Key people for alignment
One of the most important things is understanding the deal objectives from the deal team first. Why are we trying to do this particular deal? Start with the value drivers of the deal.
Then, you align with the business unit sponsor. They champion the deal in terms of their vision, its importance, and how they can benefit from it. I call that the North Star, which everyone should align to.
Our role as an integration lead is to help facilitate functional teams on how they focus on diligence, but also help plan their integration based on what we're trying to get out of a deal.
It's also incumbent upon the acquiring company to make sure they're aligned with the target leadership regarding the deal rationale and key objectives. For things to be fluid, you must have alignment on both sides.
If there's misalignment, things tend to fall apart because you brought in company leadership directed to do things that aren't aligned internally or vice versa. And now, the integration team will be confused about how to support the deal and integrate their functions.
To summarize, the business development lead and the internal teams are critical early on. First, those teams need to make sure they're in lockstep with target leadership, and then things cascade down from there.
Once we have that alignment through various conversations, I will consolidate that information and the findings from diligence to cobble together an integration kickoff. This is where all the folks that have been involved in diligence and are transitioning into leading integration to have everyone understand:
- Why they're doing the deal
- What are the deal's primary objectives
- What the integration model is. Whether it's full integration, standalone, or hybrid.
- Key findings from diligence
- Early Initial Integration Planning
We want everyone in alignment and in lockstep before we kick things off from an integration standpoint. If stakeholders can't clearly articulate the deal rationale to people like myself and the target leadership, then you will have problems down the road.
As an integration leader, you can help by looking at critical items like legal, finance, or tax, where they might be showstoppers to a deal. But it's better to go deeper and understand how a company operates, who the decision-makers are, and some initial integration planning.
- What's the plan for an acquired product?
- Is it going to be integrated into the product roadmaps or sold independently?
- If it's independent, what's the go-to market model and strategy?
- What are the communication messages to clients?
Getting the thought process started on some of these key questions will help you have the right messaging to the target and your customers and theirs. It will also help you communicate those messages internally to target leadership and the team who's going to be involved in integrating both sides, so everyone has a clear understanding of what we're trying to accomplish.
The goal is to ask smart questions because people can get caught up just getting the deal done, and they haven't necessarily gone a layer or two deeper, on the thinking and the rationale.
Alignment with target leadership
The target leadership must be bought into the deal rationale because misalignment can lead to mistrust or misunderstanding, eroding the deal's value. And then you start putting people on different paths,
Also, The integration model starts falling apart, and you get further away from the deal's value. If you take a step back and think about it, it should be logical that a discussion is something that is done up front to make sure and validate why you're doing the deal.
How to align with target leadership
During the deal process, you have to make sure those discussions are happening. So what I like to do is meet with the target leadership before closing to review the integration plan.
Because you need to coordinate with them early on in terms of the key functional workstream leads from the target company that would be engaged from an integration standpoint and a leadership standpoint.
You can see very quickly that things could fall apart if you don't have that alignment. So I try to ask questions from the deal lead like, "Is the sponsor or the leadership talking to the target?" Or, "How aligned are they philosophically on what they are trying to accomplish?"
It hurts in the long run if both sides aren't well aligned early in the process. Doing an integration is disruptive, and you want to move relatively quickly and you can only do that if both teams are going toward that "North Star."
Pushing the alignment of the vision and the integration planning as far upfront as possible is the best thing you can do. Especially if you are trying to move quickly from a go-to-market perspective or integrating a product roadmap perspective, the faster and the earlier you can align on things, you will have the momentum carried into integration or post-close.
All of these alignments are incumbent upon the integration leader because they are talking to all these different parties. Everyone else involved in diligence is typically focused on their area.
As the integration lead, you're that nexus of bringing all of these different areas together and ensuring everyone's on the same page, aligned, and working to the same end.
You have to push these conversations early because they take several iterations before you come to concrete solutions. It helps facilitate success on integration, which is where you're reaping the deal's value.
Getting what you want out of a deal has everything to do with integrating and being aligned between the companies.
Influence on deal model
Integration leads have an impact or influence over the deal model in several ways. First, you have to think about it from a diligence perspective. They'll look at whether integration costs or one-time costs are part of the integration from an IT, legal, or finance perspective.
If you think about the go-to-market models, you're digging a little deeper about what region you want to go to first. And then there is the discussion of how to do that. All of these discussions can influence the deal model.
Another one is from a resourcing perspective, if the company needs more people from a product development standpoint or sales perspective.
There can also be timing issues. For example, if you're planning to go to the market during a first-quarter post-close, you need a series of steps to execute from a legal, tax, or software licensing perspective, and those things can take longer than you expected.
Timeline of the kickoff meeting
Typically, Corp Dev has both the transaction and the integration folks as part of one team. When I was at Visa, we had great relations between the integration team and the deal leads. As the team is getting close to negotiating a letter of intent, they would come to me, and we'd discuss the deal's structure, the deal rationale, and the risks they are seeing.
And based on that information, I can start asking questions and engaging with an executive sponsor. And once I get approval from the deal leads to talk to the key members of the functional integration team, we start talking regarding key issues and strive for alignment. I can be that early warning for the functional teams on key areas.
So once we get the letter of intent signed and we get into formal diligence, you know the deal lead will kick off diligence. And now we need all the right functional teams involved and are on a clock due to exclusivity.
And as part of that kickoff, usually, you're setting a window when you want the first drafts of the diligence reports back. That's my marker. Then I start sending out meeting invites across all the functions team and review findings from diligence.
We will also discuss first, the integration model and second, other aspects that may bleed over from diligence to integration that needs to be accomplished as a condition of the close or within the first call at 90 days of integration.
So engaging with each function, you have to review the deal again. Look into value drivers, and integration findings, and as you move through diligence, the deal team should conduct check-ins. You're also continuing to have iterations in plenary with the executive sponsor and the functional teams to review outstanding issues and other findings from diligence.
This is where you understand who the target company's key people are. In addition, you understand who are the functional leads involved from an integration planning perspective.
As part of the overall kickoff, we're starting to build the governance model for the deal.
- Are we going to have a steering committee?
- Are we just going to have an integration management office?
- Who are the functional leads internally and from the target company we'll need to engage with?
As the deal team is coming at the end of diligence and there's been following conversations with the target functional teams and our functional teams, I try to be involved in those meetings so I get more information as our teams are meeting with the target during diligence.
You're also getting more insights to help facilitate the integration model and identify some key issues and the integration kickoff deck. And as a part of that I am collecting all this information as we're going through diligence.
And a couple of weeks before the signing, I like to review everyone as part of the diligence readout.
- Who's going to be reporting to who?
- If we are moving people, who will they start reporting to after 30 days
- What are the risks of the deal
- What are the things that we need to get done in 90 days or after closing
As the integration leader, you are responsible for validating all this information.
And depending on the nature of the deal, we may conduct an internal integration kickoff where we bring everyone together and go through the deal rationale, diligence findings, and the 90-day integration plan.
If it's a private deal, we have an offsite with the functional team from the target and our team to align our view on integration and figure out what we're missing. If you can discuss alignment pre-close, then great. If not, then immediately post-close.
After the deal is closed, we'll set up bi-weekly or weekly initial integration meetings. In some cases, every three weeks. Sometimes, the meetings can be done with the target organization, functional teams, or internally, depending on the deal size and nature.
If you can be a part of what the deal team is leading from a diligence perspective, you're leveraging the existing meetings. You're not creating incremental meetings to focus on integration. You're weaving integration planning discussions into the diligence exercise which is important.
Frequency of integration kickoffs
During diligence, I iterate on getting all the messaging right, findings, risks, and key things we need to complete in each function within 90 days. Then, I bring all that together with my team and play it back in one kickoff meeting.
In that kickoff meeting, it's really important to have the executive sponsor and the deal lead convey the overall deal rationale. And based on that, I'll walk people through the governance model for integration, early integration planning, and timing for some of the key activities we need to execute.
Because they could be regulatory issues and other things you need to get done in a window of time. We want to make sure we are aligned on that but it's only one in integration kickoff, shortly after signing and right before closing.
We've included milestones to our templates that we can weave into the unique aspects of integration or diligence. So when they start, they already have a semblance of a template and a plan. They can further build out that plan as needed based on the unique characteristics of the deal.
We have that prepared ahead of deal-close as well, but it's one integration kickoff. But, then, we're going to use our integration recurring meetings to execute and report back on status, issue escalations, or incremental findings that we didn't discover during diligence that now are available to us. And that's on the internal side.
With the target, we want to bring them into the fold. If it's a private company and the deal sponsors approve it, we will talk to the target leadership and engage some of their functional teams to help. This will give them a sense of how we're thinking about the deal and whether our planning and timing resonate with them.
But if it's a public deal, you may have to wait until the deal's closed. You want to avoid running into gun-jumping problems. There's not one answer that fits every case. You need to have more leeway with private companies. But, for publicly traded companies, you have to be more sensitive.
Working with Deal Sponsor
One important thing to know is a deal sponsor is more senior. They are focused on getting the deal done, they need to run a business, and they have a lot of other priorities. So it's important to know who their lieutenant is or who's the day-to-day decision maker for the leader's behalf that I can engage with.
I engage with that decision-maker for at least 10 hours a week because, as an integration lead, you have a certain degree of knowledge about that business, but it's never going to be enough. You need to rely on that decision maker to be a part of integration execution and have recurring conversations with him as you go through the process.
It's important to identify who within the business we can work with the integration lead who understands the business well. He needs to be a decision-maker, can partner with me, and be a part of the IMO to help coordinate issues. Or, escalate concerns to the business sponsor.
Leveraging them is important to ensure that you're executing at a constant pace. Otherwise, they'll become a bottleneck if you're trying to rely on a deal sponsor because they're so busy with other priorities.
Depending on the business, this person could be the product head. It could be the quasi-COO (Chief of Operations), a person in the COO role, or the chief of staff. It could be a key salesperson in the organization if it's more market-oriented, provided that sales directly reports to the business leader.
It's important that the right hand to the business sponsor is someone who's involved in a day-to-day business so you can tap into their knowledge, help make decisions and prioritize.
Both parties are still running businesses, and you have to make sure that the integration execution doesn't impact some of the work that's being done with the respective business.
It's getting their time and not getting too tactical. They stay high-level in terms of deal value drivers, deal rationale, etcetera. And also, there's a focus on getting the deal done; they haven't had a chance to step back and talk about how to align both companies.
Sometimes, it all depends on the leader - how senior they are, how they operate, and their span of control. It can be quite large. It's very painful, which is why you go through iterations.
And sometimes, the integration lead has to act like a storm and people side who keeps raising issues until they are answered.
It's much more complicated because you're dealing with people. It's difficult because there are sensitivities to these discussions, complexities, and potential implications for people's jobs. So you have to factor these things.
Advice for New M&A Practitioners
If you want to get into integration, focus on getting a lot of broad experience in different areas of companies. As an integration leader, you need to understand everything. Then, you can apply that knowledge as a base before growing in a different understanding of all other areas.
If you are interested in this role, do a number of different roles such as PMO or lead strategic initiatives where you're working with many cross-functional teams.
The other thing is to listen first, then understand things. Be someone who can cobble things together and put the puzzle pieces together. You have to be able to think strategically. You need to execute strategies and have a good attention to detail tactically.
Then, learn to communicate. You are the coordination point, and you have to share with everyone to keep them on the same page.