Instead of Kison Patel being the host, in this podcast, it is his thoughts and ideas we are talking about. Kisan Patel is the author of the book called Agile M&A Proven Techniques to Close Deals Faster and Maximize Value.
For the start of this episode, can you please explain to the listeners what exactly is Agile M&A?
Agile M&A is a project management framework that emphasizes responsiveness, collaboration, and continuous improvement
And what made you want to write the book? What drove you?
I worked with companies, whether investment banks or corporate development teams and saw that there was no standardization, as everybody had their own approach to M&A. I had these ideas, learning different project management techniques from our own internal software team, that I thought would be very much applicable to M&A, particularly the way they use their different agile methodologies.
I got very strong validation when I interviewed big companies like Google and figured that they were actually applying these same agile techniques in their M&A process steaming from their engineering culture with great success. This really pushed me to create a framework and drive that into this book so it can be shared and distributed with other corp dev teams.
What do you hope to achieve from this book?
The goal is to really be able to evolve the M&A process so that we can have better results and enable more of a collaborative, people-focused process to deliver better outcomes.
Talking about improvement, there are probably people who would ask you why is there a need for a change? What is your stance on this?
I don’t see things getting better in our market. The climate is changing, companies are becoming more information-based and this requires more overhead to actually manage those projects. We are still seeing a continuing high-fail rate and companies are still missing out when it comes to their initial investment thesis. There are a lot of people in M&A who aren’t actually qualified and there is no strong discipline for managing these transactions, so I think there is a lot of room to bring forth more standardization.
How would you communicate this to an individual organization where they think that they are doing things all right? How would you convince them?
What I usually start with when talking to companies about their process is mapping the process out - understand where the corp dev sits, who they report to, where integration sits, how they communicate with each other.
This makes it easier to identify the key personas and once they are identified, it’s wise to have one-on-one qualitative interviews focused on discovering their pain points and challenges so they are able to prioritize and understand these challenges. Bringing the group together in more of a roundtable format to discuss those challenges is usually very eye-opening.
Don’t you think that perhaps the biggest challenge is actually for organizations to admit they’ve even got the problem with their M&A process?
I agree. We get so fixated on the funding of the process, we want to find the deal, value it, negotiate and sign a letter of intent, but everything past that ends up in the blindside of the mirror and we are not paying attention to the most critical stages. When we do pay attention to these issues, they re usually in the too-late stage.
From your perspective, what makes Agile so different to the way organizations are running M&A at the moment?
When you look at an Agile approach, you’re focused on having a process that’s adaptive, flexible, and responsive, whereas, in the case of a traditional approach, you are putting a lot of effort into planning things upfront and creating a detailed plan. The traditional approach works if you know all the variables, but not as much when there is a lot of uncertainties in terms of what the end state is, which happens in M&A.
Do you think Agile is more about mindset than it is about the process?
It’s definitely focused on mindset. The mindset is what drives and leadership is what is going to enable the practice that follows through with the process.
M&A is a corporate discipline, based on some very tried and tested approaches and that mindset is quite entrenched. How do you propose changing that mindset?
By giving a compelling reason to change and this ties back to taking the time to do the discovery and understanding what the pain points are.
Where would be the compelling reason?
We start off with a deal where there are very few people involved, and as we continue, the process becomes more complex as more information comes in and more people are involved. That is when you can see the real reason for creating a process that can be adaptive and continue to evolve and respond to this growth of information and participants. It’s essential to do this early rather than later when it gets difficult to change things.
When you say adaptive, what do you actually mean?
Being able to change and pick up on how those variables are changing in the process. As you get more information, there are new things to learn, and this constant changes course and how we need to approach things.
So what does adaptive actually look like to an organization?
One agile technique to be used here is a backlog approach where you consolidate your list as much as you can and keep your list in descending order in terms of priority, so there is clear visibility in what the highest priority items are which allows us to move faster and in a shorter cycle.
This list is usually on a drag and drop tool, so it is always easy to adjust priorities, so this helps everyone stay laser-focused on the highest priority items. As the process continues, we are creating our status update meetings, that are short and keeps everybody huddling together. Everyone gives each other updates on thair past, next activities, and potential blocks they are facing, which creates this interactive way of working together because there are more frequent touchpoints.
Instead of having large groups, you are creating smaller, cross-functional teams that are focused on a specific goal and they can work on it independently. Information is distributed by using chat project management tools, so there is a continuous flow of new information that comes in, people can respond to it, which makes changing and realigning teams around new goals much faster.
You mentioned accountability earlier on. Don’t you think that people are going to say that that is just too confronting?
If you can evolve your culture to have a high level of accountability and transparency - that is what Agile is all about. It is about being able to have stand-up and know where everybody’s priorities are and what they are working towards.
It makes you feel a part of a productive team that is making a great deal of progress and everybody knows what their contributions equate to, so I think there isn’t anything to shy away from. It does take a bit of getting accustomed to it, but overall just to have that level of transparency creates a much better team working environment.
It’s very confronting to be following this Agile process and be put on the spot to be made accountable. Do you think that this is the biggest resistance you might get applying this sort of process?
It is. It’s a change, right? It takes some time getting used to it, but if we look at the root causes of problems, 90% of the time these are related to communication and accountability.
We are talking about mindset and we are talking about culture, but ultimately, isn’t this a leadership thing?
It’s definitely a leadership because someone has to introduce it and somebody has to be the driver of making a transformation. Leadership is naturally driven to be able to take ownership of the change, drive it through that approach, making the clarity on why the change needs to happen, making sure things get facilitated and what needs to be done is done.
Are there circumstances and deals out there when this Agile M&A approach would not work?
A project where you can clearly define the steps that need to be done and there is a very minimal chance of variances happening probably isn’t ideal for Agile, because Agile is designed to be responsive around changes.
Agile makes sense when there are variables in the steps, such as when pursuing M&A, when we have very little information upfront. I think leading with Agile has a greater benefit because even if a project withing Agile is better fitted for a traditional approach, it doesn’t do much harm to have that Agile approach from the beginning.
With Agile, you are not going to lose much, but you have everything to gain, so give it a go - is that your message?
The reality is, we can’t template the whole M&A process and there is a lot of variables that are unique to each deal, but it is a good starting point to know what are some general things to look for. The idea was encouraging companies to create a game plan and utilizing the framework Agile M&A as a starting point.
Within that game plan are these individual plays which are techniques that represent a way to create efficiency or overcome a specific challenge and it is designed to be very flexible because you can tailor a series or variety of plays specific to the company and your needs, whether you are a small team working on small deals or a larger company.
Are you anti playbook?
I am not anti playbook. I think we get overly fixated on using playbook continuously throughout the process. It is a good starting point, but the reality is that there is more value that can be achieved from a game plan that helps align your teams and creates a collaborative environment, which is important when there is a lot of variables in the deal.
In the end, what are your dreams and hopes around the whole notion of Agile in M&A a year or two from now?
I think the industry has a ton of opportunities to improve and become more efficient. We are in 2020 now, and there are still companies that are using Excel as the driver of their process. The goal is to try to motivate people to try new techniques, keep trying new things, and develop that mindset of continuously improving their process.
Would you agree with me that M&A is a pretty conservative industry?
It’s very conservative and I think that is why we are behind.
When we talk about Agile M&A, are we talking about the entire process or just one particular part?
It impacts the entire process and it is best introduced early in the process during those kick-off meetings. Even if it’s just applying one technique or multiple techniques, the earlier you introduce it the better, as it ensures continuity between different stages, especially when you move from diligence to integration.
Why would an organization want to follow the Agile approach compared to what their corporate development people say they should follow when doing a big deal?
There is a lot at stake when doing a big deal and these are very complex transactions. An Agile approach can help an organisation to avoid the chaos that ends up happening traditionally on these deals. A new approach can help the process become much smoother, resulting in more value creation and achieving those original goals.
Are there any final messages you have for the listeners?
If you are a company and you are dealing with any particular challenges in your process, isolate them, get others involved, really understand who are the key people in the process, and get their voice out there, illuminate what the problems and challenges are.
If you get a chance, look into the content we created and some of the plays to see if they could add value to help you overcome those challenges. Keep your team collaborating and focused on delivering value throughout your transaction.
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. M&A Science is sponsored by DealRoom, a project management solution for mergers and acquisitions. Thank you again and see you next time!