of questions, including what was the rationale for this deal? Why do you think their employment will be protected? Are there any scenarios under which they will be made redundant in X number of days, months, years? Is the seniority carry forward most of them? I mean, you do carry forward whatever the compensation, benefits and policies are in most cases.

Okay, that's good to know. So that's not part of the strategy, is just to slash the people and squeeze them. So just to back up and recap the steps we decided to do rebadging, it comes up as a way to sort of improve margins and process. And from there we're going to run rfp, make it a competitive process. And as you go through that part of it's developing a. Like a master service agreement.

That is correct.

Now that's something you're working towards instead of a purchase agreement. It's. It's sort of the service agreement you're developing.

Yes.

While that happens now that's not signed, you go through diligence.

Correct.

Which is very similar to typical HRs approach to any other people. Diligence.

Exactly.

By side comparison, et cetera.

Yes.

And then you're developing your offer letter that you mentioned that you roll out.

That is correct.

So signing your msa.

Yeah. So the offer letters, obviously, you know, deal has to be inked before you can roll out the offer letters. There's always a concern and it happens in the M and A world as well. You know, should we share employee data before signing, after signing? So there could be a little bit of flexibility here and there. So pre sign of the msa, clients do share employee data, but it will be masked.

Right.

But it should be good enough for us to do detailed due diligence. So there'll be no pii, for example. It'll be just compensation benefits kind of stuff. At the same time, you know, the similarity is that while we are talking about a master service agreement on the rebadging side and a asset purchase agreement or a share purchase agreement on the MSA employee matters clause.

Right.

Pretty much there's an overlap. Yes. Again, going back to the due diligence, you would be having details around the compensation, treatment of compensation, benefits, seniority.

Right.

Because that's the other thing that comes up. Because in a stock purchase, you pretty much, you know, the company, the seniority continues, the tenure or the service years that people had here, clients may actually, you know, negotiate with the vendor partner to actually honor that.

Right.

Service years. And therefore the benefits that are associated with a long tenured employee may be applicable. So all of those, you know, details are included in the.

From the employee's view, that's all laid out in their offer letter.

That's correct.

You go through that and that's when you're running a very similar to an asset transfer. From there you're doing very typical onboarding process as you would an asset sale. Can you tell me a little bit about integration? If there's anything else more specific is that sort of just people focus, getting them the computers, getting them situated on the networks and so forth?

It is definitely lighter than a Typical M and A transaction, right? So in that many situation you may decide to have a transition services agreement, for example, right? So where the seller, if it's a carve out, may, you know, decide to continue to provide certain services for X months or a year or whatever, right? A period of time here you don't have that luxury, right? You have to take those decisions about certain processes and policies up front. That being said, larger rebadging deals, I'm talking about maybe thousand people. Depends on the appetite, risk appetite of partner. You may even decide that for X number of months I may continue with grandfather. The titles that they had in the previous organization, of course is also subject to your internal HR system's ability to support that.

Right?

Because in many cases you just give them those titles. You have a bit transactional operation here, but you might have some dummy codes set up at the back end in the systems. Because if you look at the systems at the back end, you have a particular grade, you have code associated with that, right. Within your organization. So you will have to create these codes if you want to grandfather for or absorb these titles into your system. It's not recommended, but I've seen organizations do that. If you do that and you need to come up with a plan saying that, okay, so we continue with this title for X months and only transition over even for example PTO policies, right? Maybe the agreement, you decided that during a due diligence, you realize that your client's PTO plan was far richer than yours and the client, lack of words untwisted, you actually grandfather that policy. So they get into your organization with that policy again, you need to sunset that at some point. So that's where the integration part comes in and those decisions need to be made. And in most cases the vendor will say hesitate in grandfathering most of these policies over. And you may look to compensate in dollars if there is a gap between the two policies, right? Say for instance, your client had maybe an employee had two days more of pto, but if he or she comes over to your organization, you know will be adversely impacted. So you know, for those two days you convert that into dollars, put into the base compensation and carry forward. Or do you say that, okay, I'll grandfather this for a year after a year, whenever that step occurs in my organization, if it's a January to December cycle starting next January, they will be on our program, right? So that's where the integration part comes in. Unlike an M and a transition transaction where you're even so much dependent on a Role cutover for integration benefits cut over. All those things don't happen because they are on your enroll and benefits tier one.

Got it. So similar stuff to other integrations as well with some nuances. I want to get into some of the real valuable advice here, the do's and don'ts. Could you tell me what are the major do's and don'ts of rebadging?

All right, let's start with the don'ts first. What one needs to understand is that the dynamics between the client and vendor partner is very different from a buyer and seller. Buyer and seller being in the M and a world of transaction, right. In a buyer and seller world, once the deal closes, I mean there's no relationship beyond that. I mean you're on your own. Maybe there is a PSA in place and you know, might support the other through X months or a year, right. And then that, that's the only dependency you have. But on the rebadging side, you have a client and partner. That is, it is a different dynamic. You are going to be working. If you are a vendor partner, you're probably going to provide those services to the client for three years, five years, seven years, whatever the period of your contract is. And you have to build that relationship right through that period. And that foundation of that relationship is really built during time that you have. Then you are putting those agreements together, right? That's where both the client and the vendor partner has to understand that it has to be a win win.

Right?

I'll give you a few examples where, you know, the clients have really tried to arm twist the vendor into agreeing certain terms which could create legal issues.

Right?

So the client, because they are transferring these people over to a vendor, would obviously want to make the employees or people believe that, you know, they have been taken care of and the client, the original employer has taken care of all the compensation benefits, all the requirements of the employees and pretty much also maintains a control and a say in whatever the day to day functioning is. Example there was one a few years ago I worked on a deal where the initial master services agreement that we received client basically said, look, these people are transferring over. You have to have a bonus as per our policies for at least the next two years. And we will decide what bonus should be paid to those employees.

Right?

And then there would be like another clause which came in where they said that, you know, we will decide you cannot fire these employees or you know, reduce the workforce without our permission. Whereas we can tell you that we no longer want this particular person in our organization now that obviously we didn't go through any of these. But you have situations of employment that comes in. You have a vendor, partner and client relationship and you have a situation such as this which doesn't go well for a partnership in the long term that you know, you're still dictating firms when organization is trying to run business for you.

Right.

So those are the tricky terms that you need to look out for. And obviously I did touch upon one notification earlier.

Yeah, I can see that being some interesting conflicts if you can't.

Yeah, exactly.

Your own people, essentially.

Yeah.

And that's why I said, I mean the client and the relationship is very different. Right. So they try to. The client will try to squeeze the vendor at the same time. Vendor should if in future, once they, once the term of the contract is over. And I touched upon the partner to partner transfer.

Right.

Fee badging and I have seen a lot of hostilities between partners happening right at that time because the client has basically said, look, I'm moving my processes away from you to this partner partner B and I want you to transfer your people to this particular organization, the new organization I have a contract with. So at that time I have seen a lot of hostility. Obviously the incumbent vendor wouldn't be happy with it. The process that needs to be followed by goes through it again, you know, if. Firstly be careful about having those terms in your contract.

Right.

Know what you're getting into and if you're actually getting into it, might as well do a good job out of it.

Right.

Okay. So the, the pro tips here are it's very similar to M and A where you got to make it a win win for both sides of the table. And in terms of where things can go wrong, obviously it's just having some terms that aren't mutual and giving one power to one side and so forth.

Exactly.

What else have you seen that maybe sounded like it was good in the beginning but then turned south in terms of hey, this went wrong or we thought this would go well, but kind of curious what other things are.

Yeah, I think this really goes back to the time. And this happens in M and A also.

Right.

In valuation terms, you look at valuation, the synergies and you think that it'll go one way, but it heads the opposite way. So similarly, when you are bidding for a deal more from a vendor partner perspective, you believe that you would be able to maintain certain margins and you would be able to provide certain productivity improvement and so on. And it's unfortunate, but sometimes what has Also happened. These are probably the larger deals. You get the good and the bad. You get a department that's not functioning all that well being revised into the vendor world, and then the vendor is left to run the operations for the client. Either way, the employees who transitioned over aren't happiest because they have been transferred over to a vendor. That means the client messages, we didn't want you. And then you have also in a situation, I mean, somewhere in your contract that you can't, you have to retain these employees for X number of months.

Right.

And then the relationship starts going. Right.

So if you acquire the people, you can also acquire the people problems.

Exactly, Exactly.

So rebarging that, I mean, is there. Is there something in diligence you could do to sort of add that People discovery. And people always talk about culture, so that's.

That's tricky.

Right.

More from data privacy and compliance perspective. Most clients don't like to share performance reviews or performance ratings for last three years or how many people are on the performance improvement.

I'm doing this deal and I can't even get performance reviews. What do I get? Do I get a culture assessment? Is there anything I can get?

That's the tricky part with rebadging.

Right.

Even if they give you, they will be like, okay, you don't have an option. You can't cherry pick. This is the department. This goes as is.

So I'm basically looking at a table of data at this point. Maybe you'll tell me how long they've been there and how much comp they're getting, but other than that, I really don't know much.

Exactly. And that's where I said Dynamics is very different.

Right.

In case of an acquisition, you can still go back saying that, hey, I'm paying you X dollars.

Right.

For this. You probably will share all the information with me. I need to know who are the employees who are coming over, right? Yes, I probably can pick, but I should know what it is. But in a rebadging scenario, it's the client who says that. Look, I'm giving you the process. You're getting the revenue from me. This is what it is. Deal with it.

So I'm not even able to talk to key people.

You may or may not be able to talk to the key people, but it's really the people who have performance issues that will not be highlighted here.

Got it. So there's some dust and bugs under the rug.

Exactly. So it could get tricky. But again, this is not to say that it happens all the while. There May be one or two cases here and there deals where it would have happened, but these are real issues when you rebad.

These are great ones. Is there anything else that you can think of? Maybe some other do's and don'ts from the boons?

I think that's it. From a do's perspective. I really think if you are an HR M&A practitioner, I think you should try to implement change management tools that you have typically done in an M and A transaction. Because it's always great, right? Because M and A, you tend to welcome people with a big bang with all the rasmodels and all that stuff. And I think these employees deserve that as well. And you know, go ahead and try to implement. And as I explained, there's so much similarity between the two that you can actually do it.

What's corporate development's role in rebadging?

All right, that's an interesting one, right? If it is a large enough deal, say something like thousand employees, right? So it's definitely going to have some sort of a margin impact, right? If it's being outsourced and it's highly likely that the decision was taken by someone from the strategy. Now from corporate development perspective, it is understandable if you're not close to it because the business is pretty much running it. Outsourcing, as I said, it goes through when the bid process and you're looking to rebadge, it's probably you'll say, hey, this is a business as usual. I've decided what the strategy was and it's being implemented. I have seen several deals going back to the point during due diligence and I'll give you an example where suddenly the rebadging deal turns into an asset purchase. Talking about a 2000 employee deal where during due diligence, obviously from the vendor side you had people who are looking at real estate because you have to accommodate 2,000 people. You're looking at technology because at the end of the day the client said that I have certain and then you have to use my system, my technology. And then it came to a point where they said because of data privacy concerns, I want you to operate from this particular facility and use this particular equipment. So when they started doing that, due diligence realized that, hey, I mean, we probably have to chase all of these infrastructure related assets, right? So your lease is being transferred, all the furniture is being purchase from them. You're talking about the laptops and the desktops and the mobile phones. All of these are being also we need to purchase from Them for whatever their data privacy related requirements. I don't think there were cell phones involved. So all of a sudden this was a pure rebadging deal, became a asset case deal. And when that happens, the problem is corporate development has probably at the point that RFP was released, you know, decided not to be involved in this. Now you have a situation where this has become asset purchased deal and you don't really have know how with the business team how to manage an asset deal. Then you try to get in the corporate development folks and it's like you can't really push the timelines because the bid was made assuming there will be some sort of or revenue recognition that happens in the vendor's book for the year in which the transaction actually happens.

Right.

So then they're like, you know, drinking right from the hose. Right. Much of information too late. So I think corporate development's role, if it is such a large transaction, while it's okay to say that, you know, I let the business function run with it, I think they should still continuously monitor because coming in late in the day, I mean, you may be a superstar, but still it comes with its challenges. You probably not be able to create.

So keep them aware from the beginning and sort of cue them off in case they do get more involved. Cool.

Especially the large deals, right. The smaller ones can be managed, but if you know that it's going to have a significant impact on your margins, then might as well.

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

Whoa. There would be plenty of stories and I'm sure, you know, you've heard plenty of crazy stuff happened.

Oh, no, not on this podcast.

All right. The craziest thing I think, boring.

You know, we don't get too much excitement.

All right.

I don't know if this is going to, you know, be funny and crazy, but I think there was this transaction I was working on a few years ago in which it was already, you know, between sign and close for whatever reason. It was a fairly long period, right. It was signed to close phase. We had to get rules from some authorities and then there was some other issues that needed to be addressed. And it had been going on for, I think seven or eight months already from the time we had signed this deal. And we were almost there. We got the approvals and everything done. We were like, we're ready to close in a couple of weeks. And then suddenly the seller says, sorry guys, tough luck, it's summer vacation, we are off.

Right.

And actually weren't Back for another couple of months. They took time off. I think one of the reasons could be that, you know, it had reached a certain point in that financial year that even if the transaction actually happened, it wouldn't have, you know, met that target. So it probably had given up. Yeah, it was interesting to just wait two months, get the deal closed.

Right.

It's going to be a draw job moment for both Corp Dev. I don't know if you have bankers on the deal.

Yeah, it was crazy. It was hilarious. I don't know. But yes, it was what it was back then.

It's funny. I like that. We're just going to take the summer off. We'll get back to you on this. M and A transaction.

Working hard for nothing. Moved for two months. So you're like sitting there twiddling thumbs but anxious.

Wow. But you got it done.

We got it done. Yes. They came back and I think a couple of weeks after they came back, we actually closed it.

Awesome. Hey, this is a fun interview. I learned so much about rebadging today.

Oh, that's. Glad I could share my knowledge with you.

Hey, before we hit the hour, do you have any other shout outs or anything that you want to put out there?

Yeah, I think, you know, rebadging is an area that I think the other enabling function should also have some sort of exposure to. They should try to learn about this and for the organization or the development team, if you are in a situation where you're taking a decision around, you know, sort of building a team in house versus hiring contractors or consultants for an engagement, you might just want to look into your HR organization. There may be individuals who have on these rebadging transactions and who can actually bring learnings from rebadging with M and A.

Right.

And you can actually groom those resources into M and A resources within your people function. So I think that's what. But thank you so much, Hasan, and giving this opportunity. I really enjoyed that.

My pleasure. I know that the HR M&A people are a mysterious bunch of their own. I'm curious, are you involved with the HR M&A roundtable group? I know there are dedicated practitioners for that.

Yeah, I did. I think it's run by Clint. Right. So not mistaken.

Yeah, I know. I got a podcast we're getting ready to publish because he's just recently published a book.

Oh, wonderful. Yeah, I've interacted with him on LinkedIn and I have participated in some of those telephonic roundtables that he has. It's very interesting to hear perspectives and experience from the HR community around mergers and acquisitions.

Yes, you're in the right hand. So I know they have an annual conference coming up in a few months. I might be doing a guest interview there. So I'll look forward to hanging out with you virtually. I don't know if it's happening in.

Person, but forward really look forward to it.

Thank you so much for your time.

Thank you Kassam. My pleasure.

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