Mergers Vs. Acquisitions with Keith Conley

So Keith, we use the word or the words merger and acquisition, M and A and we just kind of, you know, use them together. But there's a big difference between doing an acquisition and doing a merger. Which of those do you think is the better approach?

Yes, you know, there's different risks associated with those two models. If you're doing a merger which means that you're creating a new company like SunTrust and BB&T.

Right, right.

Very different cultures, B and B, T, very decentralized, local cities. SunTrust or Regions bank, it's one of those two much more hierarchical, corporate, very different cultures. And they create a tourist as a new company. And we did the same thing when DTI bought Epic and we merged together. So you're creating a new vision, mission, set of values. Then you have to determine what processes in the company that you use, the hiring processes. It's easy to say you take best practices, but then you have an integrated leadership team and who's determining what's best practice? Well, the best practice is the one I'm used to. Other person says, well no, no, it's my process. And so conceptually take the best practice is great, but politically right and people are kind of stuck in the ways and you have to rebrand yourself and so forth. So I have found, I went through that at dti. We bought a public company, brought them private and chose to merge. And we had a blended leadership team. And we try to blend things as much as we could. But when you do that, one, it takes a lot longer. Two, your attrition early on will likely be less. But in the long term it's about the same. If you acquire and impose your processes, vision, missions and values, the voluntary attrition will be a little bit greater, but it's faster and it's less risk. I think look at other case studies and the bell self at&t and so forth. When you have these mergers, it is harder and it's riskier. So if you have a choice, my experience, be one or the other, buys the company. And not that you can't tweak things, but you try to apply the existing vision, mission values and don't work all that and just have the other company adopt that and move on and you can do it with some velocity there and you can get back to focusing on clients a lot quicker than having your executive leadership team in off site meetings thinking through what the mission is and what your new values are. That merger can be very distracting to the senior leadership team and take you away from being focused on clients. So that's been my experience. There's certainly cases where it makes sense. But all things being equal, the risk is a lot less when you acquire a company.

I would think it's a big challenge with the client as well. Right. So if you've got that merger situation, I think there's a lot more question as to who's serving me now and how are things changing as opposed to when you've got that acquisition, you still got messaging for the clients of the, of the company that you acquired. However, I would think it's a little easier, particularly with bigger companies, because you know what they stand for, their mission, vision.

Yeah. Because when you're doing the merger, it's two fairly good sized companies coming together. Right. And you know, I was on the, you know, calls with the clients of both companies ahead of time announcing these changes. And you know, you always say that, hey, we're not going to change your account manager and we're going to keep the people that have been supporting you in place. And they go, well, you have two salespeople that have been supporting my company now, like, how are you going to deal with that?

Yeah.

So there are greater complexities there when you do that, for sure.

So let's talk a little bit about culture, because you did touch upon that and I think it's a really important one that, that came up actually this year in our survey mark as one of the top challenges. It's interesting because we run this question around M and A. We run it year over year and culture came out as even more important this go around as being a top concern. So talk to us a little bit about, you know, you've got two companies that. Well, first of all, when you acquire a company, let's, let's use that example. Does the culture even come into play as part of due diligence? And I think I probably know the answer to that. And then when you've acquired that company and you've got two fairly different cultures, like how do you really. What's the most successful way to bring them into one?

Yeah, I mean, I remember as a management consultant we talk about culture and how important it was, but when you run companies and you buy companies, you realize it's just not a saying, it is the glue. And if you don't address it, the probability of success of that acquisition is going to go down very low. Because what is culture? It's the beliefs and the values that your top leaders exhibit. Not what they say, but what they exhibit, how they walk to talk and you know, when you're buying another company, their culture likely is different. But if it's very different, then you know that the integration from a change management perspective is going to have to be much more significant. If you don't want a lot of voluntary turnover now, sometimes you may want it, you know, capture additional synergies and you're buying them for their software or something. But in general, understanding the culture and how you integrate the companies is really, really important. If you're buying a company and they're smaller than you are, then you oppose your culture. That's easier. Here are our values. This is how we operate. This is our norms, this is how our leaders behave. And you'll find out fairly quickly who's on board and who's not. The ones who are not on board you need to get rid of because they'll become cancers in your organization. You got to do that fairly quickly, early on to help stabilize it from a culture perspective. But it is extremely important in the due diligence perspectives. As you're talking to the target management team and how they do business, you get a good feel for what you're dealing with and what the challenges are going to be. So you just have to be very, very intentional and try to bring people along and explain your culture. And this is who we are, and this is how we operate and this is who we are. Right. And if this isn't for you, understand this is, this is our core values. This is how we operate. We want to bring you on here, but if this isn't the right place for you and so forth. Understood. Will help you with an exit. And that's typically how we, we've handled that. But yeah, if you don't get the culture correct, you're going to have a really difficult time.

You know, Keith, one of the. I don't want to miss what you said there because I think that's really important. And what you said was very quickly having the company understand that's being acquired, what your culture is, your beliefs, your vision. What we have found is that a lot of companies will say, you know, they'll talk to us and say, okay, we're just not going to go there. We're going to leave them alone for now. Just let them run as is and, you know, just leave it be and let things settle down. And you know, we're called, and you know, I'm speaking about clients that we've talked to or colleagues out there and they're failing those acquisitions. And you know, they, they believe they're Doing the right thing by just letting things go. You know, my belief has always been. I'd like to. It sounds like your belief, but I'd like to hear that is it doesn't matter what the message is, as long as the message is clear. I think people just want to understand what's ahead and what your beliefs are. And we believe. I think Mark believes this, too. I think you do that the leaders that aren't clear are the ones that will really lose out in the end, regardless of your position during M and A or anything else.

Yeah.

I think it's that clarity of leadership, as you said, Keith, which is really the tricky part. It's what they demonstrate. It's what they do. Right. And I think you're right, Michelle. People are looking for clarity. I mean, we've just been through this entire change over the past couple of years, and people are looking for clarity.

We went through a change.

They're leaders.

Right.

And so, yeah, so M and A, I think, same thing, clarity. But Keith will let you comment on it because we're kind of like sort of answering the question.

You know, we did 24 acquisitions, so we got good at acquisitions.

Yeah.

We got this process in place where myself or someone, my executive team would fly out on the day of close, right. The day one, and meet with the entire company and have videos and so forth, and we would lay out why we bought them, how we're going to operate together, what our values are, how we view our employees. We would say there's some redundancy. Right. And you'll know by the end of today whether you have a job or not. Right. Because we just learned pulling off the band aid, it's just a better process. And, you know, everyone know by end of the day, Right. We would talk about the name change, right. In 90 days, everything's going to be, you know, this name and just lay it all out. And then we'd have all hands calls every week, and then we'd have Q&As going out every other day to the company because all these questions coming up about policies and this and that. So we got really good at that. But it was the engagement early on by the senior executive team in that company, small or large, we would treat it the same way. And then you just had to walk the talk.