Why M&A Integration Fails Without Leadership Enablement

24:06And then honesty and having those transparent conversations with people is what builds that trust for the future. That's a proactive way to drive honesty out of people. It's just getting the conversation and asking them directly. It's a conversation, right? But I mean, if you can't get to that point, then the other things that are going to come up later are just going to be even more challenging to talk about. Yeah. I had a conversation like that not too long ago. It was fun. And how did that go? It went good. It went really good because I feel like it's a very direct way because it was the first question and I knew the conversation I had and I would throw everything in AI.

24:39I was just like, hey, give me an outline of this and that. and it gave me like five key questions to ask. And there's a first one was, are you in this for the next three years? Which is good. It's kind of good. Everything else came off of it, but you just want to direct yes or no of that. And that could be your exit strategy of, hey, I'm willing to invest in the next three years, but after that, I'm out. So let's structure it in that way. Or like, nope, six months, peace. Yeah, exactly. So I was like, ask the big question first. And then everything else. I love the, what would make you quit? It was my other favorite question.

25:12Oh, that is a good one. Yeah. Yeah. It was like, it was good answers. It was like, okay. So I, it was fun. Yeah. I might borrow that one. Yeah. Because to me, the other part that I would start with is like, what's important to you? What's important to the teams? Because everything else, then if you can get a really an honest answer about that, you can design retention around that. It might not be money. Money's always helpful, but it could be some other things that somebody's like, oh, I've always wanted to live in a different country and do this and blah, blah, blah. I was like, oh, we can do that or not.

25:42100%. The other one I liked, it gets framed different ways, but what were you missing basically? What weren't you getting that you wanted? Oh, I see. Yeah, there's different ways to frame it. Like how can we do better in general? Basically what's wrong with the plan right now? But that's another one just worked out pretty well. And it sounds like you were honest on those answers. It was, you're right. It's like, let's have a true come truth moment on this stuff because very happy to share everything. I think that's the key thing. People pick that up. You can lose trust so easily. Just one little tiny little thing, detail that's like, oh, you were honest about that.

26:17What are the hundred other things you've been dishonest about? Exactly. And there's so much going on. The more that you can cut through all that, it just makes things so much easier to not only design the deal documents, but the people strategy, the organization design, and so forth.

26:38All right, let's go over the options for learning M &A. You could go to an industry conference. The networking is fine, but the learning is going to be an afterthought. You could go take one of those M &A certifications, but the curriculum was built 10 years ago off of one or two practitioners. You could go to a big name business school, 20 grand for an exec ed program that they cram into four days. Great networking, but are you learning the best or are you getting professor of theory? Those are the options. Here's ours. Nine years of M &A science. Learning hot off the press from the best practitioners alive.

27:19We extracted the deal stories, the frameworks, the patterns, and organized them into two certifications. More contributors than anyone. The best in the industry, all of it AI searchable with real receipts. I'll just say it. It's the best M &A training out there. Not going to dance around it. And the value isn't even close. Conferences cost thousands. The university package is 20 grand. Other certifications run 4 ,000 to 5 ,000. Ours is 2 ,000 a year or$200 a month. Cancel any time. Take the$200 bet, feel the difference, mascience.com.

28:26up and they just kept doing more and more. And then it blew up everything and people were walking away from very large retention packages. Have you seen that happen before? A few times. I don't think there's anything wrong with telling a company you'll run independent, but you got to mean the same thing by it. The problem that I see is leaders here independent as run the same, maybe just funded by a bigger budget. Ooh, now I have this big budget. And to me, what it actually means is once resourcing, tooling, governance, and reporting reality set in, then it's much narrower than that. So the fix is really defining what that independence on every level up front.

29:03And this is where I think leaders come in another place of decisions, budget, brand, customers. So before people are committing to what that is, oh, you're running independent, but ooh, now we actually need to get your customers to buy on our paper and our salespeople are going to get commission for that. So you start to pull that thread. It's just, let's get it on the table. What does that really mean? Does that mean you just have to follow our governance now that you're a public company and we file financial reporting together and you run everything under your own entity? And if not, what are those levels of independence?

29:38That's the key thing is people and leaders having really a specific understanding and a shared one at that so that they can help their employees too. Yes, it's fine that we're doing our own booth and branding and marketing at this event. Or no, it's not. We're actually part of a bigger company now. So it's okay to use the phrase, just don't leave it up for interpretation. Define it to some level. Yeah. You have a parent company. So what does that mean? When does integration actually start? Well, when companies start talking. To me, ideally at LOI, it's critical to have why you're buying this and what you're going to do with it.

30:14And then really have those discussions on what that looks like so that the acquired company knows what they're ready to receive it. And that way businesses can really start to talk about how do we achieve field value? Because things move so fast past LOI. So if you don't have a thesis in advance or strategy there, it's really hard to get people to pause and form it. So to me, having that strategy and then really thinking about if you're waiting to start planning, I guess, how about it is you're improvising leadership enablement instead of designing it. It can be done well. There's smart people out there and they built a business and they can come in and get stuff done.

30:52But to me, like it just increases the chance of success that if you allow leaders to focus on one strategy and then versus building and executing it, they can focus on a strategy and adjust it and bring their knowledge and insight to it versus doing it post-close. And then employees are like, why did we come here? What are we doing? That's when I think you lose people. Okay. So if we go back to this leadership alignment as a, you know, sort of a core area that drives success post-close, if we just focus on LOI to close, what would be the ideal timeline of key things to happen? You know where I'm getting at with this?

31:30Because if you look at a a typical deal process. It's super compressed and you're like, oh, we have two or three management presentations and we're done. We hit close and that's it. Then you're basically starting integration after close. What would your ideal look like in terms of the structures of meetings and things to accomplish before close? You have that conversation as the LOI is getting created. If people are clear what that is, then you're also putting a budget. You're thinking through, we're like, oh crap, we don't actually have a team that does that. We need somebody to really think through that.

32:02Or what are we going to tell our customers? There's so many things that when you look at what are the deal value drivers of that deal, they do vary, but I often think of revenue, technology, and talent, all of those things. If you don't start thinking about that and why you're buying it, put it into even the deal documents, then you can start that process. And at least you're getting people thinking about it pre-closed. So when you do hit close, those things sometimes have to come together super fast. Okay, we have a message for customers. We have what paper we're selling it on. Are we able to do that?

32:33How do we do that? Things like that, that I just think, I don't know if I can put a specific time. You really have to look at the size of the deal, what you're doing. Is it a tech token? Are you buying revenue? All of those things dictate that regardless of the amount of time you have, starting those conversations at LOI and getting that alignment makes everything go faster. And then once you get to close, then at least you have some structure or a guiding light to go towards. You got a good point. I almost feel like what you described sounds like even you should have before you actually sign the LOI.

33:05It's just purely like peer-to-peer, CEO-to-CEO of we're agreeing to these value drivers of the deal that were aligned on it and starting to think about what it's going to take to execute those. And then as you go through a process, you bring more of those leaders in and then start getting them thinking the same thing because now they're going to, and their function and their expertise. Somewhere I've seen that play out just on the talent side of, I know it's hard to get to the specifics that the conversations are going very fast, but if in the LOI or your letter of intent, you're thinking, hey, we either need to scale and grow or we're going to have to actually reduce positions, like have a transition or a time bound where some of your roles will be here for integration, but then they do go away because that role doesn't exist anymore.

33:50But starting that right at the front and then getting that reaction of the sellers saying, oh, I am good with that or no, I'm not. Because that changes some of the negotiation too. Big time. If you're looking at closer to day one, like day before day one, what do the target leaders need from the buyer before they kick off day one? Ideally, an outline of an integration plan or where they're going or the sense of how that's going to be creative and the timeframe for that. If they have those goals and that reinforces the why you're buying it, that gives them a clear line from their role to their teams of here's what's going to happen, here's what we're going to do, here's the shifts we need to make, or here's what we're going to help the company that's buying us shift.

34:33So ideally, if they have a sense of that integration plan and are heavily involved in the comms, and then if you're asking for my wishlist, they have a moment to pause and process that and just have something to think of like, okay, what is it that I need to do to show up and lead through this? Because that's going to be different. It could be exciting. I'm taking some of my core skills with me, but what is it that I need to do for my teams right now? That's going to really help them see why we're doing this and why maybe the craziness, the pace, everything of why it's worth it to the person to stay and do that.

35:07That pause is like a reflection so they can embody the ownership of what they need to do to get that plan executed. And I feel like that's when you hydrate, maybe stretch out because M &A is such a sprint. So anytime you can pause and just remember that, especially as leaders that have been along the process the whole time, that there's people coming into this process that are just finding out. And you have to kind of remember how that information gets paced out or communicated so that people understand what it is on the buyer side and the acquired side. It's like, oh, okay, now we have 30 people joining our team.

35:43How do we think about that? It impacts anything from you're having an in-person team meeting, people are traveling, that's budgets, that's rooms, all of those just even operational things to think through that. Give the acquired company and employees a sense that you've been thoughtful. Can you tell me about a deal where the buyer killed the target meeting rhythms? This was where things were moving fast and it was like, okay, we don't need to keep the rhythm of our cadence of meetings or with the team or how we do things or Slack updates or however you get communications that you're doing with people.

36:13and they just docked right into the company. That impacted because employees, like at a survey, they're like, hey, we get no information about the integration because they're docking into the rhythm of the business meeting. They're docking into like, here's what the company's doing versus, hey, here's what the integration's happening. Employees lost their kind of common thread to why they are now at this new company and each other. They got there together and they started to lose that. This company was very virtual. These meetings kind of kept them together. or they lost that. The lesson that just reminded me of is to find out what those rituals and rhythms are and then what is helpful to keep alive as a bridge to the future.

36:52Some of them may change, but if you have a monthly meetup now that people do things and maybe you have a silly hat that somebody wears and they talk about themselves, keep some of those things so that people still see the personal side. But then it's another way to give people updates about the integration. And then they can dock into these other meetings of like, hey, I know we're integrating and you're going to have five new meetings on your calendar, a company all hands, a team all hands, this all hands and these trainings. But at least they can give them that information versus it's not a new hire just going into that.

37:23They're coming with their own culture. There's oftentimes you want to maintain some of that. That's the goodness that got them there. So that's why it's just that continuity that leaders can really kind of leverage and it's important to keep. That's a good point. A little heartbeat of communications is what does it look like for that company? It sounds like you woke up and you're like, wait a minute, I was part of this team and now I'm doing all these other meetings, but what's happening? And do other people feel like they're a little lost or they don't understand all the acronyms or did I get that meeting?

37:53Am I supposed to be at that one? It's just some of the basic stuff. It's all being new, but you still have to deliver your current work too. So that's why it's just helpful to kind of keep some of that. Yeah, I got some extra bonus questions for you, Kim. So how do you build trust during diligence without slowing the deal down? You treat the founder CEO relationship as infrastructure, not just a nice to have. If you invest early in it, it lets you move faster or later without losing people. Without that relationship, as we've talked about earlier, you run a process at them and the process ends up moving slower than trust does.

38:27So you at least get the relationship where you can start framing and getting those hard conversations and questions we talked about earlier. It's very comfortable having that discussion and getting it flushed out. Yeah. People have to bring diligence to life. And if you don't have that trust, they might not actually tell you the real story behind some of the questions and diligence, especially on the talent side of things. Does this mean just flying in person, spending more time with those executives, whining and dining them, picking them out? That's one way. And I love in person. I haven't been able to do that lately, but you can do that in Zoom.

38:57You can do that in just conversations or phone calls or texts or things like that, that you just have to build that. Because I think with diligence going fast, you have to be able to get an answer and move forward with things pretty quickly. So that's why the investment pays off of, hey, if they didn't trust me that I could just text them a quick question and get an answer, then I'm having to set up a meeting and get time and go through all that. So it just takes more time. You have really good points in this conversation. Here's just getting alignment and then here's the actual enablement. I feel like so much of this comes down to is a lot of deviled in details or just getting to that level of detail.

39:34And I'm wondering if that's like fundamentally, how do you push yourself where you're not trying to slow down the deal, but you are getting more of those meetings and just getting into more of those details? Yeah, because the details are important. If they're just looking at keeping it high level or I'm just going to put my best base forward, eventually you find out what's behind the DD after close. And I'd much rather know and have a mitigation plan than have people be surprised later. It's a part of building trust too. Be proactive into details. Yeah, because stuff happens. Nothing's perfect.

40:04So businesses are doing the best they can and moving fast too. So there may just be some things of, ooh, we're not paying people the right way. Let's fix that. All of those things are possible. It's just a matter of you have to know and then you have to be able to act quickly on it. What do you do when there's like true gaps in the plan? And you might have better examples, but I'm even thinking of one where I'm working on where I don't know, there's some TBD to figure out. a lot of the times you're just limited on information, especially if there's some competitive nature to it. I guess, how do you talk to employees when the plan really isn't there?

40:34I would want to know what the gaps are, but sometimes you have to just move forward with the best information you have. And for me, I'm sometimes just noting down punches or, hey, that doesn't quite make sense. We're going to have to revisit that later. But the key priority items for close in day one, the must-haves are X, Y, and Z. So sometimes I just go back to the must-haves and note these to be evaluated later. And I think that's hard if you're on the buyer side. I think it's hard if you're a seller. That's just the part of the game of, and the trust of if somebody raises like, hey, we have a few things we're going to have to work through.

41:09I'd rather have that than think different of their leadership later when they didn't tell me that. And we're like, there's a lawsuit or there's this that you have to actually deal with. How does has and has not show up inside the buyer after close? It can show up in many ways. And you could have stuff that was written in the deal that as you're buying a company, you committed to keeping specific things that aren't part of the acquiring company that can go like one example is headcount. If there was an agreement in the deal that you would be able to hire for specific things, but then you come into a company that may be restructuring, looking at headcount differently, and that team they've actually integrated into doesn't have headcount, but they're still hiring, that can definitely feel like haves and have-nots.

41:54And that can be on even if the company you're buying has food at their headquarters and you don't type of thing. It can be basic to kind of business processes, too. And this is where leaders and having intentional thought on both sides of, hey, this is an issue or somebody raised it. How are we going to approach it together? So it shows the overall goals for all versus they told me that and I get to keep that as part of my deal. That really then shows up as the haves and has nots and causes a lot of challenges with teams to integrate. That's where leaders play a huge role. Yeah, the arguments and fights happen.

42:29AI is eating the process side of M &A. Where does a human touch still win? And I love that AI is eating the process side of M &A because I love that it can help analyze diligent, create plans, support work stream tracking. But to me, it can't build the relationships that we've been talking about or trust that gets a target leader to actually believe in the company or what you're telling them. There's judgment calls and ambiguity. Like you're saying there's gaps and it takes a person to have our human touch, to have that ability to make those judgment. Who keeps what? What changes? How to read the room?

43:04I don't think AI is quite there yet, but getting better. I just think some things require relationship context versus data. Do you think AI would help you like have less time on the process side and actually have more time to focus on the human side? Do we get more time to process? AI has been great of helping to kind of keep things like the thing to do some automation, like even an offer letters. But I think deals are going faster. So I don't know if I would say that it gives more time to do that, but it takes a lot off the plate or gives you insight. I use AI too. Like these are some of the things I'm seeing with leaders as a brainstorming or coach just to think through some ideas of what might be happening and approaches.

43:45And that way, it's nice to have a resource even for me to think about it. That's where I want your best advice because you've done tons of your role, specifically focused on the HR side of these transactions, small deals, mega huge deals. How do you evaluate the target for a talent? Just not look at the business, the numbers. It's just really looking for talent because that's one that always gets overlooked. There's so much that goes into it. The nice thing about doing it for a while is you have some shortcuts on that judgment. But I mean, I look past the org charts for informal influence too.

44:17Who are the people that people actually turn to? If you're asking questions and nobody can get an answer because the tent's really small, you're like, okay, there's somebody in that organization. That's the one that gets stuff done. And really that culture connection. So those are another thing that I look at of what are we really trying to achieve? And some of the roles that we're providing high retention on might be the leadership team that got you there. But it's not really that critical role that the one person that knows how this technology works and can integrate that maybe deeper down into org.

44:48So that's why for me, it's like just a conversation of questions and constantly talking to even the internal IMO functional leaders, like what's happening. And as you're hearing like pieces of conversation, just putting that puzzle together. It's not perfect. It's always imperfect at the beginning. I think there's things you can put in place to just have that touch point. Going back to the best deal and my favorite deal, there was like a org overview type of meeting every three months that it wasn't part of the IMO it was leaders and about how's the talent in your organization have we set it up in the right spot have we not are there people that probably need promotion as we did mapping did we get some wrong trying to kind of go through it that way and it was just a nice way that little org council was a different separate way to kind of just focus in on that I highly advise those because it just gives you a check-in of like, where are we now?

45:40Is the deal thesis and deal value drivers still the same? Or do we need to morph them? And did the talent change enough to actually do that? Who would sit in on that meeting? Is that just eSuite or? You know, it ended up being, I had set it up and then the HR person that supported that team, the target leaders that, and then the business leaders. And then there was just some set questions that we had as a framework. And then they just ran with it. Probably one of my favorite meetings because it was a way for me to stay involved in the deal because in my role being dedicated, I roll off and they go into the normal cadence of business.

46:13But it's nice to have the deal context and then seeing where it's going so you can think through those. Oh, that's why we started it there. But does that still make sense? Yeah. It's like you're doing this org chart review, but then you're also the question of who's the most important person here. And then... And what are the trade-offs? We now have headcount constraints. We have three we can hire. We can go do this? Is that still the goals that we need to do? Or if we hired this, we can do that. So it just became a great kind of lower key conversation versus somebody giving a business review or an IMO update.

46:45So that was just one thing that I love and is super successful if you can create it and have the time to kind of keep it going. Well, we're going to turn it into an artifact and throw in the Violet M &A framework. What's the craziest thing you've seen in M &A? Oh, isn't M &A always crazy? And that's why we keep coming back to get these stories. One of them, it always goes back to me to thinking about what's important to people, the big and the small things. But one thing that I thought was just silly or crazy was bought a company. They had a kitchen that was fully stocked or snack rooms that were fully stocked.

47:18And we took away the butterstotch lifesavers, thinking there's other candy that came into the company's stuff that here's the normal order. There was an uprising. and in place from committees. They spent the satisfaction surveys, the scores went down, all for butterscotch lifesavers. It's a candy. And you're like, okay, you could go buy the candy, but it felt like a takeaway. So to me, it was just like, it was a good reminder of the big and little things matter. And if you're going to change something, just tell people, or then be honest with go buy your own candy, or in this case, bring it back.

47:49I didn't know they had butterscotch lifesavers. Maybe not anymore, but they did it this time and they are quite delicious. Maybe that'll be the thing. I'll incentivize you. You should look for him in Denmark and see if you can find him. That's so funny. Kim, thank you so much for having a conversation with me. I learned so much. It was a great topic. I'm going to pay a lot more attention to leadership enablement. You know where to find me too. You can always ask some questions as you're going through it. Hopefully soon. It's going to be fun. I'm excited about some things to come before the year's over.

48:19I know. You always have something like percolating. I'm always curious what's coming. I'm in a little bit of break mode. for most of this year. We did a lot with M &A Science. We hired a couple PhD learning development professionals and built certifications. Now I'm ready for like, let's get back. I've seen all this AI, a lot of products and things emerging. The capability is getting really good. I'm getting ready to get back to work. Yeah, the pause is good. It gives perspective. Definitely stepping out and being able to see everything in the market and talk to people more broadly without a specific agenda.

48:55Telling them something. Yeah, exactly. Telling them something or trying to get some information out of them. You just don't care. And you actually learn a lot more when you're not trying to chase some objective. And you start thinking about things differently too. But it gives you so much more time to reflect. You start thinking, I've seen what other people are doing. I've been doing it this way. And that probably wasn't the best way to do it. It's what you know, because things go so fast. And sometimes you're just like, okay, I know what to do. I just repeat this. And then you're like, wait a minute, where do I need to adjust?

49:26Where do I need to pause? The harder thing with AI too is just confidentiality where people are comfortable using it in the deals versus not and what you can, what you can't. So it's just fascinating where it's going. Or we talked about this too, maybe you buy an AI company, the technology might be out of date by the time 30 days into close. So it's like you're buying talent with some tech. 100%. That's a big, a lot of recent podcasts. We've talked a lot about that. It's so much more about talent now. And if we're just putting that into the deal a lot more than they used to. Yeah. And about how do you get to know that talent in two to four weeks?

50:05You're trusting the leaders to tell you what they're good at. And hopefully they know. I try to use AI to do it. I haven't analyzed Slack. I'll sit there and tell it to go through all the Slack messages and give me just some observations and assessment. And it starts looking through it, those response time and their work behavior and notice some patterns that, hey, this person always has a summary of their meetings. And then this is a really good practice. Like everybody should be doing this across the company.

50:32Kim Jones:Interesting. Whereas some they don't. And it's like, you can just tell us all the stuff's in their head. And then it flagged me as like one of the worst employees. It's like, you have the worst response time. So many people ask you this six times and you still don't get back to them. and it's just i was like that's interesting and sometimes it's like people get too quick to respond to and like you said without pausing to get the right answer or a better answer than just an answer it fights with you to use it as an assessment tool though it does because it's like you don't because people work differently they might be doing most of their work in a totally different product and some people are just like good at pretending to be busy all the time and post a bunch of stuff so it does you said this is slack as you probably know i come from a team shop.

51:19Oh, yeah, that's what I did. We have our Slack connected to Claude and just ran a prompt and it uses a lot of credits and it'll go through all the messages. There's definitely other things that could be more comprehensive. This is just me testing it internally here. That could be a whole view of... I just don't know if a target company would want to be open to submitting that. But it would be interesting if you had two execs that really... Like we're trying to objectively do what's best. And could they do it as part of a DD question? Put it in a data room results? And do employees have to know about it?

51:54That's such a good question. I feel we need to get a lawyer on this. And then we can... Well, I'm just curious. Could you ask the target company to run this analysis and see their practices that way? They put it in a data room. And if they do that and it's not been announced, can their employees see that they're getting this? I don't know. It's interesting. We're going to get in. Hey, Kim, thanks so much for the time. You helped me become a better M &A scientist. If you're still listening to this podcast, my fellow M &A scientists, I love to hear from you. Let me know what you think about this interview.

52:25Connect with me on LinkedIn. I got my privacy stuff down. Just mention the podcast. I get so much spam, so put a little note about the podcast. Be happy to connect with you. Love to get feedback, any topic ideas of things we haven't covered. Until next time, here's to the deal.

52:51Thank 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.

53:36Again, that's mascience.com. Here's to the deal. Thank you.