Today, I'm here with Mike Palumbo, director of corporate development at Halo Branded Solutions.
Mike is a corporate development and M&A professional with more than nine years of exposure to finance operations, and executive leadership departments of middle-market companies.
Today, our discussion is about evolving your corporate development function.
To kick things off, can you tell me about Halo and your role there?
Halo Branded Solutions are based out of Illinois, a couple of hours outside of Chicago. We have offices all over the United States, promotional products, and distributors.
We're the second-largest player in the market. About a $24 billion industry. There are a lot of small players and mom-and-pop shops that distribute these types of products.
So being number two in market share is a perfect situation for a roll-up strategy or growing through acquisitions.
I work in corporate development, which is basically focused on mergers, acquisitions, strategic partnerships, and things like joint ventures. Although we don't do a lot of the latter.
We do a lot of M&A work that all falls within my purview. It's a new role for us. The company was founded in the mid-20th century and grew pretty well up until 2000 when they restructured and over the last 20 years have just really grown by leaps and bounds.
It's been a great role and a great company.
What was the evolution like since starting at Halo?
We have a really interesting culture in the sense that you're really accountable for your own success or failure. Our management style is very entrepreneurial.
And I don't think any of my colleagues at the C-level, director level, or CEO level whom I report to, really had many experiences dealing with a corporate development person.
I remember coming in and there was no directive.
It was just, "Hey, get comfortable, learn the business, and then I'll be interested in what you, Mr. Palumbo, have to recommend for our process and ways to make us better."
So when we talked about a blank canvas, it really was a blank canvas.
What about the folks that were currently engaged in M&A activity? What were your interactions with them like?
Department heads or C-suite, all had some sort of exposure. I didn't know what was going on but every time I talked to people, they had questions about integration.
When I talked to these people, I thought they were going to ask me about diligence, modeling, and data rooms.
The part they're dealing with is the onboarding, integration, and conversion.
These are the business leaders that have to implement all of the things that we've promised during diligence and business and strategic planning.
The executives have set it up and then it comes time to execute.
I remember really being able to read a person or understand what kind of conversation I was going to have in that meeting with the department heads based on their body language.
Some people were very excited to meet me when I mentioned corporate development, and others looked like they wanted to jump out a window.
You can tell this immediately based on their reaction, their body language, and the experience they've had with M&A.
What questions are you asking them when it comes to what they're doing and what challenges they're experiencing?
I was trying to ask all the same questions. First of all, what does your department do? How does billing work?
It goes back to understanding that the business part of it was a learning experience for me.
What's your involvement in an M&A? It was always some sort of integration or onboarding capacity, which in and of itself is indicative of, maybe they should expand the role in diligence.
Could they help out a little bit earlier to alleviate that pain a little bit later on? Or does this person seem really insightful on billing, order entry, a back-office task, or sales?
I wonder if we're leveraging that expertise during the diligence process.
How do you plan your M&A processes?
Being armed with a really good knowledge of the business is the number one foundation.
What is being done right? You have to be very careful not to jettison things that they're doing right and try to replace them. Make an effort to understand why certain processes are working.
Sit down and understand what they do and how they do it.
You get the itch to jump in. You want to get in there and say, "Well, wait a second. Why are you modeling like that? You should be modeling it like this."
Really sit there and walk through one, two, three processes, whatever it takes, and watch how they're doing things. Know what they're doing right and how to preserve that.
And figure out how you can add to that, not replace it. Create enhancements to what they're already doing.
What tangible things have been done to help evolve that function outside of learning the process?
Yeah. Then it becomes, where do you start adding value? Because until the stage, and I think I deliberately wanted to explain it this way is that, you can't add any value until you've really understood what they do in the basics, the basics of the business and the basics of how they do things.
Then you can start offering insight and value. Yeah, it may be a while until you can do that. For me, it was, I had to really slow myself down, not try to act too quickly. You can run into a lot of issues.
They're making bad decisions and then losing friends and then losing credibility. And then you continue to make more bad decisions versus the opposite, which is understand as much as you can so the value that you're bringing is useful.
And you're gaining credibility. You're gaining allies, political allies within the business, and that's a virtuous cycle move its way up.
So how do you add value that it's once you've understood where they're at for us, it was by us I mean myself and one of my close colleagues, Mike Fino, who's our head of integration.
We sat down and we said, listen, we're going to create playbooks.
I'm going to focus on the corporate development playbook, and he's gonna focus on the integration playbook. He'd been there for several years prior to me joining.
Him and his brother owned a business that was purchased by Halo and Mike transitioned into more of an integration role.
So he had a little bit of a runway, but it was putting together a playbook. From there, it's okay.
Outlining the steps that they currently go through, understanding the pains and the things they're doing right, the things that they're doing wrong, then retooling that.
So , you're streamlining and you're trying to alleviate those pains in the back.
I'd like to hear about what's in your playbook and then maybe talk about the alignment of the people, both through the deal process,
I'd say, our playbook on the Corp Dev side, was more of an educational tool for the executives, for the executive team on how we wanted the process to look.
Recall basic information that an investment banker might think is basic information, but to them, it's, it can be very impactful.
So it was starting with what are the pain points? What are the things we're doing right? And then we carved out four key initiatives, like four things that we wanted to do. How do we do that?
The first thing that I turned to and I don't know how, so I saw where we were with our process. I knew there were ways to make it better and to add to it while preserving what they're doing right.
The first thing that I think of is my network. Who do I know from investment banking?
People have implemented this. They know what they're doing, who do I know in my network that can be a resource.
Then I found your book, actually, the Agile M&A, which had some very key points in it. One was that integration has to participate in diligence. Integration and diligence has been one cohesive process, there can't be that wall.
Because that's where you get the break in communication, the people that are doing the diligence aren't communicating with the people that are doing the integration.
So bring those two things together, that was one. And then really work on your tactics when it comes to implementing diligence.
It, for us, it was establishing an internal cadence of meetings with our team and then externally with the seller’s team.
So we're managing, we're putting in a formal process to manage the diligence timeline together and collaboratively and make sure there are no barriers in communication.
We also had a little bit of a focus on, who's making decisions? Who's got the ball? If you're in a position where you've got a lot of people doing diligence, who's consolidating all of that and making a decision, how central versus de-central do you want your decision-making process during diligence to be, right?
Think about it, the diligence process you're going to do, you're going to understand the business, trying to raise any flags findings.
And then bubble up the key findings and determine is this something that we can accept? Solve? push off? like how do we handle these going into closing?
Takes sort of the boots on the ground to consolidate that information, but then when you bubble it up, do you have the right team to look at that to assess these findings and to say, "okay, this one we're okay with it, this one we're not okay with it." Let's find a resolution. How much is this is going to be cost, so on and so forth.
Getting that internal structure in place of having a centralized decision-making unit and a decentralized team to go out and diligence and to really dig into their niche areas of the business. That was one of our other key initiatives. So you focus on those things, those three, four things. And from there, you can take that sort of building intact like tactics, right? Slides or procedures. This is how we're going to start things. This is how we're going to build this thing. This is how we're going to communicate. This is how the team is going to be structured. This is when people are going to start getting involved. The group is going to expand over time from those key initiatives, unfolded a number of good steps and stages that will be implemented.
Those are really good areas and good tips. Was there anything else I may have missed ?
No. Those are two of the main points. Now I will say it's not everything. It's not exhaustive. And these are concepts and these are abstract ideas. Just cause you thought of it, it doesn't mean it’s going to get fixed or it would be implemented or people are going to adopt it.
You'll be aware of that, right? Like you start with the low-hanging fruit. It's going to be a process. It's not going to be a one fell swoop, redesign the whole process. It's going to take time especially.
For me, our diligence team is really, I'd say 10, 12 people and everyone probably wants to look into a couple of things to make sure that they're not inheriting a bomb when we buy a business. You've got a lot of team members and you think about new concepts and introducing things.
You gotta be very sensitive to people's reception of that. Some people will hear it and really internalize it, others will hear it and go back to their old ways , maybe not like it.
So there's one thing to talk about it and to come with ideas, there's another thing to execute.
That's why I think, that's where you come from, we talk about, "Hey, the playbook is just like a bunch of bullets." And it is in that sense. It isn't that sense, that's the gap, right?
It's great, getting a book, cool. If its just going to sit in the shelf and collect dust, you got to execute it and you've got to implement it and you've got to try to adopt, push for adoption. And that is the process.
Let's walk through that because you're approaching two years in this role, building out Corp Dev function from scratch. What were your key challenges along the way?
One of the main ones, it was conviction. It's hard to explain, but it's having conviction in your process and why you should do things a certain way.
Because what you're going to get confronted with, whenever you try to change something, whenever you try to improve a process. That's what we're doing here.
This is a process of a company. There's a little bit of that structural, like who's the team and how are they organized and how do they communicate? It's a little bit structured, but it's mostly the process and the steps that you go through and what.
And when you're trying to implement something like that, change something, the question you're always going to get is the, "well, why not just do it the way we always did it?" "It works."
You will always get that. For me, it become just a habit to anytime I want to suggest a change or an improvement, or an addition, extra work.
Even if you're trying to add value, you might be creating extra work for somebody. It's "Why not just do it the old way?" My first six months, I couldn't answer the question.
I didn't have the conviction because they didn't have the real life experience. I was coming in from an investment bank and do a corporate development role. I didn't have corporate experience. I couldn't say. Well, "Hey, that's what they did over here at Google and it works great." I couldn't say, "Well, I've got to write in a book."
If you are going to make a recommendation or to try to push for change in an area, you've got to really answer that question. "Well, why just do it the old way?"
I internally struggle with that, just a ton and I don't think the answer has to be complex. But you got to deliver it with confidence, with conviction and without having any experience in corporate development, which is much different than investment banking, in my view in a number of ways.
There's a lot of similarities obviously, but the team component, the process, is much different than banking. Now I think about that. I'm going to say that with conviction. That was probably one of the biggest struggles.
What was the real thing that you struggled with in building out the Corp Dev function as a single person?
That's one of them. The other thing is just not knowing what to do. I was never in corporate development. I was in investment banking and you understand things like
- how to model something out,
- how to project financial statements,
- how to run a data room,
- how to manage the data room,
- how to complete diligence in a timely manner,
- how to organize, to get people organized,
- how to ask questions, how to talk to people,
- how to pick up the phone and get stuff done,
- how to be efficient, how to work hard.
That's all very helpful in corporate development. That's not the end. That's not, it's not all similar, right? There's a lot of things in corporate development, working within a corporate structure and trying to get sign off and decision-making done.
Get on people's calendars that are extremely busy doing their day job, it's all new. Here's a great example. You're the buyer instead of the seller in many cases, so most bankers come from sell side M&A.
I want to hear about that. What was the difference between your deal process at Blair versus where you're doing to Halo?
Yeah. Great question. That's one of the main differences you're used to selling versus buying. Huge change. I had the situation today. Somebody sent me an LOI.
They just said, here's an LOI ready to go into due diligence. Well, what do you do next? What's the next move.? And coming from investment banking, we knew what to do with an LOI when we received one from a buyer.
But when you're the buyer and you've got to get the team set up, orchestrate the team, who should get involved in when and why, who's going to be doing accounting due diligence. Are you going to reach out to the seller? Like, what are you going to say? Who from the internal team is going to do what?
It's all really under your purview and it's a much different. Setting that up, you haven't done that before. It's a whole new set of steps that if you're not coming from corporate development, how do you know that? How do you know what to do and what's the best…
You can guess. We're all smart, you can make really good decisions and try to do what you think is appropriate.
But, I always think somebodys figured this out, there's a lot of ways to do this. There's only one best way. You always want to achieve that, now you can't like bask in the way you’re just doing well. So what's a good way to do this? How do I do it?
That's all new stuff and big challenge when you're coming into a role like this without much experience.
I'm wondering if you're working on the sell side and you're helping companies divest, you're interacting with buyers. Don't you have some insights in some of the nuances where this guy should have really done this on the buy-side or done this and diligence.
What kind of buyer? Would be my first question. At William Blair is a lot of financial sponsors. They dig in a much different way than a strategic would, I think that's probably number one. You got a lot of followers,
I'm sure they work in an array of different types of banks or non-banks, different types of industries. If you're used to dealing with financial sponsors, the questions that they're going to ask and there, they associate and they're going to put a list together and send it over to you for the investment.
With the goal of creating a sort of deck for the investment committee. It's heavily based on economics. With a strategic, you get, you're going to get just a broad variety of sort of different interactions when you're in investment banking.
I remember back when I was at City Capital, we had a strategic look at a deal and it was a mess. There was like 15 people and they wanted us to come out or they wanted to come out and visit our client, the seller.
They wanted to come out and visit for two weeks. And just sit in a conference room and pour over files and talk about things and it was everything about the financials.
So that's one interaction, other strategies, depending on how frequently they're doing deals and who's at the helm kind of a similar approach as the private equity group, but more often than not, if it's a different, they're buying it for a different reason.
So their questions are going to be different. Me coming in at Halo from William Blair, I was very used to the questions that you get from financial sponsors.
The other thing I wanted to get into was when you go into your role, your M&A role, what is the first thing that you're doing to establish credibility?
It's to not make mistakes? I touched on this a little bit earlier, it's truly to not make mistakes. It's, don't let that action imperative win. Don't feel the need to jump in too early.
There's a balance here because you've just been hired. Your goal is to get up that learning curve and to start adding value to the business.
Where you're the value that you add is greater than the cost to the enterprise. So there's this need that I got to get the learning curve is start adding value.
Do you have decision-making frameworks or processes that you've used or recommend?
I don't really have a framework, I have a framework on how to prioritize work, like what I want to make decisions on next. When a decision needs to be made and when it needs to be escalated.
A very delicate balance, right? Part of the value that you add is autonomy and taking things and just in making decisions, but you can't make the wrong decisions.
I think I got a pretty good way to answer this. You're not going to be able to make a lot of decisions in the beginning. You're going to have to sit back and listen and really to defer to other people and ask later lot of the time and that's okay.
That's okay. As long as you're learning and you're trending in the right direction.
I remember the first six, nine, 12 months, I was calling a lot of people.
I was asking for other people to sit in on things and deferring just a lot, because, and that's okay as long as you're trending.
Because what you don't want to do the alternative is that you try to make an uninformed decision or a bad decision. It turns into a vicious cycle.
You want to get small wins early and avoid any sort of negativity early on. So the first you have to and learn about the business to the point where you can start making more and more and more decisions over time.
If you're afraid to make that decision, because you don't know the answer, you don't make the wrong decision, at least earlier on, forego making a decision and escalate it.
You have learned that, I don't know the answers to everything. Some of it is also trying to know the answer to something that you probably, maybe it's not your call, trying to overreach, trying to make a decision in a realm that really there's experts that deal with that.
Part of that learning process and affirming processes is to learn who the experts are in what areas. If you're confronted with a decision and you know there's two experts out there that work on that, you're a team.
Leverage their knowledge and bring them in and add support. How can I help you make this decision?
If a team that seems to be unorganized or they lack just general communication process. What can you do as a leader to help alleviate those problems?
That's tough because you're going to run into people that, like everyone has a different communication style.
You've got to understand their communication style, trying to meet them where they live, number one. Especially with the boss or somebody that's superior.
You've got to accommodate them. I often feel like I'm bothering somebody but what's really helpful is talking to people, making sure that you're communicating often enough and having meetings.
If you've got to do a quick call in the morning or if you got to loop somebody into a meeting, even if you don't know that they should be there or not, I go through and I do it anyways just to get more communication rather than less.
It's a little uncomfortable.Sometimes people don't want to be looped in and they don't communicate that way. If you err, on the side of being more inclusive than exclusive.
And starting, developing a rhythm or a cadence. With that, people come around eventually. There's a number, different ways to attack that, there's different tools you can use. There's different processes that you can set up. Maybe that person is the wrong person to be working on something.
Give me an example. What have you done that really creates a value?
So identifying the right structure that you need, the right people that you need to get involved, that's number one.
Getting to know those people very well, you're gonna be working with them.
Getting the right process in place, just establishing some sort of framework and alignment on that process. It can be very simple stuff.
I think I was just talking to a colleague today. We were talking through, I'm giving you a live example. We were talking through, a small kind of like an Aqua hire.
That's just get together on this guys. I've got the right team in the room. Let's try to due diligence here in three phases. We're going to focus on accounting.
That's the long pole in the tent as we round that corner. Start doing more onboarding and operational sort of confirmatory diligence.
And then we can start preparing for close and drafting an announcement. So something as simple as that sort of a process.
Setting three, four, five milestones, getting everybody aligned on the same page that in itself does wonders for adding value and putting order and organization into a process that can be very complicated, high anxiety, lots of moving pieces.
What are some tools or tips to the trade that help you get there? Just getting people aligned on the same process when you have especially folks that are all siloed off in different parts of the organization.
That's a really good question. The first thing is to define what's important to you? What are the top two or three things? You do not understand what everyone wants to look for.
You got to get a list going man. You have go to get a checklist going of like things that people want to accomplish and make sure that everyone sees it.
For us man, it was absolutely vital, start using dealroom.
Are there other products that you use outside of that and then just hear the good and bad of those?
Yeah, really any sort of project management tool. This kind of goes back to the difference between corporate development and banking.
Banking, we're used to using a data room to load files in and usually requests for track on an Excel spreadsheet or something. It can become a mess when you have 12 different buyers and they're all asking similar questions.
And how does it all line up? We've used multiple data rooms over the years.
But any sort of project management tool where you can create a list of to-dos and ask people to check that off, work through it as a highly valuable tool for us in diligence.
And then as we started using it during diligence, the integration team saw us using it and said, "wow", like I have a huge integration checklist and they're using Smartsheet for integration, I believe.
And now I'm pretty sure they've fully switched over to our current platform, which is dealroom.
But what that brings any sort of platform that you use, what it's bringing is visibility.
Okay, where is everybody at, and what they're doing? Who's working on what?
Because it's not just assigning a task. This was a new sort of concept to me. It's not just a assigning a task to somebody saying,"do this."
Because every task is cross-functional. So it might involve HR, but finance also has a very big decision to be made with that compensation plan. It could involve supply chain.
If they change it up, then how is it gonna change up our ops, our customer service process.
So when you're looking at a business, , there's a lot of cross-functional issues. If you don't have it organized in a way where everybody can see what everybody is working on.
Whether it's an Excel spreadsheet or a project management platform or dealroom or whatever, then you just get people work in silos. People are just talking past each other.
They're not on the same page with things. They might have two different answers. If I ask, "Hey, what's the plan for the three employees?"
One person might say something different than the other person. It's horrible sort of trap to get caught in. Is not having that inner communication
I'm hearing real-time views on progress. And then inner communication, or maybe refer to as collaboration. I want to hear a little bit about that.
There needs to be a quarterback. There needs to be somebody to bring everything together. A conductor, not a big orchestra guy, but I know that the conductor plays a very large role, big football fan- “go pack!”.
So I know that, the quarterback has a really important role. The only way around this Kison, is communication. It's the only way that this, that the siloed issue gets solved. It's making sure that you're communicating, communicating, communicating.
And what I found is that calls and emails don't get answered all the time. Meetings, I was, when I was coming into the role.
I try to set up a meeting and be like, "Hey, my next availability is in two weeks." I'd be like, "What?" I am 8 to 5 and you want to talk to this SVP, it's going to be two weeks from now.
It doesn't work. You can't get everything done with phone calls, meetings and emails. So you've got to have some sort of consolidated, consolidate to where people can log in at their leisure and track stuff.
They're getting reminders, it's just another form of communication to make sure that everybody is understanding what everybody else is doing. That's the only way to get around it.
I'm curious before you got in there, almost two years ago and today, what would you say are the main differences that your company actually approaches?
I think what it's doing today, I think the difference today is the organization and the upfront preparation, just alone, the planning, the knowing what to expect.
Even if somebody is doing the same amount of work today, as they were before I was around, even if it's the same amount of work, just being prepared and organized, it takes the anxiety and stress level from like a nine down to a two, because they know what to expect.
They understand what's going to happen. They're not scrambling. Just the thought of like, I don't know, I don't know who was handling this, and what's the next step.
Like I can know my immediate task, but where is this going to go afterwards? And then you start thinking about all those things that are going to be due down the line.
It's in your head, you're thinking there's no plan to tackle any of this. It raises that anxiety and stress level to a whole another level. Even though, it doesn't do any good. It's not like you give any extra work.
It's the same amount of work it's just knowing that it's organized and taken care of and thought about and planned out, it's helpful.
So I like to think that as we progress and as we get better with our process at Halo, I'm hoping it's just going to be something people are excited about and enjoy. And we want to do more of, it's not creating issues or additional stress or anxiety.
What's your approach to working with integration?
Utmost respect for our integration folks to whole another realm. Somebody did the work and thought this is a cool company to buy.
Then we'll throw it over the fence and you guys got to come in to work and actually deal with these employees and send messages, communicate with them and change their benefits and it's an awesome position and a ton of respect for our integration team.
That's where a lot of the pain could come from. You don't diligence a deal a certain way, or you overpay a little bit, it's usually not the end of the world but with integration, if it's done poorly, it can be a nightmare for everybody.
It can tank the deal, it can, people will quit. You're going to leave a permanent sour taste in somebody's mouth on the other, maybe this, the sellers team, it's going to be done well.
For us, it was starting with integration and what can we do earlier on.
Even before diligence, before the LOI is signed, even when we're forming our pipeline. What can be done at those earlier stages to make it better for the integration people and our number one solution was get them involved early.
Bring them in. They're going to have to deal with this on the backend anyways. Whoever, if their department is leading that charge, send them as an integration leader and get them involved in.
One call is all it takes during diligence, a couple of questions, whatever it may be, just get them involved. They'll know the timing, we'll see the updates. They don't have to be in every meeting or be deeply involved in the diligence process, but they can see it coming.
They can see it coming. They're much more comfortable instead of, "Oh, Hey, by the way, we bought a business today." That's not how you wanna approach that. But that's how we like to handle integration.
How does Halo being headquartered in a pretty rural part of Illinois, can impact all of this?
Not having a face to face presence, this is pre COVID. I think we're all experiencing this now. It's probably the same shot that everyone here has had when they had to switch from going to in-person meetings and being remote.
I think I would go maybe once or twice a month and visit folks try to knock out a bunch of meetings and then come back and work remotely. It didn't really get much in the way of the day to day or talk with so many people.
Not only in Sterling, we have offices all over. I think we have 50, 40, 50 offices all over the United States. Our chief of integration is in New York. We've got our one of our main sales leaders is in Ohio.
So we're pretty much remote anyways, and actually the pandemic has helped in that sense because now instead of calling, we actually see each other's faces on zoom.
What's the craziest thing you've seen in M&A?
When I was at City Capital, we sold Jayco, which is an RV business to Thor, a publicly traded RV consolidator, Jayco is a family business.
Third generation, I think second or third generation, started in a chicken coop in Indiana and grew to be a huge Compli, very successful business. We sold the company to Thor.
Being privately held and a generational business, they had a big family, that the owners, it was two brothers, their mother was still a little bit involved who had started the business with her husband and all their sisters and kids and grandkids.
And I remember we closed the deal, sold the company for I think it was 507, the public announcement is 576 million or somewhere around there. We drove to Indiana to meet the whole family in a conference room.
We brought checks, somebody brought checks. I think it was one of the brothers too, just tell to people what, "Hey, here's your share of the business, or here's what you're going to receive from the sale of our company." We sold to Thor.
We think it's going to be a great steward of the business. And by the way, here's how much we sold it for. And here's your check.
And it was incredible. People were crying and hugging us and just the nicest people on earth. And you don't get to see that when you're in an M&A.
A deal closes in a day and the guy goes buys a boat or whatever, but this was family, generational family from four generations in the room or five generations in the room.
And this was the culmination of a generations of work and they're seeing it and they're feeling it and they're, it's changed their life. And I felt like I was on Oprah or something.