The Evolution of M&A Functions

21:51We need this input by then. Get it to us and have it make sense type thing. One thing I probably did too much is just do other people's work. I didn't do finance diligence. When it came to presentations and reporting, you just wind up doing some of that for sake of expediency. That's probably a skill or not a skill, but something I did too much of when I was junior and I'm trying to break that habit and hold people accountable to do what they need to do and just report on it as opposed to get it right all the time. Was there anything that you did in terms of getting the functions sort of aligned together, being more cohesively as a team, as opposed to just independent resources?

22:25We do offsites. We try to do events. We try to get people to talk about things that are other than M &A. It just builds some empathy and some group cohesion. We try to bring them on board that, hey, we're on a mission or a quest to do this piece and we need everyone's support to do it. And whether you're doing the accounting integration or the technical integration or the revenue, whatever it is, we're all part of making this successful and we should feel joint accountability for the overall success of the transaction. And we try to report to try to connect what they're doing with those value drivers and success metrics explicitly.

22:57It's not easy and not all functions want to hear it all the time, but yeah, we do those things. There's a big group of people that do this work and that's great. We're also trying to cultivate, hey, who are the key stakeholders that we can start to elevate and get them to think about things more strategically, get them out of the weeds of the integration project management and get more strategic around the decisions we're making, issues we're seeing, making things better. Because ultimately, I think that will provide better results, but it'll provide better engagements and work satisfaction and intrinsic motivation and all those sorts of things.

23:27So we definitely do it explicitly. We're okay. If anyone has great ideas, please send them to me. That sounds key in terms of building the integration muscle. It sounds like this stuff is all initiated through CorpDev. Those off-sites and things like that, you're actually driving those events. Yeah. Take a step back. Everyone wants it. But when I came into the role, lots of people said, hey, we need to do this. We've done it in the past. So it's been on our radar for a while. We're not dragging people there, kicking and screaming. And then we're balancing getting input from people. What do you want to accomplish?

23:54What are the needs that you see that we have versus some of the stuff that we know is important and that we need to get done? And it's the beginning of a conversation, not the end. There'll be regular pieces and there's regular interaction and team building and all that sort of stuff. How many different business units do you have? The way we're set up, we have really four kind of product groups, industry groups. It's AEC, architecture, engineering, construction. It's manufacturing. It's media and entertainment. So that's film, visual effects, animation, Pixar movies, those sorts of things. And then we have a platform product technology team that does a lot of research and forward-looking stuff as well.

24:26Those are just product strategy marketing. They do not have sales. We have one central sales team for everyone. So they're not really business groups the way some other companies might view them. But those are the four industries that we serve. And on the deal side in particular, we partner with as they grow their strategies and identify targets. And we're intimately involved in that whole process. When you started, were there four groups or were there less than four groups? Maybe there were five at the time and they've merged and changed and split apart and been kind of different things over the years that we've had.

24:54That's fun stuff that happens. That's a whole other story. What I'm trying to get a sense is how your corp dev function is structured today because you have your corp dev team, which is roughly how many people? On the deal side, I've got two directors and two assessors. So it's not a big team. And then another couple of people on the integration side. We like nimble teams here at M &A Science. They're the ones that do the best deals. And then you have a dedicated integration team, or no? Yeah, so two people. So the structure we have is a business partner. On the deal side, it's a business partner approach.

25:23So each industry group, they have business partners, whether it's finance, HR, legal, that are part of the executive staff. They're part of every conversation. They're not just lawyers or finance people that talk about that. They're part of the executive staff or that industry group. Each industry group has a core dev person that's on there and that participates fully in that. That's where the initial strategy discussions happen. There's lots of other places they happen. That's where the industry groups are reviewing pipelines, helping to prioritize, getting input from the product teams and strategy teams and other folks around, hey, what's most important for this industry?

25:56And then we as a team view that collectively across all the industries and make it work. So that's the approach we have. It's different than what it was when I came on. When I came on, like I said, we were kind of the internal banks. You know, we were the example we use, a short order cook. We're the short order cook, throw it up there. We'll cook it up and put it back on the shelf. And now we're trying to farm to table. Hey, we're part of the initial conversation. We're all the way through to the end and even beyond. And then there's a corporate resource in the BU. Yeah, dotted line into the BU, basically.

26:23They report to me directly. But those people to get most of the review information, they join all the staff meetings, they go to the off sites. Yeah, do all that stuff. Why'd that happen? Because this is interesting because it's, like I said, they're all structured different. So yeah, well, it's an evolution. So when I joined, there were people in the divisions that were called business development. They didn't really do business development. They basically did corp dev, but they only did the upfront strategy, target identification, and that was it. And then corp dev did everything past then. We did the valuation, the negotiation, the term sheet, the diligence.

26:53We did all that stuff, right? That relationship was not super helpful or functional. It was a legacy of something that was before my time. So I came into this environment. And then ultimately, I don't know, maybe 10 years ago, we combined those. A bunch of people had left and they made the decision to combine those, but then they centralized them under CorpDev with this kind of business part of the model. So that was how we got there. And frankly, this approach definitely caused strife because these people, the business unit sometimes want to do stupid deals, right? And we're trying to say, this deal doesn't make any sense.

27:22We shouldn't do it. We're overpaying. It's not going to do what we want to do. But at the end of the day, we were there to be the bank and we got in line. But now it's much better. At the end of the day, we're not the ultimate decider. We have a strong voice. Executives want to do a deal. We're going to go help and get the deal done. But we have a much stronger voice in this scenario and bigger seat at the table and stake in the conversation. What about the accountability at the corp dev person in the B unit? Are they still running it through close and handoff or are they involved with integration to see through that part?

27:52They're involved. I would say the expertise and history of both of the folks that I have in those roles right now is more on the deal side, getting to close. We bring the integration team in very early. They're part of all of the diligence conversations. They start interacting with the BU or the division execs right when we get to a term sheet, even before to start thinking about what are the big rocks? What do we need to be focused on? And then ultimately, the evolution that we're working on is that becomes a slow transition. It's not this hard and fast. Hey, the deal's done. integration off and running, like the deal side is focused during the early phase of diligence, et cetera, and the integration people have a smaller impact.

28:27And then that kind of grows over time. You get to close and you're kind of ready to go. Lots of what the deal folks appreciate that at Autodesk, it's not just about getting the deal done. We care about the decisions that are made. We care about the assumptions that are made, the product and go-to-market integration decisions impact the revenue plan, which impacts the success metrics, which impacts what everybody cares about. It's very much a group effort, but the deal folks do tend to drop off a little bit after the close and go working on the next deal. They do still stay involved in some of the reporting and connected to it, but not the day to day of integration.

28:57Then keeping those integration folks in the loop about the decisions and really part of that deal early on. So they're part of the mission. Are there any secrets to doing that? Let them in the room? Include them on the invites, get them in there. The thing that we're really doing is getting our leads and most importantly, I have a new person that's running integration for us. He joined maybe six months ago at this point. Getting him to embrace and what I'm telling him is, hey, our vision should be the integration as a strategic advisor to the executive around what they want to accomplish. This is not a reactive, passive activity.

29:29It is a forward-leaning and strategic advisor role to the executives. If you want to achieve this, here are the things you should do. Here are the things you shouldn't do. Here are the issues that you should be worried about. Driving, being proactive, being directive with the teams around, these are our standards. You have to hit our standards. And we're going to talk to the executives and confirm why, and we're either going to say yes or no, and just being much more directive and proactive. And it's also up to the integration leader, to some extent, to force himself to be relevant and force his way in there and force decisions to be made early.

29:59Because I do think that one of the worst things you can do with an integration is just keep delaying and say, we can't talk about this. We've got to sign. We can't talk about this. We've got to close. We can't talk about this. We've got to get this first thing done. You have to have the conversations early. And someone I admire made a statement I really like. I can fix a bad decision. I can't fix no decision. So just make a freaking decision and then we can move forward. That's a lot of what we're trying to do. It's a whole thing of its own with all this integration stuff. It's a huge volume of decisions that need to be made.

30:26Is there an approach to it? Is there a framework that you agree on? Or is it just something that becomes part of the culture in terms of handling that to be better at integration? Yeah, I don't have a great answer for that yet. And that's one of things I'm asking my team on. It was just like, I don't want 1500 lines, smart sheet. That's not useful for me at all. And frankly, I don't think it's useful for anybody. Maybe somebody somewhere has to confirm that all this stuff gets done. We need a framework to talk about things at a level that makes sense to executives. Kind of back to the strategy piece I discussed, like you can't look at this and understand what's going on, then we're looking at it in the wrong way.

30:58We're trying to up-level the way we talk about integration and the decisions that need to get made in a way that is more intelligible and can't just be this 900 line thing of stuff that takes two hours to go through. What are the big rocks? We have to rely on some of the functional people to just execute the job below that can know the right thing to do once we set the higher direction. So that's what we're trying to get to. It's a work in progress. We're not there yet, but we're moving the needle. OKRs. Have you heard of OKRs? Yeah, I've heard of them. That's part of it for sure. Trying to balance the desire of folks to make sure they have every I dotted and T crossed versus OKRs, bigger objectives, big rocks.

31:35What are the key decisions? And this is where I think the creativity and the strategic advisor piece of integration can come in is what are the big rocks that we should care about with this deal based on what we know about the company, what we know about the buyer, what we know about what it takes to integrate, what are the things that we should be most focused on, pushing those forward. To me, it's a lot more fun because you're having real conversations. You're not having conversations around, oh, we're 79 % done. 70 % of what? Of everything? Something less? A thousand? I care about. Is the channel activated?

32:07Is Quote to Collect integrated? How do we get at that kind of level in a way that's more useful to exacts? It rings well. On a very small scale, is what I'm working on internally, is like bridging OKRs to the actual task so you can follow the chain all the way through. And then you can jump in the middle where you need to and click down when you need to. Can we talk about governance? I'm curious how you've seen the governance model evolve over time. And we got different layers of governance, I guess, right? Because we got overall go-no-go decisions to, are we creating steering committees for these deals and things like that?

32:37We've bounced back and forth, right? We've had committees, which are subsets of CEO staff and a few other people. We've added everything as the executive sponsor and they do everything and they're the decider. There's trade-offs with everything you do. What we're focused on now are setting up the right kind of steering committee that can provide governance, inspection, decision-making without being a ton of bureaucracy and making sure that we have the right people there. and for the right deals. Like some deals, I'm just going to say, this thing doesn't need a steering committee. It's too small and it's not, there's not going to be enough to talk about every month, right?

33:08So we're just not going to do it. If it's important enough to do, everyone needs to make a commitment and that's where we're going to drive the accountability and making sure we have the right folks there. I think we're doing okay on that. It's better than sending out dashboards that are out of date, unintelligible, or where you can't really tell what's going on. So we're forcing people to have the conversation and building the expectation that this is going to be the nexus of accountability for these deals. So that's what we're doing now. Early signs of success. You don't have the full playbook built out, but I think it's best practice.

33:37And I think you need to have some kind of written down governance people can rely on and become accustomed to. So that's what we're doing now. And it evolves and changes. Do success metrics change or are they very much derived based on the deal itself? Do you sort of think of like a general framework overall? Yeah, we generally have probably the standard ones that most folks have. Some sort of top line, some sort of customer or go-to-market type thing, some product type goals, people goals, integration goals, etc. So those are the main buckets that we'll look at and then we'll pick and choose based on what's relevant.

34:08What we're trying to get to now, and this is one of the evolutions we're working on, is making them less of a report card that comes out at the end of the quarter where you get to see, oh, is that red or yellow or green? And then you have arguments around, what's 89 % red or yellow or whatever. And by the time everyone sees it, it's out of date and everyone sort of knows about it anyway. Making the steering committee is the place where people are really looking at the tracking of the efforts, whatever it is, whether it's top line or product or whatever's most important. And more importantly, the forecast and are we on track?

34:38Having the time to make decisions that can impact their trajectory versus just saying like, did we do well or not? We'll always have some element of the kind of backward looking, hey, we got to say how we did last quarter, but there's not that much you can do with that except either pat people on the back or make them feel bad. I'm much more interested in the conversations that have a view on the forecast and what we can do going forward. So So we're trying to make them more forward and backward looking to drive the right kind of conversations. And it's been sort of the same as the steering committees.

35:04We're seeing success so far. We're not done, but we've seen it driving the right kind of behavior and engagement with folks, which is really the biggest thing I was looking to achieve. It's a whole topic to unpack of its own. When we look at these opportunities to improve as you go, it's interesting how you're very candid about there's still things in the works. You're still learning and you're still improving. And I turn around and talk to somebody at Cisco with 200 plus deals and still the same narrative. They're still improving, still working on it. Have you identified any approaches or methods to help with the retention of learnings deal by deal to be able to build off of those things?

35:39We do postmortems. We try to share everything with the teams. We're getting back to documenting playbooks and trying to have more stuff documented that we can then go back and look and say, did we change this? Did we do what we say we were going to do? Are we on track or not? Some of those sorts of things. But no, I probably don't have a silver bullet. Here's how you get every money baked into what you do. Some of it comes down to just pattern recognition and being part of these things for over years and being able to raise your hand and maybe have an uncomfortable conversation that, hey, I think we're doing the wrong thing here or we're on the wrong track or we really need to think about doing this a different way.

36:14So I do advocate for my team and I try to model this behavior of throwing ourselves in front of the train. The deals can take on a momentum of their own and so can the integration plans and so can other pieces. If we don't raise a voice or make a point, maybe no one else will. Trying to do that and bring that forward and make that part of what everyone feels comfortable doing. Not everyone has access to the brake handle on the train, but at least you can try to have an impact. You keep a lot of dialogue going, have the tough conversations. And that's probably one of the key things. Yeah, it's definitely a tough one because even if you document a bunch of things, how do you give people a look at the documentation?

36:46Yeah, and then people leave and you get someone else coming in. and you have, yeah, it is tough and we'll do the best we can. How about the hiring process? How has that evolved? I can imagine the standard is you start off hiring ex-bankers, de facto, you know, is that still what you're doing today in 2023? I haven't hired anyone yet this year, but we'll see. Hopefully I will. Yeah, I mean, the junior people, we still do look at that. The experience you get as a junior banker, as an analyst or an associate around just the stuff that we need to be able to do, models and comps and company comparisons and decks and all those sorts of things.

37:16We've hired people that don't come from the core M &A banking background. And you can train some of that stuff, but it's a steep learning curve if you have none of that experience. And especially given that most analysts do two years of work more or less in the year they're there, they're well-trained. So we tend to focus on that. I'm less worried about that for the more senior people. They need to be able to interact with director or with executives, operate with indirect authority and ambiguity. They need to be able to handle those sort of skills that they need to be able to handle. They need to be an effective advocate and ambassador for auditors externally to different folks.

37:47Those are the things that are more important. But for now, both of my deal directors are ex-bankers. That's where it is. Yeah, I'd be curious to see how that evolves. On the other areas like integration, how does that fit in? Is that trying to be as intrinsic as possible, getting folks internally that really know the business? Or are you pulling people from consulting firms or just hiring consultants? We do use consultants from time to time, certainly in some of the functions in particular. Across the integration team more broadly at Autodesk, we have a mix. We have some people that just grew up in Autodesk and they're a functional expert and now this is what they do.

38:19We have some people that have done this at other companies. They've hopped around and so they're more of an integration or an M &A expert. And there's pluses and minuses to both of those pieces. The skill I'm trying to hire for now is what I talked about. You need to embrace this strategic advisor, concierge mindset to the executive. Your job is to help shepherd this thing from A to B and to help lead the team. Some integration functions come in and say, well, here's the checklist. Tell us when you're done. And if you're not on track, we'll report you as red. That's not what we're looking for.

38:49The teams need to come say, here's where you need to get to. Here's where you are. And here's the roadmap to do that. We're going to help you. We're not going to do all your work. We're not going to solve every problem for you, but we are not going to let you spin. We're not going to force you to chase your tail around. You're going to know what's going on and we'll escalate when we have stuff that we need to talk about. embracing that strategic advisor mindset and that kind of, I call it concierge mindset, but it's like, hey, we're going to help you get there. We're not going to solve all your problems, but we're going to make it explicit so you're not wondering what's going on and we'll get decisions more quickly.

39:16That's the hope. What would the title be for that role? In my mind, that's an integration lead. That's a functional lead that can do that role within their function. You're on the finance side. Here's where this is and here's where we're going to be fully integrated and all these systems retired and here's how we're going to get there. And then really, you know, the role of the integration management person, the person who's running an integration is to help synthesize all of those issues up in a way that the executives can understand and help them make decisions on what's important, what's not important, how should they trade these things off?

39:43One of the things that we hear a lot is I had no idea that this decision was made. It comes up later that this is a huge problem or it's an issue and they never heard about it. No one else heard about it. We have to figure out what those are and do a better job of shining a light on them. Yeah, it sounds like the big trend of the industry right now. Everybody's really trying to beef up their approach and integration and maximize the value of deals. No question. That's why it's taken up a ton of my time and I appreciate it. It's good. I'm very excited to see where we are in a year and how successful we've been.

40:09What other big lessons learned? Advice you give to the early corporate function, getting ready to start year one off? It's more personal than anything else. I wish I had been more outspoken and aggressive when I was younger and more junior. It was not in my demeanor. You get older, you don't care as much. You just get much more comfortable. And I wish I hadn't been as nervous and I had been willing to call more BS when I saw it. People appreciate a point of view. Don't be obnoxious and respectful with it. But yeah, I wish I had done more of that and gotten more comfortable with it earlier. That's one kind of big personal thing that I try and still on my team as well.

40:42You have to have a point of view. If you don't like what we're doing, tell us what the alternative is and why it makes sense. A lot of times they don't have an answer for that. So they need to have an answer for that. That's one piece. And then the other thing I would say is just be out there, be external. To me, that was the piece that kept it most exciting for me was getting away from just doing deals that people told me to do and getting out there, talking to companies, talking to investors, bringing that external point of view back inside the company and be out there and talking and building your network and having something useful to say, but being out there regularly.

41:11Those are good tips. And they kind of go hand in hand with each other. Go out there. You want to be proactive, vocalize it internally, try to stir up some new ideas and actions. Yeah, exactly. Advocate for a point of view. That's the goal a lot of the time. Hey, what's the craziest thing you've seen in M &A? Oh, the craziest thing that I've seen is not really that crazy, but it was the most surprising to me is that we go into these things with a lot of transparency and openness and an desire to get things done. All of our deals are negotiated. It's very rare that we're part of an auction. We're getting deals done that we work on together.

41:42And so this journey you go through with the seller, and oftentimes it evolves over quarters or even years of conversations and getting to know them and seeing them at trade shows and those sorts of things. And then just every once in a while, you run across a bad apple that just exploits that. And as engaged in ways that are, if not quite nefarious, are certainly they were never serious about what they were doing and played us. Building that cynicism and that skepticism is a lesson. It's a bummer about the industry, but it's also, I get it, everyone's doing what they're doing. So you just have to have some of that cynicism and skepticism around.

42:13What's their angle really? Are they serious about this? Are they playing me? Am I playing them? What's going on? It's not that crazy, but that's one of the things that I've learned over the years. It's like a nature thing. You get a little two-face that comes up when you're doing these deals. You have to be careful with it. We're going to work with these people for years. There are multiple members of our CEO staff that came in through acquisition. So, you know, Auditor's is the best people to stay. We take it very seriously. Maybe not everyone does. The only thing you can tell yourself is, hey, those people that behave this way would never have been successful inside Auditor's.

42:41So it's good that the deal didn't happen. Sometimes it's a bummer. I can handle the blows back on me, but the team and the deal blows up because someone wasn't actually acting in good faith. Okay, I look for both their faces. Yeah, exactly. David, this has been great. Thank you so much. I enjoyed this conversation. Learned a lot. I appreciate you helping me become a better M &A scientist. Oh, this is great. Thank you. These sorts of things are a lot of fun. So I appreciate the opportunity. And hopefully folks had some sort of interest level. And if anyone has questions, feel free to hit me up on LinkedIn.

43:07Happy to talk further. Anyway, this is great. Thank you. No, cheers. For those of you with us, here's to the deal. And until next time.

43:24Thank 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.

44:09Again, that's mascience.com. Here's to the deal. Thank you.