People-Focused Integration

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1:45You get a free 30-day trial. Now on to our interview. I'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.

2:14Welcome to M &A Science, where we curate knowledge from the best in M &A to continuously improve. If you're interested in keeping up with the latest from M &A Science, subscribe to our free newsletter at mascience.com Every week, we share highlights from interviews, invitations to 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 Marilyn O 'Hara, Global Head of M &A Integration at Block. Block, formerly known as Square, is a global technology company with a focus on financial services made up of Square, Cash App, Spiral, Tidal, and TBD, blockbills tools to help more people access the economy, traded on NYSE under SQ.

3:05Today, we're going to talk about how to perform a people-focused integration. How are you doing today? I'm doing very well. Good afternoon. How are you? I'm doing great. Thanks for taking the time to chat with me about M &A integration. My pleasure. Can we kick things off a little bit about your background? Good afternoon. My name is Marilyn O 'Hara. I'm the global head of M &A Integration at Block. I'm originally from Cote d 'Ivoire, the Avri Coast, West Africa, where I obtained my master's in electromechanical engineering before coming to the U.S. as a Fulbright scholar to pursue my Ph.D. in biosystems engineering, then a postdoc in food processing.

3:41I did go back to the Avri Coast after my postdoc and worked for about a year for a top government agency focusing on food safety. After a year, I came back to the U.S. and I took a little break. I was a full-time mom for about four years. Then joined my first company, a medical device company making cancer research product. I was there for about five years and I did a lot of things. I did product development, manufacturing operations, project management, regulatory affairs, quality assurance, you name it. Ironically, I left that company prior to an M &A event and joined Taco Fire Protection, where I started with integration of business units.

4:22So business units that had been purchased long ago that were never fully integrated. After a while, I did some IT outsourcing. And when I wasn't sure if I wanted to continue in engineering or product development, I just thought about M &A. And I was lucky to be given the opportunity to learn M &A. And my first transaction was actually very strategic and I joined the team two days prior to close. After my first year in M &A, I realized that my background that I thought was so diverse, not sure which area I wanted to focus, was actually very well suited for M &A integration. And I took my first M &A role as a loan, the first M &A hire with BillTrust FinTech, where for six years, I had a chance to really build the M &A operations team and also an enterprise PMO organization to be able to have additional resources to work on M &A and also strategic projects.

5:19After six years, I was approached by Block and joined Block in 2018 as, again, the first hire in M &A integration. And since then, I had a chance to build a very strong and talented team of M &A experts who really handle all the transactions at Block from the two or three people talent deal to several million and recently billions of dollar acquisition. I live in the Philadelphia area, but my team is in San Francisco, Texas, Austin, New Jersey, and New York. Very excited to be chatting with you today. You have a PhD in biosystems engineering. Yes, I do. We're going to talk about how that applies to engineering an M &A process.

6:01All the process-driven events that you learn come handy. And it gives you a lot of comfort really speaking through different work streams. We usually love to work with the part engineering work stream. I know the language and I know the culture, so I know how to get things moving with that work stream. When we lose that term, we don't normally correlate it with people and people-focused. That leads us into defining what is people-focused integration. I would say people-focused integration. All integration should actually be people-focused. We all know in the M &A world that saying that says culture will add-perform strategy.

6:36And if you have culture and strategy together, it's unbeatable. And when you look at it, by the end of the day, the people will be the one driving or executing the strategy. So really making sure that when you have a transaction, you really take the lenses to really look at, okay, what does that mean for the people? Who are the people who are going to get these transactions successful? And what can I do to make sure that I get them on board with the rationale to get to the objectives? That's it. You make it sound so easy. Been doing that for a while. Can we walk through your ideal integration process?

7:09My deal integration process will begin really very early. I want to make sure that the deal, the sourcing lead and the integration lead, and also the general manager really form a pretty tight relationship. And then have the integration lead really involved in those conversations as early as even the management presentations. By doing so, the integration lead has a possibility to really plan for a strong integration plan and really understand and have a better alignment with the deal leads and the GM on what we're trying to achieve. It also allows you not to be really asking the same question to the seller two, three months down the process, while a lot of those conversations have happened earlier during the diligence.

7:51It also helps the integration lead really build strong relationships with the target key employees or management. And those relationships really come handy post-close when you really try to get people on board to execute the transaction. Okay. So ideally, start up early, as early as even the management presentation. So you get acquainted with the deal leads, the GMs involved, and then help you eliminate redundant questions. also build a relationship with the target? Ideally. Companies don't always do that. They don't because sometimes what I've seen, the integration team is not usually staffed as it should be.

8:30Some companies don't have an integration team. The deal leads, the deal will be closed and then we'd find someone in the business to really take over. When the bandwidth allows, really getting them early will be very critical. And for me, ideally, those team members who are going to be critical post-close, I like to have them involved. in the diligence if possible. What are the situations when this doesn't happen? Because I feel like you got the extremes between a proprietary process where you control a lot of variables and an auction process where things are artificially out of your control. In two of my roles, I was the first integration person.

9:06So being the first integration person, if I bought two or three transactions going on, there's little change that I could be on all of them at the right time. The integration lead stays with the transaction much longer. But if you don't have the right staffing, it'd be very difficult for the integration day to be managing so many day one readiness and post-close and at the same time, really starting early diligence for two or three transactions. Ideally, you want them involved, but once you have a tight relationship with the deal leads, you can compensate for the time that they missed and then also design tight processes with documentation to allow the integration to catch up as much as they can, close to at least signing of the deal to be able to take the planning to day one more effectively and the post-close to success.

9:50Speaking of deal leads, we had Mr. Rohit Dave interviewed recently. Maybe you got a little insight in how you keep a strong partnership with your deal lead. At Block, we are all in the same house. That makes things so much easier and pretty tight deal leads, integration leads. So really early on when we are looking at a target, we will send an integration lead to that transaction. So early on, they can start working with the dealings. And because we all report into the same structures, it allows those team members to build the relationship, know their work style, and really know how to really pull off the process to make sure you have a successful transaction.

10:29You're under the same house. It's not a completely separate team. No, it's the same team. So we have a deal side and integration side. And we have a pretty nice ratio of 1.5 deal leads to integration lead to really allow that bandwidth for the integration team member to be able to support one or two deals if possible, while the deal leads are very busy sourcing transactions. And this is all within corporate development? Yes. Okay. Anything else you do to keep a good relationship with the deal lead? Do you guys do periodic pipeline reviews, things you meet up on? Yes, we meet weekly to review the pipeline, which is very useful because as an integration lead, you always know the different stages.

11:08It allows the integration lead to continuously learn about the business unit and the process also. And by the time you know that you get into term sheet, they become pretty much a pair. And within our transaction process, the deal lead will be leading the diligence process. But by the time we get to signing, we really switch our weekly calls, ownership to the integration lead, and we use a similar template. But now we know we're moving to that integration planning phase. So any additional questions, information needed from the target, the integration is the one who becomes that point of contact.

11:39So it really allows that relationship with the transaction management to be strengthened throughout the close. That sounds like a good partnership. You're really working hand-to-hand and your role progresses and the deal progresses and take more responsibilities and lead. The first transaction I worked on, I joined the project team two days before closed. So there I learned what not to do because I have no knowledge of the transaction. So I spent a lot of time trying to catch up, did not take part into the division. So a lot of the questions I was asking to be able to oversee the post-close plan were things that were discussed two, three months prior before I was even aware of the project.

12:18So from that lesson learned, that painful lesson learned, Even when I was the lone integration person, I was really keen to build that relationship with DealLead to make sure that even if my bandwidth was tight, I could offline stay informed of how the transaction was progressing so that I can join the project team as soon as possible. There's just so much information, so much you get from those early conversation, understanding how they're talking to other people, what's important to them, how to prepare for onboarding. A lot of those early conversations will touch those alongside all the deal terms.

12:53But being disconnected gets the target team frustrated because you have a new team that comes for integration that asks 50 % of the questions that have been asked, who questions the same documents and lose some time. And as we really want to close the deal, you know, most of the deal as fast as you can, so you can start really implementing on the strategy. So anything you can do to smooth the process and make sure you don't bring in a team that's already frustrated, we'd be very appreciated by all the parties involved. There's some benefits of the prep you could do getting involved earlier. When you gave the example of, hey, I got involved two weeks before close, what are the negative consequences of having an integration leader involved later as opposed to earlier?

13:34I would say sometimes ownership. You have critical information that's not really available if conversations are not well documented because early on there are so many calls for all the functions. If all those are not well documented, it's a lot of time wasted trying to catch up and a lot of mistakes or assumptions that needs to be rectified. trying to either document as much as you can or have the integration person who, by the time you get to a day one readiness, become your anchor of process. You want them to have as much knowledge of the transaction, the risk, the issues, the sensitivity as possible, because they can orient the newcomers of what to do, what not to do, what to be careful, what to look for.

14:19Because a lot of functions, we have sometimes some team members dedicated to the diligence. And by the time we're closing, they still have a day job. So then we're pulling new players who sometimes don't have much information about the transaction. So that integration lead who has been in the process early becomes that person who can at least guide them on where to get the information and where to get up to speed as fast as they can so that they can do their job efficiently. Okay. This saves you a lot of the time to really get caught up, positions you better to guide people. And you also mentioned ownership, which positions you to have better ownership of these activities that need to get done.

14:57Is that right? Totally. One of the roles of the integration is really to be able to, with the general manager of that transaction we did, establish some type of reporting of a transaction. So being able to be that anchor early and understanding the deal rationale inside out, understanding the objectives of the transaction, be able to contribute on what to look for and build support. if you have a function to build a strong plan, allows them to put in place better processes to monitor that transaction. Yeah, that makes sense. You have your controls in place and it sounds like there's a lot of good benefits of getting involved early.

15:33I don't see any cons. It can only help. The more information you have, the better you are prepared to address any issues. The most challenge is the bandwidth, making sure that if you have two, three, four transactions going on and you have a very small integration team, they do have to prioritize which one to focus on and then play catch up with the other ones. Tell me about your integration team. How many people are on the team? How do you approach building the team out and sourcing your talent? So for me, when I was building the team, one thing I had in mind was diversity in experience. I wanted to be able to be complimentary.

16:09So I'm looking for people who have deep knowledge of different functions because we're a close partner with all the functions. So I have people on my team who have an engineering background I have some with a partner's background, some management consulting, some IT, even some government experience because each transaction brings different risks and challenges. So for more diversity, I always know that we have someone who has seen something similar or something close to that can help us build a stronger plan or address issues easily. It sounds like diversity is the key there. What are the different types of roles that you're staffing for?

16:48Or is there an order which you would recruit building out your integration team? Yes. When I started building my integration team, early on, I'm looking for M &A-based project management. For me, those are very important because there's a lot of program management in integration. After I have those two roles, I'm now looking for more functional expertise that they're bringing to the team so that as we work on transaction, if I have a function that is efficient in resources, I have someone who can help there. or we can provide more guidance on the work plan because we have expertise in IT, engineering, or products.

17:24So we can be able to challenge some of the plan, but also be able to be partner and help when needed. I like how you mentioned the project management piece first, and then it sounds like it goes into your functional expertise. Functional expertise, people be very good. People have great social skills because on the integration team, we have to oversee a lot without having those people directly reporting to us. So be able to build those relationships. And as we said earlier, the people are the most important in the transaction. So knowing how to read the people during the transaction, read the sensitivities and be able to understand culture and advise the other functions of how to really set up their integration plan or cultural integration processes would be good.

18:11project management, diverse background, being agile, being able to learn quickly because each transaction will be different. So you have to be able to learn different product coming on, have a quick way to grasp what's most important, and also build relationships with all the functions because you need those strong relationships to be able to achieve the goals because integration is tough. Knowing how to manage the sensitivities to get to what we want and keep in mind the overall deal objective in mind is very important. And when you're building out this team, are these full-time hires you're making dedicated to M &A integration?

18:49Or are you recruiting people that you mentioned have a daytime job and now you're saying, hey, you're part of this integration team? What does that part look like? I had full-time hires that are now part of integration. And I was very fortunate to have a couple of mobility transfer, which was great because they already come with knowledge of the company, the processes and now they come to the M &A team to learn the M &A process. If they have great project management skill, it's pretty easy for them to get up to speed with the overall M &A integration. Okay. So you are building out a dedicated team, recruiting internally too, which gives you an advantage because they know a lot about the business and the general operations.

19:27I've seen so many organizations where there is no IMO, there is no real dedicated, maybe they're operating it through a PMO or something of that sort. And then they get to that point, they're doing a couple of deals a year and see the benefits finally of having a dedicated integration. What should that look like building it out? Do you go from zero to really building a full deck team? Or can you start with one person and say, all right, let's see what resources they need as they progress on the volume of deals they're doing? And I was actually in that situation in a previous company where being the first integration person, that was okay for the cadence of transaction we're doing.

20:02What I did, I built an enterprise PM organization to be able to have that flex model of having PM who will understand and will be trained on many processes. So they could be working on transaction, during transaction. And then when we didn't have a transaction, they become full-time PM, assisting some of those functions that have integration, projects to oversee but did not have a bandwidth. So those PMO who have been part of the transaction have that knowledge. So now they become PM and they're helping any other strategic projects. So that would have a very nice flex model to have those individuals being full-time M &A integration when we have transactions going on, but then moving to full-time PMs for strategic projects in between transactions.

20:49And that was perfect because it was one, two deals a year. So you do have that flexibility to flex up and down as needed. Okay. So there's a lot of configuration depending on the organization's need, volume of deals they're doing. Totally. Pretty much the deal sourcing team was at the corporate level. So the business unit was having one integration person and bringing in people from the functions as needed for specific transaction. And post-integration, six, 18 months, they'll go back to their role. And that also seems to work. I like that plan. So it depends on the size of the company. If you have business units, it's more single quarter line.

21:28And then also frequency of the transaction, the complexities of the transaction. That's a good point. Not every company out there is a 50 plus billion market cap company. I've spoke with some people who have 40 plus people in integration team, which I'm jealous of. They're at a different stage and level of acquisition that they're doing. How early should you involve the integration team? As early as possible. ideally during the management conversation, if not at least when we have a term sheet, because we know for sure that, okay, this deal is happening. So we have to be able to free up the resources for the integration lead to start taking part into at least the confirmatory diligence.

22:05By the time we get to signing, really reverse the role where the integration lead now is leading the weekly functional conversations to plan for day one and post-close management. Okay, so let's say term sheet gets signed. How are you involved during confirmatory diligence? They turn all the calls with all the functions. That's the way they start guiding the function to start planning the work plan. If you have specific detail workshop, they're part of this conversation. They start reviewing documents in the data room to catch up on anything they might have missed between the earlier contacts to term sheet being signed.

22:40they start planning for day one readiness because for some transaction, you have a luxury. You have several months between signing close. For some transaction, you might just have a few days. So as an integration lead, as soon as you can, you have to be planning for that day one because you don't have too many opportunities to mess up that day one. So as much time you have to be ready, you have to take that advantage. Who's driving diligence? How are you working in that process? I've been in a situation where integration leads have been driving diligence. Currently, what we do at Block, the deal leads will be driving the diligence until signing.

23:15And then the integration lead will take on any additional questions, information is needed to get ready for day one. Okay. What's the difference? What do you think is better? It's like a concept, right? There's a concept of integration-led diligence. Yeah. They can both work. But I personally, in those situations where I was leading the diligence, I found it very rewarding because planning was much easier. It was forcing the integration to really know everything about the transaction and know everything that was in the data room. Sometimes when you come much later, it's just so focused on getting ready for day one that you don't have time to catch up on the other functions.

23:56So you have to play catch up when you have your time. But it's all about bandwidth. Because when I was mentioning I was the lone integration person, I could not be doing three divisions and integration because you really need to be focused on the detail and what's happening. And there's not much room to draw the ball. So if the bandwidth is not there and the deal has a bandwidth to lead the divisions, that works fine. Just making sure that you have that handoff between the two, make sure nothing's lost. But even in our case, when we have a transition from the deal is to an integration lead to get ready for day one.

24:29The integration lead is part of the conversation. So you always have someone who has enough information about what has happened to really fill in for all the newcomers and make sure that all the risks are highlighted to everyone and people can do that when they're building their work plan and their day one readiness plans. Okay, so whether integration leads diligence or not, they should be in for the ride and doing what we talked about earlier, getting as much of this preparation and planning done so that they can really hit the ground running and avoid a bunch of redundant work. Exactly. And make sure they talk to each other and transition, do as much knowledge transfer as possible if one of them has to leave the project.

25:07Yeah. How do you plan for that? That's why they have to be very agile. They move fast. All transactions are different. So it takes a different type of person to enjoy that because you have a lot of information that you have to process on top of being of all the people related issues. and you have to think quickly and making sure you do the best plan, create the best plan available and be accountable for the deliverables. The agile part I get. We wrote a book, by the way, called Agile, Manet. I'll have to get you a copy if you don't have one. I'm just wondering, because it's such a large magnitude of change management.

25:39What's the depth of thinking through the backup plans? Or is it more about having the agile culture that your team just responds to these changes as needed? Experience comes handy. That's why by building my team, I want to make sure I have such a diverse team because someone has seen it somewhere. I was working in a recent transaction where during one of those diligence calls, something was mentioned. And right away, one of my team members was like, we need to talk to the people team. I was on the project and this situation happened and it was difficult. This is what we did. And it was wonderful because that was a transaction that was different from a lot of the project team.