Integration Focused M&A: Why Execution Should Inform Strategy Before You Sign Part 2 with Ciprian Stan

22:08Ciprian Stan:And we spoke about, I think, keeping the founder in or not, because that's a big differentiator. If you're going to have the founder, the seller part of your organization for long enough, they can definitely, in many cases, they change with a catalyst of positive behaviors you want to see around the new group. At the same time, too long, depends what too long means. And also depends on the purposes of your business. I've seen founders stay longer in the acquired business than they've spent in their own business. And I've seen people move away pretty quickly. And there's a risk eliminating behavior where I say, let's not keep the founder too long because then we stop cultural growth or development or moving away from the history.

22:49Ciprian Stan:But there is a case for both sides and there will be a recommended one in both directions, depending on what you're trying to achieve. that's a great point like a very positive outlook is that there's more growth and success opportunities that can actually happen close close certainly can we talk about the future of this industry and then there's two parts to it there's all this emerging ai technology since we're both sort of techie oriented people there's also just the working model we talked a bit about this previously about sort of like independent contractors and emerging i know you have some experience you've dabbled into it.

23:24I'm going to go meet a friend, Omar, who runs fintalent.com. After this, we're going to go ski in St. Anton. So we'll be probably talking more of how that ecosystem shaping. I personally have found that to be lacking in this industry and have interest around that human capital side, because especially if you're an infrequent inquirer, it just helps tremendously to get somebody experienced who's seen it with the outcomes of these deals, like in some of these lessons that we talked about, getting access to it. But it just hasn't been prevalent in this industry. There's obviously big-name consulting firms that charge you big-name fees.

24:00And it's tough to justify when you're doing small, single-digit revenue deal. And then we've seen other industries. There's almost every segment, sales, marketing, tech. We use Upwork a lot for a lot of these tech projects and hires and a huge ecosystem of these independent contractors. but we really haven't seen that as much in M &A. I want to get your take on that and then also the tech part.

24:24Ciprian Stan:So technology is always going to play a bigger and bigger role and we can debate how big of a bubble AI is. In any emerging technology, there's a bubble element built in. Is there a difference between saying bubble and hype cycle? Because I've been referring it to as a hype cycle. I want to call it something that's not directory because it shouldn't be in any emerging technology that we've ever had. everybody. There was a lot of critics that came and said industrialized factories, they'll never work. Diesel engines, they'll never work. Electric engines, they'll never work. AI, it's all a thought, it's all a bubble.

24:57Ciprian Stan:There's definitely a hype cycle support behind it, which is normal. And by the time we dehydrate and crystallize AI, we're still going to have a lot left. So I'm not concerned that it's a bubble. Will there be a correction? Likely. This is a deja vu. I remember crowdfunding. and then blockchain, where I've just seen this past year, I've seen 50 plus AI for X and M &A pop up. And then again, like all those other cycles, you end up seeing a bunch of them get washed out because there's just room in the market for that much. Everybody's on the wave. There's so many that are caught up with the AI boom, let's call it.

25:39Then there's going to be a lot left when things settle down.

25:42Ciprian Stan:There's going to be really good tools out there that we can use. really use. So the thing with the moment in time that we find ourselves in is my son reminds me that I'm spent more than my shelf life in dealing with some technologies because he's much more accustomed to them. And when we try to compete on the same terms, he obviously beats my arcane knowledge on things. But besides the fact that the generation that is going to be taking this forward is not going to find it awkward at all like we do. I still feel uneasy. around some terms. And I'll give you a relatable example from the cell phone technology era where I first saw somebody talking on the mobile phone on the road, just walking on their own.

26:28Ciprian Stan:And I found it like this guy is talking to himself and laughing. And at the time it looked like sci-fi movies and it could not be more natural now. That's the same thing with anything that we invent. It changes the way that we behave around technology. that tools and technology and AI will have a huge impact in the way that we go through information. Like you're putting out the tool to parse and browse to hundreds of hours of podcasts and pull out the information that you need. That's incredibly useful. And the fact it works with video content and audio content, it's incredible to me. The kids today, when they get to be professionals, they won't find it awkward or impressive.

27:06Ciprian Stan:They'll just find it normal and natural. But for me, I smile when I type in things and five answers come in from different episodes, and different sources with links to say, this is where you find the reference to what you're looking for. And I find, wow, if I had this in my university days, I think technology is going to grow into more of a helping tool. We just need to settle down on the hype of inventing everything and just settle for inventing the right things. I don't think we can do this without trying lots of stuff to see what's fit, what's not. And some of them are going to be out of the context, popping up as winners.

27:43Ciprian Stan:And those will be the old adage about the last 10 financial crisis. Out of the 10 financial crisis, the financial experts have accurately guessed 248. We can debate about what's going to be the future of AI and technology and M &A. I was debating this with a good friend, Keith Posner, about what's going to be true in leadership 10 years from now. And we settled in for the fact that whatever we say now, We cannot be wrong because all things are possible. That was our way of not being irrelevant. You need to predict based on what you know. That's a very important skill to have. You need to have pragmatic voice around you.

28:23Ciprian Stan:So what are we going to use from the technology that we have today? What should technology look like to help us in the future? Those two discussions need to be had. This is my little vent point to set the record straight because I've been about two years out of CEO role at Dealroom. spend 12 plus years as a technology building solutions for buy side M &A felt very proud and happy about where I left the business at record quarter number one market in the segment it's off to a management team that's scaling it and that's not my skill set going from 10 million to 50 million I've never done it before that's the largest company I've ever worked for and the management team is incredible like they are good the CEO over there Greg comes from the back that guy's literally trained on every management leadership framework out there eats leadership Cheerios every morning for breakfast.

29:09Ciprian Stan:And he just thrives on all this stuff. I get excited just seeing him in action. I just love being observing. Still involved as executive director. Do a lot with the investor relations side of it. I'm really optimistic about it. I like where the business is also set as a platform. It's just been mature in the market. That's one thing I've noticed a lot of these startups underestimate, especially finance, slow moving industry. People are pretty conservative. They want brands they know and trust. And then it's just slow, just really slow to get changes happening. That's one I've noticed where I feel like that alone kind of makes it a challenging environment.

29:44Personally, now that I'm out of the business and just looking at the broader ecosystem, I have a question like what IP actually is. Because if everybody's developing on the same large language models, what is actually your IP? And even the stuff that we worked on in Dealroom, it's interesting because you're fine tuning with these prompts to get different kind outputs and tailoring it for the industry, which, okay, you've got a few prompts. You can't have all your IP just based on that. And it's also, honestly, I've had this debate with other founders, and it's the interface and workflow. Is that actually your IP?

30:15Which I thought is really interesting. Not very defendable. It's pretty easy to copy. People see the chat box and are familiar with it. Not every element's got a chat box onto it. And the question and what you brought up with, hey, you're kind of seeing our new product. We have the M &A Science membership, and part of it's this intelligence hub that we're building. License. That was my going at people. I asked me, what are you going to do? I was like, well, at first I thought I was going to do services, but then I talked to a few operator services companies. I'm like, wait, this is just the part I hate about running a company.

30:42That's all it is. It's just, and the philosophy is there's all these great tools. Why don't we just license? And to me, I looked at the IP of all this content. I'm like, we're in unique in that we get pretty tactical. I've been asking a lot of tough questions to this interview. This is actually the IP that we have is all this qualitative unstructured content. But then to license one of these AI forward LMS platforms, now it's kind of what we're building around. That's been the thing I've been really thinking about a lot lately is what actually is IP. And to me, it's almost like marrying that at what that actually is with, and people might look at like private company data, like another set of IP.

31:20Ciprian Stan:Even though that industry is getting weird too. If you talk to any vendor, they all license each other's data. And it's like, it's really interesting what actual proprietary data you ultimately get. It's all a compilation of different license deals. It gets interesting like what IP actually is because it's this sort of AI and the technology part getting commoditized. And I've seen a lot of folks, even like you, probably next time we talk, you're going to show me some AI in-house tool that you built that's like automating components of your integration planning. This is so accessible to do with all these no-code platforms.

31:49That's my rant. That's my view. That's the record straight at the same time.

31:53Ciprian Stan:I agree because it reflects a lot of the challenges that we have about what is allowed, what should be allowed. And there's going to be a lot of open source advocates and that the volume of technology platforms or technology streams out there is going to completely outweigh the regulatory and there's going to be a huge need for simplification of the regulatory environment to make room for all this growth. Because otherwise, we're going to end up in Kafka-esque world. I'm working on an interview in Paris with, we did one in Scadding, but got another one. that's going to be focused on the regulatory environment and just how it's just changing, but also getting to be a very big overhead on all these deals, which is good for lawyers.

32:37Ciprian Stan:They're going to be benefiting from the environment as well. You're going to need an AI prop. I have a friend who's also a founder, Dan Rogoz. He's created this tool that aggregates all the legal background used by notaries. And Europe is a great place for notaries to develop and grow and thrive. and he's just making it so easy for them to parse through information and get updates based on the latest. Because sometimes the more complicated the regulatory environment is, any change will trigger, I don't know how many, consequences in different areas of business that you didn't know about. We're going to need to be able to go through this in a more seamless way.

33:15I'm looking forward to it. There's a lot of good changes that we'll see out of this AI high bubble. I also agree. It levels the ground for some of the spikes,

33:23Ciprian Stan:but it also creates good opportunity for growth. We didn't talk about the freelancing environment. What's your view? It's a natural element of the ecosystem in M &A and there's going to be freelancing in any job that has to do with consultancy. We're going to have a healthy amount of freelancing. There are a couple of good aggregators in the industry that I've spoken with in the recent years. It's definitely a good avenue for companies that are not necessarily seeing a benefit from implementing an internal M &A department. They're going to outsource the things that they want a quick expert to step in and settle things for them.

33:56Ciprian Stan:If they need another pair of hands on deck to deal with a transaction that is taking longer than it should have. The one thing that you need to get the balance right of, I find, is that you need to reduce the learning curve. So if you buy one company every two years, you'd like to go back to the same people. You don't need to introduce your company to them all the time or every time. And then ideally you should have a credible freelancing hub from which you can contract an agent and ideally should be the same if possible. And that's how you can both benefit from some knowledge accumulation that they know your company, they know what you're about.

34:31Ciprian Stan:At the same time, you don't have enough work for them to be in-house or to be fully employed. You kind of mentioned this, you know, the hub environment. The thing I'm optimistic about is more of boutique independent. And I don't know if there's a way that they band together in a way that drives efficiency because the traditional model I see is pretty inefficient. You have somebody who's very business development focused, and they're usually incentivized on a revenue target. There's a quota to hit. And then ultimately, you're selling hours to hit that quota. If you look at how everything's evolving with AI, it's all a big driver of efficiency.

35:04You're still on this old school model that incentivizes inefficiency, right? It's like, build more hours. And people always tell me that. We needed help with integration, and we reached out to this firm. And we just needed someone like you to come in and guide us a little bit. But instead, we got five people. And we got him. We got a bunch of underlings. And they're all running around with checklists, driving everybody nuts. And our bill keeps going up and up. And then at the end of it, we just didn't feel like it was a strong return. That's where I'm like, there's got to be something to shift there with everything happening.

35:38I feel like you want the experience. I find myself threading a lot in this conversation. To all my friends and consulting out there, I love you guys.

35:46Ciprian Stan:I respect it. honestly there's some truth to the about the brand because there is the cya run having a brand stamped on things you do it with a law firm i just did it we did a big tax conversion over a deal room we had fenwick we worked with ultimately we had to work with a bigger brand we want to start building that relationship up it makes sense to do it we see with the consulting firms billion dollar plus deal there's always a big four labels somewhere on there but even if it's a sizable deal it's top 20 consulting firm and i get that to the degree but again we're going back to this wider ecosystem of all these deals that are single M, you know, revenue.

36:21And that's where I think like there's that opportunity to see that emerge. And that's where it gets interesting to say, Hey, can I get somebody like you with experience leveraging AI tools, driving all this efficiency, but I'm focused on getting that next leadership experience as opposed to here's this playbook. And then the IP is changing too, because nowadays all the templates were always coveted. That was always the only IP that consulting firm really had. But now you can use any AI tool to generate all kinds of checklists, especially you put the variables in. You start putting comparative variables of here's a little bit about our company.

36:54Here's a little bit about this target company. Can you help me build it some kind of diligence and a guide? Certainly, yeah.

37:00Ciprian Stan:What I like about the fact that we're bringing some reasoning power from AI is that you can use all the accumulated knowledge of the industry. We already have this at our hand in our mobile phones. now we have a reasoning, let's say, all around wrapping tool that goes through and parses all the information and says, given what most of the people that have dealt with your problem faced later on by making this decision, this is what you need to think about. And then you're going to be able to ask, okay, so why? This is the one thing that I like about AI chat boxes or brainstorming with AI. Why are you giving me this answer?

37:35Ciprian Stan:And then it needs to produce arguments that I sometimes agree, sometimes I disagree with, but at least it educates my knowledge of the information background that I'm not that familiar with, where I couldn't parse through in 15 minutes if I had the time. I'm very optimistic about the future when it comes to all the moving pieces that I see out there right now. I'm strongly in favor of using them responsibly, both from an ethics point of view, as well as not expecting them to be ideal from the very beginning. Just be mindful and we should be reading through the background information to make sure that there's no hallucination behind it.

38:14Ciprian Stan:But otherwise, when all of this settles, I'm pretty sure we're going to be left with some really good tools. Yeah. The tools piece is going to evolve. We don't know what's to come because just like the That first cell phone. Yeah. And then the people side, it's less like having a whole team just pushing a process, but more of that experience that's really enabled with AI makes things interesting. So it's going to be, I'm curious to see how that ecosystem evolves. I'm afraid that AI-driven tools are going to break or make mistakes. And I agree with that. That is the risk we should be thinking about.

38:48Ciprian Stan:Sometimes we give them access to more than we should or more than we feel comfortable with, like our credit card or stuff like that. But we also made, when I started my first job, subject to the generosity and forward-looking optimism of a childhood friend of mine, Valentin Jordache, he used to be part of the department where I started working in university. Right now, he's running IT services for, managing director for IT services in Accenture, America's in EMEA or so on. His CV updates every 15 minutes, he gets promoted, he gets more stuff to do, he's a brilliant guy. and two weeks into my job, I deleted his hard drive.

39:26Ciprian Stan:That's how much trust he had. We both recovered well from the experience and I don't trust AI with that kind of power right now. It's got to be an enabler, not a dependent. So learning from that, I am very cautious with what I trust automated tools with and I think we all should be. But there will be errors and we need to be mindful of those margins of errors. How much are we willing to take and how do we test this in a sandbox before it goes live. We're going to need to do it at some point. I got some more stories for you about some automation experiments that have gone sideways and just good learning experiences.

40:01Before we wrap up, I'm going to ask you, what's the craziest thing you've seen in M &A?

40:05Ciprian Stan:Craziest thing in M &A? The more you see, it starts to look normal. I did see one thing at some point. I'm an American company coming to Bucharest, Romania. I was born and raised and educated in Romania. And they were going through due diligence with a local established business, they were not allowed in one room of the company. And regardless what this American company representatives tried, because they're very well educated, the diligence people, professionals, they couldn't get an answer why they're not allowed in that room. We can speculate, but the deal went off. It just didn't go through.

40:42Ciprian Stan:It was a loss of trust, and clearly something was in that room that would have made the deal go wrong anyway. And it was the immaturity of the seller that thought that they can pull that through. I found that very surprising. I thought that this is crazy. Nobody's going to allow this kind of a red flag on their list. Was that a literal sense of where the bodies are hidden? Romania has gone through various stages of changing towards more Western values of the 90s after the 89 and 90s. And there were some leftovers in that room that if the Americans would have seen them, they would have run away anyway.

41:17Ciprian Stan:Wow. People speculated there were communication equipment in that room and all sorts of other things that exposed the business to control beyond their reach. And yeah, I'm pretty sure that due diligence people would have not accepted whatever that was to be prevented from accessing the premises and asking questions about everything they're going to be paying money for. Big red flag. And today's days, this is not happening with physical premises. It's happening with financial reports. It's sometimes people try to hide things and we should be trying to making sure that we ask all the right questions and get all the right answers before we make a decision.

41:54Got to do your diligence. True. Chiprian, this has been a great conversation. I appreciate you taking the time from doing deals to help me become a better mining scientist.

42:02Ciprian Stan:No, thank you very much, Kison. You have a way of asking the right questions to produce the best outcome out there. Seeing some of your, many of your podcasts, very happy to be part of the program. Oh, it was a great conversation. I challenged you a little bit. We didn't use the script very much on this one. And those of you still listening, my fellow M &A scientists out there, I'd love to hear from you. Let me know what you thought of this podcast. Reach out to me on LinkedIn. I actually took my privacy filter off because you had to put the email in there. I don't know how long I'm going to keep it.

42:31It's like every day I get so many of these connection requests. But reach out to me. I'd love to send a little note so I know you've actually listened to the podcast or something like that. I'll make sure I connect with it. I want to get some feedback. Let me know what you thought of this podcast. If you have some topic ideas that we haven't covered, love to hear that. Anything else? Criticism? I'll take it. If there's things it could do to improve this format, I love hearing those ideas as well. Until next time, here's to the deal. Here's to the deal.

43:10Thank you for taking the time to explore the world of M &A with our podcast. We love hearing feedback. Tag us on a LinkedIn post, add a review on Apple Podcasts. We'd love to hear from you. If you need help standing up an M &A function or optimizing one that you already have, we're here to help. And if we can't help you, we probably know someone that can. You can reach out to me by email, Kisan, K-I-S-O-N, at mascience.com. Or you can text me directly at 312-857-3711. If you just want to keep learning at your own pace, visit mascience.com for a lot more content and resources. That's where you can also subscribe to our newsletter.

43:54Again, that's mascience.com. Here's to the deal.

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