From Silos to Synergy: Best Practices for Uniting Diligence & Integration in M&A

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1:43I'm Kisan Patel, and you're listening to M &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 &A deals.

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2:59This episode, I'm excited to feature Matt Arsenault, Vice President of Corporate Development and Strategic Alliances, and Camilo Franco, Director of M &A Integration and Operations at Jamf. Jamf's a leader in Apple Enterprise Management and Security, traded on NASDAQ under JAMF. We're going to be diving into the critical topic of due diligence and integration synchronization. To get started, let's hear a quick intro from Matt and Camillo. Matt Arsenault started at Jamf about three and a half years ago. It was brought in as they were starting to think about doing bigger deals and formalizing the process.

3:36The Monday before I started, they put out a$400 million LOI, and I texted my boss asking if there was anything you need me to do to prepare myself, and he said no. So I showed up Monday and handed me a whole bunch of information to get ramped up on. From December 2020, we've been building the process and formalizing and scaling. Camilo Franco out of Greenville, South Carolina. So if you're down in the Southeast, come say hello. I've been at Jamf now for two and a half years. Really, I have a corporate strategy background, but did some divestment work there and some integration work at my prior company.

4:11So Matt brought me along to kind of help along with the integration side of the house at Jamf, formalizing that process and trying to make it a bit better. Sounds like a good team and a lot of progress since day one there, Matt. We've been talking a lot about buyer-led M &A. I wanted to get a sense of what does that mean for your M &A function as it's evolved? A lot of times you're doing your first deal and it's following a traditional seller-led approach. As you progress and continue doing more and more deals, your process evolves and becomes more buyer-led. What did that look like for your process?

4:45The interesting thing for Jamf is because we're so focused on the Apple ecosystem, we actually have a really strong guardrail on strategy. So for us, even our largest acquisition was buyer-led. Seller was not in a process. It was a technology set that we knew we needed because we were trying to expand from security on macOS to iOS. Even the largest transaction was buyer-led. We went in, we did a lot of our work up front. But the number one kind of way to make sure that you're looking at those things is to have that clear strategy and sequencing. As a software company, we are very product-led in the way that we do that.

5:22We're looking at that roadmap and an element of what could be next. And then I'm sourcing deals 12 months before we would even start a formal process. So we're closing the ones that we were looking at last year now, and then looking for the deals for that next phase of roadmap acceleration and customer value acceleration. I think another piece to that is getting integration involved really early on in that process. So Matt and I work really well together as he's building out that pipeline and having those conversations. He's including me in some way, shape, or form so that I know what's going on, have a pulse on where those things are going, and can already begin formulating some of those integration planning pieces and teeing up resources internally too to know, okay, when this thing does come down the pike, we're ready for it.

6:12I think that's also key. Strategy, sequencing, and early integration planning. Let's break it down. How do you synchronize diligence and integration planning? I was very intentional. I don't know if any of you paid attention to what Camillo's title actually is. He is both integration and operations. I put him in charge of setting up everything from LOI on. So he coordinates all our due diligence activities, all of our integration planning. He's the main point of contact with our executives. We're working on a deal right now where we don't even have an IOI or a valuation range. We've already met with our C-suite on the key synergies and synergy plans and integration plans, because to justify the valuation we want to pay, we have to have that solid.

6:57The first thing was being very intentional about setting up that idea that due diligence informs integration planning, and therefore the person in charge of both of those work streams is the same for our team. One of the very first things I did after joining Jamf was evaluate systems, figuring out, hey, what do we use today in the process? And it was scattered everywhere. We have members of our team here who can attest to that. We had certain people that use SharePoint for this and Confluence for that. And we also store all this stuff in Dropbox. And so there was information overload and everywhere.

7:35My first chat with Matt was like, all right, I think we need a tool that can help us bring in all of these different resources. And again, it's such a cross-departmental function and everybody's using something different. So what can we use to streamline this process? Enter Dealroom. It was one of the very first things going through the process of approving a software package that we need. That was fun. We were able to get that done and start using the tool. And exactly what you said, bringing that full-blown process from all the way to due diligence, all the way through integration in one place where all our information is stored.

8:11and people can get onboarded way faster from an integration perspective and know that, oh, this is my source of truth for everything that we're building out has been a huge facet of where we've been able to streamline the process and become more successful. It was a lot easier for us to justify that spend because we did our largest integration in Jira and Confluence. So when the board asked us for a Gantt chart, it literally took the program team four and a half weeks of going through all of the JIRA tickets to create the timeline. Yeah. Like in an Excel spreadsheet. And so my boss was like, yeah, we're not doing that again.

8:49So we really did look for that system that allowed for us to get to ease of reporting and that coordination. I heard two things. One, you guys familiar with the concept integration led diligence? Sounded like what you're describing. But the second one was the tech stack. But let's break that down a little bit. Because it sounds like you're running diligence altogether. Yeah. Having that kind of front row seat to the entire process is key. Running the diligence process while also already having and formulating an integration plan and the resources that we need to allocate for that has been huge.

9:26I think the other piece to that too is, and I think we all kind of can attest to this, the vast majority of the people involved in integration are not full-time integration employees. They're resources that have a full-time job, and this is just additive to what they do, which is challenging to have a full set of, hey, we did due diligence. Here's the report outs that we have from due diligence. We now know the resource allocations that we need to make this successful. and we can begin planning or we can highlight red flags and say, yeah, we're not going to have the resources available to properly integrate this company.

10:01And that leads to better executive decisions on whether to close this deal or not, whether to move forward or not. So that kind of thing I think is huge and wouldn't necessarily exist if we didn't have that kind of tie, that bind between the integration side and the due diligence efforts. We talk about early integration planning. Can you walk me through how early, what are you actually doing? So I can say, and this is one of the reasons why I love Dealroom, we manage pipeline in Dealroom. So all the conversations that Matt is having with, and it's a long process for us. So he's having these conversations for 12 months.

10:38Sometimes that information is going into Dealroom and we're managing that pipeline there. As soon as those, and we move the, we have our phases set up. And as soon as it moves into the phase where, okay, we're pre-LOI, we're starting to move forward. We're putting this in front of our investment committee for approvals. I'm already involved. I already know what's been happening, but now, okay, we're full-fledged. We're going to open up a data room. We're going to put in all those preliminary findings that we already have. And we're already starting to build out those data sets. We're before LOI still.

11:09Yeah. Okay. Walk me through that. What are you doing before LOI? I know you're starting to put some stuff together information, but in terms of integration planning. So we've built out like a pre-LOI DD list. Like we're wanting to have a good conversation with you about this. And again, this has been moving for a while. This is the key top 10 financial information that we need in order to come to a proper valuation. So we build that out. All that information goes into deal room, into the data room that we open up for them pre-LOI. We start building out that data set. There's very few people in that data room at that point.

11:43It's basically our team and our financial analysts that are doing all the modeling for us to make sure that we're at a proper valuation. So that's kind of built out pre-LOI. Once we have a proper model built out and we can give a proper valuation to our investment committee, we have that meeting with them, get approvals, go to the board, and then move to LOI from there. And the important piece there is that valuation has to have kind of the idea of synergies. We have to have the plan of what sales team is going to be bringing which products to market. We have to have the idea of G &A leverage, if any, already built in.

12:21You sign an LOI, it's a commitment. And so that really brings that focus early. Because the assumption is when you're sending that LOI, you are closing that deal. And it really does help bring that perspective early where the head of engineering is already talking about how the two product technologies could come together. The teams are really thinking about that pre-LOI. And that means that we sign way fewer LOIs, have fewer targets, but really early in the process, we actually have a good sense of what our integration plan will be. You have an integration thesis. Yeah. What goes in it? Whatever Woody tells us.

13:03We have basically, the first employee of the company has been the kind of driver of our expansion strategy. And so he starts with the thesis, which I would say is very loose lines on a piece of paper that then Camillo and I get to color in. But it is, this is why we would be interested in this deal. It's in this space for us. It's this extension. Here are the teams at Jamf you will have to work with to optimize that. And we bring in some of those seeding your leaders pretty early into that process so that they're contributing pretty early. For us, that go-to-market piece is fairly important as well.

13:41So how are we actually going to move this now from this integration piece? Yeah, we're integrating them into the company, making sure there's a cultural fit. All of those things are important. But then also, how are we going to go to market with this new, if it's a new product, or if it's going to integrate into our current products? How's that going to work? And what teams are involved in that? What sales teams are going to be able to now take this product and sell it? are they well-equipped and enabled to do that today? Or is that something we're going to have to allocate resources for and plan for as well?

14:09Does the company come with that go-to-market function already? Or is it just a smaller startup kind of thing that doesn't have a go-to-market function yet? And do we have to allocate for that? All of those things, we're already having those discussions and building out that thesis on, okay, this is how we would make it work. And here's the approximate cost to that. Are you signed an LOI? Yeah. How do you progress? What does the continuous look like? The LOI signing is when we start to get the next layer of management bought into the integration thesis and the plans. They'll color a lot of the pieces in.

14:41That's kind of when we go from our C-suite down to our vice president level across the different departments. Post-LOI, we go from anywhere from 14 to 18 people involved pre-LOI to like 30 post-LOI. And so a lot of that transition is about that knowledge transfer down from the executives to the team and then allowing for them to add the value within their areas. But we have a pretty firm goal set at that point because the executives have signed off on major milestones, major targets, major pieces. And then the team is coming in to enhance that and execute on it. And then full-blown due diligence.

15:21So we kind of have that top tier, top 10 kind of view already. But now we're going to dive into all of the nitty gritty of what you're about, what you have, what skeletons are in the closet, all of that kind of thing. Obviously, management meetings as well to make sure that there's a cultural fit and trying to get face to face time, not only with their teams, but our teams having that with them to make sure that this is a good fit and a move forward for us. Teach me more about balancing doing diligence and integration, because it sounds like a pretty big lift to do both and have a clear focus on identifying risks versus finding to realize value later on.

15:57If you have your integration plan up front, your findings are what modifies that. In a lot of ways, we do it backwards. We do due diligence, then integration plan off of that. We don't actually get our thesis, build that thesis, and then test it with due diligence. That's what the experience at Jamf has forced us to do, really, is if you've built your thesis, now all of the findings that you have are an adjustment to the plan you already published, not a creation of that plan. And I think that it is a really interesting mind meld. We can't do high volume. We're doing two, three deals a year, but we're making sure they're the right deals to do.

16:37But that's a very important mind shift set in saying, I already know what my risks are going to be. And then I'm going in and proving through the accounting due diligence that ARR is the way we would measure ARR. What are we going to bring over to the balance sheet? We're going in and the legal calls and making sure that the contract and what we're negotiating shares that risk appropriately. That is one of the things that the team has pointed out. You can either pick quality, price, or speed, not all three. The one that we give on is speed. And that's because we are so intentional with saying, this is what's our two or three year horizon.

17:12So if it takes me two years to close it and a year to integrate it, we're still on time. So we do allow for that period of diligence to extend. But that's why having that buyer-led approach is so important to us. We have to have that trust on the other side where they're not thinking that we're extending to push it out or not do the deal. They're actually understanding what our thesis is. We are sharing it with them. And they're actually helping us solve some of the questions even before we're fully through the due diligence process. That's actually a key point that brings a lot of value. Matt is building that relationship for so long that by the time we get to these stages, we're actually, they're so bought into not only what they're doing on their side, but our kind of future forward thinking about what this can be and what those synergies are, they're well bought into that and are supporting of that or are informing that in some way.

18:08So I think that's really key and helpful for us to get to those next stages in a way that, okay, yeah, this integration plan actually makes sense and is validated through due diligence. Or if it's not, then we can pivot and change and do so in an informed manner. In our current in discussions, I think we only have four deals. And Krista, you can correct me if I'm wrong. But I think we have four deals in discussion, which is our phase prior to what we would bring to our investment committee. I want to say the average time in deal room for all of them is over two years. Yeah. We have a giant pipeline in our outbound of interest, inbound of interest.

18:45We have an in contact when we're starting to build those. But the ones that we're bringing in, even the ones that are banker-led, we've been talking to them for a while. A pretty long time. Integration planning starts really early. You got an integration thesis before you sign LOI. And it sounds like it's pretty iterative. As you go through diligence, you're killing that integration thesis into a formal plan. This is the risk of allowing for that flexibility, is a lot of the teams that are joining us, I keep trying to tell them 80 % of your plan isn't going to change no matter what you find. So give me the 80 % and we'll put that in.

19:22And they say, but what if I find something I can't put the 80 % in? So that is the back and forth that we have with our departments as they come in is because we are planning so early and because it is so iterative, they don't feel confident in a final published plan ever. Even after close, we will continue to iterate. But it's saying for our IT organization, guys, you're always going to have to understand what systems you're going to have to put an SSO in front of. That step is going to be the same step no matter where we're at. Now, you might find that they don't have an SSO, but the step is going to be the step.

19:55And that has been a lot of the education that we've had to do as we bring that next layer of people on is be confident in what you need to execute on. Yes, it can change. Yes, you can iterate, but most of it will be the same. I'll say too, having one of the things that becomes challenging with our process is that there are a lot of different people involved in every process. So we'll have this HR person is handling this particular deal. The next one, it could actually be a completely different individual. So we're having to onboard that individual to our process. This is how we do things. This is what we do.

20:28These are the tools that we use, that kind of thing. Prior to having a system of record, really, that kind of ran through that process, it was a very challenging thing to onboard new members. and sometimes you're onboarding 50, 60 plus people that have never done a deal in their life, but know their function and are the new person that are going to be responsible for helping this process along. I think having a system of record that now we can bring them into this and say, hey, here's all the information you need. Here is the kind of the repository for that. And here's our process and building that process out in a way that's simplified has been huge for us too from a scaling perspective.

21:08as we have so many new members that we have to onboard through our process. My last two public companies have been very intentional about actually making sure anybody who is touching the integration is getting credit for it. And I would say pretty readily that every integration takes more than 200 people in the organization. I like the seller experience. When you're working with that target company, how much can you plan with them or give them a heads up? So you're public too, so you obviously don't want to trigger any gun jumping laws. With the sellers, the concepts are the most important thing to keep selling them on.

21:45Your engineering team is important, but we want to move the sales teams into open racks. How would you think about expanding your product into the Japanese market? You give them enough where they understand what the synergy could be. They actually help you build into what would be possible. So stretching the seller a little bit to think about how to transform. into while you're in the due diligence process and integration planning process is important and identifying what individuals and roles are going to contribute going forward. We have more recently started to lose our founders pretty quickly.

22:20It's actually working out a little bit better for us, to be honest, because those startup founders are really looking to be extremely agile and it doesn't fit into the scalability of the company at this point. So we're pretty open with them to say, do you actually want a corporate job when you can buy a yacht and hang out in the Mediterranean? But we're making sure that they're part of that planning for their team for that succession plan. Who were you thinking would take over for you in engineering? Or if the CEO is more of a sales guy, who takes over the sales team? you start to plan that life cycle with them a little bit more up front.

22:54It's really helpful because it sets that expectation. And then the message comes from that seller or the management team of the seller, not you on day one saying, we've decided this. It's put that founder, put that seller out front. And he's the one delivering the message of all the great things we'll do together. And then having an integration leader, honestly, on the other side of the house. And once you can start bringing these things together, having someone that is your go-to for integration activities is really important too. And the last deal we did, we were challenged in a lot of ways, external factors that were completely outside of our control from a deal perspective.

23:34but having an individual on that side who was intimately involved and trusted by the target and middle management employees, that he could lead those efforts from an integration perspective and really sell them on the value and synergies that we'd created together. It wasn't my plan. It was our plan. I think that was really important to sell that vision. Let me make sure I got this right. Sounds like the key is to be very transparent on synergies throughout the process, Being able to communicate that with the target company and get that feedback from them to better identify the roles that are going to contribute to capturing those synergies allows them to be prepared for the messaging on day one where they communicate to the broader company and team members.

24:17So they're bought in as well. And then Camilla also mentioned is finding that integration partner on that side that's really going to be there to jointly navigate the effort altogether. other. I don't know how you do that, but you take everything we said for like 15 minutes and you're just like, okay, yeah, you said this. That's perfect. That's what happens when you have a short attention span. I got to take you to my zone. Perfect. What about measuring success in terms of the transition from diligence to integration or the managing risks associated with that? Or is there no transition? There is transition and there's always going to be transition because like I said, you're extending the team.