episode 

Assessing Value Realization

Michael DeVita

Kison interviews Mike DeVita, Business Value Advisor at Salesforce, about how to assess value realization, what is it, how it works, the steps, and the common challenges. Mike has an impressive career history, previously serving as Salesforce's Success Strategy Lead and prior to that as Director of M&A Integration at Walgreens.

Jeff Desroches
VP of Corporate Development at Atlas Copco
Ivan Golubic
Former VP Corporate Development at Goodyear
Erik Levy
Group Head Corp Dev and M&A at DMGT PLC
Kison Patel
CEO at DealRoom

Assessing Value Realization

23 Aug
with 
Michael DeVita
Or Listen On:

Assessing Value Realization

Assessing Value Realization

Integration is crucial to realizing deal value. In this interview with Michael DeVita, Success Strategy Lead at Salesforce, we talked about integration best practices, the importance of having dedicated resources, and why you should measure integration success. Here are some of the highlights:

"Overlooking the need for organizational commitment is the single biggest mistake that I've seen made. It's also why most deals fail to deliver the value they seek." - Michael DeVita

Best Practices on Integration

Aside from involving integration as early as possible, it is crucial to involve the right people in the process. According to Michael, one of the reasons why deals often fail is that we tend to limit the expertise involved in a deal for confidentiality reasons. We need to ensure that we're not tied to a number but tied to necessary expertise instead.

Measuring Success

You need to document and establish measurements of success. If you are genuinely integrating an acquired business into your system, it's going to be hard to determine its impact. Everyone needs to agree on what successful integration looks like, and it needs to be as simple as possible.

Improving Integration

Michaels strongly believes that if you want to keep executing M&A and integration at a high level, you need to have dedicated M&A resources. Not only can those resources save you money in the long run, but you will also receive tribal knowledge on past deals. Dedicated M&A people will get to know your business very well, compared to outside services, where you can have different people all the time.

special guests

Michael DeVita
Success Strategy Lead at Salesforce

special guests

Michael DeVita
Success Strategy Lead at Salesforce

Hosted by

Kison Patel
episode 

Episode Transcript

Intro

I'm your host, Kison Patel, CEO, and Founder of M&A Science and Dealroom. Joining me today is Mike DeVita. Mike is a Business Value Advisor at Salesforce, M&A Transformation Executive at Salesforce, and he was previously Director of M&A Integration at Walgreens. 

Today, we're going to talk about assessing value realization, what it is, how it works, the steps, and common challenges.

Mike, if you can kick things off with a brief introduction to your M&A background?

My name is Mike DeVita. I've got a couple of decades of background in M&A, working across the deal continuum from LOI signings, all the way through full-blown integration. 

Integration is kind of my sweet spot. I've done this across a myriad of industries. Kison mentioned healthcare in my work at Walgreens, in technology with Salesforce. 

One of the roles I've held here with my current employer and a myriad of other companies, both as an employee and a consultant across consumer goods, manufacturing, distribution, etc. 

I think that experience across the deal continuum, it's really helpful when it comes to assessing how to ultimately arrive at dire since as most folks know most M&A deals and depending on the survey between 7 and 8% fail to achieve that value. 

Before you were at Salesforce, you used to be an M&A integration at Walgreens. What were your biggest lessons learned over there? 

Like most roles, there's always a lot to learn. That role for me was certainly no exception. When I think about the integration hat, which was the hat I wore up until the time I left. 

So the last role I had there, and I've heard this echoed on other podcasts of yours and certainly in the broader M&A community, but integration really needs to start, and folks who are responsible for it need to get involved as early as possible. 

So we have a tendency and with good reason to concern ourselves in the early stages with things that are primal in terms of diligence, valuation, et cetera. 

But we can get into some of the problems if that's neglected can lead to, but I also think the tent really needs to be as wide as necessary in order to make sure a deal is successful.

So we tent in M&A for very good reasons. Confidentiality reasons, et cetera, to often limit the expertise that we have involved at a given point in time to a small group of individuals. 

We need to make sure that we're not tied to a number, but tied to necessary expertise and build the tent and who's involved in it. So It's one of those things that I felt is one of the reasons that deals often fail. 

And then third thing again, also it can get into this is to let the deal model guide your decision, not the decision guide your model.

And this is probably more relevant in the valuation phase, but I've seen it happen a number of times where someone involved in the decision-making process just has to have an acquisition.

And so folks make even things that are supposedly as rigorous as a deal model, ending up being a self-fulfilling prophecy, where things are catered to make a deal appear a certain way. 

If you don't know what your walking point is and it seems fundamental, but as many of us who practice in it know, in many cases, egos are involved for many other reasons.

Folks who are very capable of understanding the model don't like what the outcome says it does. And so they sometimes don't follow their better judgment and let other things get in the way of making the deal. 

The other thing I'd say in terms of that planning without harping on it too much, it's really more than just having an integration plan, of course, that's important. 

But making sure that the plan is adequately represented in the deal model, because in many cases that affects that go, no go decision. If there are material impacts that are required based upon your ambition. 

And if ambition is to not integrate something and it's standalone, maybe you have a portfolio-style approach to get a deal, whatever those objectives are, then you probably don't need to worry about that much.

But to the extent, it's really part of a strategy to leverage current assets in the portfolio of current businesses and integrate them into those. 

Then if that is adequately represented, not only in the model, not just planning a task, of course, it's important, but representing in the model, then maybe you overpay or do a deal that you otherwise wouldn't. 

So there's gotta be a connection between the two. Between essentially how you're planning and then validating your model so that you have the right checkpoints in place. I guess it ties back to that also knowing when you need to walk away from the deal?

And let's be realistic about it. Material items related to integration need to be accounted for in that deal model explicitly. 

There are always tons of things that maybe folks who are involved in a certain part of the business go forward think are important, but that's just simply because of the scope of their role.

So it's not every dollar and cent, but it's the big dollars that would otherwise impact that decision that needs to be explicitly accounted for and often aren't, simply because to that other point, maybe the tent doesn't have everyone who's necessary in it. 

We go through the deal and have a lot of assumptions to build out the model. Where do you see the people that often aren't in the tent, that should be in the tent, that would contribute to not only better planning, but validating that model earlier?

I'll categorize it generically to make it more applicable. It's often not the folks who own, let's say the P&L of an area or areas into which the acquired business or businesses will be integrated. 

It's often the folks that own, operate those businesses. So maybe that level, just below that exact title, and the exact numbers will vary based upon the composition, the org structure, the acquirer. 

But like I said before, the nature of the business and how much integration really want to take place, but it's what I'll call generically an operator persona. 

So maybe I don't own the whole P&L and hopefully, those folks at that P&L ownership level for recipient businesses of the acquired assets are involved.

But they may not be the chief operators within their critical function. That operator persona at a senior level are really the folks you want to make sure to get involved. 

So really key operational folks that essentially are going to be managing the actual integration work. 

Absolutely. And the day-to-day, so think about the folks who own those functions, operations, the way things are currently organized. Again, it takes some forethought too. 

Because okay, we're going to bring this acquired business in there. Are things going to operate the same? Is it simply a matter of assimilating to the current operations business processes that we have with our existing businesses?

If it is, those people should be pretty easy to identify. That's something different and you're really revamping how you're doing things, the individuals may change. 

So it's essentially making sure a really good understanding of the integration ambitions, that integration strategy is met. And those folks need to make sure the right people are in the room when it comes to diligence.

What about when you start creating those checkpoints about backing out of the deal or changing directions? What goes into that? How do you actually solidify that? 

Let’s not be pollyannaish about it. It's not easy. The timing, meaning upfront we've got to consider what walking away looks like? 

Think of it the opposite way. What does a deal require? Make sure there's agreement upon that before we get into any of the other specifics.

And hopefully, when you're signing a letter of intent, you have that in mind and it's hopefully discussed and then explicitly documented, maybe for a small group of folks, what that looks like? 

Because you do get into that fever, people are working hard. It would be good to have and every person in M&A knows there's always a deal at the right price.

It's very rare that you say this is a future asset. Now, if you get in there and you have quality earnings issues or other issues like that, you're dealing with a situation where you probably want to walk away regardless of what a model tells us. 

But let's say there is that integrity, it really comes down to making sure you've got agreed-upon guidelines for what we'll do a deal at and what we won't and then can stick to that.

So it's easier to stick to it when it's already documented. So you're not overtaken by the emotion of it. And at the end of the day, it comes down to integrity. 

If you're a fiduciary, I come from a finance background. So typically you're essentially the bad guy, depending on how you want to look at it, but the person to say, Hey look, and that's a radically different assumption here.

I don't see us realizing enough of the total deal value created versus maybe the seller to make this thing worth our while. 

So by thinking about this stuff early on about where those points are, that you're not going to sacrifice and almost basically thinking about whether things are going to go wrong ahead of time to have the understanding and clarity in terms of what are going to be. 

It's not even all the things. It's nice to do that the first time that's accurately forecasted in every way, shape, or form, or the next time will probably be the first. 

It's more about how that translates into numbers. So all the circumstances, those foreseen and unforeseen end up with us here rather than a higher number, then it can't be done.

That makes sense. That gives you your cutoff point. 

And that's objective, so even though there's some circumstances you anticipated and some you didn't. 

And some have a financial impact that you either under or over-estimated, it all comes out in the wash because otherwise what can often happen is you then start to tweak the synergy.

I can get more out of that than this, which puts so much pressure on the back of integration. If you have a small tent, you have to keep going back to that. 

And if you're just moving on to the next deal, you're not as accountable. You're not there the next couple of years, presenting to the board on the progress. You are in and out, and you might not mind putting more of the risk on the back end.

When you have a seller, that's the one that wants to run a process in confidentiality. How do you deal with that? 

Run is a kind of nebulous word, it manifests itself in different ways. So it's not impossible. Certainly, if you're aligned, there's uniform integrity throughout all parties and everyone's above board. And however big the tent is there's information sharing.

Do you know each other's stands? That is a really good foundation, even if you don't own as much as you would like, but at the end of the day, you really got to put the financial fiduciary hat on but you're really accountable to those folks. 

So it's a matter of not succumbing to the romance of doing that deal. That's the kind of things you alluded to and described a moment ago and being able to say, Hey, look, we haven't been able to dot our I's and cross our T's.

I won't name any of the deals, but there are some that former employers of mine and others have done that ended up with really bad headlines. 

That can happen when you're perhaps romanced by a certain theoretical competitive advantage or a certain piece of technology that will separate you and you really want to get your hands on that. 

And perhaps hasn't even been fully vetted, so you can ease the kind of stretch the synergistic value. You can justify in the model because it's lesser-known. 

But at the end of the day, you've got to be able to do all those things, a diligence checklist, etcetera, to make sure you're happy with it.

Otherwise, you have to, it's really difficult. You might have pressure from the board of directors, whomever to make sure a deal gets done. 

But if you're not just a service provider, you're going to be the one. But even if you are a service provider, I guess in some situations, you should be accountable for getting into a bad deal. So you really got to think of your fiduciary responsibility first and foremost. 

At the end of the day due diligence needs to get done. 

It's got to be done according to the parameters that don't change it's because there's a shiny object here. And there's an aspect of the shiny object that folks don't want to share.

And they've got a number of other bidders out there. You don't want to lose to the competition. So you can imagine the scenarios that exist every day all the time. 

But you've got to be able to sleep at night, knowing that you either did that diligence in which case you can go ahead and do the deal or not do the diligence. 

In which case, you should feel comfortable walking away and being able to justify that to those, to whom you're accountable.

That sounds like the challenge of today's market. Especially, if you're going through a bank process it's extremely competitive, aggressive, you know, that's a tough one. 

Thankfully, some of those are aggressive with, let me say I won't call it perfect information, but with an open sharing environment where you can make decisions about who's into the tent. 

Make sure you have proper legal coverage, non-disclosure agreements, and the like for those parties who are. So you're at least covered from a legal standpoint and then go ahead and do it. 

It's competitive today even if you had those conditions, but certainly, if there's not full disclosure for using a legal term in a colloquial way, then I think you've got to question whether the deal is worth doing 

What's the biggest mistake you've seen made during integration? 

This manifests itself in a number of different ways, but insufficient attention paid to creating an organizational commitment to making the deal successful is probably the biggest hurdle.

To paint a picture, you had an excellent diligence process, you're very confident in your model. And then you're extracting certainly at least a fair share of the total deal value generated. 

And I hate to keep going back to this because it's not the only reason, but let's say it's a small group of folks and the people if this is a deal where you're going to integrate it into a larger or existing organization. 

And it's thought of as your deal. So you're the M&A girls or guys. You’re throwing an asset to someone who's running a business saying, Hey, this is a great deal. We got this for X, whatever have at it. 

If those folks haven't been involved, and involvement isn't the only indicator of organizational commitment, but those folks haven't been involved, then there's a better than average chance that they're not going to be committed to it.

And so without that commitment, if you think about it depending on how organizations are organized if you have enterprise folks who have their day jobs. 

And then they're also called upon to integrate an existing business, which happens to some degree and just about any deal, even if you have some dedicated resources. 

But if they're not really going whole on this really making the company better and identifying their individual role, and the relationship between that and this better strategic outcome for the company. 

Then burning the midnight oil to make this deal work for someone else in M&A that threw it at me when I've already got my play for the day-to-day now, I don't know if I'm going there. 

Whereas, if upfront we had that kind of commitment that we're all going to row in the same direction to make this happen and it almost always takes extra bandwidth to do that. Then you got a way better chance.

So it's that organizational commitment or the lack thereof overlooking the need for organizational commitment is the single, biggest mistake that I've seen made and why most deals fail to deliver the value they seek. 

This is a good one. Stakeholder alignment needs to happen early. 

There's a thread through there if we've got a change management plan for analyzing the stakeholder, who's likely to be going whole about this deal? Maybe it's creating a career opportunity for them that they didn't have. 

Who is most likely to be reluctant to embrace the deal? Maybe because there's something about that deal that might be adopted or that business that diminishes their current role. 

Whatever that is, you really need to analyze that and not just at the very top, but maybe a level below to understand that and really do a job. I always say that culture eats strategy for breakfast, it's really part of the parcel to make sure the culture is there. 

So it's not only about the acquirers who have to make sure they buy into the deal, but it's everyone who's been acquired to the extent you're maintaining and the profile changes with each deal. 

But how many of those folks you're counting on as typical actors in the go-forward company so that they stay on, et cetera, et cetera. How are you accounting for cultural differences? 

You know what the end state is in terms of culture. So all those things play a role in determining the level of organizational commitment. 

It sounds like there's this M&A preparation that could never happen too early, almost this sort of identifying or getting stakeholders involved can even happen before you identify the target company in a way.

And I'll admit, culture has to happen all the way down and you can't have everybody in the tent. That's not really efficient, not realistic, but at least on those levels, you can account for everyone in the planning. 

So you probably don't want to, or you won't have everyone involved in the actual deal process. But hopefully, those who are involved are thinking of the implications. 

At least the material implications which tend to happen higher up in the org chart that you need to account for that'll have a big impact on whether or not success is achieved. 

So at least have them thought about and planning. Even if it's not realistic to have them all included in the detailed deal-making, that makes sense.

What other problems do we come across in integration? 

One of the things my pet peeves about is a lack of an agreed-upon measure of success. So in most larger transformational deals, you'll have, if they're well-run you'll have business cases, maybe by business process or by function. 

Where you're going to achieve synergies, cost synergies, role synergies? You name it, the cost associated with integration, et cetera, et cetera.

But if we don't agree upon how we're going to measure success, and it's not just the profitability or some established financial statement measure. 

It's literally about how you build that up. So inevitably, if you are truly integrating something that's acquired, then determining its impact in isolation is inherently difficult. 

I'm going to merge all my systems. I'm going to merge all my business processes. Then how do I determine the value of what I acquired when my goal is in fact, to just make it part of one unified organization? 

So in other words, your overarching goal works against measuring in isolation. So that's just a known M&A dilemma. 

But what you can do is to establish what those measures are going to be, knowing that they're never going to be perfect, knowing that you can always shoot holes in them. 

But just say, Hey, look, we're going to make them as simple as possible. Make them directionally representative, it will never gonna be perfect, but direction representative, and then communicate it so everybody's on the same page. 

Yeah. This measure isn't perfect yet. It doesn't have this or that. But you know what it is, you know how to calculate it. And we agreed that’s how we're going to measure ourselves. 

The devil's in the details of that one, so it's not like people don't say, Hey, we need to have an ROI of X. Everybody does that. So it's not the highest level of measure. 

It's really, how are you building that up as like a business case that, well, that's where the devil is in the details. And so that's where if you don't establish that upfront and it's everybody, men are wrong for themselves. 

You know, how we can all manipulate numbers to get to where we want to go.

Do you have some examples of what these success measures are? Because I feel like when I talk to integration folks, there's a lot around milestones that are set up, but not so much success metrics. 

I tend to think of things in financial terms. So in many cases, it's dollars and cents, but of course, those are the lagging indicators.

Of course, there are some leading that are probably more qualitative around organizational, org design, org structure. 

But when you think about it, those things that are related to cost and in some cases even growth, to have a baseline for what the acquired businesses look like? And in many cases, not changing that.

So in other words, agreeing on a baseline book of business, agreeing on a baseline level of costs, and then assigning some factor for considering the impact of the overall trend in costs or growth made by that acquired piece of business. 

So if that's on the growth's side, you've got a book of business X. The overall business post-close grows by Y percentage. And you're going to assign 0.2 of Y of that growth rate to this particular book of business as a way to determine what the growth was for them. 

Or if there's a factor of let's say a certain percentage assigned to that unique homogenous book of new business, and then maybe there's some synergy there on the growth's side. 

A smaller percentage of the overall growth of the non acquired girls will also be attributed to itself. It's much easier showing on paper because it doesn't sound as simple when I talk about it. 

But it's really about two or three calculations and you're repeating that reporting period after reporting period to really measure the growth. 

That's a good example. And I can see that fluctuates quite a bit depending on the deal and the strategy itself because you have a different purpose of doing the deal. Then obviously those metrics are going to be completely shifted. 

Exactly right. So this is what we'll say, a generic ambition that we're going to build. We're going to integrate Target into this existing business and it's going to flourish even more than it had before because it can leverage whatever we currently have.

And that can also have an ancillary benefit to that existing business. And just coming up with a simple mathematical formula for both and keeping that static. 

How'd you see the integration approach evolve over the years? What are some things you've done to improve? 

Well, it's logical where I've seen some of the problems, but creating dedicated resources is in a large organization, it's one of the best ways to be able to help ensure. 

It doesn't guarantee anything, but help ensure you're going to realize that deal value and this of course is where deal flow justifies it. 

So if you've got folks who are dedicated across the deal continuum from diligence to integration, they get to know your business.

And although you can always find wonderful service providers and you can use those service providers deal after deal, you may not always have the same folks. 

Even if you're using the same firm, what you have here with dedicated resources is that you get tribal knowledge of not only doing a deal but being around long-term for integration. 

You need to probably resource it at a level that is below what needs are in peak levels to be able to maintain those folks. So you're not constantly adjusting your resources. 

But if you have it somewhere below the peak, maybe a midpoint below the peak, that way you can always maintain those resources as deal flow cyclically rises, then you can always supplement it with outside service providers.

And then as deal flow subsides, you can still maintain a healthy pipe for those folks who are still around. But what it enables you to do is to not sacrifice your current business. 

There's a real pattern in M&A when folks who are necessary to make an acquisition really survive, you're typically gonna pull some good people to make that happen. 

When you do that, typically, what happens is you've got the current book of business suffering, or you get burnout, or both. 

By doing a number of deals and having expertise in some part of the deal continuum, you're going to build knowledge about your business, about how deals work inside your business and you're going to have continuity from deal to deal. 

So not only does that allow the fundamentals of the deal process to work well, but it also allows and gives you the chance in integration but happens much better and much more successfully than it otherwise would.

And the bottom line is too, it's not the top consideration, but it can end up saving you money in terms of your integration or diligence resources that you might otherwise have to spend if you're constantly going to service providers. 

I have to prep it all by saying you need to have some level of deal flow. Like if you're doing deals in a very one-off fashion, then that approach won't be for you. There's gotta be some level there that justifies making those investments. 

Wait, and then probably it's a real core part of the strategy.  

That's right. We've got inorganic growth, it's a real cornerstone of it's going to give us X percent of our total growth. And we think our total growth is going to be two or three X, whatever those numbers happen to be. And therefore it's worth the investment. 

What does it look like as you start building out those dedicated resources? Do you keep taking more people in the group? Do you start looking for operational expertise within each function and having them as a dedicated resource? What does that evolution curve look like?

I think you hit upon most of there is a little bit of that. So you'll have a team that would be involved in traditional M&A functions. It's certainly the front end of the deal continuum before you get to integration. 

As I said, the resources should be dedicated to that. If you've got, hopefully again, you're doing strategic planning for your larger organization that was somewhat sophisticated.

You may be doing an LRP, long-range plan, two or three years long. You say, Hey, this is what the organic growth profile looks like.

We're going to hire against 40% of that deal flow, knowing that I'd rather err on the side of having a little bit too few people than risk having to lose people. I can always supplement my needs with a service provider.

So you've got that in a core team. And then as you mentioned, it doesn't have to be every function, but think about those that have the largest impact. 

I'm sure most folks can quickly come up with and whether it's function or business process, I should say, I feel like function is a somewhat dated way to think about things as opposed to the business process.

However the org is designed, however, your enterprise is designed to emulate that, but areas that are obvious would be in terms of your legal representation, some in-house counsel that's skilled in deal-making obviously in human resources as well. 

There are plenty of issues with respect to acquired employees, etc. And they are often a mistake, too many organizations put it all on them, but they certainly are key players in cultural adaptation. 

So the whole concept that I mentioned before of having an organizational commitment, HR plays a key role there you've obviously want to have folks in various other operations.

So if you're a manufacturer, if you're a distributor, you want a supply chain. If you're a manufacturer, you probably want those areas, at least at a high level represented. 

Because every function has to be in there, do you need an M&A expert in the treasury? I don't want to pick on organizations.

You probably can have someone who may work on all your deals but the bandwidth needed is small enough to where it can just be a percentage of their current role rather than something that they need to be dedicated. 

And that's still a way to build organizational muscle around M&A. 

In the tech context, if you don't have product development dedication there, you probably should, because that's going to be a key part of diligence integration, where you see a given platform developing in the future, et cetera. 

Since being on Salesforce, you’ve started a new chapter of your career. What does your current role entail?

So in my current role, I'm a business value advisor. So essentially I help our customers identify and realize the value they receive from their investment in our platform. 

Can you give me maybe an example of what that looks like?

At the end of the day, folks who will make investments and like many technology investments. There's a whole lot of functionality that can be deployed.

Salesforce is no different. And so customers will often want to quantify the impact that a given investment has on the value that's created at large. 

So we tend to think about things in terms of the enterprise value that's created, not died related to a given product or solution that we might deliver.

So we tend to, if you think about this from a strategic standpoint, just like M&A, I always say it's probably the most explicit manifestation of corporate strategy, simply because particularly for public companies, you're telling the street how great this deal is. 

And you almost always, if it's of a certain size at the C-suite et cetera, et cetera. So that's just one leg of a potential strategy for an enterprise. You could have plenty of organic growth strategies, other markets you'd like to tap, etc.

So what we'd like to do is get an understanding of what your strategic goals are? And then particularly at Salesforce, which has grown over the years, there's such a wealth of functionality in the platform that typically, you can align to some of the performance indicators. 

So in many cases, these are the leading indicators that have a relationship to ultimately whether or not you achieve those goals. 

So we help our customers identify the relationship between their overall goals and some indicators that we can help drive that have an impact on whether or not they achieve those goals.

So you're making sure there's some ROI there? 

Absolutely. No doubt about it. And in some cases, that's a real explicit exercise with the customer. In other cases, that is both a qualitative, quantitative, and anecdotal exercise. 

It really depends on where the customer's at in terms of their ability to measure some of these indicators and their ability to act upon what those indicators tell them in order to have an impact on a strategic outcome.

And then even M&A can fall into that? 

Absolutely. There's no doubt about it. So when I talk to a customer about what your strategic values are or strategic objectives are? 

You will probably have both organic and inorganic goals among them, even for your growth. And you've probably got maybe other organizational goals that are not as rigorous quantitatively, but M&A certainly can fit into that.

What are the common challenges of assessing value realization?

The biggest challenge is establishing measurement mechanisms with customers. So first, the customer needs to agree upon, what measures are really good indicators of value? 

And if you can establish powerful leading indicators, most folks who deal in these things realize that if you provide yourself with a really powerful tool to affect the outcome. 

So if you see an indicator trending in a way that's not favorable, you have some time before the rubber has met the road in order to make sure that you can course-correct to try to achieve your objective. 

But the only way you can do that is if you're actually measuring it and the more rigorously you're measuring your indicators, the better sometimes these indicators will be at a fairly granular level.

So activity-based level, activity based on employees and so if you don't have ways to measure those, and again, with measured, that's kind of like we mentioned about evaluating deal success. 

It's better to have it well-understood, well-communicated, and something that you can track easily enough as an indicator rather than something that's absolutely perfect.

To the extent customers have those measurement mechanisms in place, they have a much greater chance at not only measuring the value being received but having an impact on the eventual value realized. 

But we see that many customers for various reasons. It's not always a matter of capability in many cases, it's a matter of bandwidth and priority without the measurement mechanisms in place to really provide themselves with the level of confidence that they can sleep.

How are you getting visibility in this data? Are you wiring some VI tools together? 

It really depends on first what those strategic goals are. And then what those indicators might be in many cases in the context of Salesforce and other technology companies, data can be had strictly from the platform itself. 

In other cases, you may have an indirect impact on a customer's goal. In other words, your particular technology may be having an indirect impact on it or maybe other things within the customer's business that have a more direct impact. 

But in any case, you still have an impact and those might be measured outside of the platform. In which case, you need to rely more on the customer. But even if it can be measured Within a given platform, it doesn't mean it is. 

I forget some of the statistics, but even with respect to not enterprise software, but with respect to user software, what percent of functionality do people use? And even common software tools, it's always a minuscule amount. 

Well, the same can be said about enterprises with enterprise software. It's filled in by not only the partner, but the customer themselves to make a commitment, to really leverage that functionality in order to be able to provide those measures. 

And that's part of what we do in business value is to make sure the customer understands the potential, here's what it could look like. 

Because we paint a mosaic prospectively first, and then hopefully that's a good enough selling tool so that the customer will invest the bandwidth, the mind share, into not only selecting the right indicators but mechanisms to measure them. 

Really unique, a lot of variables to map out for every unique organization.

Absolutely. Those who make that commitment really don't have to wonder or take wild guesses as to whether or not they're really getting bang for their buck. 

They've got a really good understanding based upon agreed-upon attribution and the like about what they're getting out of their investment.

Anything else we're missing in terms of key lessons for practitioners tuning in?

I just mentioned it once and it's not the least bit profound and everybody knows it, but it's always still those of in that's that culture does eat strategy for breakfast. 

So creating, particularly if you're talking about an acquired asset that has a different culture, either, maybe you want to adopt that culture in your existing organization or vice versa, or maybe something new, you can't overestimate that.

And since it's a little less easy to objectively measure, It's still a big hurdle that most organizations face, but that's, I guess the only thing that I would reiterate, that's the real nut to crack. 

I feel like we can evoke round table discussion about it because everybody's got such varying views. I'm curious if there's a certain approach here, a way of thinking that you default to?

I always come back to what are the strategic objectives of this deal?

You could have Berkshire Hathaway’s approach, which I don't care if the companies are vastly different, might not even be in a similar part of the portfolio. 

In that case, Hey, whatever's working, I assume it's a worthwhile asset. You're buying it in the first place. Then let it go. If it's full-on, like this is going to be completely absorbed then I think either of those two approaches, you've mentioned can. 

We've got to mention in that latter scenario that you've got that planned out and that it's not taking three or four years, it's the time value of money at the end of the day. 

If I've been delayed, what's crucial enough? I'm never going to make that up in the deal value. I'm never going to make it up. 

I think you should heed large cultural differences and consider whether you should do the deal as you mentioned first, but that it's not that, that second option isn't doable. 

You just need a plan, particularly the timelines around that plan, and need to make sure you hit them.

Otherwise, if it's still five years and you're working to see what that common culture looks like, you've already lost. 

Mike, what's the craziest thing you've seen in M&A? 

So I love this one. Kison, for everyone else's benefit, you may have asked this to everybody, but so he sent me some questions in advance and for whatever my humble opinion is worth. It's a great question. 

Now I don't have the most awesome story. Maybe some things I probably can't share, even over a podcast. But I jotted something down with respect to a particular deal where there were some trying circumstances, not related to the deal itself. 

I think back to some of the things like aliases people would create when we're going to due diligence at certain places and kind of like foe identities on how that used to work in a pre-LinkedIn age. 

And now if you say your name, but give yourself some other title from some other place, and I'm finding you out on LinkedIn in two seconds. 

But the one thing I remembered was going to do a deal in the, not quite near the upper peninsula of Michigan, but Northern Michigan in the middle of the winter.

We'd get in there at nighttime, meaning anytime after like 4:00 PM, it's like a crazy blizzard and the small, I don't know, 20, 30 seater Jet. 

I don't know how this thing lands, this plane, but somehow it gets on the ground in between all the thankful prayers I'm saying, finding out that just not a little bit of snow, there's like this blizzard.

And we've of course the target's a couple of hours away from there. And roads with no street lights, whatever. And then I find out like, I'm the guy who has to drive that thing. So it turned out that the flight was a piece of cake. 

And it's literally white knuckle driving for two hours on a road that isn't that probably about 10 feet of visibility, all trying to get to this place where we find the end up making it there in one piece after nearly sliding off-road into a 20-foot drop.

But anyway, we'd go ahead and get into due diligence. We don't end up buying that darn company anyway, life on the line. 

We didn't end up doing a deal at the end of the day. We actually ended up making another trip there in less in-climate weather. 

But in any case, kudos to the dedication of my colleagues, who first of all, were foolish enough to have me as the driver. But thankfully, they got us there in one piece anyway. 

Ending Credits

Thank you for taking the time to explore the world of M&A with our podcast. Please subscribe for more content conversations with industry leaders. 

If you like our podcast, please support us by leaving a five-star review and sharing it. I enjoy hearing feedback and connecting with our listeners. 

You can reach me by my email, it's kison@dealroom.net. M&A Science is sponsored by Dealroom, a project management solution for mergers and acquisitions. 

Additional educational content is available on Dealroom's blog at dealroom.net/blog. Thank you again for listening to M&A Science. See you next time.

Views 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 is purely educational and is not intended to serve as a basis for any investment or financial decisions.


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