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M&A Tips for Improving Post Merger Integration w/Kison Patel, CEO Ep#159

By Anthony Taylor - March 14, 2022

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Untitled design - 2021-12-27T131748.040  Anthony: Welcome, folks, thanks for joining us on today's episode of the Strategy & Leadership Podcast. Today my guest is Kison Patel. Kison, what's happening today?

Untitled design - 2022-03-10T124818.529  Kison: Hey, thanks for having me, Anthony.

Anthony: Awesome. I'm excited to chat with you. So Kison is the Founder and CEO of M&A Science. What does M&A Science do, and why should our listeners be super excited about it?

Kison: We do a few different things related to mergers and acquisitions. Our business originally started as a software product. It's a typical founder story - worked in the industry, took inspiration from the software space, particularly how software engineers were using these project management tools to manage developing software and thought, why not something like this for M&A?

That's what led to starting our first product DealRoom in 2012. That product evolved - we started with managing the diligence process. When you start pursuing a deal to acquire a company, you do a lot of diligence to make sure what's represented is accurate, and identify the risks. We built a workflow to manage that, then evolved into managing the whole integration process, which gets even more complex. Once you close a company, we need to integrate these two unique entities together. We added pipeline management functionality and became a full lifecycle management solution.

Along the way, with the encouragement of a friend, I got into podcasting, and we took our own spin in terms of leveraging a podcast to enable industry practitioners to be able to share lessons learned. That evolved into a full digital media business that we run today, where we host a series of events. We have over 350 published blogs, eBooks, and two published books. One notable one is Agile M&A, which is based on case studies with Google and Lassie and how to use agile techniques stemming from engineering culture applied to M&A with great success. We published that book as a framework to help other organizations move from their old school traditional approach to agile, so they can get better results in their deals, and shift their focus from the numbers to more about the people. That way you can get people lined around goals and priorities.

That's what we do today. Our business is comprised of about five, six different business lines all around either educational resources or technology.

Anthony: Awesome. I love that. I think it makes it really easy for people to not only adopt and understand M&A, but also understand what makes it successful, because you've seen no doubt your share of successful mergers and acquisitions - ones that are not successful. I think the common theme between those is the people. So I really like that not only agile approach - like when we first started chatting today, the M&A finance world for most people that were kind of bred into it. And then approachability for people who want to better understand M&A.

So a lot of our audience here, they're growing businesses, they are evolving in their careers, what are some of the things that they should understand about M&A that might not be so commonplace in terms of information?

Kison: When we look at what M&A is in the grand scheme of things, they represent the largest transactions that happen in the world. They're also the largest magnitude of change management an organization will go through. I think that's why when we look at why deals fail or slip up, it's typically geared towards executing the change. When you go buy a company, especially in today's competitive market, you can't just buy a business, expect it to just hum along on its own and then make returns for you. It's a highly competitive market.

You need to have a strategy in mind and how you're going to generate value through a series of synergies. Are you executing on cost synergies to reduce costs, combining different functions between entities? Are you going to create new revenue streams and expand with revenue synergies? Those are the big things you really got to factor that in. But ultimately, when it comes to rubber meeting the road, it's how well you can execute the change, how well you can align people around goals to drive this change. That's the key thing. And that's where we see a big shift and change in the industry in the past five years, from this emphasis on the financials, making sure the numbers work, getting a model the board can buy into, and really focusing on the people.

Every M&A starts with good intentions, innovation, and how we're going to generate value for our customers. They often result in a lot of frustration, headaches and blow ups. But can we change that by taking what we're trying to achieve, and bring it to the front end of the process? That way both executives can get aligned around it, identify who's actually going to be responsible for executing this change - their integration leader, have them involved to start developing that go to market outline. So we have clarity, and each respected organization has a unique way of creating value for the customer. That's why we exist today.

But when our organizations come together, what is that going to look like for the customer? How do we align ourselves to understand what that's going to look like and build that as part of our go to market? Then the other big factor is culture. When we think about how things come together, where friction can come about is when you have some contrasting differences with culture. Starting with values - having each respected organization understand the other organization's values is a good starting place. Because then you can expand that conversation and better understand culture, leadership styles that lead to the understanding of decision making and problem solving.

These are the key areas that you want to get a sense of related to the transaction, because it can help guide how you're going to integrate the companies. What's the depth of integration you're going to pursue? You may come across some stark, conflicting differences that may raise some concerns, and even warrant from doing the deal in the first place. These are all good things to know about, earlier the better. Really identifying what are some of the the cultural pieces of these organizations? As well as identifying who the key people are that are going to be needed to really drive that change, that you want to keep around. These are all key things, when it comes to making sure that the process is focused on the people.

We always think about diligence. When you have the buyer coming in, and they're peeling back the company trying to understand all the processes of it. There's a an idea of reverse diligence of the company you are acquiring. Can you help them understand the organization they're going to be integrated into? What are the different business lines that the organization has? What do they do? Where are they going to fit into that? What that's going to look like?


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Anthony: Yeah, there's so much good stuff there. Because one of the things I was wondering was, what can you do on the front end versus what you need to do on the back end? Seeing everything is way different when you're in the diligence phase versus when they're actually integrated and you change their logos and all of that stuff. It's a process and I've seen it done quickly. I've seen it done slowly, and you know, different results happening there. But I really like that reverse diligence, preparing people for that. Then trying to think about what it looks like both for the customer end state once we complete this, but then also, what does it look like for the culture?

So having that final piece in there I'm curious, because you mentioned billion dollar companies doing these big transactions, and they've got a lot more resources to put towards change management integration, like all of those pieces. Plus, they've probably got a couple deals under their belt.

If you're, let's say 25 to 50 to $100 million company, and you're kind of new-ish, at M&A integration, maybe what are some of the things that you've seen gone wrong? Like what are some lessons learned for their first deal or their first big acquisition? Like if you had done XYZ, you could've nipped this in the bud.

Kison: Planning and preparation. We tend to underestimate what it actually takes to do these deals successfully. I think there's capabilities as an organization you need to develop, to allow yourselves to be able to take on a company into your organization, and building that muscle of how you integrate companies. I think that's the big piece - it is a significant amount of change for the company you're acquiring, but also for your organization. Being prepared for it tends to get underestimated.

When you're doing even the front end early process, a lot of times when you go through the diligence phase that later changes to integration, you're pulling in a lot of resources in your company that may be new to M&A. So preparation with these individuals that you're pulling in to get involved with the deal and helping them understand what they're supposed to be doing, what their accountability is. Helping them understand why their company does M&. how does that fit into the whole strategy And what their goals are? You know, the these are real key things that need to be clear. thinking about that as well, The value drivers. You typically have the strategy, and M&A is a tool against the strategy, you go pursue acquiring a company.

The reasons you buy that company should be very clear across the organization, their specific value drivers. are we buying it for the people, because we want this amazing engineering talent? Are we buying it for the product, so we can add and expand our product mix? Are we buying it for the market share? You know, what are those drivers of the deal? Then building your approach and how you're going to execute x integration around those value drivers. So you can prioritize it, and say this is the main number one reason.

First thing comes first, let's really focus on capturing the value around this number one thing that we bought this company for. What ends up happening is we over plan a lot of this stuff into checklist to do list items. Next thing you know, you're pulling people in, and they're tackling this massive checklist without a clear understanding of why. Then it gets confusing, because you're not enabling people to really make those decisions. That's a big part of making all this change, is there's a lot of decisions that need to be made at a fast pace.

If you haven't prepared leaders to do that, you end up with a lot of these issues, friction, confusion, and folks getting frustrated, burnt out and eventually blow up, quit their job and take a lot of value with them.

Anthony: I get that. So really focusing on as part of the integration, change management and communication. Making sure that the alignment not only with the organizational strategy, as it stands with call it the parent or the acquirer, but making sure that the acquired - there's that link between the why. What are we trying to accomplish in simple terms?

So as people move into the operations and integration, they understand not just what they're doing, but why they're doing it and where that connection is. And failing that, or assuming people will know, means that you have to leave them to their own devices. When we do strategic planning and leadership development, we support companies who have merged or integrated a company. We stress communication and making sure things are explicit instead of implied, so that everybody moves forward. Ultimately, you're going to get a better bang for your buck when you acquire a company or integrate somebody.

So carte blanche for you here. What do you want to tell our people about M&A, about the world of it? If you can tell anybody anything. What would you want to tell them? Because I've got a couple more questions. But I'm just curious if there's that one thing you're like "Hey folks, you need to know this. Listen up."

Kison: I think leadership is the big thing. At the end of the day, it's not a tactical exercise. It's not like any other financial transaction where it's highly quantitative, digital computers talking to each other, the blockchain, any of that stuff. We're talking about people aligning people. It starts with leadership and ends with leadership. That's the key component of it. I think when we look at those leadership approaches, the ones with compassion and empathy tend to be the right fit to drive change. That real listen first mindset.

I can get in this conversation with you right now Anthony, being the subject matter expert that knows all things M&A, but can I put that to the side? Can I assume what I know is wrong or I know nothing? I could learn some things about M&A from you. There are some things. Can I shift my focus and intently understand what you're thinking about how you're feeling - why you feel that way? It changes the dynamics of the relationships that we have. Because now I can understand your goals and challenges, understand how I can align to help you with those goals. Then it changes the way our relationship is forming, because you're going to be more receptive to some of the ideas I have, because I took the time to really listen first. I think that that tends to get forgotten.

When we do these M&A deals, we tend to make it this exercise of scrambling to get a bunch of to-dos done. Well, that's not it, when we're talking about the real focus on people. You got to stop and put the person first, understand where they're coming from. You'll learn a lot. Because if I'm buying a business, and you're part of this team, and you're now going to be part of my team, I want the best from you and I want the best. I need to understand where you're coming from. If I ask you "What are some of the things that we could do to make this a good win for everybody?" You're going to have a really different perspective on what that means. I'm going to learn, I'm going to get some of these ideas that are more tangible. The fact that I took the time to listen, is going to send a clear message as well.

That's the big thing I'd probably want to say across when it comes to M&A - listen first.

Anthony: Yeah, I love that. Well, I think it was at least implied that was at the leadership team level. But I think what you expressed was really doing that at scale. Because you know, at any level - frontline employees, middle managers or your senior level, it impacts you at a different level. Your ability to connect before you pull with those people is probably going to impact the success of the integration. And beyond that, the outcome of the deal and the outcome of all the businesses. So really making sure that leadership first, throughout all of that, if I got your key point.

Kison: Yes, it's just more critical with change involved. The fundamentals of creating a positive workplace are still the same. You got to create a strong communication framework where every employee feels their voices heard, so they can point out the ideas and the problems. Then also acknowledged achievements across functions. Then the last but not least, create an environment where your team feels they work amongst friends. It's where we have these social events and things of that sort.

Those fundamentals still apply when you want to create a positive work environment, you're not getting away from that, it just becomes even more critical when you're actually driving change that you have to be very proactive in that manner. That way people don't feel they're left out there in the dark about things. People can surprisingly take bad news well. Unsurprisingly, they take no news really bad. Even with an M&A transaction, there's some good and bad. Yes, there are probably likely going to be some layoffs associated with this transaction. This is what's going to happen, because part of the strategy is creating value by combining some of our activities or functions together.

But we also have opportunities that're going to be created. We're going to be expanding in these different directions, we're going to be creating new roles. So even if somebody is going to be impacted by this, we're here for them, and we're gonna support them by either helping them identify other roles in the organization that are now emerging that they could be part of, or if it's outside of this organization, we're still going to help support them transition into a new role. We're not going to leave people hanging in a bad spot. It's simple communication. "Layoffs are gonna happen", or "I heard there's a rumor going around", you know, it gets a little unwieldy. That's where it's important to have that level of communication that even if it's bad news, you can still communicate it and at least give people that news coming from the source of truth.

Then they can digest and have better association with that trust. That's the most important thing that you want to develop and preserve, is trust with the team.

Anthony: Yeah, absolutely. And we've got a couple of great podcast guests prior to this one that talked about communication and communication structure. So how to move that forward - so check those out. I've got two questions for you before we finish these, and you can answer them in whatever order you want. One is, when you look at a typical merger acquisition or change management effort when integrating two companies, what's the timeline like for that? Like what would be reasonable? It's obviously not going to take two weeks, it's going to take a couple months. So what is your experience there?

Then two, as you put your foresight hat on, what business trends do you see in the world of M&A or just organizations as a whole? What are some of the trends that you're seeing, that our leaders might want to be aware of? So two part question and I'll let you take it from there.

Kison: The timelines varies, if you're on the buy side or sell side. It's a big decision to make. And the more time and consideration you put into these big decisions, the more likeliness you'll have to make better decisions. When you're impulsive, and you rush things, you're more likely to make bad decisions. I can promise you that from personal experience. So when you're going to go sell a company, take your time, build out the strategy, understand what your goals are. Is it objectively to get the highest price, and that's it? Or are you looking for a good home for your people, so that they have good career futures? That's gonna sway who you sell this company to.

So understanding that, understanding do you want to take the time to get to know these potential suitors? You might already have in mind that there's three big companies in your space that tend to do most of the acquisitions. Do you want to take your time to get to know them? Do you want to play the long game, maybe entertain some partnerships, and really get a good fit and feel culturally? How are the organizations going to work together, and what would that acquisition look like? If you got your time on your side, you can really take a lot of these different considerations and test out things.

On the other side, if you want to compress and create a very competitive auction process, you can work with an investment bank, and that's typically what they're good at doing. Be mindful that you could potentially ward off certain buyers, because they choose not to participate in that kind of aggressive process. When you do have an auction process, you tend to compress your timelines significantly, how you do diligence, and how you get to close. Then once you get to close, the banker takes their cut, and then you're left to figure out how these entities are going to come together. So it is a different way of doing things, it's very common to do an auction process. That's what creates that competitive environment.

But then there's factors to keep in mind. How you put your consideration could shape your timeline on the buy side of the transaction. On the buy side, when you go purchase a company through an auction process, you're meeting the timelines, you have to act aggressively. You're taking more risks, because you're not going to be able to do the full, comprehensive diligence. If it's a deal that you're working directly with their management team, you're working together and you're bringing up these things like "Hey, here's the timeframe that we'd like to do this". It allows us to do diligence, allows us to plan integration, get people involved working directly with other team, giving them more information, transparency, and build a relationship.

It really depends if you're working principal to principal versus through an intermediary in terms of the overall impact of timeline between these transactions.


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Anthony: Got it. Then in terms of the integration piece, talking like a year, two years?

Kison: It depends. What are we integrating? Why are we integrating? What's the depth of integration? We may do a very, very light little integration that could get done in a number of weeks. We may be doing a full integration, and it could take much longer. We could be two large entities that are almost like a merger of equals coming together - that could take several years to combine those entities. So there is a lot of complexity when it comes to integration. And it does vary quite a bit depending on what exactly needs to get done and the overall strategy of how we're gonna integrate.

Anthony: Cool. That makes sense. Yeah, there's no one size fits all. It depends on the size and scope of what you're taking on. I think that as you had to set earlier, don't shortcut the process. Because otherwise, you're the only person who serves to stands to lose from that. What are you seeing in the M&A space moving forward, in 2022 and beyond?

Kison: We talked a little about the people approach. So that's a continued thing that we anticipate, is these companies are made up of people. At the end of the day, it's all about people coming together in these organizations, and you need to prioritize that. That we'll see continue.

We talked a little bit about agile, and we're seeing a lot of significant results when you can create this iterative process around focusing to respond to change, as opposed to creating a massive plan. So that's another trend. I'd say the technology side is getting interesting. We've seen some early tools of contract analysis for the legal space. I see some of that stuff where you can take that technology, simplify it, so regular consumers or practitioners could use it.

But to be able to summarize information, I think that's a big part of doing diligence. You're analyzing a lot of information. But if you can use some of these machine learning type of products that help you summarize information so you can get through it, get the key insights that you're looking for a lot faster, be able to dynamically ask general questions and get those answers on the fly. I think that's what's going to start shaping the efficiency in the way we pursue M&A deals. It allows us to spend less time on the tactical crap and more time on the activities that generate value.

Anthony: Yep. Awesome. Well, I appreciate that. I'm excited to see what happens. And as technology moves faster, every industry is going to get disrupted to a degree and then what's all that's left is people, because that's all there is. Kison, where can people learn more about the programs you offer, learn more about your course and connect with all of the different entities that you support?

Kison: Absolutely - it's all on mascience.com. Everything's there. We have tons of content and resources related to M&A for anybody interested. Last year, we launched a diversity scholarship program to encourage women and people of diverse backgrounds to get access to the training materials, templates and resources, so that they can explore a career in M&A. Yeah, all on mascience.com.

Anthony: Awesome. mascience.com. Check it out, folks. As somebody who's involved in that integration, change management side, I can't overemphasize the people side of things. The communication side, and then creating a structure and a process to make that transition as seamless as possible. And to have really clear outcomes out of that. So I really appreciate you sharing today. Really great insights, and I look forward to learning more at mascience.com.

Kison: Thanks, Anthony. My pleasure.

Anthony: Folks, my guest today is Kison Patel, who is the founder and CEO of M&A Science. Check them out. If you're thinking of an integration or even a career in M&A, there's so many resources there. I think there's a lot of potential missed there that could stand to be busted. So check them out.

Then if you know an organization that is considering merger, acquisition or integration, be sure to send them that link because it'll help them maximize the success. So thanks so much for watching.

My name is Anthony Taylor. This has been the Strategy & Leadership Podcast. I appreciate you being here. I hope you enjoyed the show. And I'll see you next time!


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