How Positive Relationships Can Drive Success in M&A

24:46It's to set expectations about setting expectations. The expectation setting, yes. I like the getting to know the people. Like if you break that down, I feel like there's very formal ways of, hey, let's go grab coffee or lunch or sit in a conference room. I can go informal. Let's grab a drink. Let's dinner. I don't know what else you can do. Hopefully people are doing fitness activities. Let's go play golf or something or tennis. A walk maybe. I can pick that one back up. Yeah, let's go for a walk. Is there a strategy with that in terms of how do you approach building that relationship? How quickly do you escalate it?

25:19I usually just ask people for alcohol. I feel if I can get them drunk, I can get everything I want out of them. But that might not be the best approach. Yeah. So usually we ask them if they would be interested, especially in that first meeting, we ask, are you interested in going to dinner with us? So a little bit more of a formal approach in the beginning to let them know, we're interested in spending time with you outside of the walls of this organization. We're more than happy to field questions about work during that time. but truly try to set the tone of, we want to get to know you during this dinner and you as a human, not you as the individual at work.

25:57We tend to start out with more formal approaches of a dinner, and then maybe it goes a little bit more into informal. For instance, during our associate announcement, I may not be presenting. I may be present just so that I can mingle around at lunch, talk to some of the people, see what they're having heartburn about, take an interest in what they do at the company. How many years have they been there? How do they like the city that they live in if it's a new market for us? So more of those informal approaches of when we're doing structured things, we can also take an informal way of trying to get to know people by having enough people on site to spread out and have conversations with people.

26:41If you have one person there, you can't get to everyone. So it's important for us to have enough people out there to build relationships across that firm. Wow. There's like a whole strategy of how you're finding people. There absolutely is. In the IT world, I had it down to a science of how many people we needed to support a certain size and or type of firm when we were bringing them in from an IT perspective. I was assessing how tech savvy are they? Are they able to join these meetings? So for instance, we've definitely had transactions where you can tell their people just aren't tech savvy. They've been handheld in tech.

27:19They had someone sitting in their office that could walk over and physically do the fix for them. And unfortunately, that's not how Whitfley is staffed. We're an international firm. We've got a centralized help desk area. And so I knew that if the technology knowledge of that incoming firm was low, we were going to need more support people. because we're completely ripping apart their technology world when we give them their new Whitfully computer. They've got to relearn where their data is. They have to learn a whole new practice management system to enter time and expenses. Their email is going to look different.

27:52They have to put their email signature back in. It's extremely overwhelming. On the flip side, if I noticed that it was a more tech savvy firm, we might staff down, but have virtual support available for them. It's all about assessing the characteristics of the unique firm that you're acquiring and adapting to the needs of that firm. On the people assignment of relationship development or accountability, can you give me an example, like using even the IT integration, how would you plan that out and saying, all right, we're going to integrate their systems and here's the people involved, here's who you should be making relationships.

28:26What did that end up mapping out to in the example of an IT? So let's say we had a traditional CPA services type firm that we were acquiring that was low on the technology savviness scale. And let's say they had about 35 people. The first thing that we had to do is we need to figure out how challenging is the actual process of integration going to be? So how many pieces of software do we have to bring over and install on their new computer? How much data are we migrating from their servers onto ours? Is there any super unique setups for the desk? So for instance, in some of the acquisitions, we completely redid the entire desk.

29:06I'm talking mounting monitors, plugging in docking stations, making sure that the computers physically worked with everything at the desk. That requires a next level of on-site hand support to be able to complete all those desks at the same time. Then I looked at more of the what types of questions are they likely to have. if they're really heavy on, let's say, CCH document, and they're going to be coming into our caseware, we know that's going to be a level of change that we need to staff up for. We need to have maybe three people there instead of one person there in a firm that's going from caseware to caseware.

29:42It's all about understanding how much time are you going to have to spend on specific tasks during the actual IT integration weekend? And then what is the profile of the clientele, basically, do you need to staff up a couple people because you think that one person's likely going to be sitting at someone's computer for two hours? Or can we staff down a little bit more because it's just going to be a quick question about, I need to click this button. I appreciate the example. This is the very thing of why both love and hate M &A. Yep. It goes back to the thing. You can't just create a checklist and go get this done.

30:17There's so much variables they have to tailor to on every single deal. Listening to Cole teach you a lot of good things about that. Could you give me an example? Okay, so let's say we planned that out. At least we had this mapping of the people and who's doing what. In terms of working with that leader and positioning them in terms of what the expectation is or approach for them to build relationship with people at that target company, any key things there that you frame up to get that person at least knowing what they're supposed to do? I don't know that we had a truly formal process for that.

30:51Although I could see where a more formal kind of training or the lovely word expectation setting for the people going on site. What we ended up doing is as we had people on site, we were taking note of the people that the incoming firm was responding to. If there was someone that was always raising their hand, because usually we would sit in a conference room and we would let people know, hey, if you have an issue, if you have a question, come into the conference room and ask us the question. What myself and the leadership of IT started to do was notice the people that were raising their hands to go help the individuals and then taking stock of how did that interaction go.

31:29So getting a summary of, did they get the issue resolved? Was it a bad interaction? Were they yelling at you? All of that kind of stuff. So taking stock of the skillset of the individuals on our team. And then honestly, what it morphed into is the people that had the skillset that were great both technically and with people ended up coming on M &As more. Naturally, we just started to gravitate towards the people that were excelling in that environment versus the people who maybe weren't as comfortable talking to people, which again, is totally fine. Not everyone is a people person, but we needed the people front and center when we were on site supporting the staff.

32:09Now, what I could see being helpful is almost like a kickoff call. So the week before everyone goes on site, A, hey, this is going to be a really stressful five days. We understand tensions are going to be very high. You are representing not only our firm, but you're representing IT. So we need to keep positivity front of mind. We need to be accommodating to these people. We've got to be organized and we have to be responsive. Again, everything goes back to expectations for me. Having that initial conversation to set them up for success of what we're expecting of them from support, to me, could go a really long way.

32:47I think I have gotten the Nicole Markowski framework of relationships in M &A. I'm going to buy you because I'm going to have to touch it up a little bit. First and foremost, you're developing relationships with the key executives early because you want to develop them as champions for the messaging and things of that sort. But you don't jump right into it. You really spend the time to build that relationship and trust with them. then you're essentially providing the messaging which you would inherently like them to replay to the broader company and broader team. And also as well as important for you to just get to know them generally so that you understand what their working approach and culture is like.

33:24From there, this is where expectation setting really clicks in. As you progress and you have your meetings, you're even setting expectations about setting expectations. Driving it in so it's super, super clear, but also welcoming the other side an opportunity to add to that initiative, to keep making things as clear as possible. And then the other leg would be the strategy piece. We put that at the end because I think it really evolves because now you're moving through the deal and you're identifying more and more people and you're learning them. And that's where you start mapping this out and to get that coverage or the broader thinking about how relationships are going to need to be there to cover all these activities that need to get executed on ultimately.

34:07Absolutely. You're gonna have to break that down further than come back and teach it as a course at a Sunday. I like it. I feel like we could work on that. I did my part. There you go. Who is the most important person to have relationships with in the acquired company? It's so hard to just pick one. But honestly, I keep going back to the leadership of that firm that is coming into Whitley. That leadership team, again, this is under the assumption that they were a great leader in their organization and they have the respect and attention of the people underneath them. This all kind of blows up if that's not the case.

34:44But to me, that is the leader of the organization. And that is the person that we keep going back to. They are the one that has to positively message this. They are the one that potentially has to deliver some bad news about a short-term decision and why it's going to be better for the long term. They are truly the head of change management for their people. because as much as we want to be those people, and eventually we will be once we've had the time to develop the relationship, out of the gate, we don't have the trust of those employees, but that leader should. For us to set that leader up for success, we have to build a relationship with them.

35:23We have to coach them and we have to make sure that they are appropriately prepared to deal with the situations that are gonna come up in M &A. That is the most important factor in success of the integration because the instant that conversation starts to turn negative from that leader to their associates, what do you think the associates are going to think of it? If they trust and respect that leader and the leader is saying, yeah, they decided to make this decision, but I don't agree with it. Great. Now we're all the way back to the beginning of the change management scale. We have zero adoption, no buy-in.

35:57They don't even want to do it at that point. So it's truly important that leader keep a positive tone, even through tough messaging. Right to center of influence. So I want to talk to you about dealing with assholes. Now, I want to point out that they could appear in any group. They could be on the executive team. They could be one of the attorneys, one of the bankers. They could be on your own team. What's your approach? Like, how do you handle that? Because they can really make it miserable for not only yourself, but whole groups of people. 1 ,000%. And I can tell you, we have run into this situation probably on every single M &A.

36:35Like you said, it can show up in any group of people that you're working with. I take those on as a personal challenge. So my competitive sign comes out a little bit, assuming that I need to keep a long-term relationship with them. So let me qualify that. If we're talking about a broker banker that maybe we are interested in keeping a long-term relationship with, I'm going to do my darndest to try to build that relationship with them and show them that I am a reliable person. I am listening to what they are saying, but they also have to respect and listen to what I'm saying. On the other side, if this is going to be a long term, like if they're coming into Whitley and they're going to be one of my coworkers for the long haul, it may be a little bit of a different approach.

37:15So to me, I'll start with the broker side. So on a call, let's say that we all end up joining early and we can have a little bit of small talk. Let's say that they're in California and I'm in Wisconsin. I can razz them if it's the middle of winter. Don't even tell me about your weather because it's snowing in negative 40 here. So trying to bring a little bit of humor with small talk to get them to loosen up a little bit. I try to go back to that, see each individual as a unique human being. So I try to start understanding why are they having these actions? This is going to sound harsh. Do they feel stupid because they don't understand the new change?

37:54Are they just so stuck into their own ways and they're unwilling to compromise in certain areas? So what I would try to do in that situation is, okay, we can do it your way, even though it's going to cause some hardship on our side, but then we're going to need you to do it this way for this other item that may cause a little hardship on your side. So almost trying to take that more compromising route for the short-term relationships can work. Now, there are definitely going to be situations where I have not been able to build relationships with people. I'm not going to say that I've been able to build relationships with every single person that has come either I've worked with in a transaction or come through a transaction.

38:30And if it's a shorter term relationship, then it's business. Then we're right down to business and we're going to do what we need to get done. And we're going to work together in a professional manner. And that's where it's going to rest. And that's fine. I was thinking what might be helpful is actually if we defined assholes, because I was thinking about that when you're describing potential approaches that there's actually a variety. I have a few of mine, maybe to start off with. I always feel like the people that completely lack self-awareness, they get defensive about it. They can't be wrong about anything.

38:59and it inverts into a blame on somebody else and things of that sort. I know there's going to be a lot more personalities around this that we can cover because there's, again, this whole broad. There's that one. There's the one acting on pure selfishness. And then there's just the hardheaded ones. They're resistant to any change. The worst is the ones that say they're going to get something done. They don't get something done. That's the worst. But I don't know, missing something. Those are my thinking when it comes to this profile. I would agree with that. Each one may require its own different style of trying to break through and build a relationship.

39:30So I would say for the person that doesn't have self-awareness, being able to have maybe an individual conversation one-on-one to me is a lot easier than if we're in a group setting. For instance, let's say that this individual was going off in a meeting and they weren't being professional. Their speak was not professional. You could tell that they just weren't getting it. They weren't picking up on context clues. To me, it's the afterward, the reaching out, hey, I noticed in this meeting, it seemed like you were either really upset or really frustrated with this issue. Is there something going on?

40:05Because to me, it didn't seem like it was that big of a deal. Can we talk about it? Can we get to the bottom of why this is frustrating you so much? So again, it comes back to that arbinger, the turn your chair, the meet to learn, the try to dig a little bit deeper, ask those questions. Maybe they're having a really bad day. Maybe one of their top performers quit. And so now they don't have the mental capacity to be able to separate out what's professional and not professional. So that to me is taking that step back and having that individual conversation is huge for that scenario as well as selfish.

40:39So that's another good one. On this, the lacking self-awareness one, I like the asking questions approach. Would you see yourself stepping beyond like even being assumptive of... Because sometimes you can read people, you can tell they're pissed off about something and you're just like, you're pissed off. And you know, like, why are you pissed off? Is that an approach that you've used in long lines of questioning to get information and curiosity or? A thousand percent. So there was definitely a situation where this individual, I would say, lacked that self-awareness, lacked that bedside manner of communication with other people.

41:13And unfortunately, it was an individual that was in that leadership role, the leadership role that I expect to be the champion of the deal going through integration. We were on a meeting with other leaders of that firm. So it wasn't just this individual, but this individual was at the top. And the tone was very different from any other meeting. It was very, oh, I pushed back on that and they said no, or I don't understand why they're doing this, or this seems really stupid. And it was in front of this group of people. And so I had to take a step back after that conversation because it upset me when I put my trust in you to be the champion of this M &A integration effort.

41:52And then you turn around and basically blow it up in one conversation. That hurts me personally. I took a step back. I gave myself a little bit of time. I walked away. I took a little walk. I processed. And I came back and I wrote an email. And I said, hey, the tone of that conversation seemed really different from any other conversation. Is there something going on that I should know about? Is there something that has been left unaddressed? And the response came back and the individual basically said, oh no, there's just a lot going on in integration now. I'm like, hey, I'm here to help you. If there are things that you want to talk through, if there are things that maybe we need to find someone else to take that off of your plate, please let me know because I'm here to help support you.

42:34Making sure that you know that you saw there was a change in the tone, to me is key to bring a little bit of that self-awareness that other people saw something different in this individual. And then the care and concern of, I care about you as a person. Is there something going on that I either need to know about or I can help with? Got it. That helps. We're getting to empathy and the selfish people. I don't know if that same approach would work. Maybe not. I still like the questions. I still like making clarifying statements. But to me with the selfish people is almost got to build up their ego.

43:11So even if it was a joint effort to solve a problem, giving the praise and the kudos to that individual to feed the ego, to me is a way to build a relationship with that selfish person. Feed into that plate off of what their natural state is, because you're not going to change them. At this point, it is up to themselves to become the individual that they want to be. So my whole way of doing it is approaching it and trying to use their natural tendencies to get that relationship built. I like it. You got a good example of that? I feel like I haven't. We do a pretty good job at looking at the culture of the firms as we're going through the prospecting process.

43:52So to be perfectly honest, I haven't run into that a whole lot, at least outwardly. I don't know that I've ever had to, unless I did it without knowing it, I don't know that I've ever had to be in that type of situation because most of the leaders that we work with are most concerned about their people. It's true. I know a couple of people in the industry like this. I can try it on them. And then the other part of me doesn't want to even engage with them. And that's totally fair. And at the end of the day, I have to remember, and this is something that I continually work on. I'm not going to have a relationship with everyone.

44:22Not everyone is going to like me. Not everyone's going to like my style. And at some point, then you just have to be resolved to, okay, then we have a professional relationship and it is what it is. The hardheaded slash stubborn people. Hardheaded, stubborn. I try to take the nice approach first. So I try some of those other methods. I try asking the clarifying questions, digging in a little bit deeper, potentially even playing into maybe what they want. And if I'm not seeing changes, I basically have to make a decision of, is this worth my effort to continue to try to build this relationship?

44:59Or am I going to have to start playing hardball back? And if I have to start playing hardball back, relationship isn't going to develop. I know that. But at the end of the day, I have a job to do and we have to get it done. To me, that's more of almost the lost cause area. you got to make a tough decision at some point as to whether it is worth your effort to continue to try to build this relationship or if you just got to go down the we have to work together if you want to play hardball i'm going to play hardball back i like expectation setting it kind of is what it is you have to just know that there are those people out there and luckily this is a short-term relationship that we're dealing with more of this hard-headedness and so i don't necessarily have to care about the long-term impact of not being able to build a relationship with them.

45:46I think we just made a nice little framework on how to deal with assholes. Yeah, I like it. So let's try to summarize this into advice that you just give a first-time practitioner. To me, the first piece of advice is when you get introduced, take the time to get to know the people you're working with. And I caveat that with if the environment is safe to do so. I can't think of an example where it would be, but I always like to caveat statements because I'm very risk averse. The best way, in my opinion, to get to know people for who they are is to do it in person. You can try over Zoom and yes, you can build positive relationships over Zoom, but there is just something different about being face to face with that individual and looking them in the eye while they're telling you about their life or while you're telling them about their life.

46:35making that a priority at the beginning of the deal is going to make overcoming those rough patches way easier. So that's my first piece of advice. Second piece of advice is patience is essential in developing an M &A process. You are going to have people who are stuck inside the box. You're going to have the hardheaded people. You're going to have the self-involved people. You're going to have the resistors. But M &A truly is a continuous improvement journey. Every transaction is different from the last, even if it's only slightly different. That means that you really want to take the lessons that you're learning from each transaction to make your process better every single time, not just rest on your laurels there.

47:14And the third one is my favorite piece of advice. Realize that no deal is going to be a perfect transaction, whether it be integration, due diligence, negotiation. There's this quote that has stuck with me and I can't for the life of me remember where it came from. But it basically said, if you're looking for perfection, M &A is not for you. I really like that quote. And I wish that I knew where it came from. Awesome. If anybody knows, reach out. Face to face, patience, no such thing as perfection. Yep. I got to ask Nicole, what's the craziest thing you've seen in M &A? I cannot wait to answer this question because I have heard you ask it on so many podcasts and I had my answer ready.

47:53So I got to provide a little context here. At Wifley, we have an IT policy that when you're printing, you should be using a multifunction device. It's cheaper, it's easier to maintain, and it's more standard than an individual desktop printer. And that's assuming you're in the office. This was actually, I want to say, maybe my fifth transaction that I had been in the IT space. We were on site. We had completed our work over the weekend. Everything was going great. We were into support mode on that Monday. And we had an individual storm into our conference room. And of course, what had we removed?

48:27The printer from his desk. So we, during the transactions, we would take away the individual printers and we would set up the big multifunction devices for everyone to be able to securely print. Again, less costly for the firm, way easier to maintain and way easier to support for the individuals. Well, apparently printers are like family to people, especially in the CPA world. So this individual was so upset that he stormed out of the room and actually punched a wall on his way out. You put a hole in the wall? I think there was a little hole in the drywall. It was around the corner from where we were.

49:01And I was actually over by someone else. And I had just heard the commotion. We learned a bunch of lessons from that situation, though, that we needed to regularly communicate over communication, that we needed to prepare them for the standards of Whitley as early as we possibly could in the process, allow them to ask questions, and allow them to potentially raise an issue or a problem with the way that we were doing things to potentially receive approval for an outside standard. So I think that is the craziest thing that I have seen in the transaction so far. That is insane. It's cool that you actually saw it firsthand.

49:40It probably was a good learning experience to see a real emotional response and take that back to integration planning in the early stages. Absolutely. Yes. And again, we learned a lesson and we adjusted going forward so that hopefully we could avoid that in the future. Awesome. Nicole, this has been great. I appreciate you taking the time from doing deals to have this conversation, helping me become a better M &A scientist. Absolutely. I truly appreciate you having me on the podcast. This has been a lot of fun. So happy to help whenever. Hey, those of you still with us, thank you for sticking through.

50:13Until next time, here's to the deal.

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51:11Again, that's mascience.com. Here's to the deal. Thank you.