Why Big Companies Destroy Small Ones in M&A

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I'm Kisan Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals. Welcome to M and A Science Live where putting together companies is really complicated and taking them apart is even more complicated. On this podcast series we we interview leading M and A practitioners to learn lessons from their experience. Learning proven techniques is key to perfect your M and A practice. I'm the Host, Kisan Patel, CEO and founder of Deal Room. I spent 10 years at M and A advisor, saw a whole slew of industry wide challenges. In 2012 I decided to pursue the great American dream and build the greatest software to manage M and A. With me today in this discussion is Carlos Sesta, Vice President of Corporate Development at Presidio. Carlos is investment banking and private equity trained executive with over 15 years of experience executing and leading strategic initiatives. Recognized for the ability to develop innovative solutions to challenging issues. Also joining me today is Jeff Daroche who is until recently Vice President of Corporate Development at Atlas Copco. Jeff has been managing full life cycle M and A processes and other inorganic growth initiatives for over 12 years. Primarily focused on the industrial, manufacturing, semiconductor, life science markets. He's apt to developing strategies and then leading cross functional teams to successfully execute those plans. These guys have over a hundred deals of experience and today we're going to talk about why big companies destroy small ones. We see it happen all the time in a variety of strategies and industries. I'm interviewing two senior corporate development leaders to learn why and what can be done to prevent that from happening. How are you guys doing today?

Very good, been good.

Thanks for having us.

Well, let's kick it off. Why do big companies destroy small ones?

Who's asking who's destroying what? Let's define that a little bit. So destroying from whose perspective? Maybe one of the examples would be total absorption of A company which might have been by design. So the shareholders are happy about it, but with other stakeholders. Maybe be thinking differently if you're a client. For example, I was a great friend of Canelo when United bought them. I felt they destroyed the company. It wasn't a good deal for the shareholders. It probably was. I don't know. It depends on who's the stakeholder you're talking about. But I think for the purposes of this, we're talking more about disconnect between when small companies fall into big companies and adapting to processes and efficiencies in professional management. From that perspective, I think we'll have to get a little bit more granular.

Of course, there can be some reasons why a larger company intentionally kills a smaller company. But as Carlos mentioned, for the purposes of this, I think we're talking about kind of the more common mainstream situations where an acquirer brings a smaller business on board and over the longer term, it doesn't meet its objectives. It maybe isn't killed per se, but there's varying degrees of performance below what the expectations were. As Carlos mentioned, that can be different from different perspectives. Some of the issues that you run into are the overlaying of the bureaucracy and the approval processes and things like that. The overhead, obviously a part of a lot of larger companies for various good reasons. But applying those same processes, those same overheads to smaller companies just may not be appropriate.

Okay, so to clarify, we're not talking about a natural integration where the company just gets absorbed. We're talking about when value gets missed, the deal objective gets missed. When we sort of defragment the company culture within that, you sort of have that happening accidental and then intentional. Strategically, some companies would do that as well, I. E. Anytime there's an iTunes competitor, they tend to get purchased and disappear. That sound right?

I like to use an example where the day before the deal closed, the owner of the company made almost every decision about their business, and then the day after the deal closes, perhaps they've transitioned to an environment where they need to get a couple levels of approval to buy a $400 plane flight. That's a drastic change for the owner of that company. And a bit of a trivial example, but large and broadly across the acquired entity, it can really cause some serious challenges.

That's a good example of transition change I want to get into. Maybe we get into why do big companies buy small companies in the first place?

If you boil down to what it is, is us executing the inorganic strategy against a strategy, right? Why do you buy them versus why do you not partner with them or make them an early investment? It's something that came from an analysis that was before that decided that we had to have a stake, we have to own, we have to control the asset. And it could be because it's a new technology and by definition the acquirer wasn't able to develop organically. Could be scale acquisitions, more the same because you can obviously squeeze a lot of efficiencies out of it. It could be to use a very good group of engineers to be sort of bring in house R and D. But in all this there's a recurring theme which is you weren't able to develop these things organically. So you're going out there and you're buying and bringing it in to execute against the strata at a high level.

I think I agree with that. I think a lot of these things, we look at them typically as make versus buy or build by partner type of options. Oftentimes it's more. Given enough time and money, you can do just about anything. But that's not always the most efficient way to try to achieve strategic goals that you have. So acquiring a small business that brings in a certain type of technology that you want to incorporate into your products, for example, or oftentimes competencies capabilities that you could ultimately obtain. But acquiring them is a much more streamlined approach.

Yeah, and just to build a little bit on that, that sort of trade off between do I build in house and lose time to market or just go out, acquire someone and create the tension of okay, now I have integration. And that's where we run into the sort of issue that we're talking right now.

If I could throw one more thing in there, Kisan, about why big companies buy small companies at all. Part of it is because there's more of them out there, there's more opportunity to do that and you're not betting the farm. Everyone's aware of the history of megadeals. It's a very checkered performance history. I think boards and shareholders, executive management teams are much more comfortable making these smaller investments. They're important not to say that it's not still viewed as highly strategic and critical to the long term success of the business. But you're not taking such a risk that if something happens and goes wrong, you're surprised by something that it could take your whole business down as well. I think that's part of the attractiveness.

Gotcha. So it's less risk. And it seems like these scenarios can fit in a variety of different strategies in terms of what draws you into these smaller companies. Why do you think smaller companies are killed by bigger ones unintentionally so often, regardless of strategy or industry?

I think the most common issues as far as unintentional are the layering in of the bureaucracies. The decision making, the approval processes can take much longer. There's reasons why those processes are put in place for larger companies, but for a smaller one, it doesn't necessarily make sense. Applying an allocation of shared services overhead to an acquired business. You've got a large IT organization which certainly wouldn't be justified for such a small company who maybe had one, maybe two people managing most of their IT and outsourcing a lot of it previously. Now they have an allocation charge that they didn't have before. That's just another example of the kinds of inefficiencies perhaps that you can introduce inadvertently.

When I was purely a deal guy, there was the jargon, blame it on integration. I did my job, I closed the deal, blame it on integration. But probably about five years ago I got obsessed with integration, processing it because it's really where you capture the value. And for me, these type of situations where you hear the target companies or the acquired companies say, well, they're destroying my culture. This is not what I had in mind. Destroying value. A lot of it is maybe two sources. One is communication, doing the deal. And I like to start the discussion about integration before loi intensify. After loi design a plan together with the seller. Because a lot of times things that you discuss about how are you going to integrate, be it go to market, top of the house or back office are discussed. Well, the worst thing is to not discuss them at all. So that's you're setting up yourself up for failure. So you have some discussions, but a lot of them don't end up on a purchase agreement. So it's this. Oh, I remember we discussed. So it's just all up in the air. So what I like to do is sort of memorandum of understanding. It doesn't have to be like a legal document, but a document that is agreeing with the seller about how are you going to go about all the integration touch points, all the work streams and when you're going to integrate certain things, when you're going to take them off of QuickBooks to SAP, when they're going to do HR. Because these things is where it touches people vibes and they get annoyed by that. There's no communication or a way to do it. So I think one of them is process Process, process. And we can get into a whole chapter about how to perfect that process of putting together an integration plan. But second, I think especially in the middle market, we're talking about companies in a lower middle market below $100 million, where sellers are most of the times, the owners of the company, the entrepreneur start thinking about selling and start connecting with the deal sponsor at the acquirer company. Things are going to go not the way you design at first. So these two people need to be, as I like to call it, bridge builders. Right. So these guys have to have in mind that things are going to go not as expected. And you can't at the first difficulty, just turn around and say, oh, it's the big guy just turning to me and squeezing me and asphyxiating my business. That's a really easy cop out. From the entrepreneurial standpoint, that connection has to be tested and solid. Those two guys have to be in sync in a very solid integration process.

I'm hearing that there's a big change curve after the company gets acquired and goes through integration process, which is going to add more bureaucracy and so forth. And it requires some adoption there. And then also that clarity in terms of that alignment earlier pre close to make sure that there's a clear alignment and plan on what's going to be carried on post close. Walk me through the relationship with the entrepreneur and how does that evolve pre to post close?

It's interesting how that transition works. This is oftentimes for the entrepreneur the only time they'll ever have any exposure to this type of process. I mean, of course there's some serial entrepreneurs out there, but oftentimes the business carries their name on it, perhaps their family name and there's family members involved in the business. So the evolution of their thinking, going from the primary decision maker to having to get perhaps multiple levels of approval for something can be a very emotional transition for them as well as the rest of the employees. I want to echo Carlos points earlier about the communication being very clear, doing the planning up front as early in the process as you can, and then being very clear about setting expectations with the sellers, how they're going to fit into the organization, what the roles are going to be. I think setting those expectations incorrectly, poorly communicating about how that's going to work can lead to a lot of issues afterward.

I collected some data points on that because I conducted interviews with the companies and the CEOs and one of them told me, carlos, I think I could do your job even better than you do. I was like okay, great. Tell me what I have to do better. And it came back to integration. Very good conversation. Became friends with the guy, he said, hey, listen, I'm an entrepreneur and I did a lot of work in diligence to what I was going to find out. What happened is that my team, the team, a company, about 140 people, they were never used to facing inside a big company, what is called the professional management. It is someone that is going to check you. Day one, after you close the deal, you're going through the motions of the deal. You talk to the strategic partners and the vision and everybody's excited about it. Day two, someone calls you from finance and says, what's your budget? Let me look at your numbers. Oh, you're not closing on day two? No, we have to close on day two. It's professional management. It's how big companies get bigger, right? They work on the margin of efficiency. Every single dollar that they save on processes counts toward the bottom line. This clash between the entrepreneur spirit and professional management is what needs to be smoothed out. There's definitely a point where everybody's exciting and they all think they understand what life's going to be. And then there's a cliff where you meet the professional management if you're not prepared for that. And that's what the integration point process supposed to be like. Total transparency. Say life's going to change. We're working on the margin of efficiency here. That's when things change dramatically. I think what we're discussing here, right. Well, they're destroying my company because now I have to worry about close the books in two days versus 15 days.

So it sounds like the keys to really preserve the relationship is to over communicate and have that level of transparency. I want to turn around to the big companies. What should they not be doing to destroy these small companies?

I mean, aside from some of the clear things that we've mentioned before, generally there's a philosophy that the integrations should be done as quickly as possible. There's always pain in the process. So let's go ahead and just jam it through and take on the pain early on and get over it and move forward. What I've seen work better than that approach is more of a nuanced approach. Big companies ought to be acknowledging and understanding how the smaller company works, how they make their decisions. Obviously the culture. And I think you need to try to appreciate the emotional transition that the company is going to go through and ensure that your employees of the acquiring entity have a respect for what the company being Acquired is going to go through. There's a reason we wanted to pursue them. They bring something of tremendous value to us. And I think there's some times where employees of an acquiring entity perhaps take a view that, hey, you know, we bought you guys, so we're going to do things the way we want to and perhaps not provide the acquiring entity with as much opportunity to participate in the processes as they could otherwise. A more nuanced approach of this transition. Sorry, let me mention one other point. There's some things like financial reporting, employee onboarding, payroll. There's some things that absolutely have to happen immediately, but there's a lot of things introducing your NPI process, for example, or some other business process that doesn't necessarily have to happen right away. And so I think a more nuanced approach, approach to the timing in which you're going to implement some of these processes can be a huge help to smoothing things along and improving the performance.

I would echo everything that Jeff said and put on top of it. People don't value how intimate linked how you integrate. The plan for integration and the deal structure needs to be to allow both to happen in a successful way. And the example would be when you're in a business situation, usually the economics of the deal come up front and we're talking to a banker or discussing with the seller how much money up front. What is retainer, what is earnout? Did you guys know? Earnouts are a good way, very sophisticated way to bridge valuation gaps, but also introduces some challenges because you need to keep the perimeter of the acquired company intact at all times so you can measure them and compensate them in a way. Prevents full integration in the classic sense of that. You end up negotiating that up front and then going to the integration and guess what, maybe some of these assets need to integrate right away. Sort of feedback back to the deal terms and you need to integrate right away for this to be successful. You need to pay everything up front. And then Iran indicates, okay, so how do we solve the valuation problem now? How do we manage risk? It's really like a spiral of these three points that you have to do in order to get to where you want to be. I think in addition to that, even if you do those things, you go back until everything lines up, the deal structure, how and when I'm going to integrate. And then you go back to the banker and say, guess what? Just got outbid, so you have to do something else. And usually at the point you forget about integration and then you're back to the economics of the deal again and you sacrifice integration. That's the point where I'll be a big proponent of. If you did your work on the integration, you should not sacrifice in detriment of just getting a deal because you have to change the economics. Yeah, I think you should have these three pillars and iterate with them and be absolutely convict that these are the three things they need to get successful.

It's interesting, I'm hearing a few different themes here. Empathy. I like Jeff mentioned just sort of being empathetic with that company that you're acquiring. Then also when it comes to integration, you're sort of contrary to the traditional thinking of integrate as fast as possible no matter what. And it sounds like it's more of an emphasis as you elaborated, Carlos, to really do this stuff up front and develop more of a joint integration plan with that company so that there is that alignment and then everybody's on the same page of what that pace of integration is going to be.

One correction there though. I'm not saying that we shouldn't integrate right away. I think the integration should be customized for each case. It could be integration right away. I was in a situation where the target company was so much younger in terms of average. They communicate differently. If you just roll them into the larger company right away would have been a disaster. So you really wanted to fix it.

That's an important point is not to go the other extreme and just put it off forever and hope that it happens at some point. I certainly don't mean to imply that to integrate smart. Maybe that's the most concise way to put it appropriate for the deal structure and for the two companies coming together and involve the acquired entity in that.

Neither of you believe that you should integrate as fast as possible or put it off. It's more about co developing a tailored plan so that everyone's on the same page. And it's really designed for that specific case.

Right. It ties with economics.

When it comes to the small innocent companies like the one I operate. How can we protect ourselves from the big bad wolves like you guys out there?

I think you have to do your diligence. Kind of the cliche talk to people that were acquired by that company in the past. It's PE. It's easier to find out. You have 10,000 connections on LinkedIn. You can get someone connected with your network and talk to them and say, okay, what was your experience? Just one second point. I think you should be asking the hard questions if you're really worried about, yeah, great. I'm Going to get cash on the bank. But I really want to keep doing this in a big way. And you agree with the vision? Ask the tough questions to your deal sponsor and say, okay, you never told me how we're going to integrate. Grade this thing or when can you put it on paper? What's the plan? And if you say, no, no, that's fine. We did 100 of these. It was going to be great. No, I really like the conversation I think had in mind. What are you facing?

Oftentimes you're acquiring a company because they know so much more about their industry or their particular markets, their products and customers and so on. An acquired company or one that's in the process should also recognize that and ensure that they feel very comfortable. As Carlos put it, asking the difficult questions and challenging the assumptions as they hear about the plan and they discuss it over with. If you don't think those plans are going to be effective in your market or for your customers, you need to bring that up because it's very likely you know more in some cases than the acquired entity. That could be a reason they're buying you in the first place. Additionally, maybe it's motherhood and apple pie at this point. I always encourage our sellers to not try to go it alone on these kinds of deals. And they're used to making a lot of the decisions and controlling a lot of their activities themselves. But they should get good advice. They should get professional advisors on the legal side, on the financial side, preferably ones too who are not just family friends but have actually done deals before. I always encourage folks to do that and it makes it smoother all around. It's better for the buyer as well if you have experienced people on the other side.

I agree there's some good themes here with having good advisors checking references I like. That's a good idea. Seeing the previous companies they've acquired and how their experience was asking the tough questions. I think that's another good point for a company like us. One of the things I pride the most about our company is our agility. I mean, we not only run circles around our competitors, we dance circles around our competitors. How do I preserve that if I'm going to sell my business to a larger company like yours? Because you just told me I'm going to have to adhere to all this bureaucracy and this crap I don't want to deal with already. But I know this is our competitive advantage. It's just this culture of agility that we develop. How is it possible for a company like Us to actually preserve that.

That's a billion dollar question. If you're in the middle of diligence and feel that you won't be able to do it, maybe that's not the right partner. One of the things thinking about this and the theme of agile M and A, what happens many times is that these signs that things are not right, they come up during the process when you're doing diligence. But then there's this perverse thing that because it's like a train and it has momentum and you are negotiating, you get towards the point and you think, oh God, if I open this right now, I already paid the attorneys, I have to start it over again. Start a process, let's just close it, we're going to solve it. No, it's a problem that we have to solve. And I know it's an agile M and A. The parallel tracks of this is something that you do, but you find that more often that people are able to admit it gets towards the final line and big issues come up and they end up doing the deal anyway with the hopes that they're going to fix it.

The pursuit with influence of deal fever.

Exactly.

That does happen, unfortunately.

How many times have you done that? How many small companies have you destroyed just because of deal fever?

I didn't do an integration. Then blame it on integration.

That's what happens when the deal goes bad. You blame it on integration. There's integration folks that are watching this.

Right now shaking their head. I have one story though and I've got to be as generic as possible. Sure. Again, to my point of design integration, tie the deal terms. First year of that deal, everything is lined up. The deal sponsor gets out, another guy comes in, he has completely different ideas on how things should work. The previous deal was designed to have an earn out and base things. This guy comes in. No, no, no, no. Disowned everything. We have to buy the yearn out up front, bring everything to present value. Let's see how much money I can pay the shareholders to be able to pay all of it. This is also one issue that happens. Talking about trying to figure out the personalities of the entrepreneur and the deal sponsor. While if this guy's gone, should I spread my risk of having different deal sponsors? Then you run into a problem of accountability. One throat to choke. But that's a tough one. I haven't been able to. Thanks.

Yeah, I think it's a whole nother interview. Just around the old antidotes around deal fever.

Fending off deal fever is A challenging one that happens on both sides.

Yeah, that can make sense. You overlook some of those concerns just to get that big fat check at the closing table. What are some of the successful strategies you've used to mitigate the risk of destroying a small company?

The early planning, the communicating involvement of the integration team at least, certainly the leaders of that team early on in the process, involving the seller, as far as how they're going to operate afterward, being transparent, I think all of that's really critical. There are other approaches. You could simply bolt on the company and let them run as they do currently, for the most part. But there's obvious downside to that. You're not likely to be able to execute the synergy projects that you would like to execute if they were fully integrated. The employees may not feel a real part of the newer company. So there's real pros and cons. Don't think there's really a silver bullet, but there are more or less appropriate ways to do it in each case. In any case, some careful planning and careful thought for how it's going to affect the employees and customers and the other stakeholders. Really critical.

Yeah, I'm going to echo 100% of that. And just one point just to add to that. I think people underestimate many times the role of the lead integrator. I've heard many times people say, well, you just need someone to project manage this and you can do that. But the best project managers for integration come with a lot of experience as well. And it's a very interesting and rare profile to find. It's a good project manager. It's almost like a coo, someone that knows about operations, knows finance, that can. And by the way, my process. What I like to do is just have integration as another work stream in parallel with diligence. That person manages everything and continues after we close the deal. When that person has the ability to understand, deeply understand the issues that are bubbling up during the process, but also navigate well back to the mothership on who's going to have a on this. Let's say we're doing diligence and the CFO is not a great guy. Okay, so do we replace the person or do we integrate? So just bring those issues very early discussing with the stakeholders inside the company and solving the problems. When I have that type of lead integrator in my team, I sleep like a baby because I know issues are not going to be left there. That role of the lead integrator for me is so key. Yeah.

If I can tell A quick war story related to almost exactly that situation. The very first project I was on, the very first acquisition I was on, I was brought in as the integration manager because of my background in project management. I was brought in the day that the deal closed. So we went to breakfast. They asked me to be the project manager for the integration and then we went to the deal announcement. And you know, needless to say, that's not the right way to do that. And in fact, very quickly thereafter I found out that there was a massive disconnect in terms of what the plan was for melding the two supply chains together, whether the ERPs would go to the acquired entity or continue to use the acquiring entities. One, it was a massive disconnect and it took a while while to negotiate resolution to that. But that all could have been handled earlier. As Carlos mentions, I like to use integration as a separate work stream as well in diligence, because that's absolutely the. You want to start thinking about a high level even before that. But that's where you really start to do some of the detailed planning is during the diligence phase. And we could have avoided that and some other issues that we ran into if we'd been involved a little bit earlier.

I want to jump back into that whole idea of having the integration person in early. You mentioned having integration there in parallel with diligent. Break that down for me. Like, what does that actually look like? You have functional leads that are participating in diligence and then you have your integration lead there as a sort of another head in that group. What does that structurally look like and how do they approach it? I do see a lot of value because we always preach this stuff that, hey, if you get an person early, it should be looked as one seamless process, not two things with a big wall between it. I'm curious if you guys can explain what that actual approach is for those listening can walk away with something they can apply on their next deal.

The way I like to do it, and typically the way we've operated is develop some high level framework of how you plan on operating. Post closing and as Carlos correctly mentioned, the deal structure itself, there's going to be some implications. You develop the high level integration strategy early on, before you've even signed an loi, for example, how this is going to work and in fact, who's going to actually manage those processes, what the level of interaction is, how big the team will be, what the different work streams are going to be, and so on. But then in diligence Typically, that's where we'll really start to get down to crystallizing that strategic integration plan into the more detailed project plan. So you may not have every tactical task on it at that point, but the idea is to make sure that you've covered all the key elements that are going to be required depending on what your integration plan is. I don't know that I necessarily share the full detailed plan with the entity being acquired, but I certainly do discuss it with them in some level of detail and make sure that they're on board, they think it makes sense and that we'll be able to achieve our combined goals afterward.

I agree with everything, but more tactical. If I double click on what the process itself look like when we're going to we're about to make a bid, I'm talking to my deal sponsor and I tell them if you're going to make a bid, you need a lead integrator. Can you nominate someone? From there on, it's just for the three of us for the life of the deal. And then when you start diligence, integration is another work stream. And if I make an analogy about the other work streams, if you have an HR team doing diligence or the finance team doing diligence, their final product in the diligence process is a report that says, here's the additional value you can get from it, or this is the value destruction and these are the risks. There's those two things, how does it affect value and what are the risks? That's how you tell them, you owe me this report. For the lead integrator, the mission is you need to give me integration plan templates and so forth, but talks about each one of the work streams. How are you going to integrate them in terms of timing? There's timelines in there, getting to the detail of saying we're not going to integrate in the first year, we're going to integrate this in 18 months. These are the people that are going to do this accountability in each one of them. So it's a very extensive document. Towards the back, it's synergies and we like to discuss the synergies with the seller. If you have some sort of earn out component and you discussed starting from, okay, these are the synergies. Do you agree with them? Validate at a high level with the seller what the synergies are and how the payout is going to vary during the, I don't know, two to three weeks or four weeks of diligence. That integration deck is put together, discussed with the sellers and blast by both parties. I think that's a bit more detail on how.

Just to add one additional point on that. By having the integration manager or the key leaders involved in that diligence process, they're able to provide you more than just a plan. They're able to provide you with a heads up red flag report of their own. Right. That says here's our plan. But this acquiring entity does things a little differently and here's some issues that might come up and that you can start to try to mitigate early on. That's the logic to having them involved early. Because if you're just going to use their standard templates, you can let them know on day one, like I was initially notified. What you really want them to use is bring that capability and that expertise to try to recognize issues as early.

As possible within those conversations. What I also use is casting the relationship and the chemistry between the entrepreneur and the deal sponsor.

That's a good point.

Conversations, right. You have to migrate to our systems. Well, there's cost to that. Who's paying? Those are tough conversations that the seller is going to say, you told me that was the price. Why are you retrading me? Well, we're not retrading. There's cost. How are we going to do this? And then it's in the tough conversations that you test the chemistry. If they're bridge builders, if they're not, again, training is not going to stop. Maybe or I wish the train would stop. But at that point, if that's not working, it's a rapid.

Because it's likely that the entrepreneur is going to go from working with me quite a bit early on prior to closing. It's going to flip. And they're going to be working with the integration manager.

Exactly.

So I could ask frequently for integration templates. There's no such thing. Like, I mean if you have something that you could kick off and say, hey, so we're going to start integration. Because everything you just described is very tailored.

Yeah, it's a checklist, it's not a template.

Those are good places to start. You want to leverage the experience and the lessons learned from previous projects. You don't want to repeat the same issue. Nothing against templates, those are great places to start. But they're just that both talking about due diligence checklists or integration project plans. They're a great place to kick off from and then you start tailor it to the deal.

So I got a comment here from Greg as opposed to functional driven integration plan One experiment that can be done is to organize integration SWAT teams centered around the key value drivers of the investment thesis. In this way you can prioritize the biggest impacts. You'd also have a functional plan across the work stream. I like this comment because I've had a recent interview where we brought that up around gold based teams. So one of the agile approaches is to prioritize those value drivers and then build cross functional teams specifically to deliver on those value drivers. I know, I talked to Dan actually at Xilinx and they called it a value capture team. What are your guys thoughts on that? Have you ever used that before?

I have once but it's pretty recent so I think it's something that I'm going to be doing way more. That also saves money by the way because if you use outside advisors to do quality of earnings or so forth, what you do is before they engage them, before you start spending money with them, test and retest the investment pieces of the deal itself. You're also testing the patience of the seller. Is going to say I thought we're going to start diligence right now but you say well give me one week to test these things and then we'll come back. Then I have another go, no go. I'm a big fan of that.

Yeah, no, I think that's a great point. We call them synergy teams. But to have a separate group of people focused on really getting the value that you planned on achieving out of the deals as opposed to just putting the two entities together in a real tactical operational basis. You want to also go after those projects, not just sort of hoping that they evolve from putting the two entities together. They actually have to have a focused resource and efforts and timelines and separate project based focus on it Sounds like.

A great way to keep goals aligned. So I got a comment earlier from Moraly. During these stressful times for small companies with interesting ideas, what is the perception when larger, more stable companies acquire the smaller stressed out companies, how can they mitigate any messaging? It's tough. I think that that's what's going to happen is a lot of these companies are going to be under duress and it's going to be obvious.

I'll tell you this one though. In my experience when times are tough and you go back to does this make sense from a strategy perspective? I'm rambling a little bit but I'm just referring back to one deal that I was thinking about and I was on the buy side and it became evident that Salah was in A tough situation. It was strategic enough for us. We didn't quite. We changed the structure of the deal. Some of the things that were guaranteed turned into earnouts. Reduce upfront but maintain the ability to get the full value of the deal. Just work with the seller on that.

Back to an earlier, a couple of earlier points about both the empathy for employing that on the acquiring entity side of things for the smaller business, but also leveraging what that larger business is good at. You make a great point, Kisan, about the smaller business being more agile. Well, the opposite is unfortunately in many cases negative. But in this case it would be positive in that the larger company is more stable, got a stronger balance sheet and it's probably stronger financially to manage through these challenging times. So hopefully some of that stability, that strength that the larger company brings can help to perhaps attenuate a little bit some of that stress that the smaller company is feeling.

You don't want to create a feeling that you put a lipstick on a peg. When you give that perception, then from there on it's going to be a challenge. There's a credibility issue and then there's going to be questioning of everything that you say from there. Kind of be factual, try not to be too rosy. If there are issues, the credibility is an issue. If you break that.

Carlos, you guys tooling up to go on an acquisition spree?

I think it's a very good time to apply companies.

You answered my question, but I'm going.

To leave you on that.

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

This was a few companies ago where I saw on the day that we closed, half the management team closed up their laptops and walked out, decided they wanted to leave and not be part of the of the combined company. Surprisingly enough, that actually worked out probably as well as it as it could have. It was a shock to us and we could have put things like retention plans in place. Generally we'll do that kind of thing. We didn't do it in this case for various reasons, but to have them all just walk out on that day and we had to do a bit of juggling. But we managed through it. I think it's a better company for it. In any case, that was a bit of a challenge. It was a crazy thing to happen.

Closing day So I was working for a publicly traded company. We were buying another publicly traded company, actually a household name. And we were in diligence. I remember it was a call with finance to go through some boring depreciation schedule with the head of Corp Dev and the CFO of the seller. We're going into this excruciating detail. Very dry call. Fifteen minutes into it, the CEO of the company dials in unannounced. She interrupts her team, cut them off, started discussing that same schedule in a level of detail that we never expect a CEO to be into. Discuss it intelligently answered the questions. It was a call. We didn't have video at the time, but I can only imagine the face of our team. But for me it just stood out of it as she is some kind of genius. You gathered that kind of information, that kind of grand Larry information talks intelligently about it.

She's sometimes a real type A CEO. I want to wrap things up and thank you so much for taking the time to have this conversation with me today. For those of you that stuck through, really appreciate you for spending the time and supporting this. Thank you very much. Have a good one.

All right, Take care.

Thank you.

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