How to Focus on Integration as a Corporate Development Professional

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1:46I'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.

2:25to events, M &A role openings, and other resources as we build the greatest community of forward-thinking M &A practitioners. Again, that's mascience.com. I'm your host, Kisan Patel, CEO and founder of M &A Science. Joining me today is Brent Campbell, Vice President of Corporate Development and Strategy at Alight Solutions. Alight is a leading cloud-based human capital technology and services provider that powers confident health, wealth, and well-being decisions for 36 million people and Dependents. Traded on NYSE under ALIT. Today, we're going to talk about how to focus on integration as a corporate development leader.

3:05Brent, how are you doing today? I'm doing well, Keithan. Thanks for having me. How are you? I'm doing great. Thanks for taking a break from doing deals to have a conversation with me here. Can we kick things off with a little bit about your background? Coming out of business school, I worked in investment banking for several years. I worked for Barclays. Did M &A advisory there and cut my teeth on M &A. I worked out of the Chicago office, so I was a generalist there working on services, industrials, and education services. We did a number of sell-side transactions there, as well as some financings and other types of corporate finance deals.

3:39Really enjoyed my experience there. I worked with a lot of great people and got exposure to a lot of different things, but felt it was somewhat incomplete. I wanted to see more of a full picture, more of the strategy leading up to the deals, and then seeing what happens after the deals, seeing whether they were successful, whether they made sense or not, and whether the deal rationale really played out the way it was pitched. We decided to make the move into corporate development and began working at Aon in 2015 in their Hewitt group, working among a team of about three or four people. Got a lot of exposure there as well.

4:11We did a few sell sides and then a number of buy sides there. Just really kind of learned a lot of the things that I wanted to see the strategy. Why are we doing this? What's happening? Why are we looking at these assets? And then the aftermath too, which is really important to me seeing, did this work out the way we wanted it to? Did the deal strategy, holding up those types of things? And in 2017, we sold most of that business to Blackstone. And then that business actually became Alight Solutions. And shortly after the divestiture, I joined Alight and started building out a team. I joined actually my former boss who came over with the transaction.

4:50We built out a team together and we've been pretty active from an M &A perspective. I've got a team underneath me and we've been pretty much in buy mode consistently since about 2018. We've done, depending on how you classify the deal, 10 or 11 acquisitions, for the most part, all strategic, not really roll-ups, either getting into a new TAM or adding a new product or getting into new geography, those kinds of things. We came out of the gate hot with a light and we're continuing to use M &A as one of our strategies to grow. That's a pretty diversified background there, my friend. You went from the advisory side to going in-house, working on strategy, seeing what happens after the deal's closed, being part of this carve-out, then IPO.

5:35The interesting thing is you're the one that wanted to talk about integration today. Maybe we can kick things off with why or how important integration is. I'll be honest, coming out of banking, it really wasn't even on my radar. I knew about it. I had spent some time with it, but it just, it wasn't one of those areas where I felt that, hey, this is an area that I really am going to need for my career development. And I knew it was important, but I didn't know how important it was. I was more focused on the why, the strategy piece of it, the aftermath, the impact of the deal. But having gone through from an idea inception to finding targets to diligence to acquisition and closing the deal, having been through a number of those reps, I've really noticed and really started hitting that integration is just as crucial as any of those other pieces are.

6:29Without a proper integration process and without really dedicating the resources to it. You can turn what could be the best idea and the best asset and flawlessly executed the diligence and negotiated a great deal. You can turn a win into a loss fairly quickly if you're not really planning for that future state, particularly given the way we've wanted to do things. We're not really buying separate businesses just to set aside and let them continue to run and do their own thing. We really want to integrate it make it part of the bigger story, the bigger strategy, the story that we're telling the street and real value for our clients.

7:07Seeing that firsthand really opened my eyes to, we need to be serious about this and we need to make it something that is not just an afterthought. It needs to be considered upfront at the very beginning of a deal. It should be, in my opinion, one of those items that's involved in the go-no-go decision on a transaction. Is this something that's their culture fit? Is this something that we can integrate without disrupting their business, without disrupting our business. Those kinds of things are really critical. How did you come to this conclusion? You don't often get this perspective. And I'm curious, is it purely from experience?

7:42Where did you come through with this realization? Just going through some of the reps. It's not quite as sexy as some of the other things on the deal. Oh, this is going to open us up to these new geographies. This is going to open us up to this new TAM. We can really sell this to clients. And let's talk about purchase price. Let's talk about negotiating. Those are the things that get a lot of the attention in the deal. And sometimes it can be an afterthought. And coming out of Aon and Light, we really wanted to hit the ground running with acquisitions and trying to feed up some of our solutions to market and things like that.

8:16Being a carve-out, there were quite a lot of learnings that needed to do. Some education needed to happen there. And while we were an established company, we were part of the Hewitt acquisition going all the way back when Aon bought that over a decade ago. We were a company that had been around a long time, but as a standalone company, we were totally new. New C-suite, new infrastructure, all that kind of thing. We were on TSAs and things like that. So it wasn't a fully automatic process. There were things that were still being built up. We still had to get off the TSAs, get on our own. And so we didn't have some of the benefit of that infrastructure that a more established company might have.

8:54And so we were trying to build that up. At the same time, we were really trying to get some of these deals done so we could make our clients happy, so we could get into areas that we really wanted to get into. We had a couple of deals where we did have an integration plan. We certainly did. But there were so many things in process. There were so many moving pieces early on that a lot of the plans that we had for integration, by the time we were starting to actually execute on that, people were in different positions, We had different ideas about the direction of the company or direction of specific areas.

9:27It was one of those things where there was just a lot going on, a tough situation. You can't really put the blame on anyone, but it was just a lot of moving pieces. So the integration didn't get probably as much attention as it should have. So we had some growing pains with some of these acquisitions. We had to go back and say, okay, here's what we really thought we wanted to do in the deal model. and other people that came in after the deal happened, had different ideas and things like that. I saw firsthand what it can do if there's not like a core focus on that. The deals ended up being successful ultimately, but it took, some of them took much longer than we anticipated, much longer than we had thought.

10:06Seeing that happen, it was quite eye-opening for me. That's a common theme I picked up on. If you don't have the right practices in play to execute integration well, you'll get your anticipated deal value, but it's going to essentially take you longer. Are there negative consequences of that? Yeah, absolutely. You're acquiring NASA, you're acquiring a management team, depending on how you've evaluated that. Typically, you want to bring some of those leaders over. And if things start taking longer than they are, if they see some kind of, hey, this is what we had planned, this is what we're going to do, but now that's put off for another year or something like that, then you can potentially lose talent.

10:44You can lose market momentum. A lot of the acquisitions that we've done were very exciting to the clients. They were very appreciative that we did this. This is, you just bought a solution that we really have wanted you guys to have kind of a thing. But then all of a sudden, if we're not delivering on that in a timely manner, then that can cause an issue as well. There's certainly some negative consequences to not being able to move at the speed at which you had anticipated and what you had originally told clients and you maybe originally told the target company that you acquired, that can really slow down the momentum.

11:17The idea is you acquire an asset, you make that initial splash with the market, with clients, with the target company's employees. You can talk about all the great things that you're going to do with it. And you keep that going. You want that to just continue on. You want to keep seeing big or small successes along the way to build upon that. Hey, look, we said we're going to do this. We're doing this. We're doing this. We're doing that. The other thing. And we're continuing on. Not, hey, we made the announcement. We told everybody about it. We got everybody excited. And then you don't hear anything for six months.

11:45How does that tie into the story to the street, which you mentioned earlier? Now that we're public, it's more critical than ever. Not that it wasn't important before. It certainly was. But really nailing that down because that's our leadership team. They tell us a message to the street and we are expected to deliver on that. If we're not moving in a manner in which we had asked into the street, then that raises questions. then it becomes on earnings calls or things like that, that potentially becomes an issue in terms of, hey, what's going on with this acquisition? You said this was going to happen.

12:17And what you don't want is to have your leaders on the call saying, oh, we're behind on that. You get it from that end, then you get it from the client. It all comes together and you want to keep that momentum going. You want to keep that speed going. That 100-day plan, you want to get that going and deliver on those things because it can snowball. You're not moving as quickly, then maybe you start making some decisions that weren't necessarily in the deal model or in the plan or things like that to speed it up. And that can cause some problems as well. This leads into the next question, because when you talked about integration, a couple of things you immediately mentioned were people and culture.

12:49So how can corporate development focus on integration? Every corporate development group is structured differently. I'm lucky enough to be in one where I report in the chief strategy officer. And so So that alignment with the strategy is there from day one. I'm involved. I'm aware of why we're doing this, what's going on from before we even identify the target. My team and I, and we work very closely with the strategy team, we're all kind of one team, really. We all work together. And so we have the best, along with some of the business leaders we bring in from an early stage, obviously, who sign off on the strategy and are aligned with it.

13:25From day one, we're aware of what we're doing, why we're doing it, why we need to do it, and what it's going to give us and how it's going to help our clients. Our continued involvement post-acquisition is an essential piece of that integration part. Every company does it differently. Sometimes there's just a handoff. All right, I signed the deal. We just closed the deal. We transfer the funds. Bye-bye. I'm looking for the next thing. That may work for some tuck-ins or things like that. But if you're doing real strategic acquisitions, you need to keep some level of involvement. Our goal and what we're working towards is to keep our involvement as hands-on as possible post-acquisition.

14:05Now, that's not always possible given some of the other conflicting time elements and things like that. But that's the goal. Certain things will come up, obviously, during integration that you never thought about. And having someone who's been in it from the start, say, here's how we can approach this. Here's how we can tackle this given this is why we acquired the asset or this was what was discussed during the deal. This is what we told the other side and those kinds of things. Really making sure there's that continuity and not what's disjointed. You guys were saying one thing during diligence and during the negotiations.

14:38Now we're integrating and you guys are doing something totally different that we're confused about. There's not that. That's another, you ask for negative outcomes. That's another thing that can cause people to be upset or some morale issues and things like that. These are good examples. I see how you can help bridge or make sure there's these connective tissues with integration so that there's none of these gaps that blow open and cause bigger problems. And look, nobody's perfect. There's going to be problems. There's going to be miscommunications and things like that. And we've certainly had them.

15:10And that's kind of that continuing process of learning from previous mistakes and getting better. And we've also had some good continuity in a lot of our work streams who are doing the day-to-day work on the integration. They've been through a bunch before, and we're really opening those lines of communication, making sure that there's no miscommunication. And getting those reps for them, too, is also critical. What about some of the other challenges I hear from the integration side around stakeholder alignment and culture? Are there things that you get involved with at all or have a perspective on?

15:46In terms of culture, that's certainly an area that we focus on during the diligence piece. We're involved in that for sure because we're on pretty much every call during diligence. We get a feel for that. We'll typically go do some sort of site visit or meet with the management team and some of the key employees. So we're involved in that. The work streams are certainly working with their counterparts on the other side to get that fit as well. It's never an easy answer because you talk about a company's culture, you talk about culture of a group. Even within a company could set a culture, a company could have a certain culture.

16:23Even within different groups within that company, they can behave differently or at an individual level. So we try to look at it in the aggregate. Obviously, there's those quantifiable metrics. This is their benefits. This is our benefits. How does it work together? How do we pair those? Are people going to be upset about that? We make decisions on making sure we keep people whole, but then those intangibles are where it's difficult. Is this a more mature company that has more of a corporate culture where they've got their defined lines? Are they more flat? They're like more of a startup. up, those considerations play a pretty important part in how we look at a deal.

17:00Because what we don't want is them to come in and say, man, I can't work at a company like this. It's just, you guys are big and they've got all these approval processes and things like that. And that's just not going to work for us. So those are certainly considerations that we take into account while we're looking at it. It's never perfect. You're getting interviews constantly when you're doing diligence. You're getting their best foot forward. They're not going to come in and say, I hate my job, this company's stuck, you know, you're not going to get that. So you have to try to read between the lines occasionally and decipher that.

17:30It's not easy and we don't always get it right. And you try to learn from that and you try to make it so the transition is as seamless as possible. Like, hey, you guys are still doing, you guys still need to do the, continue to do the good job that you're doing. Your job doesn't change just because company logo changes or something like that. We try to make it so it's easier for some companies that day one will you're not this XYZ company where you're a light or gradually ease into it with other companies where it's like, hey, we're going to give a grace period of six months. You're going to, you can continue to call yourselves the company, but we're going to transition that over to our company after some set period of time that makes sense.

18:09So I think it's a tough one, but it certainly has to play a role. You can't ignore it because the last thing you want is to lose major talent. Yeah, I feel like as you get into integration, you have a whole series of decisions to make and you have a lot of stakeholders that need to be aligned around these decisions. And that's where some of the friction and conflicts happen. And I was just curious to know if you get involved with any of that stuff at all. We do, but what we've been trying to do recently is make those decisions up. Just from a technical perspective, some of the key decisions are, when do we switch over their technology?

18:44When do we switch over their CRM? various systems internally, getting those decisions made up is really important because things that you don't think about when you're acquiring a company can have a huge impact on the employee experience or the target that you're acquiring. So there's conflicting desires on some groups, all right, we need to move everything over day one because that's just the easiest for my group. Or some groups say, hey, we need six months to get things aligned and do that. So that's where, particularly internally from a technical standpoint, that's where a lot of conflict comes in.

19:19Now, as it relates to business decisions, stakeholders there are like, hey, if we're going to change our go-to-market that we had thought of for some reason, our go-to-market strategy that we had put in the deal model or that we had come up with for the thesis for the transaction, we want to change that because we don't think it works. We absolutely do get involved in that. We tend to ultimately defer to the business on what makes the most sense, But we need to make sure, hey, if there's a deviation from what we had said previously, why are we doing that? Is it going to cause problems with clients or is there going to be an issue there?

19:53Or what's the benefit of doing it a different way? Having a strong integration team and having us aligned with that is important because some of those decisions, particularly, you can come up with a go-to-market strategy as the buyer. there's certain rules in how you interact with the seller in terms of how you're going to go to market post-acquisition until you've actually closed the deal. You have HSR restrictions and things like that. You don't want to be seen as operating the company combined prior to owning it. That's where you start to see some deviations from what you had expected. And that's where we come in.

20:27We need to know what's going on. We need to be aware of it. One, so we can track, Like, hey, is this the same deal that we put together or is this now changing? And two, so we can provide our insight into what we think. I think that's another critical area because it helps us explain to the teams and all the people that we've worked with during the deal. Hey, I know we said this during the actual deal, but things change. You can't stay totally rigid and stick with what you put together 12 months ago that information's failed. Yeah, we are involved in all that. You got to encourage a level of agility there.

21:00Can you briefly explain what HSR restrictions are? Because from what I know, it's public company oriented. It dictates anti-competitive behavior and all transactions over a certain size, I think it's 90 million or something like that now. You have to put in a filing with the government to get approval for the transaction. And oftentimes with that, you have to supply deal materials, communications, things like that, that the government reviews to make sure you're not doing anything that's going to ultimately impact the consumers or clients. So think of things like pricing discussions, talking about once we own you guys, we're going to just dominate the market.

21:38That kind of stuff is stuff you absolutely want to avoid, even the perception of to ensure you get approval. So a lot of those go-to-market discussions and joint discussions on how you're going to approach a certain client, you can't really do until after you actually own the business. Because then the question becomes, are you buying this business to basically get rid of a competitor so you can raise prices and your clients have no other outlet or no other channel to go to aside from you after this acquisition? Yeah, it gets sensitive on some of those topics, particularly as it relates to clients and sales and go to market.

22:13Is that specific for public companies or does that apply to private companies too? It's private companies as well. Yeah. Same rules applied to us prior to our IPO. What's your integration structure like? Do you have a dedicated team? Well, we don't have a actual dedicated team for every deal. We do have a significant amount of continuity around who's involved. So the teams that do the diligence, so take, for instance, the technology team that's doing technology diligence on the deal. They'll be heavily involved in integration. We don't have an IMO yet, like an integration management office yet.

22:47That's something that we're thinking about and seeing how it works. We have specific project managers who have actually done it before. We have one lady who's great. She's super organized and she's very hawkish and on top of things, who has had some reps. She's been like our de facto IMO and she's worked with us on a couple of deals. We have the right people. We have the right teams. It's more a matter of now making sure it all comes together and having more involvement from the corporate development strategy team as well on that kind of on top of all of what we have right now. We have all the right pieces in place.

23:20It's just a matter of making sure it continues with that process, continuing improvement and making sure there's the higher level strategy continuity on why and what was intended. Because one of the other issues that comes up a lot of times is if you've got TSA, transition services agreements, you can only put so much in legal documents. And believe me, they put plenty, but you can't spell out every potential scenario in those. Otherwise, it would just be thousands and thousands of pages. So helping to interpret what the intent is on certain things and what was discussed and maybe verbally agreed to like, hey, while the purchase agreement doesn't say we have to do this, really in the spirit of the deal and the spirit of the negotiations, we did kind of agree to this and we said this is how we would do it.

24:06So to honor our word and to make sure we're keeping in line with what was told to the employees and the sellers, having our interpretation of that is helpful as well. How do you approach building your integration muscle? Well, you described you have some key internal resources, but in the process of building it, are you working with some external consultants to get there? How do you make sure you don't screw it up from the beginning? We do currently use some external resources. We'll bring in some consultants and things like that. A lot of it is more for excess capacity and extra pair of arms and legs.