How to Build Better Deals: Sourcing and Integration

How to Build Better Deals: Sourcing and Integration

Kison: Joining me today is John Romeo, CEO of the Oliver [00:01:00] Wyman Forum and head of m and a Oliver Wyman. John has over 30 years of consulting experience advising the boards and senior executives of the world's leading private and public sector organizations on strategy, organizational effectiveness, risk management, and MA.

Kison: He has extensive experience helping private equity firms, pension funds, and corporates make successful acquisitions, both as an advisor now as a principal leading Oliver Wyman's own m and a efforts. [00:01:30] Today we'll explore how Oliver Wyman sources executes and integrate acquisitions, balancing strategy, culture, and financial rigor to create long-term success.

Kison: John, how you doing today? Great. Nice to be on the show. Kison. Thanks for making this happen. Live here in New York. Is this global headquarters? Yes, it is. To get better than this. Thanks for hosting. And can we kick off a little bit about your background? I

John Romeo: started my career back in the early nineties working for an investment bank.

John Romeo: I loved it. But then a [00:02:00] company called Oliver Wyman came across my path and had the opportunity to join, and I thought I would go for a couple years, figure out which role in the bank. I wanted to do research, sales trading, investment banking. I. But over the years as I, I saw more and more of consulting the variety, the working with the caliber of people, the solving the problems, the intellectual challenge was just too compelling.

John Romeo: I've stayed at the firm for a long time, been here over 30 years, seen the firm grow from 60, 70 people when I joined to now over [00:02:30] 7,000. Started our private equity business. I moved back to New York. I ran Oliver Wyman in the Americas, set up the Oliver Wyman Forum, and as of last year, I took over responsibility for leading our our own m and a efforts.

Kison: A lot to talk about. How can you say banking was fun? I'm trying to go back. You said nineties. Was it like the three martini lunches? Like what made banking fun? Back then,

John Romeo: banking was right at that nexus. In financial services, we don't build anything but in financial services, without it, nothing can be done.

John Romeo: You're [00:03:00] right at that intersection between the corporate world and driving that change. So it was exciting and it was evolving. In the uk you just had big bang In the eighties there was all sorts of potential and growth. We can't call it fun today, though. Different. Now, you mentioned you built the

John Romeo: So we started the private equity practice back in the mid two thousands. We were, as a firm, relatively late to private equity, but we timed it well in terms of their interest in financial services, which was the [00:03:30] part of firm that I focused on at the time. We built it up.

John Romeo: It was about combining some of the content expertise that we had with the needs of the gps, and now we've turned that into a big practice within the firm. We support the gps. We support sovereign wealth funds, LPs, hedge funds. At the core, it's about commercial due diligence and then value creation work with their portfolio companies.

John Romeo: But increasingly we help them with business model strategy, with risk management, with deal generation, with exit support. [00:04:00]

Kison: I take it, private equity and private capital is like synonymous.

John Romeo: It's synonymous. Private equity is a broad term. It started really referring to buyout, but now you have infrastructure, you've got real estate, you've got private credit.

John Romeo: We think about that as any of these private market liquidity pools and investors playing in that ecosystem.

Kison: So do a lot of work, grow the company there through organic means. And then this role that you have now as head of Oliver Wyman forum. What is that? So the forum's really about bringing

John Romeo: together [00:04:30] leaders from across public and private sector to discuss the issues shaping the future.

John Romeo: It's a mix between a think tank and a CEO and chair community. And we do a combination of thought leadership and convening, really focusing on issues, the big trends that are shaping the world. So technology, workforce, demographics, things like that. Ultimately to. Elevate the conversation, the brand, see the signal through the noise.

John Romeo: Who's involved in with that forum? The forum has a core dedicated [00:05:00] team, but then it's really linked into every part of Oliver Wyman so that we're delivering all of the content expertise that we have and mapping that to what our leaders externally really care about. That's pretty interesting.

Kison: Let's say you have a lot of different events and probably other channels to facilitate that communication.

John Romeo: Yeah, that's right. And ultimately it comes down to community or trying to build a community and not trying to necessarily sell work day to day. This is about building those relationships, thinking long term, establishing some of that thought leadership and helping work alongside those [00:05:30] leaders to really tackle some of those shared challenges.

John Romeo: Is it just internal folks

Kison: participating?

John Romeo: It's definitely not internal, right? It's all about the collaboration with external and getting a lot of different perspectives. And at the core of the forum's, focus is community and bringing those leaders from across private sector, public sector, third sector, together with those different perspectives.

John Romeo: 'cause the level of change, the revolutions going on in the world. You think about geopolitics, economic [00:06:00] nationalism, climate, demographics, ai, right? Other time in history, these would've been. Era defining, but they're all happening at the same time, and they're not just concurrent. They're convergent, they're playing off one another in a knowledge economy.

John Romeo: Compute is energy. We need those different perspectives and understanding that, and that's what the forum's all about. One of the things we're doing in the Oliver Wyman forum right now is our annual CEO survey where we partner with the New York Stock Exchange to reach out to all of their [00:06:30] listed companies, not on sentiment, but on pulling them on.

John Romeo: Real hard business decisions. What are the decisions they're making now in terms of investment cost, all the shareholder value levers, how are they thinking about supply chains, long-term investments? And it's out in the market right now, but one of the things that we're seeing already is that m and a is seen as a core strategic value lever, and the vast majority of CEOs are expecting to engage in strategic [00:07:00] m and a over the next one to two years.

Kison: I'm pretty optimistic about m and a in that general sense that we see how companies mature, how they need to compete and be relevant in the market, a lot of times involves disrupting themselves, which means they need to acquire these little darling startups before they come after them, and then other things as m and a gets more mature, they get better at doing it.

Kison: And those companies have seen, they get higher returns for their investors when they execute MA well. It's [00:07:30] partly startups, but I think

John Romeo: it's broader than that. If you were a company and you were fortunate enough five or six years ago to have the optimal portfolio, you think about the level of change that's happened first through covid, but then on some of the geopolitics, the demographic changes, technology changes, climate and risk changes.

John Romeo: It's unlikely that portfolio that you had is perfect for. Now, and as you think about responding to some of those changes, [00:08:00] differences in how do I think about my supply chains? How do I think about the impact of technology? How do I think about some of the workforce changes? M and a becomes a key part of rethinking the portfolio, both in terms of divestments, but also acquisitions, collaborations, partnerships.

John Romeo: It becomes a real central value lever to all organizations. It's fast moving world, which is prompting you to rethink your business. It's a fast moving world. The pace has never been [00:08:30] quicker, right? But this is the slowest it's ever going to be. It's often said, it's never been harder to be a CEO, but it's never been easier to blame the external environment.

John Romeo: What we're seeing is the top firms are really having to understand what's happening, breaking down that signal and noise, and being crystal clear over what is it that we. Really have is our central strategy. Where do we want to double down and go after that, that we know is going to shape this over the next few years?

John Romeo: That's a tricky thing to do, [00:09:00] but everyone's facing that right now.

Kison: Race yourself for change. What's like the philosophy of m and a at Oliver Women?

John Romeo: I. M and a's been a central part to Oliver Wyman's history. A lot of the firm now has come from different acquisitions. It's been something we've used to expand the footprint, expand the operations, the quality, the skillset, the capabilities across the firm.

John Romeo: We continue to have m and a as a core part of our growth going forward. Last year we completed four deals, and on every deal, the way we think about it is [00:09:30] strategy, culture, and math. So it's MA strategy in service of. Wider firm strategy, helping us move towards that vision of the firm rather than just a series of deals.

John Romeo: But when we think about our own m and a team, it's really about building a capability that can execute a series of orchestrated deals around a clear business case. It's not just a random collection of things. It's gotta be linked explicitly to firm strategy. And then we can use m and a to [00:10:00] systematically build those businesses, build capabilities, help us expand into new geographies.

Kison: Is there like a big practice difference from somebody that worked at a well reputable consulting firm? You've worked on client facing m and a, but now you're, and working on all the in-house deals. Do you see a difference?

John Romeo: There's definitely a difference. The two, I'd say, are really complimentary. You need to understand the business side, the day-to-day operations of how the firm works, of how we think about priorities, how you deliver that change, [00:10:30] what it means to our partners day to day.

John Romeo: You can't do. MA and my experience in isolation. There's plenty of lessons I've learned from the work we've done with private equity firms, with strategics on acquisitions and trying to translate that into our own world.

Kison: So this is the value of knowing the business. To me, I would assume is a challenge coming in as a consultant.

Kison: And if you don't have the history of the firm, that's essentially your disadvantage is learning how the firm really operates. But now in your current role, you gotta, that's what you have [00:11:00] to, you got all the time to keep learning. And make sure you really know the business in and

John Romeo: out. Oliver Wyman is 7,000 colleagues, 90,000 if we think of the broader Marsh McLennan that are unified by common purpose, by shared values, and a unwavering commitment to drive outcomes for our clients.

John Romeo: And we need to link into that strategy at our core, Oliver Wyman is focused around transformative moments, those high stakes inflection points that have the potential to shift the trajectory of Affirm and where we try to [00:11:30] turn those moments of. Uncertainty and complexity and change into opportunity for our clients to adapt, to grow, to thrive.

John Romeo: When we think about our own m and a capability, we're not an enormous firm. So you could certainly make a case that any acquisition would enable us to build into a new market, et cetera, and we're always open to those ideas. But what we've done. In recent years is really think through our own priorities.

John Romeo: What are the areas that we really want to bet and double down on and the core priorities at [00:12:00] that intersection between geography, industry, and capability? And then be really clear on how to tackle it. So on any deal, the way we think about it is, how is this strategic or even transformational to Oliver Wyman, how will this make us better?

John Romeo: And then we think, what value do we. Really add to the target what makes us a unique buyer as opposed to just being willing to pay the most. And then the third is, is it executable? Can the staff and the partners of that target firm transition to [00:12:30] Oliver Wyman in terms of some of the OW style arrangements, the compensation, the titles, the operating model?

John Romeo: We need to get through those hurdles. And that takes a lot of work, a lot of discipline, and where that link to the business is just so critical.

Kison: I like when you use that term transformative moment, but you define that as these new markets based around geography, industry capability. When you say value add, what does that entail?

John Romeo: Well, there has to be a reason to do a deal. [00:13:00] We're not acquiring a company and then just leaving them on their own. It has to be, everyone talks about one plus one being more than two. I prefer the idea of Paul Pullman at the old CEO of Unilever used to talk about acquisitions and partnerships where one plus one equals 11.

John Romeo: And that's the type of mindset that we go in, that you need to be able to add value in a different way to just what they have. Any of the companies that we acquire, we admire the capabilities that they have, but then you think about some of the operational [00:13:30] improvement that you get, some of the commercial improvement, how we can go to market together, whether it's.

John Romeo: Bringing more capabilities into their client base or vice versa, and how we just can ultimately redefine what we're trying to do. That's the objective.

Kison: How do you get a sense of those ideas become like confidence in them becoming tangible versus just smoking mirrors? It's just something I, I personally struggle with because you just get a lot of ideas and everything sounds good, but then when reality hits, this stuff's a lot harder to execute on.

Kison: How do [00:14:00] you even get a sense of that when you're. Looking at opportunities

John Romeo: in any process or whenever we're talking to these companies, we've spent a lot of time building out our own bespoke pipeline. And part of that is really about building relationships and getting to understand those firms. It takes time.

John Romeo: There's no quick win. You've gotta, you. Invest the time we need to get to know those folks. We need them to get to know us. So in any process or any relationship building with a target company, we don't try to rush that. We do that over a very long period of [00:14:30] time. In an ideal world where we get to meet all of the key folks on their side, but we also make sure they get to meet.

John Romeo: The folks on our side. 'cause that cultural fit is just so important. If you don't get that right, there's no way the deal works. Especially for a business that's all basically people. It's all about people. So the people need to want to come here and then the people here need to buy into that and create a vision that is bigger than either firm is at the start.

Kison: This is something we chatted about a little bit before, is the shift from banker led to buyer led and how [00:15:00] that's sort of impacted the deal process. Can we maybe talk through some of

John Romeo: that? Yeah. We think on our side about three channels of deals. We've got at the very top end, the what we call the big fish, the once in a career type deals that would transform the firm.

John Romeo: Those by definition don't have happen often, but you keep an eye on them, you nurture them. We think about them. Maybe they make sense, maybe they don't, but they're sort of their own category. Yep. And then you've got banker led processes and bespoke [00:15:30] processes. Several years ago we made a deliberate strategic choice to try to really build out our bespoke pipeline.

John Romeo: Great companies that we could build relationships with that have a real high strategic fit with Oliver Wyman over the next five plus years. And aim, originate. Deals outside of a process. Now that's a constant rolling search and it has a few components to it. We basically invest time in building comprehensive market maps, so our partners are out in the market every day, [00:16:00] but it takes work to figure out what are all the companies out there.

John Romeo: It's a constantly changing source, so we invest in time in building those maps. Then we think about real clear prioritization around any kind of business case. And then you come out with the outreach strategy. There's usually something we admire about what those companies have done, but it's very rare when you first reach out to them and talk that they would necessarily want to do a deal.

John Romeo: This is about building a relationship over time, telling our story. It's similar to the way it's. Oliver Wyman, we think [00:16:30] about client coverage and relationship building over time, but what we love on the acquisition side are companies that are, for instance, founder led, where the founder really cares about their legacy, cares about the people and what they leave behind.

John Romeo: We take that long-term approach. It's not to say the banker channel isn't important. The banker channel can be really valuable. We need. The bankers to know the types of deals that we want to do, what we're in the market for. So when those opportunities come out, they know to give us a call. A good banker can be hugely [00:17:00] additive to a process.

John Romeo: So we maintain all of those relationships. And the last thing I'd say is the bespoke channel doesn't necessarily mean that we can make an acquisition more cheaply than through a process. Every process is competitive these days. We're not looking for that. What it does do though is it goes back to your original point.

John Romeo: It lets us build that relationship, really get to know the firm and that de-risks anything. 'cause you can see whether the culture fit is there and you've tested some of that relationship and you can [00:17:30] jointly develop those plans for the future. And so it brings down the uncertainty and it enables us to have much more conviction around which

Kison: deals to pursue.

Kison: Banker led bankers are essentially pitching you stuff. But there's this point of even if you've built your bespoke pipeline, you get clarity of what you're looking for, which can actually help the bankers bring you stuff that's more in scope. And when you look at the steps in building your bespoke pipeline, you talked about market mapping, prioritizing the business case.[00:18:00]

Kison: And then doing the outreach. And then the other benefit of all this is that you can test your hypothesis in that approach of building the long-term relationship. So you get a good sense that there's a good culture fit versus just finding about the company through an auction and trying to scramble to figure out it's gonna be a good culture fit.

Kison: Can we break down these steps a little bit? Yeah. So market map, one question I had was big. You obviously part run the m and a component of it, but then you have all these other stakeholders and they got their peripheral on [00:18:30] emerging companies. How do you put all that together and be pretty comprehensive about market map

John Romeo: on the market mapping, we do some of that ourselves, and you can break that down by, by region, by industry or capability, and we do those.

John Romeo: But we also work with the bankers who often help us with that process and uncover things we might not have seen ourselves. And then we've got partners in the firm who are out in the market every day sourcing some of those ideas where they admire things that are out there and are [00:19:00] interesting. But then we put that against the filter of our own strategy and the priorities, both at a global level and at a regional level.

John Romeo: That helps us narrow that down. Listen, when the markets are uncertain, it's never been more important to be crystal clear on what your strategy as a firm is. Who are the clients that you're covering? Why and how are you better than the competition? We focus on that and that helps us narrow it down and then thinking, who are the firms?

John Romeo: Then we want to build relationships with. Over time, it's that [00:19:30] prioritization process and the discipline becomes really important.

Kison: Is

John Romeo: this

Kison: consolidated

John Romeo: in one place? Do you

Kison: use like third party

John Romeo: tools to mine data? We use a lot of tools. We do consolidate it in one place. We use some of your tools to help us around the tracking of that, and then ultimately the implementation.

John Romeo: But it's gotten more and more professional and discipline. We've sharpened all of our processes over time. There's always gonna be a component that's a little bit opportunistic, but we try to capture that in one place that all of the team [00:20:00] has access to.

Kison: Should put that disclaimer all Roy Iman is a dealer room customer and gonna do our best to not make it a commercial pitch.

Kison: You got all these data sources you're using, you get it consolidated. When you say prioritization business case, break that down for me.

John Romeo: So you have a long list of companies and names that are out there. We look first at just some of the economics. Are they in line with the types of productivity, the focus?

John Romeo: Are they doing the same types of work, the same types of clients that would fit with Oliver Wyman? That's an [00:20:30] important part. The culture is difficult to tell from the outside, and it's not that one culture is better than another. It's just when you get to know the firms, you get to see the culture shine through, and whether that's a nice fit.

John Romeo: The third was the math. And will those economics work, would you be able to take that from, would it be successful within an Oliver Wyman given some of the processes? We apply those filters against that, and you get to a shorter list and then we'll reach out and we'll start to build relationships. Most of those firms are very keen [00:21:00] to talk and get to know one another.

John Romeo: It doesn't mean a deal happens right away, but you might find opportunities to collaborate together in certain situations. Anything that gives us an opportunity to get to know one another better and understand that fit is a valuable input to that

Kison: process. This is like lead scoring basically. Yes. Do you do this is over a meeting in collaboration or is this sort of, Hey, we've got such tight criteria that we can go through and.

Kison: Do that independently. It's

John Romeo: a rolling process. I'd say it's a living [00:21:30] process within our team setup. We've got a few senior partners involved in the m and a team in each region that are coordinating that process. But ultimately we work really closely with the leaders on the business side. 'cause m and A can help and run that process and steer and guide it.

John Romeo: But ultimately the business are the ones that own this need to be closely involved in all of that.

Kison: That sounds a key part. Once you prioritize, then you're not wasting time going after the wrong targets. You're actually for the reason that you prioritized it. Then the fun, good old outreach. [00:22:00] How does that work?

Kison: Is it, we got such a big name, we just go reach out to folks and then got a good response rate. You push for introduction somehow. What? How do you actually do your outreach? We usually go

John Romeo: direct to these companies right at the top and talk about them, and we tell a little bit of our story, the history, what we've done, and.

John Romeo: Inevitably, there's something that we admire in what they've done, and it's part of having a conversation beginning to build a relationship. It's not an aggressive approach. It's trying to jointly explore [00:22:30] whether there's a win-win in some ways from a collaboration. You sent a cold email. Send a cold email, you make a call.

John Romeo: People are willing to talk if you have something to say. In my experience, everyone wants to engage. If you can help them achieve something that is more of a struggle on their own. People are curious and want to do things, and part of this is finding that overlap that is good for them and

Kison: good for us. So the framing is generally, Hey, we saw you run an interesting practice, wanted to make the introduction and see if there's some [00:23:00] opportunities for us to light around.

John Romeo: Yeah.

Kison: And get to know each other, and it may be, I just made that up. What, how does this pitch sound to your words? Well, in, in a lot

John Romeo: of cases we're competing with them, but there's also opportunities to collaborate. If I think about from our client side, the problems that they're trying to solve in some of those transformative moments, these are bigger than any one firm can deal with.

John Romeo: What we're finding is we're working in different client situations alongside a whole range of other firms with different capabilities, and if I can help deliver more [00:23:30] services to my clients to tackle their problems, that's great. That helps e everyone, and maybe that ultimately becomes part of Oliver Wyman.

John Romeo: Maybe that's us. Just collaborating and helping deliver things in coordination with other folks. Either way works for us.

Kison: Sounds like the right way to do it. When you get these early conversations, how do you get a sense of the actionability on a deal? You know that, hey, this is a firm that's gonna likely start thinking about some kind of exit.

Kison: Is it something, do you wait [00:24:00] for clues or you just. A little blunt, just generally ask, it's

John Romeo: a mix of all those things. Private equity have started to play in the professional services space. More and more. Those guys, you know, there's an exit coming down the road. You can work to that type of timing, basically always for sale, for the right price.

John Romeo: Yeah. But equally, they're gonna have to exit for usually given their fund structure. In some ways. Other folks are at a different stage. We've had a lot of success. Teaming up and acquiring founder led businesses. [00:24:30] Those are really interesting 'cause the founder has usually built a lot of their life around it.

John Romeo: They really care about it. They care, not just about it today, but the legacy. They're leaving behind the people in that team. And that fits very well with how we think about things. 'cause it's not just buying the capability we talked about. Anything we buy is mainly people. So the people need to want to come here, and part of that is the capabilities in the short term, but it's also creating an opportunity for them to build their career here and to thrive.

John Romeo: These things you [00:25:00] can't just do overnight in one meeting. This is about building those relationships. It's why we draw the parallel to a lot of our client coverage on the core consulting side. You ever convinced anyone to sell their company? I don't think it's been us convincing them to sell. They have to want to be in that place.

John Romeo: It's on us to convince them if they do want to do that, that this is a really compelling. Opportunity and coming together with Oliver Wyman and plugging in usually to a bigger platform can create more opportunities for the business, more [00:25:30] opportunities for them, and more opportunities for the whole team.

Kison: You're selling them on the future of growing better together?

John Romeo: Yeah, that's exactly it. It's trying to create a shared history. There's nothing in our firm that couldn't be done better. Our culture, the one thing that we have fixed is around the values, but the strategy can evolve. The people will evolve.

John Romeo: What we're looking for is not, they plug in just to our culture. Let's create a shared culture. Let's create that new shared history and build something special that no one else has.

Kison: That ties back to that business [00:26:00] case that you were developing on the value add that you talked earlier, and essentially you're bringing them to work on that together.

Kison: Share that same story.

John Romeo: That's right. You can't have a team off to the side doing that. And this is where we have to link in on the m and a side in Oliver Wyman. We have to be really closely connected to the business partners. Ultimately, the business partners are the ones that own this. So a partner of mine often talks about the difference between a chicken and a pig, a chicken and a pig, want to open a restaurant and have eggs and bacon.[00:26:30]

John Romeo: One is involved and one is committed. We think about that. Who are the pigs? Who are the ones that are really committed to this? Especially as you move to that bespoke pipeline, the expectations on the deal sponsor on the business side have gone up and up. They have to be willing to roll up their sleeves to get their hands dirty on execution and on implementation.

John Romeo: 'cause ultimately it's their neck on the, the line on these deals. So they have to really need to buy into that. And that's where the link between the m and a and the business side becomes [00:27:00] so important in the firm.

Kison: You gotta make sure the post close success by linking that principle to set 'em up to be successful.

Kison: Has it been easy to do deals? We mentioned doing four deals last year. Has the market been easy? I'm in tech and I'm just wondering, I see a huge, big ass spread gap as the biggest struggle that I'm, I'm coming across. I don't know. Is life easier for you? I dunno if a's ever easy, there's a lot of opportunities out there.

Kison: I don't think there's a shortage of opportunity, but do you come across that there's this high expectation of valuation just [00:27:30] because market's been on the run, it's been over the past years.

John Romeo: There are high expectations, especially on the tech side. We're not usually going out and buying a lot of technology, and so the consulting firm's

Kison: already a little more rationalized about what to expect when valuation.

John Romeo: We're not usually the ones willing to pay the most. There are folks that come in and we'll pay a higher multiple. What we're doing is thinking about how do we create the most value over a period of time? And that's why selling on the vision, why the [00:28:00] alignment. So it's not just a transaction, but it's how do we build something together is so important.

John Romeo: And it's partly why we shifted. From the banker led processes to the bespoke processes in terms of that degree of emphasis. 'cause it gives us a little bit more control and focus and willingness to really invest in building out those relationships.

Kison: You're taking a byla approach to build those relationships, which allows you to tighten up that story of better together.

Kison: Are we gonna create value? [00:28:30] How do you correlate that part of, Hey, we're gonna do all these great things together with the actual deal structure. They take it, you're not just cutting one check and they're like, see you around Jud. Is there sort of a way you structure the deal that ties you both together?

Kison: I, I'm thinking of is it earn outs? Is it roll of equity? Is there. Those types of elements that you bring in, structuring your deals. We're doing all of those things.

John Romeo: Okay? Right. We think about this over a period of time, so we use a whole wide set of metrics. We have a whole wide set of [00:29:00] tools as you'd expect.

John Romeo: It's about that alignment of interest. We're really trying to do this together. It's certainly not all upfront. One and done, and then cross your fingers. I guess I was

Kison: curious that is it more of using those tools as bridging valuation gap or more of, Hey, let's keep this level of alignment that we got a vision of what we can succeed together.

Kison: Let's make sure that we're both lined on it, that hey, we are gonna get rewards, we're rewarded for it. You are gonna get rewarded or the. Reveal second bite of the apple.

John Romeo: It's much more the latter. There's a [00:29:30] lot of planning upfront. You can think about diligence as being a balance between risk mitigation and preparation for integration.

John Romeo: But in any deal, in any conversation, we're spending a lot of time with the folks up front, thinking about the culture, thinking about the synergies, the pricing, the clients, but we're also thinking about some of the technology, the human capital, the. Even things like the titles, the offices, how all those things come together.

John Romeo: You gotta think about the experience that people are going to have over time and how do we [00:30:00] create the right foundations for them to ultimately be successful and to build their career.

Kison: I wanna learn to like, how do you plan this psychology? Because at face, this is why I don't like that super transactional process.

Kison: 'cause you're literally looking at the lump sum total amount on a LOI versus what you described. Now you're nurturing this relationship, you're billing this. Better together business case, and that principle is bought into it. Now it's okay, here's short-term game, but now I see long-term value creation and catching the upside of it.

Kison: That [00:30:30] becomes more of a driver or interest than just that, Hey, I'm giving you this much money today. Is that the playbook? Is that

John Romeo: what it comes

Kison: down to?

John Romeo: Yeah, that's right. We go to great lengths to align the incentives for everyone joining us as well as the folks on the Oliver Wyman side. It's that long term approach.

John Romeo: That is our best weapon in terms of doing that.

Kison: I wanna follow you around for a day and learn how to do this. That's the game changer because it goes back to that bid as spread. That always becomes a thing. People, when you start a [00:31:00] conversation, you just wanna know that you wanna know what to offer. Here, I'll sign NDA here.

Kison: I'll give you some preliminary information. But there is that when you can build a relationship where you are actually really excited about working with that firm together, and then you see all these upsides and all of a sudden you're looking more long-term value creation.

John Romeo: And

Kison: that's where

John Romeo: the business involvement is so critical, right?

John Romeo: Because you have to start to get into those conversations of what does the flying formation look like? How are we gonna go to market together? How do we create some of these opportunities together? You can't do that in the bank process, can you? [00:31:30] It's much harder in a bank process. You'll get the level of interaction.

John Romeo: Each of these have some degree of variation in terms of timeline, the exposure, but in general, we haven't found we can get quite the same proximity and depth of those discussions.

Kison: I think this is literally crux of the buyer approach. You're gonna be able to. Test your hypothesis, get a better sense of a cultural fit, but also you're building a much better alignment on the long-term vision of what [00:32:00] both companies are gonna achieve together

John Romeo: in any m and a deal.

John Romeo: There's always gonna be anxiety when you've been able to build up a little bit of that shared. Relationship conversation, then you can be transparent and you have the time on your side to do that. It's why we invest so much time in the deals with folks to let them meet people on our side too, so that we're very clear on what are some of the upsides, certainly, but also what are some of the challenges, because it's always gonna be a different environment.

John Romeo: It's gonna be a challenge. So let's be transparent about that. [00:32:30] Figure out how we tackle it together.

Kison: Ready for story time. Well, we talked the talk. I wanna get an example of a deal that you went through. I want to get how you identified the strategic, the cultural, financial fit.

John Romeo: Lemme give you an example.

John Romeo: One that comes to mind is Sison. NT was a company that we bought a couple years ago, November, 2022. It's a terrific aerospace and defense firm based in Washington dc. We had known the team for a [00:33:00] decade in the runup to us doing the deal. They had had five plus years of really strong organic growth. It was a founder led business.

John Romeo: They were servicing corporate, some of the public sector and private equity. We knew the culture fit was there because we had known these guys for a decade. We had competed with them, but we had also collaborated on a number of projects together, so we worked alongside them. The partners in our commercial aviation team knew them.

John Romeo: We were looking to build up Oliver Wyman's aerospace and defense [00:33:30] capability. The market fit was really strong because the commercial aviation guys were among the best in the market. And you combine that with aerospace and defense and we had great growth potential. Financially. It worked out. We paid a fair price for a great company.

John Romeo: As I said, it wasn't about buying these things cheap, it was more aligning the incentives for all the staff. So you had the retention schemes, you had some of the alignment that we spent a lot of time thinking about. How would some of these folks, when they came into Oliver Wyman Thrive, [00:34:00] what were some of the opportunities for new clients, but how could they ultimately build a career on a bigger platform?

John Romeo: And it's been a fantastic experience for everyone. It's got to a great outcome. The majority, almost all the partners are still here and doing bigger and better things. We've realized a lot of operational improvement. We've realized the economic improvement and it's redefined a lot of the things that we could do.

John Romeo: We've sold work together that neither one of us would've been able to do. On our own in that example, like how do you [00:34:30] measure success? So on any deal we have a wide set of metrics and it's not a one and done type of thing. And partly that is thinking about that one deal and tracking how it's progressing, but it's also about learning and developing and reducing the uncertainty on future deals.

John Romeo: So we think about all sorts of things. We look at client retention. We look at new clients. We look at some of the operational and functional measures. We look at what we can do on pricing. We look at employee retention. Employee [00:35:00] engagement. We think about some of the functional aspects, the synergies. We think about revenue from different types of angles.

John Romeo: You have all those numbers, but it's not just the average numbers. You've also gotta look at the variance. Is it just sort of a few people that are really thriving versus the rest? So thinking about all of that as a whole is important to track the progress of a deal, but there's also a way to give us more conviction on future deals.

John Romeo: Like what is the type of operational synergy or pricing uplift that we're really [00:35:30] able to achieve, and then we can apply those lessons elsewhere.

Kison: I always think about these deals. Even for us, like trying to do our early deals in this company is the surprises. I feel like there's good surprises and bad surprises.

Kison: What has your experience been, John like? I'm trying to get a little peek into like a reality. I. What would be the type of bad surprises you come across in a deal? Be it in diligence or post close, and then good surprises. I gotta assume there's gotta be something like you gave examples. We won [00:36:00] some deals that we never thought we would

John Romeo: win.

John Romeo: There's always surprises. One thing in m and a is something either unique or unusual will pop up in every single deal. It's not usually one of the really. Big things. It can be something very small that really matters to folks that you hadn't necessarily anticipated. It's getting used to more and more of those and being able to respond.

John Romeo: Ultimately, the way we think about that is for any of the deals that have really worked well, it's when our partners [00:36:30] have leaned into that, both personally and professionally. Yes, there's the planning. But you need to bring in a wide variety of perspectives and teams. One of the things we found really important is having our support function folks involved from day one, not just in a confirmatory diligence perspective, but in really helping to shape things, creating a forum to raise concerns.

John Romeo: 'cause often they can anticipate something that will come up down the line that the business may not have. Making sure [00:37:00] things don't fall between the cracks. And it just goes back to that transparency. We're not trying to hide anything in the deals from folks. We're really trying to find where is that overlap between what we really care about and what they care about, and being transparent on that and working through that together.

John Romeo: 'cause ultimately it comes down to trust between those individuals, because you can do all the work you want on the numbers, but this is really about people at the end of the day.

Kison: Yeah. How good can you mitigate these surprises that come up? Going back to this banker versus buy led [00:37:30] contrast in setting up a company for integration success.

Kison: We use this example that in the front end of the deal you can get better alignment on what the goals and vision are. Culture, you can do that 'cause you have more time in that relationship. You probably control just some of the timelines of how the deal gets done versus you gotta close as fast as possible.

Kison: How would you look at the difference between the integration, sort of planning or setting the deal up for success Post-close? Between the banker and more of your bespoke process. You just have

John Romeo: a lot more time [00:38:00] to begin to anticipate some of those issues in a bespoke process where you've gotten to know each other.

John Romeo: And it comes down to the culture. I've been at Oliver Wyman for over 30 years. I. I understand the culture here, but I haven't ever written that down. Somebody coming in new. There are a lot of unwritten rules. There are a lot of ways of doing things that everything's flexible, but having someone that you can talk to and say, Kisan, really how important is this?

John Romeo: It can be a 32nd conversation versus if you're not having [00:38:30] that dialogue, someone could go away and stew on that for a couple of weeks and it could turn into a much bigger issue than ever intended. So a lot of that just comes down to the transparency and alignment, and it's very difficult if you're part of a rigid process to get that conviction.

John Romeo: It's not that it can't be done, it just pushes that level of risk or uncertainty more into the integration than into that diligence process. That's where the bespoke process to us is so valuable, because you can reduce [00:39:00] that level. Of uncertainty and it gives you just much more conviction on how you execute and where you're really willing to take the

Kison: bets.

Kison: Transparency and alignment, that's like part of the playbook in terms of making sure an integration goes smooth. You have the big, broad form, company wide form model, but it's almost like you're using a variant of that or your individual deal.

John Romeo: That's right. We're not afraid to learn. Listen, we've learned from the consulting work that we've done, we learned from how our clients do these things.

John Romeo: I go into this on the premise that there isn't a [00:39:30] single thing that we couldn't do better. We're learning every day. We found this is working better and better for us, but I'd expect us in a few years to be even better at this than we are now.

Kison: That's a big part of that cultural alignment being, I guess open-minded is part of the culture, so that way it's not, Hey, you're gonna integrate the way we tell you to, and that's the end of it.

John Romeo: No. That's about building a shared future together. When someone comes into the firm, if we do an acquisition, it's their firm. Then as much as it is mine or any of the folks that were here before, let's build something [00:40:00] together that we're really proud of and excited and want to be part of.

Kison: What does all this m and a activity look like with the board?

Kison: I'm just curious if there's just certain elements of, Hey, here's our pipeline. Here's stuff in flight. Here's deals we've done in the past. How long do we measure success after we've done the deal?

John Romeo: It's a living process. We track these things to learn how well any deal is doing, but ultimately it turns into post acquisition reviews that we do on a regular basis and continue to track those.

John Romeo: We've [00:40:30] got a series of metrics both within Oliver Wyman and then working with the broader Marsh McLennan corporate development team. And we track all of those things over time. Both, as I said, the numbers and the variance on different aspects of the financial side, but also the human side. And then we look at a lot of the retention, the engagement.

John Romeo: It's not a one and done. It's something we have to live and breathe with. Oliver Wyman's, a subsidiary of Marsh.

Kison: Marsh McLennan is public, private,

John Romeo: public [00:41:00] company listed on the New York Stock Exchange. This is the global headquarters. We share the same building and we work across the four operating businesses, so Marsh, Mercer, guy Carpenter, and Oliver Wyman, and there's a lot of collaboration and coordination between the group.

John Romeo: Do you roll up into the Ative team at Marsh McLain? Yes. We work tightly with that group. Work pretty easily. It works really well because we've got, on the MMC side, we've done a huge number of [00:41:30] deals. We've learned from that expertise. They've got world-class sort of banking capabilities that plugs right in with our team.

John Romeo: We work side by side on all the deals.

Kison: I mean, you got a lot in-house, you got a lot of resources and expertise, but is there anything unique you get from that relationship where it's. Umbrella public. I don't know if there's any advanced sophistication.

John Romeo: Oh, I think it's a huge advantage, both in terms of the caliber of the people that team, the experience, the number of deals that have been done that we get to learn.

John Romeo: But Marsh [00:42:00] McClennan is 90,000 people, has an enormous I. Reach, the ability to both tap into additional deals, but it becomes a key part of the career opportunities for folks that goes even beyond Oliver Wyman. So it helps on that front, it's listed. So we then have that capital as a currency, which most of our competitors in the consulting side don't have.

John Romeo: We think it's a huge advantage for us.

Kison: Do you ever find that because now you got much bigger footprint overhead that it could slow down or you got extra opinions on [00:42:30] valuation on deals? We get the

John Romeo: benefit of the experience on the valuations. We're not trying to rush to do a deal, right? We're not traders.

John Romeo: We're thinking long term. We're not trying to go into a situation where we have to take a decision overnight. This is really about building those relationships and thinking long term. To be honest, we really haven't seen any downsides from that.

Kison: That's pretty cool. I just was curious, seeing similar structures and seeing they could get complicated at times when we talked about integration and just setting a company up for post [00:43:00] close success.

Kison: You're running some real people businesses, and I would think so much of it hinges on retention. Can we talk about what's the secret sauce to retaining people and keeping 'em happy and motivated?

John Romeo: The integration is the big question. It's the difference between. An idea and an outcome, and you know better than me, the percentage of m and a deals that fail.

John Romeo: And it comes down to that. What we found is when that works, is when our partners lean in personally and professionally. It's the planning [00:43:30] upfront on some of the financial side and the synergies that you can get, but it's just as much about the people and the career. We're very clear in any of those situations that we're thinking about this as a multi-year journey for people.

John Romeo: And it's partly around the transaction, but it's partly around their career. We pay a lot of attention to their needs, both the folks joining as well as the folks in the team that they'll be coming into. And you gotta spend a lot of time with those people. It's understanding those concerns and being [00:44:00] transparent on what we can and can't do.

John Romeo: Some of it's the finance side. Sure. And the economics. That's part of the math of the deal that we think about. But a lot of it is that bigger picture, making sure they feel this is a home where they can have a career and thrive, and you need both of those to line up.

Kison: There is just the overall environment that they're going into with the partners lean in.

Kison: What about some of the more mechanical retention packages? Because I feel like that would be like a bigger emphasis compared to a tech, depending on what you're [00:44:30] buying, buying the tech. That becomes how much certainty we can have on integrating this tech versus the people. Do you see that of just mechanically having a strong retention package, being a key lover to Oh, I think

John Romeo: it's an important, it's one of the inputs to me around that alignment of incentives.

John Romeo: We like to make sure there's alignment and that really means from this perspective, having some economics over time. But it's partly as you think about the transaction, but then you also need [00:45:00] to think. Okay, well, they're coming into Oliver Wyman. We've got our compensation system that works as it does.

John Romeo: How will their compensation change in that? And oftentimes what we find is the upside from coming into that compensation model and then thinking, not just how do I take the tools from my company and sell that to a client, but how do I think the other way around? What are the questions that my client really has?

John Romeo: And then how do I then plug that into the 7,000 people I have in Oliver Wyman, or 90,000 people? In Marsh [00:45:30] McLennan, now I've got access to all of those capabilities that I can help deliver to my clients. When you start to think about it like that, the upside gets much, much bigger. Yes, we have the retention and the incentive packages linked to the deal, but then a big part of that is how can I plug that in for the rest of my career with some of the compensation and now the access to the whole range of tools of this bigger platform that I didn't necessarily have before that we found has often been a compelling part of the equation.

Kison: If you offer like option awards, then it's public [00:46:00] stock, right?

John Romeo: Yes. We have that for a lot of our senior leaders within Oliver Wyman.

Kison: Does that get perceived differently, private versus public? I don't know if you've been exposed to difference when you structure a deal. I. Obviously there's more liquidity with public stock.

John Romeo: It's part of the equation. It's one of the pieces of the conversation we have with folks. I don't think that has generally been the central point of any deal that I can think of. Again, we're trying to make things that are fair and aligned. We want to buy great companies [00:46:30] and we want to do a fair deal for everyone where we're sharing both that risk and sharing that upside.

Kison: Yeah, just curious of these little mechanics, because you got a lot of different things you could lean on. What lessons from private equity have you applied to Oliver Wyman's m and a approach, particularly when it comes to execution and value creation.

John Romeo: Private equity are obviously different in that they're not operators, but I'm not ashamed to say we've taken an awful lot from private equity.

John Romeo: Learned a lot of [00:47:00] lessons on the sourcing side, the execution side, and the value creation. All of the top private equity firms build those market maps. They put a prioritization against it. They figure out the companies they really want to build relationships with. We think very similarly to that. But when you get into the execution, the best ones in private equity have real discipline through the funnel.

John Romeo: And that's something we've spent a lot of time on the last few years. How do you make sure you're not getting swamped by small [00:47:30] deals that, or deals that are slightly off strategy that might feel compelling in the moment, but you can waste an awful lot of time and some of the small deals might be compelling, but they won't move the dial.

John Romeo: And if they don't have a banker that can even make things worsen, disjointed. But there's a huge opportunity cost to doing that. We've been sharpening that process on the value creation. The way PE firms think about it is, what does this company look like in five years time that maximizes the commercial value of it and then [00:48:00] work back and we've taken.

John Romeo: Elements of that, that's a useful discipline to think, what are we trying to build and get everyone bought into that. And then you can come all the way back to today, you go annually, then you go quarterly, you go monthly, et cetera. And you get the metrics against that, that both the management team of that firm and on the Oliver Wyman side buy into Now, it's rare that ever plays out according to the plan, but that doesn't matter.

John Romeo: What you've got is you've got everyone engaged in that and agreed to it. When you track those metrics over [00:48:30] time, if they're different, you ask the question, why is it something that we got wrong at the beginning? Is it something different in the market? Is it just playing out different than we expected?

John Romeo: And you can adapt as you go. We do that. It goes to the metrics that we talked about earlier, but we've also got, within PE firms, they all have playbooks on their value creation levers, pricing, et cetera. We do the same. We think about that on pricing uplift, on operational synergies and some of the functional.

John Romeo: Changes and it's all about part of building [00:49:00] that real clear integration plan.

Kison: That's pretty cool. Yeah. There is a level of discipline to acknowledge with PE firms. I like the view of just working it backwards, almost like, all right, how we're gonna achieve this optimal IRR. But there is that sort of taking best from both thinking

John Romeo: that discipline is tricky because as you say, there's a lot of interesting things and you could spend your time.

John Romeo: Very easily chasing after lots of things. We periodically just tried to check and pull up and work with the folks across Oliver Wyman and the regions [00:49:30] and the industry and capability teams on what are the clear priorities and how are we really spending our time.

Kison: Advice you give to many practitioners looking to build a scalable by lead acquisition strategy.

John Romeo: We're still learning. I wouldn't wanna be presumptuous as to advise people, but when we think of the best companies. In the world. They've got real alignment among the top team, but then through the organization of what is it that we're trying to achieve, and then everyone understanding how their role fits into that and moves that along.

John Romeo: And I'd say one of the [00:50:00] things that we've seen here is that if you want inorganic growth to be a key part of the firm's growth. Then it's gotta be part of the day-to-day business as usual in Oliver Wyman, what that has meant is we need all of our partners thinking about m and a. And that's been a big mindset Change means putting it into people's objectives and trying to change that behavior.

John Romeo: And that's had a huge impact because then you start to build a lot of excitement, a lot of drive, but [00:50:30] still recognize you need to counter that enthusiasm with recognizing. Not every idea is gonna go through to a deal. It's gonna be a small percentage in terms of the yield that you get from that.

Kison: This is key.

Kison: Creating a culture of m and a. So it's not a push, but more of a pull effort. How do you do that?

John Romeo: It takes a little bit of time. It takes explaining the vision. I think the senior folks need to have real targets on what percentage of our growth would we like to come from the inorganic side. And then aligning that ambition with some of the time and the resourcing.[00:51:00]

John Romeo: If you have a gap between that ambition and the reality, it's unlikely to be achieved. Everything's gotta be consistent.

Kison: Vision targets,

John Romeo: time and resources. John, what's the craziest thing you've seen in m and a? I mean, one thing you know, in m and a, right, there's always gonna be a surprise that pops up.

John Romeo: Now yours is a family show, so I don't want to get into some of the things that we've seen. We had a deal a couple years ago where we had gotten to know the company over several years. We were, I think, their favorite partner to go with. We were getting close [00:51:30] to a a deal, and then pretty much last minute from our perspective, another firm came in and offered a price that was many multiples of what we were doing, and they called us up and they said, listen, we just had this come in.

John Romeo: We said, there's no way we can match that price that you should go with them if that's what you want, and good luck. They went with the other firm. It was crazy to me, not in terms of the multiple. That's fine. Every firm can think about how it makes sense and it could plug in and maybe they had a much better [00:52:00] upside from what they had.

John Romeo: What was crazy to me was they made that finding offer, meeting the leadership team once. That was it. We would never do that. Now, maybe that would work for them. In that case it didn't. But to us, it's so important to get to know those teams and all the things we've talked about on the culture, the integration, the alignment, someone going in and paying it.

John Romeo: Any price after one meeting to me just seems crazy. The story of a happy ending. We've hired a few of those partners individually as they left the [00:52:30] firm. We'll see. But that's part of where you say in the market it's

Kison: question the market. They got their, their return back on it. But I agree. I've been known to be pretty impulsive and that takes the cake.

John Romeo: It can work. I'm not saying it can't work, it's not consistent with our philosophy and how we would do things.

Kison: I get if it was like a, an asset based deal, like a real asset based deal versus. You're acquiring of that many people. We're acquiring people

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