Thriving in Times of Change With Flexibility in Your Integration Planning

0:00It is shocking how many companies are still getting scammed by per page price virtual data rooms. In the past 12 months, Firm Room has saved corporations over$80 million in per-page fees. Now we're stepping it up big time with Firm Room's new 50 gig data plan for only$1 ,000 per month. That's over 500 ,000 pages. You'd spend hundreds of thousands of dollars with any per-page VDR provider for similar storage. Firm Room is trusted by top 10 private equity, IB, and law firms for IPOs and M &A. If you're spending more than$10 ,000 on a VDR, let's show you the easiest way to cut your deal expenses.

0:42Visit firmroom.com. There's a free trial so you can compare directly side-by-side with your current solution and see why the best in M &A are switching. Again, that's firmroom.com, an M &A science company.

1:02I'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.

1:26Good morning, good evening, and good afternoon to our community. Here at M &A Science, our goal is to deliver knowledge. Knowledge that we learn from the community and we return back to the community. By visiting M &A Science, you'll find all the information you need to help upskill your M &A career. To get started, all you have to do is sign up for our free weekly newsletter to stay current on the latest courses, upcoming events, and expert interviews. Again, that's M &A Science. Hi, everybody. This is John Morata, Chief Operating Officer here at M &A Science. And today, I am so excited to introduce to you Stacey Van Shagantobak.

2:06Stacey, how are you? I'm very good. Thank you. Lovely. For those who aren't familiar with Stacey, she actually heads up M &A integration and disentanglement at Philips. Philips is a multinational corporation, and they are traded on the New York Stock Exchange as PHG. So with that, Stacey, today for our audience, we're going to go over the topic around flexibility. Notably, how to bake flexibility into integration. In this current market, flexibility is probably the modus operandi of many cultural changes within integration. If you wouldn't mind, can you tell us more about how you got started in integration and in M &A?

2:44Sure. Thanks. And I'm really excited to be here as well, John. Thanks for having me. Stepping back a little in who I am and where I come from, my background molded me and brought me to where I am today. So I've been in the position I have now for about five years. I guess you could say officially M &A integration and disentanglement just for five years. But of course, that's not the case. I've been doing integration and separation for many years, only, yeah, it wasn't really a discipline at the time. So I've been piecing that together a bit across my career. So I lead a team of program managers and we focus on integration and separation activities at Philips globally.

3:16And as you said, Philips is a health technology company. We've been on our acquisition and divestment journey since about 2014. We got very serious when we took the strategic decision to become a pure health tech player. So I started at Philips in 2014. It was welcome to Philips and you're going to help disentangle the lighting business from Philips. So right when I started, it was the biggest disentangler separation that the Philips had done. And it was really our huge step to help tech. So there I was part of the IT work stream. So I led the IT procurement work stream because I was the IT business partner of the procurement.

3:49I learned so much on that journey just because procurement touches so many parts of the organization. So that really gave me a broad perspective of the operation of Philips. That was how I came into Philips. I was an IT business partner for many enabling functions where we do the business transformation roadmap. But then as part of that, I also was the IT transition manager for the global business services, which is like integration in that you're moving these internal processes to enabling services in low-cost countries for more efficiency. But then again, you're using the same models of integration.

4:20I led international integration in a project that spanned 34 countries. I had a project team of over 150 people, and it taught me a lot about the world and also about fill-up. So I think that gave me a great basis to lead the team I lead now. We oversee many integration and disentanglement projects. Some of them make it over the line. Some of them don't. All of us that are practitioners would recognize that. And if you want to know more about what we did, you can check out our corporate website. And I just want to go back a little bit to what I said before. Yeah, I've been officially for five years in the M &A, but of course, that's not the case.

4:50And prior to Philips, I worked in publishing both international and domestic. And there also dabbled a bit in integration and disentanglement, but just from a different perspective in publishing. So kind of have that vast background in different industries. Oh my gosh, there's so much to unpack there. I'm writing notes as quickly as possible to keep up with your history and your experience. I'd actually like to double down on the topic of perspective. Your tenure, both national, international, which you covered is outstanding. Philips itself is a multinational corporation. How would you say that through your experiences, just outside of Philips, within Philips, that this has enhanced your perspective around running global integration projects and programs.

5:34What has it that spurred this culmination, if you will, of just knowledge about how you run a global program around integration? It's really important to have a good view of the world, understanding the cultures a little bit better when you're running global integrations. And ever since I was young, I've been very active in intercultural activities, let's say, and interacting with different cultures from around the world. And that was really what bit me and made me want to work internationally, let's say, because I like bringing different cultures together and working with different cultures. I think it really helps because you have an understanding of how the different groups kind of work.

6:07Also having a multinational team really helps understand the different cultures. So my team, I think we have, we're a team of about 10 and we're probably five or six different nationalities. It really helps in bringing a different approach to the transformations that we do. And I think that plays a key role when you have a global integration because you also need to understand each other. So like I was talking about that large project I worked on, Our IMO consisted of, I think, four or five nationalities working together. And that really helped us have that view on all the other countries that we needed to integrate into this project.

6:38I think it's a lot harder to integrate across geographies because you're also not dealing with one specific country laws and compliancy rules. You really have to look at how does HR work in China? I can tell you it's very different than how it works in the Netherlands or in the U.S. So it's really good to have that perspective when you're running these types of integration. It's not necessary. You can learn it. I learned a lot. But having that diverse cultural background and understanding really helped me, especially knowing a lot about international business and where we needed to go. So that helps navigate.

7:08I think also makes it a little bit easier and more flexible if you do understand that. I love the idea of multinational teams. It's something that myself or my career doing integrations, I've found to be just one of those hidden gems, if you will, not only from the perspective of people being in different places, but the difference in culture, the difference in ideas, the difference in ideology, bringing that all together really creates just a really nice dynamic that I can learn from as well. As an IMO leader, it's been wonderful to participate in that because one of the things that I think is important as a leader is to learn and continuously improve on myself and every integration that I've ever done.

7:44And if I may, I'm going to go off script a little bit, which is on the culture point. With so many people in different countries and different geographies, how does Stacey keep her team moving forward with a lot of that differentiation that you're trying to absorb and learn from and continue to stabilize and standardize? Is that something that you do as a process or as a leader, make sure that the team continues to move forward with some level of stability? One of the things is we're a very tight team. So we're very aware of each other's strengths and weaknesses. We create a lot of psychological safety in our team.

8:17So we really feel like we can ask each other anything. And I think the diverse cultures and working in different geographies also helps that you can ask someone in the team like, Hey, I'm feeling uncomfortable when I'm in discussions with our Japanese colleagues. Do you have any tips on how to do that or things like that? And I think that really helps us and helps me as a leader to encourage them to step outside their comfort zone and to feel like they can do that. And we're very aware of the different cultures within Philips, just because Philips is such a global company. It's kind of part of your DNA when you're onboarded is to really understand that, hey, we work across the globe and we have to be sensitive to different cultures and ways of working.

8:59In healthcare, it's even more important to understand the different regulatory environments that you're facing. Because besides all the cultural aspects of how to even talk to people in an integration, you also have the, okay, but what are my rules of the game in that specific geography? So I really helped the team in learning, being open, and being able to have those conversations when you're in those difficult situations. Wow. That's so powerful. Just the idea of having the rules of the game predefined. Our audience today, there are many who actually also work for other multinationals around this idea of safety.

9:31What would you recommend as one of the first steps that they can take to espouse this idea of safety within your IMO? One of the things I do when we're onboarding new colleagues is we give everyone a copy of a book called The Culture Map. That's by Aaron Meyer. I'm not sure if you're familiar with it, but it helps set the scene of the differences in how cultures work. And I think once you've taken the time to read that book and you have an idea, especially if you're new to the international way of working, I think that really helps you to kind of get a grasp of how people work. And you'll also have those aha moments when you're in those discussions.

10:06Aha, I remember reading that about that specific culture. So that's one of the things we do. The other thing I try to do is just have a really open and transparent relationship with the team so that they feel comfortable enough and not intimidated to have those conversations. I try to be as encouraging as possible. I'm also very direct and sometimes say the wrong things. But then I go back and say, hey, sorry, I was probably a little bit harsh there. But what I meant to say was, so really gives them a feeling of working together. And we do a lot of learnings and deep guys, like you talked about continuous improvement.

10:38We do a lot of continuous improvement and learnings as we go along so that people feel comfortable in sharing how they did something. They get tips, maybe other ways they can look at it. But we're very respectful of everyone's journey. And when you're looking at IMOs specifically, because we advise the IMOs, we're part of the IMO for a while. And then it's business as usual where the business integration leader will take over with their project managers, let's say. Try to also give them the tools they need or we as a team what they need to be able to work in that intercultural environment. But a lot of people at Philips already have that or they're expats or they've been in international so long that they don't even know what it's like to work in a domestic company, for instance.

11:17It's such a big world. It sounds like in terms of the Philips culture, but even within your own team, you building your own culture, I think is amazing. I'm definitely going to look at the book called The Culture Map by Aaron Meyer. Let's actually talk about this idea of the continuous improvement. It's an important topic, I think, from what you just mentioned, and the way that you want your team to continue to evolve. I found that just for my own personal career, continuous improvement has allowed me to rebuild myself over time when I thought maybe I didn't want to do integration anymore. And I just go in-house, if you will, and just run a BU or just run a department.

11:52But then things come up and I'm like, oh, I get revived and recharged about doing integration all over again. And this idea of continuous improvement is one of those principles that comes out in terms of agile principles. It's one of those tenets of Agile. Yeah. So let's shift a little bit and discuss the methods behind what Stacey employs, not only at Philo's, but also over her career. One of the tenets that I also want to talk about is with regard to delivering outcomes. It's not just about delivering on a date, not about delivering on a budget, but it's about delivering outcomes. Would you agree that there's this movement toward delivering outcomes from integration, not just delivering a successful merger of a company?

12:30A hundred percent. We're definitely seeing that. I want to touch on all these and I hope I don't forget each one. So remind me if I do. Let me start with continuous improvement. I also want to call it continuous learning. I think continuous learning, continuous improvement is really important to be flexible and agile. So what we do as a team is after we've had a, let's say, a big deliverable like the integration readiness deck, which for us is like this huge deliverable of your plan of what you're going to do in integration. We have a deep dive meeting with the team where the program leaders who are working on that project present what they did, not the deck, but how they got to the deck.

13:07So what are the things they did in order to get there? What are the challenges they encountered? Why did they encounter those challenges? And how can we improve that moving forward? And usually after each of those deep dives, we call them, we come up with ways to change our process a little bit or change our template or do things a little bit differently from the learnings. That's one way to be agile and to really focus on how to learn from experience and to make sure the team, and this goes back a little bit to, yeah, we're constantly, not constantly, but every few years you have this turnover of after about three or four years, we tend to make a move within the fill-up.

13:40So you're going to get new people coming in who need to be trained. By having these continuous learning sessions, you give them the tools they need to be able to develop quicker because they hear what's happening from others. So you also become more agile and a little more flexible in delivering on your strategy of integration or separation. To go to your other question about delivering on outcomes, there's definitely been a shift from, hey, let's get this project done, A, B, C, D, hey, we're integrated, we move forward to, did we deliver on the value that we said we were going to when we went into this acquisition?

14:13So we're seeing a shift from really looking at planning, getting your IT done, just checking all the boxes to moving it to delivering on value creation. And that means being agile in your integration planning. It means, hey, we might not 100 % go into our ERP system, but we might do a hybrid approach because we want to create values. So what we're doing now is we've just actually completed what we call annual improvement plans, where we worked on how can we better show value creation and what do we need to change in our process in order to create that value creation. And what we've done is we've really focused on...

14:49There was a huge focus on get things done, spend the money in the two years of your PMI budget period, and then the value will create itself. But we all know value doesn't create itself. The business is super excited about doing this integration. We need to make sure we're focusing on the right thing. So now we're looking more to capability building towards the value drivers. So we identify earlier in the process. And this came from our continuous learning. We look at the value drivers earlier in our process, and then we assign owners to that from a business perspective. And then we are going to drive the value creation through releasing capabilities within the planning that will enhance those value drivers and then ensure that we create the value first before we finish all the checks in the boxes.

15:31So that's how we're adapting that and becoming more, I would say more agile, more flexible, but it's really delivering on your promises a little quicker. If you talk to other practitioners as well, they'll probably say, we eventually get to the value, but it's not in the three, five years that we had initially said, maybe it's in more in the outer years. And by focusing more on this value creation earlier, we're hoping to get that value earlier in the process. Okay. I can't keep up with the speed of which you're getting all this amazing information. If I may, I'm going to summarize a little bit of what I heard, but certainly feel free to correct me where I'm wrong.

16:04One of the original points that you made around learning about the why, not just the how. Why do we do certain things a certain way to get to the integration readiness tech? What were the lessons learned that we applied that we've now absorbed? And of course, instituted into the next version of that, which is the better version to do the next acquisition. I love the topic of did we deliver on what we expected to? And what I wanted to add on to that was, did we deliver the right thing? And to your point of value creation, which is, right, did we deliver value for all the stakeholders involved in this transaction?

16:37Whether it's a disentanglement, a roll-up or an acquisition, we have to look at a lot of facets. We have employees, we have our customers, we have our vendors, we have our key stakeholders, we have our customers. All of that is part of delivering the right thing in terms of value creation? It's a lot to unpack there because I think we focus a lot on the numbers. So did we create the value in dollars or euros or whatever currency you're using? And we don't focus a lot on what you said, which is, did we create value with maybe our contracts or our customers? We measure that differently. So we measure NPS scores, for instance, for our customers, things like that.

17:13I don't think we're as good at capturing things outside of monetary value yet. But it's definitely a very good point that you make that we should be putting more focus on all of the other value creations that should come out of it. We identify a lot of it, but we focus a lot on the numbers just because that's where the financials come from when you're a listed company. I totally understand. Maybe a lesson learned for all of us as well, which is we got to pay attention to the numbers a little bit better. overall. One of the things that I heard you mention was that this integration readiness deck, it's a process to get there, right?

17:47It's a learning process also to get there. But once you're there, it's great because people are engaging and having conversations and exchanging information. But I'm going to go a little bit off script here, Stacey, to ask you, which is, what happens when you don't know something or you can't forecast past 100 days? What happens then and how do you address that with the team so that you continue to move forward in the conversation so that you're kind of baking in some uncertainty into your assumptions as you build your integration plan. You're absolutely correct. In the integration readiness deck is a process.

18:18It's an iterative process. It's not something that is just born. We don't just fill in slides. We're really building it from the ground up. We have a template, of course, and we decide which parts are the most important to present, let's see, for approval. But we make sure we fill in all the parts. And it's not just about the first 100 days. It's really about our approach for making this a success within Philips. So it goes much further than that. And it goes into a lot of details, including what is your legal entity roadmap? It goes really into the nitty gritty, but it is a process and you can't know everything at the start of an integration.

18:54So what do we do? First of all, it is iterative. It's very agile in that we're changing and editing and recreating as we go through, because what we do is we check with the business leaders. We check with the owners of these value creation targets. We check with our markets that they're going to be able to do what the business thinks they're going to be able to do to sell. So we have a lot of those checks. And along the way, we find out if it's actually possible to do this or not. And then we will tweak it or we'll bring up red flags saying, hey, this is going to be challenging. What do we need to do to prevent those red flags in the future?

19:27So it's very much fluid in building it. and then once we have it, it's a stick in the mud. It's not to say, this is what you have to do. So you have to continuously change that as we move forward in the integration. That's one part of it. But also the team should not be afraid to make mistakes, right? We can't know what we don't know. We don't know everything. So we need to make sure that we leave room for that adaptation as you move through the deliverables. Huge point about adaptability. Given our current economic situation around the world, we certainly see companies adapting very quickly to lots of different things from ESG to supply chain challenges.

20:02There's a lot going on there. I like the point about checks and balances. I will be honest, I've probably not been the best in my whole career putting in checks and balances with my own leadership team. I tend to have a plan and then I tend to stick to it a little bit more so than I probably should. I just drive forward. I think I'm going to put that into my next set of integration plans as well, which is checks and balances for sure. This idea of, of course, not knowing everything and allowing for the flexibility of where errors can occur. Do you find that you have this innate nature of understanding like if something's gone too far and you got to kibosh it so that we get back on track?

20:37Or do you like the work stream leader have a little bit free reign, more free reign? I think this is probably a question more for my veteran audience, which is like, how far does Stacey let the team go before she says, okay, timeout, we got to stop. We're going a little bit too far here. We're going in the wrong direction. Let me go a little bit to our process. So in building the deck, I think there's a timeline to that because you have a certain amount of time that you need to deliver. So it has to be before we go to sign and that has the agreements you have with the target. So there you have a defined end time.

21:06So you know how long you have and you have a lot of long nights right before that, but it's a deliverable. Once we've done that and we've actually acquired the company, then we of course have the first hundred days where we do the kickoff planning and things like that. And we check our thinking with the target. So we say, Hey, is this right? Did we get our thought process right here? We something we've improved upon as a learning. And then we have what we call replanning workshops. And we do that pretty much every quarter. So the furthest out a mistake, let's say, can go is a quarter because then we look back and we say, hey, is everything on track or do we need to recalibrate?

21:41So we're constantly recalibrating and re-baselining and making decisions based on what we now know because you never know everything. You're making tons of assumptions when you're taking over a company. Even when you're doing separation, tons of assumptions until you actually meet with the buyer or the seller and you say, this is what we've thought of. And then you realize, okay, maybe 10 % is right, 50 % is right, 80 % is right. And then you have to shift all that as you move forward. So that's how we adapt for that ever-changing gaining of knowledge, I guess you could call it. It sounds like a lot of re-education as well.

22:15Like relearning, hey, what I learned six months ago may not be true. Or actually, in some cases, I'll be honest, when I go through some of the due diligence talks, is, hey, did you make this right assumption? And I guess the market was different six months ago than it is today, but it's okay. We might have to refactor this and apply a different algorithm. We also do retrospectives. So after a year, we do a retrospective of how we did. And we also do a retrospective sometimes after three years. And it's very interesting to go back to the diligence documents because I just did one recently. And I was like, whoa, what were we thinking?