Synchronizing the Deal Team and Integration Team for Better Outcomes

25:46And then the departments and so forth of, okay, we're going to have a new product. How are we going to introduce this in our go-to-market? IT is going to have their whole plethora of stuff. I want to get the easy part. I want to understand the hard part because the part you mentioned was there's doing that planning, then that gives you a sense of milestones. Talk to me more about the iterative part because I've published this book a while back. I think Russ probably remembers where it's contrasting the waterfall versus agile. And that was the big business case was that, hey, it should be very iterative in the process.

26:15Tell me more about that. How do you do that versus just trying to run through one big exercise of a planning event? There's a lot of information that comes out post-close. So you can map out a plan and what you're going to do. Obviously, once the sale is done and we start to integrate, there are a lot of little things that we learn that don't quite map to what those original assumptions were. That's when the teams really have to come together to figure out maybe it's something that involves IN and how we're going to incorporate technology. So we may have had a plan to shift them within a certain period of time, we'll say six months.

26:53But we may find that just due to the technology and the dependence, maybe it's going to be 12 to 18 months. So it may be something just changing a timing or a time frame. Sometimes it's pivoting and saying, right now, we're going to leave this piece as is. We're not going to make any changes because we don't want to experience any major business disruption for the clients. And we want to keep everything steady. I do want to go back because we skipped ahead. Now we're talking about post-acquisition topics. back to post LOI and pre-deal and touch on, I said, we'll likely hit on some of the process points.

27:32Let me hit on some of the process points. LOI is signed. We are now, as a process point, we pull together that whole, remember I referred to the core M &A team, which has representatives from all of the functions as part of that team dedicated to M &A. Of course, our M &A team is part of that. We're meeting usually twice a week, depending on the size of the deal, could be more or less, but usually twice a week. And we're going round robin through the functions. What are you seeing? What's worrying you on this deal? What are you not seeing? What do you want to see out of the target and you're just not getting information?

28:09And what's your early planning? How are you thinking about planning? What are we going to do about what you're learning in due diligence post deal. And everybody gets to hear what every other function is seeing, not seeing, and planning. And they can factor that into their work stream, or they may have something to add to what they're hearing from another function. Or they might hear something about an integration plan that, say, sales has, that finance says, well, you're not thinking about all the right order entry issues that are going to pop up. Those are really live working sessions. And like I said, they happen a couple of times per week during the deal process.

28:50Carrie and whoever from her team is going to be leading the integration effort are part of that too, hearing all of that and starting to solidify the thoughts about how we're going to run that integration. So getting a lot of the diligence information directly as it's coming in. Yeah, 100%. That's right. You mentioned other acquirers don't really start thinking about integration until the very end of the process. And worse yet, sometimes after the deal is signed. At that stage of the process for us is when we start pushing integration out front and center. So they've been involved in the process from the very beginning.

29:26But as we're getting to those latter stages, that's when they start taking over more of a lead role. So we have, as part of our process, at some point towards the back end of pre-signing, we get the executive team, at least the CEO together with, again, Carrie or whoever's going to lead that integration. And the whole discussion is about our integration process, how we do it, what to expect. We give the CEO or if it's more members of the executive team an opportunity to ask us questions. They've got a lot of burning questions on their mind about what life is going to be like post-deal. And there's a lot of anxiety there.

30:06So it's the forum for them to get some of those questions off their chest. and we answer as much as we can at that stage. It speaks to the point of they start becoming the face of the next phase of the transaction, which is the integration phase. But that's still before we sign the deal. We will have internal integration kickoff meetings before we even close. Obviously, we are informing some of the key founders of what's going to happen post-close and really educate them on that process and who they need to be thinking about that would lead some of those functions as well on their side. Those expectations are being set early and we're getting geared up so that post-close, we can have a kickoff meeting within the first week or two and bring the teams together.

30:54It sounds like there's a lot of different events slash meetings that happen. You're just trying to get a sense of as you bring people in because you will sign an LOI and it sounds like there's a kickoff meeting that happens early after you sign LOI. That's right. Core M &A team. We got to do diligence on this. Who's doing what? And it's mentioned like twice a week is when you sort of have readouts on diligence. That's right. Readouts and discussions about or dealing with what we're finding in diligence in the transaction terms, but also how are we going to deal with it during the integration? Is it going to affect our budget model?

31:28is the way we're going to tackle some of the things that we find in diligence in the integration going to cause greater cost, higher expense. So we're talking about that in those bi-weekly meetings. Bi-weekly, like what is it, Monday, Friday? Tuesday, Thursday, usually. Tuesday, Thursday? Yeah. How long are the meetings? An hour. An hour? Give me the agenda. I'm creating a playbook for somebody. So usually the execution lead for the transaction leads those calls. That person will kick off the meeting with announcements from the deal execution chair. Are we still on track for timing, for example?

32:06One of the things that we're dev as part of an active part of the diligence team, we're not just a quarterback and project management. We actually have a substantive role in the diligence process. We're airing what we're seeing and what we see as a concern in diligence. And then that person goes around the horn, as I said, to each of the functions. hey, finance, you're up next. What are you seeing? What are you thinking? What's your concerns? HR, on down the line. And we get through every function and every call. Start off at the high level, where are the main updates and where we're at with the deal status?

32:41That's right. And then let every function voice their position. That's right. How do we tie all this diligence to the integration part? Or is this sort of each function you discuss at the same time? Part of that goes back to your assumptions and your integration planning that we're starting to structure very early on. So all of those are inputs to those assumptions. They start to capture them. Obviously, there's a lot of collaboration and conversation, but you have to start to capture some of those ideas. And that's the basis for your integration plan and how you're going to roll it out. There's another element too that comes to mind.

33:17You're always observing the target company and even the differences in culture. And you've got to think about that. What is their management style? How do they inform their employees on changes? What are the perks? That's always a big one. They'll have perks that we don't have. And we have to start thinking about how we're going to manage through some of those things. Do they have a chef on site? Do they do yoga on Mondays? Can they bring their dog to work? All of those things, they seem silly, but people really hang on to those things. They can become a big deal. So it's good for us to kind of know what those things are and be thinking about them early.

33:58We pay attention to characteristics of a target company and how that plays into their culture purely from how we're going to integrate. It informs our integration plan. Those aren't deal killer issues. You don't need to know if they have a cafeteria or not to know whether you want to do the deal or not. There's no risk there really, but you need to know how you're going to manage that out of the gates. as an integration matter, or you could lose the people right out of the gate. You could lose their, and lose, I mean, hearts and minds, not necessarily they're going to walk out the door, but you need to be mindful of that and set the right tone from day one.

34:37As functions go around, I'm getting updates on what they're finding, and we look back at our assumptions, and this information around diligence is what's allowing us to detail our integration plan. The culture element's going to be another component that we're putting in consideration on how we're going to integrate the company. What's the big variable there? Because I've always been curious. Everybody always talks about it and said, oh, the culture of this and that and different philosophies. Some are like, well, they're going to adopt our culture. And they do have a very proactive approach about how do they get them to understand their culture and know that it's going to be a shift versus, oh, we're going to combine them and build a unique culture.

35:12I don't know. I think there's different philosophies, which is a whole other topic to get into. But is there things that you look at and say, we follow more of a traditional top-down management. this startup is very bottoms up. And is there some certain themes that you have when you start thinking about culture or that you may want to start shifting your approach around? We generally always want to bring that company into Ansys and make them part of our company overall. But I don't think there's a one size fits all. We really have looked at each of those integrations differently and approach them according to that culture and the way they operate and really figure out how best to insert them into Ansys.

35:52They're all hard because they're all different. But it's just when you think about it more individualistically versus broad brush, it really helps them to feel like they're part of the company and we're listening to them. That's important for me. And that's part of the Ansys culture, which makes it nice. We have four core values and don't ask me to state them all here. but one of them is be open. And you could read that a lot of different ways. But one of the ways obviously is to be flexible, to be open to new ideas. We do have our own culture. It's palpable inside of ANSYS, but we are open to understanding slightly different cultures.

36:33If it's a complete mismatch, that starts to pervade how you're thinking about all of diligence and can you make this business a success inside of Ansys? Because you need their people to help make it a success. And if it's a complete culture mismatch, it's more than just cafeterias. It really calls into question your ability to execute on the core business objectives. If we have that, we get a sense of that culture mismatch. We get a sense of that in the very first couple of meetings and we probably don't talk very long. I wouldn't say culture is always the make or break, But if we have what looks to be just a complete mismatch, I don't know that we'll get very far in the conversation.

37:15Can we say culture, it's not so tactical that you have to worry about changing your strategy and approach to integration, but it's more of being mindful so that you can ultimately create a good people experience for the incoming people. Absolutely true. I learned something today. And I'd say the IMO, Carrie and her team, take the responsibility for a lot of that cultural assessment and change management partnering with our HR organization. Everyone on our deal team, on that core M &A team needs to be mindful of it, at least with respect to their specific function. But the overall kind of responsibility for that aspect of it and paying attention to that element of it in our company rests with the IMO and HR.

38:02That's a common theme across other acquirers that have those functions involved in M &A. Back in our readout room, what are any other things on the integration side and how do we ultimately close out the meeting? As we get closer to the signing and then closing event, we talk more and more about integration, what it's going to look like, what are the major priorities in these readout meetings. Because obviously our attention has shifted away from diligence. We've learned about all we're going to learn at that stage of the process about the company. And now we're really putting those initial plans down on paper.

38:39The ultimate outcome for everybody involved in those sessions is delivery of content that becomes our business case for our executive team to support final approval. So not everything said on all those calls end up in the business case, but the material issues do, the final financial model, but also our core elements of the high-level integration plan across all the functions is part of our business case. I think that infuses some discipline around integration planning into our process with all members of the team knowing that they ultimately have to deliver a plan that the executive team is going to see.

39:17So that is an outcome from those meetings. Eventually, it all leads up to a business case to support final approval. And then, Carrie, you mentioned as you get closer to closing, you're spending time with those founders, executives, and really helping them prepare for integration. What are those conversations? What are those key things that you really hit on? It's more just to be informative and set those expectations so that they know what's coming. And I want them to understand that it's a partnership. We want to hear from them. We want their input. It's really walking through what the integration process looks like within Ansys and some of the practices that we deploy as part of that.

39:56We'll demonstrate to them how we structure the integration and who's responsible for each functional area. We ask that they think about who on their side would lead those functional areas as well. Sometimes if it's a smaller company, it may be the same one or two people for all the different functions. Where if it's a little larger, then it may be a little more dispersed. But they need to think about that. That's a key element to integration. Who's going to lead it on their side? That's also the beauty of us being involved so early. we don't have to go through the same questions with the target or the founders and ask all these questions that we don't know because we weren't informed early on.

40:38Hopefully, we've already started to build that relationship and that rapport. That's something that I've really stressed with my team. I meet with whoever those key founders are on a weekly or biweekly basis, just to stay connected with them and make sure because in our integration meetings, things come out. But the one-on-ones, we get a lot more information. They'll share things with us. They'll raise things that they're not comfortable bringing to a larger group or audience. Those are the things that we really tackle and get in front of and prevent them becoming a problem. If I was a founder and was going to have a big payday, I'd disappear for a whole month.

41:17We incent them to stay around. Yeah. But no, it was like disappearing. No. For months, I wouldn't disappear that long. Also, a lot of these founders, they have the sense that this is their baby. They want to be around it and make sure things are off to a good start. Or they do just buy a nice toy to spin around the parking lot. I try not to focus on what they do. It might make me feel bad about what I've been doing for the last 25 years. Part of what we're trying to exhibit to the management team in those early meetings where we're explaining how we do integration and why we do things a certain way is to carry touched on to instill some confidence.

41:55That is a key part, but also to show them that we're transparent. We don't believe in hiding the ball about the way things are going to be for them post-closing. And for the most part, the calls that Carrie was referring to, they're not controversial. We're sharing what our process is. They ask some questions, but occasionally they'll ask or suggest that maybe we do something that we know is a non-starter for ANSIS. let's continue our benefits for two years post-deal or one year post-deal because these benefits that we have are really important to us and yours are a lot different. We know that's a non-starter for us and we'll just tell them that.

42:34But we may think about, are there other things that we can offer them that would be palatable to Ansys, even if it's a slight comp increase because their cost of benefits are going to go up. We want people to have essentially the same take-home pay, same amount of dollars in their pocket every week as they had prior, we might consider that. But we'll be upfront with them about the bounds of possibility. Again, trust is important and we try to establish that upfront in these calls. Do you have an example of here's early integration planning and how it made a big impact in the deal more successful?

43:09With Extrality in particular, we had really thought through our timeline. Those assumptions had been captured. So we were really trying to figure out within a certain timing how long it would take. I'm not sure if we had done that previously where we had really mapped out a formalized timeline, but that's something that I'd really pushed the team to do. And it helped us to capture our milestones a little more effectively as well post-integration because we did do that upfront planning and really thinking through what are the things we have to accomplish or how do we get here? We have these assumptions.

43:46How do we validate those assumptions? What analysis has to be done? What data do we need? Because there's limited information that you can ask for during diligence. You don't want to overwhelm them. So we really start to go in and that's what we did for Extrality. We mapped out all the elements that we needed in order to progress. And assuming we got that information, you're able to build out your timeline. As long as we can get this within 30 days, we can complete it within 90 days. So there were some post-close assumptions that we made, and that's how we sort of factored in our integration plan.

44:19I was like, that was a big factor. It was just being able to get ahead of it. I mean, that plan laid out with all those timelines and milestones. So it was a great one. Yeah. The tasks that are completed, we've had all those captured for each of the functions. Each of those functions has to go in and determine, okay, which of these tasks apply to this integration and what tasks do I need to add? because it's unique in some way. That's a good rinse and repeat for the teams. They know what all has to be analyzed, what data we need. We've already got that structure and that foundation. So it's building off of there to create a reasonable project plan.

44:58There've been a couple of instances where transition services have been part of the transaction where we've carved a business out of a larger organization. And this model of early integration planning and having the integration teams involved early was particularly beneficial in those cases because you're planning how you're going to execute on the transition services, whether you're delivering them or you're the recipient as buyer of transition services. That happens sometimes too. How that is going to work alongside of all your core integration activities. Sometimes transition services are seen as an add-on, a separate thing that's happening over here and you still have your integration plan.

45:44Well, transition services are happening during the integration. And many times the same resources that are responsible for seeing that the integration is working and that your tasks are getting done are also involved in the transition services. That integration team also is well-versed in the costs of what things cost post-deal in that early stage. and that can inform the economics around transition services as well. So I just point to deals where you have transition services as part of the transaction. This early model of integration planning works particularly effectively in those cases. I like it.

46:26And that's a good point of things that could complicate integration. Absolutely. So we make it all, all these things work together in concert instead of just some complicating factor that's causing us noise and disruption off to the side. How does your partnership work? How do you stay in sync? How do you... That was a big thing, Russ. You said, hey, look, I got a partner that wouldn't be able to do the deals I did. And I give you a lot of credit for that because usually deal guys don't do that. They take all the credit. But the integration people, there's a blame category. I'm curious to hear what Carrie has to say.

46:57I mean, this has been a really great partnership. I used the word seamless earlier. It really is seamless. We probably talk four or five times a week and that's when deals aren't happening. So you can imagine when we're in the midst of a diligence process, we're talking every day, multiple times a day. We're on the chat line constantly and it's easy. It's seamless. It's easy. It works. I think it helps that we like each other. We spend some personal time together too. So it's good. I agree. This kind of goes back to really early in the podcast when we talked about that reporting line. And that was an important factor for me.

47:34Having that connection with our team overall and being able to have team building, that's been really important for me. Our team is very cohesive. We get along really well. We're very close. Russ and I, I think, are very similar in the way we approach things. He allows us to be autonomous in what we do. And that was really important to me and the folks that work for me. So some of that is personality. obviously. And for us, it just works really well. But I think that's important. You need that cohesion to be able to communicate effectively and quickly and pivot. And that's just another important element.

48:11Our whole team is very tight. You could be having the same conversation with any other two members of the team, any other member of the integration management team paired up with the other team members that do deal execution. And I think they'd tell you largely the same thing about how their relationship works in the midst of a deal. I have been doing M &A a very long time. And I think part of the way I've been able to do that is a bit of a work hard, play hard mentality. You know how deals are when you're in the throw of a deal. You're on a schedule that most people in your organization never have to experience.

48:46Maybe the sales guide's at the end of a quarter, but it's 24-7. It's weekends. It's holidays. When we have downtime and we get to enjoy a breather a bit. We like to go have some fun and get together and talk about something other than M &A and talk about each other's families and what they're up to and what do we like. I think that all plays back into when we're in the throw of it and the thick of it, we function at a very high level. Eventually, I'm going to have to find an integration partner. What's going to be like the one or two key things I should be looking for? They have to be an effective communicator and a people person.

49:17At the end of the day, I think all of M &A, every phase of M &A is a people business, but the integration certainly is. And they've got to be flexible. You asked about surprises earlier on. We don't get surprised in a way that throws our whole deal thesis off and we were completely wrong. And now we got to think whether this was a good deal or not. But we got a lot of little surprises along the way that make you make tweaks, adjustments to what you've set out in your integration plan and assumptions. And you've got to deal with those constructively and keep the overall business objectives in mind and adjust in a way that doesn't disrupt from achieving those objectives.

49:56Those are the two key traits, good communication slash people person and being flexible. Having project management type of experience is also important. You've got timelines and deadlines and milestones, and you really need someone that's structured, that understands that space and can drive that side of it. But I agree with Russ. For these companies that are coming in, they're going through major change and you really have to care about those people and what they're going through. That's another key factor is someone that really has that empathetic lens of this is a major change that they're going through and how can we ease some of their concerns and make them feel comfortable and trust us.

50:37All of the members of our integration management office are champions for the acquired business. They still work for Ansys and they've got ANTIS's best interests in mind, but they play a safeguarding role with respect to the acquired business and the acquired people. And they take that role very seriously. Communications, being empathetic, and having some project management skills. Carrie, this is a safe place, but what can Rust do to be better? Well, he can pay me more. I don't know. Yeah, that's good. Take care of people. No, I'm not sure I have anything. I have some criticism. We put away the nice stuff.

51:14I don't have anything off the top of my head. I mean, we recently had our mid-year review and this is like, how's it going? I'm like, it's going great. The autonomy is there that I need and I think my team needs to be successful. And that was so big for me. That just works really well for my personality and helps me be more effective as a manager and a leader to my direct reports. Maybe I haven't worked with him long enough. Maybe that's part of it. It's only been a year. I'm going to come back to that at the company reception. All right, let's wrap up the couples therapy here. The question about kind of broader of aligning deal team integration team, what would you say are the common challenges of that?

51:57Being that you've seen it both, right? Disconnected and connected. Obviously, when you bring a team together and we do things outside of Manet, we have team building experiences. And fortunately, we're all pretty similar in what we like to do even outside of work. So sports is a big theme for all of us. Honestly, having that connection outside of work helps us to work together more effectively. It does help us to be more empathetic toward one another in how we work, how we approach things. We're all a little different in just how we approach our daily life. And everybody plays a different role.

52:35That really has contributed to a lot of that stronger communication that we have, a willingness to work together on issues that are a little harder. And even coverage, maybe they have something going on, they don't have the time to tackle certain topics or certain challenges that come up. And our team will step in. They'll step in and drive those things. Say, hey, I'll take that. I'll pick that up. That kind of goes back to having that team aspect, that team building that occurs. So team is a big theme from this whole podcast of ultimately that's a challenge when you don't have a real team. You have two different teams, but bringing both the dual team integration as a team seems to be the big thing to accomplish.

53:21One thing you don't know about me personally, Kisan, is my side hustle is I'm a Division III college softball coach. Softball is a team sport. For me personally, this overemphasis on team, it comes from that I've been doing that, not quite as long as I've been doing M &A, but I've been doing it for a very long time. And you can't do any aspect of what we do in M &A alone. And you shouldn't. You shouldn't. Even if you had the bandwidth to do it, even if you were the smartest person in the room and have seen it all, which no one has. But even if you think you did, there's just too much work, too many things to think about, too many things to plan for that you've got to do it as a team.

54:02And it's not just our M &A team inside of CorpDev, but it's that core M &A team that I talked about that expands into the other functions. We proactively try to maintain that team culture, structure, approach to everything we're doing in the M &A practice. If we were to create our list of best practices or approach to really synchronize deal and integration team members, is it getting them to play softball together? That would be one good thing. bug game. It's one thing to go to the bar and drink together, but if you could actually do some kind of sport activity, I think that's fair. I think it's also driving accountability.

54:44There's really a lot of accountability for each of these functions to step up and speak up when they see things that, is this going to be an issue or should we discuss this? But really taking that accountability to see things through, that's another factor of success for us. And that's - is. Ansys is very good at that. I'll come back to the three elements we talked about at the outset as themes for us, the org model, the staffing, and then the processes. All of that is meant to create this team approach that is more naturally collaborative and well-coordinated. The one thing I want to say about it though, because I know some of your listeners, even if they do a couple of deals a year will think we can't staff, just from a cost perspective, yes, M &A is a part of our strategy, but we can't staff a dedicated person across every function.

55:38That's legitimate. And I understand for some companies, that's a constraint. At a minimum, then I would say, have the same people when you're borrowing from functions to get people involved in diligence and integration. To the greatest extent you can, have the same people doing that from one deal to the next. They're going to get to know each other that's involved in that M &A activity as a team, even if they're not dedicated to it all the time. They're going to gain experience. So you're not training a new finance person every single deal or a new legal person or you name the function. So it should be the same individual.

56:14They can have other roles in your organization if you can't dedicate them to M &A, but try to make it the same people from deal to deal. The same people from deal to deal. Meaning the same within each function, the same person in finance that moonlit on a deal the last time should be that same person on deal number two and deal number three. They'll start heading up the learning curve quickly. Again, they'll get used to working with the same group of people from the other functions that are involved in the M &A. That's a way that you can somewhat mirror the model that we have in place with the dedicated staffing without dedicating them solely to M &A.

56:53You also though, if you're going to have that model, their managers need to understand that when a deal is happening, the deal part of their role needs to take priority. It can't be, I'll get to the M &A piece that you put me on part-time when I have time to get to it. Because you know M &A doesn't work that way. You've got a 30-day process, 45-day process. This is an area that a lot of newer M &A for a company, because I think you hit the nail on the head with building the muscle is like getting the reps in. Yep, that's right. But then this part of that accountability or prioritization where M &A says, I've heard a lot of corporate leaders struggle with that.

57:30And it sounds like you know that's important, but if you were coming in as a new guy, how would you? I would make sure that everyone bought in all the way up to the CEO, frankly. If it's driven top down, it will happen. If each individual functional lead, functional manager, head of HR, our head of legal, and I don't mean to pick on the back office. The same is true of sales and product. If they're not hearing from the executive leadership of the company that M &A is important to us and we got to get it right, and everybody across the organization needs to be on board, they're going to operate in a way that benefits their function the most on a day-to-day basis.

58:12Sure, okay, I hear we're doing a deal, but I also have my sales targets to hit this quarter. And so that's going to take priority. And all my resources are going to be dedicated to that. And if they have time, they'll work on your M &A project. You can't have that. You can't dabble in M &A in that way and get it right. When there is a lack of accountability, you will not meet your timeline. You won't meet your milestones. You won't close the deal in your targeted timeframe. And it's really hard to wrap up the deal and to close it out as an integration with the business because there are so many loose ends that you're not able to wrap up.

58:50It really has a severe impact on the success of closing the integration and really making it part of the company. And oh, by the way, all of that, all of those stumbles are being witnessed by the target company and their management team. And you're sending a message, this isn't important enough to this company that is now going to own my business. So even if you make it across the finish line, you're going to lose people and you're going to lose the value props that you were looking at that target for in the first place. You ever had to put a leader in their place about M &A priority? Not at Ansys, but at former companies, yes.

59:26How do you do that? You found a successful way to do that? It's very difficult when they have certain egos. It's very challenging and it's a series of conversations. And there have been times when I've had to go to their business sponsors or the executives they report to and have them help. So I try and do it as much as I can. Sometimes there are limitations and you have to engage other leaders to hold them along. I have an intervention. Let's go all out on this. Yeah. I mean, you try to avoid the escalation route because most times you're going to have to work with that leader again and again and again.

1:00:03But I agree with Carrie. Sometimes you just have to. I've been working on this framework, FireLed M &A. I spent a lot of time just thinking about a podcast. Actually, a marketing team challenged me to have a point of view in the market. And I spent a lot of time just reflecting, doing a bunch of these podcast interviews. And what I concluded is when you get a company and they do their first M &A deal, it is very seller-led. It's following a very traditional approach. Maybe there's a banker involved, but it's pretty much the whole process is driven through the sell side. As they continue doing deals, it becomes more and more buyer-led because you realize how you need to optimize for the better results.

1:00:40And it could be from the way you source deals. It should be straight against the strategy. You shouldn't just wait for stuff to fall in a lab. Moving into just your information handling, having it all centralized so now you can better leverage the information flow from stages. And then the synchronization, which you talked about between diligence and integration. The other pillar, I think, is scale, which we talked about the resource allocation and getting the reps in, really building that out for scale. And then the last one would be a win-win. How do you make it a good people experience for both sides that it's really going to be a value add for everyone?

1:01:14I agree with all that. When you get to the point where you're in a position to be the buyer-led M &A buyer, you need to have the fortitude to stick with that, to have the confidence that the way you're doing things is the right way. And so if you find an opportunity where the seller or their banker is trying to push you, not in a way that if you nudged a little bit, you could go along. I'm not talking about drawing lines for the sake of drawing lines. But if they're trying to push you to either agree to something or do something in a way that you know is just not going to be successful on the back end, is not going to help the deal be successful.

1:01:54It's like being on a car dealership lot. You've got to be willing to walk away. That is power. When you're willing to walk away because you know your price is the right price or whatever, when you get to that point, it's a buyer-led M &A. You got to stick to that. In many ways, that's how we operate. When you're in the auction process, multiple bidders, I understand the seller slash banker wants to have some control. Yep. But once you sign LOI, I think this is where you described. It's fair to have, you're putting up the cash, you're committing to getting the deal done. Your team has standardized a lot of things and their approach in doing deals.

1:02:29And frankly, you have more people involved. That's right. And that's where I'm always curious because I've noticed that when I see some corporate leaders that aren't as experienced will hesitate and they'll say, oh, it's a big brand bank. We got to follow their process. We are very transparent with bankers in those situations up front that once we sign an LOI, it's largely got to be our process or the deal won't happen because we won't be able to get the approval we need ultimately at the end from our executive team. They have an expectation of what a business case is going to look like, what it's going to include, and the type of diligence that we've done along the way, the type of integration planning that we've done.

1:03:09They expect to see that. And if they don't see it, the answer is no, because they just will feel like we haven't done our homework and done things the way that it has always made us successful, that will be perceived as risk. And we're a very disciplined acquirer. This podcast has all been about integration. If we don't have an integration plan that is part of our final business case, and the answer is the banker pushed us to do our integration planning post-deal. We've never said that, by the way, because we know the way it's going to turn out. But if that were a case where we got pushed to that type of paradigm, the answer would be no.

1:03:45We tell bankers that up front. This is how we're going to have to do it. And it benefits you. We don't walk from deals. But we have to do things the way we do things. It's tough. They're not incentivized for any of your integration success at all. I say if they have the price, that's what should matter to them. We're going to do right by the target. We always do. We've talked about hitting objectives and metrics very generically. But among our metrics that we measure and that are very important to us is employee retention. And we're, again, mid to high 90s on every one of our deals. Buyer-led is front-loading integration.

1:04:21Because you're, as a buyer, saying, hey, we really want to make sure we're going to plan and execute integration well. Yeah. For us, it speaks to the rigor in the process and what we've learned throughout all the different integrations that we've experienced. That's the science that we've put into play. And this is the way that we're going to have to operate to be successful. We've demonstrated that retention rates, the success of these businesses that we bring into ANSYS. The other interesting element at ANSYS that I haven't experienced before is that the integration team still stays involved with each of those integrations.

1:05:00And as we track their performance, if their performance seems to decrease in any way, we will get actively involved and really try to make sure that they can get back on track and they have a plan for that. And that's something that I haven't experienced in the past. You know, in the past, once integration was done, we walked away. Not our problem anymore. That attitude that we have of we're always going to ensure that integration is going to be successful even when they become part of Ansys. It's another element of that success that we've been able to capture. I like it. It's like plan early, but also plan to stay a while longer.

1:05:39Absolutely. We don't forget. We always, once we're closing out the integration, we always tell those teams, you can come to us. We'll help you. If you need something, reach out. And we're sincere about that. And so I think that's something that's unique to ANSYS and the culture that we have. I just brought the buyer-led stuff up. I didn't even tell you about that. I don't think we've talked about that. Yeah, well, to go to another conversation, I thought, why not make an actual framework that we could publish? You see all these organizations learn it through trials and tribulation versus we build a framework around it and just consolidate with the lessons learned around how your process evolves to be buyer-led.

1:06:18Yeah. It's a journey. And usually it's around like 10 deals. Then it's you seeing a lot of the things that we're talking about that they're actually doing it. I have a lot of pain. To that end, one of the other pieces, the win-win, people experience. What are you doing to make an amazing people experience? This is a huge differentiator for companies. If you're not getting followed that aggressive process, didn't do integration planning, probably don't have things in place to wow the incoming employees. So what are some of the lessons learned and things you do now? So mapping out that employee experience or that journey is really important.

1:06:52We're probably experiencing that in a different way right now. But really understanding how this will impact the employees and being able to map that out and identify some of those areas is, I think it's critical. That's where you start to really build some of that empathy as well to see these are the changes that the employees are going to go through. And so you have to look at it under a couple of different lenses because you've got the lens of the employees coming into a new company. But then there's also the lens of these managers that are coming in to Ansys and we do things a different way.

1:07:27How will that be managed? How do they help their employees transition? So it's sort of arming them with more information, different approaches, thinking through how that will impact how they lead their individuals. And that all builds into that retention. When you feel like you're part of the company and you're being considered as part of that equation, it really does. It goes a long way. A couple of things, small but go a long way. Our CEO makes it a point to address acquired teams when they come into the company. Maybe it's not so small because he's a CEO of a 6 ,000-person company, a public company.

1:08:07But if he doesn't show up on site to welcome them very shortly after an acquisition, he'll do a video message. He'll send an email. Other executive leaders across Ansys will send emails to the entire acquired team, welcoming them, talking a bit about why we acquired them, why they were so special to Ansys. And then at every quarterly company meeting that we have, all hands meeting, the first one after an acquisition happens, the CEO mentions it again to all of the Ansys employees welcoming this new team from XYZ company. Again, goes back to what Kerry said. We want to make them feel like you're part of the family and you're important.

1:08:46I think there's a lot of planning has been another key theme here. But the elements around culture, the more mindful and better you understand it, it's going to position you better to create a stronger people experience. And then to your point, Russ, just making it personal. The CEO directly, going to meet them, like those things really make it personal a matter. Before we wrap up, you know I got to ask, what's the craziest thing you've seen in M &A? Keysan, we've done a couple of these, so I'm not sure which stories I've told. I forget what stories I've told. I know the one about the founder of the bookstore chain that held up the closing, and this is a deal where he was going to make life-changing money, held up the deal on the closing table, so all of his family members could get 25 % discount for the rest of their lives at this bookstore chain.

1:09:32I think I told you that one before. I'll give you one that's a trend. It's actually a troubling trend. And in my mind, it's crazy. I'd say in the last couple of years, the number of last minute surprises in price negotiations with another buyer coming over the top, even in deal processes where there wasn't a banker involved. I'm not sure what's going on, but I practiced M &A for 22 years. I can't think of any situations where you had a handshake on price and in a couple of cases, a signed LOI on price and the company comes back and says, oh, we just got a call from another company offering more than you.

1:10:14I don't want to say anything untoward is going on, but it's happened on a few occasions in the last few years and it's a troubling trend and in my mind, it's very crazy. Someone's gossiping. Yeah. Obviously, I'm very people-centric. Things that have happened in the past that stand out to me. There was one particular deal where we made the purchase days before this company was going public. And that is the best way to make people dislike you. There's pre-IPO and you swoop in and purchase and it's really hard to get them on board. And I do not suggest that. So that was one of the craziest things I've ever experienced.

1:10:53I'm pretty sure I know which deal you're talking about. Yeah, you probably do. That is actually great. I'm going to pick that conversation too at reception because I was so curious. I know the whole event was such a big surprise for the market that all of a sudden, wow, I feel got hijacked. Yeah. I never thought about the employees. Never. The employees are so critical to the success. This has been a great conversation. I had a lot of fun. I learned a lot. You've helped me become a better M &A scientist. Thank you for having us. Yeah, I'm in the midst of M &A royalty. Don't flatter me too much.

1:11:28Those of you still listening, my fellow M &A scientists, I appreciate you. I value you and want to continue finding ways to create and deliver value back to our community. Reach out to me on LinkedIn. I welcome feedback. More importantly, the criticism so I can keep challenging myself to get better and topic ideas. Until next time, here's to the deal.

1:12:01Thank 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.

1:12:46Again, that's mascience.com. Here's to the deal.

1:13:00views and opinions expressed on M &A science reflect only those individuals and do not reflect the views of any company or entity mentioned or affiliated with any individual this podcast