Integration-Led Diligence: Cisco's M&A Approach

How Cisco Uses Integration-Led Diligence

Kison: We agree like the biggest factor in M&A's [00:36:00] success is how well you can execute integration. And a lot of it we've learned from the years of doing so many deals is start thinking of these tough. Things early on of mm-hmm. The how, and then having that thesis in early and being able to validate it.

Kison: When you go through diligence, how does that actually shape your integration planning? You have this thesis, you start going through diligence and there's, I don't think there's ever a deal in history that has zero findings. So you, but findings bubble up and then obviously you go through, you talk through it, think of a like [00:36:30] mitigation plan for those findings, but then in turn you're leading integration.

Kison: How does that sort of impact the actual integration work stream?

Johanna: It does impact it a lot. So part of this tentative integration strategy that we set out very early on, we are testing that in diligence, certainly to be able to detail it out as we do fine diligence findings and attached to the integration strategy.

Johanna: In order to measure is this acquisition gonna be successful, we call out something called value drivers. [00:37:00] Essentially the metrics on which we do acquisition performance management. So it's important in that process to test out. Will this target be able to achieve success given the value drivers that we've formed based on the deal thesis, everything is surrounded around deal thesis and the value drivers, the metrics that we're measuring and going back to throughout the deal life cycle to ensure that we're achieving those targets because that's when we say this is success.

Kison: Those metrics, you're really looking [00:37:30] for like certainty against achieving those value drivers.

Johanna: They are quantifiable or they're at least time bound. So there's certain quantitative metrics that we achieve based on which dimension of the deal it is. For example, it could be retention from a people perspective, it could be go to market synergies for the larger deals where that's applicable, or it could be technology.

Johanna: We are acquiring a company to achieve faster time to market, so it's roadmap bound, it's time bound in terms of [00:38:00] that value driver. So it depends on the acquisition. It usually has those three aspects or dimensions.

Kison: Do you have an example of like when you come across something and you're like, all right, we had to change our plan here or modify it.

Johanna: This could be when, for example, a tech and talent, like a tech talk in technology isn't what we expected it to be. Or there's IP issues, for example, and you have to reevaluate, and that's really the purpose of diligence. We thought we were gonna do X with this acquisition, but you can't because of those [00:38:30] findings in diligence.

Johanna: So that will be something that will form a no go recommendation.

Kison: It could be a no go, or you might adjust your integration plan, or you might adjust your sort of deal thesis of what do we expect the outcomes to be? Because some of these things that we found out aren't exactly the way we thought it would be.

Johanna: Yeah, I would say we typically do smaller tweaks on a deal thesis, but in large the deal thesis, the. It's typically pretty set at those early stages and just because we find something in diligence, [00:39:00] it's harder to adjust a deal thesis based on diligence findings. What we do do is adjust the integration strategy based on diligence findings.

Kison: Okay. So

Tesia: yeah. Or price or deal conditions. Yeah,

Kison: we got like a lot of little things circulating back. 'cause you're validating this deal thesis. The integration thesis is part of it. With this integration led approach, you're really refining those metrics of what's gonna drive success and you're building certainty around those metrics.

Kison: And then the other thing is decisions. [00:39:30] So it sounds like you get a little leg up on some of these key decisions you're gonna have to make, which I have concluded is such a critical factor in how well you can integrate a company is really setting the stage to make fast-paced decisions. Because if you don't, then just integration gets delayed and it becomes excruciatingly painful.

Kison: Is that kind of what you're actually doing? I don't wanna make sure I'm not putting words in your mouth, but you're sort of going through diligence and you're actually taking some of this information, but you're using that opportunity to start making decisions for how you're gonna integrate.

Johanna: Yeah, so you [00:40:00] wanna have the critical decisions made early on, as you said, because ultimately what we wanna do is as fast as possible, time is of the greatest value here.

Johanna: As soon as the deal closes, you wanna get started in terms of execution of the integration strategy and plan. Because for larger companies where we have assumed go-to-market synergies, for example, you wanna get the go-to-market vehicle started so you don't miss out. 'cause time is literally money here.

Johanna: If you get behind on those synergies, we know how hard it is to catch up [00:40:30] and you have a momentum in the beginning. So making those decisions early on so that you can have strategies aligned so that you can have operational processes aligned to that strategy. And of course, you know, when it comes to go to markets, having seller incentives line up as well.

Johanna: So there's many aspects

Tesia: really coming out of diligence and in all of the final kind of commit or the buy decision as part of that is this kind of agreed upon integration [00:41:00] strategy. But things that are embedded in there are things around an end of sale, end of life decision, for example.

Johanna: Yep.

Tesia: If that's a critical part in unlocking some of that value because we need to exit customer obligations so we can refocus an engineering team, for example, even down to site strategy.

Tesia: So we've said, Hey. You guys are in metros that Cisco already has a presence [00:41:30] you're gonna co-locate. So the teams can work together and in getting ahead of a decision that if you come open-ended with the target and they have maybe an emotional connection to that building, you've almost pre-made the decision and aligned the Cisco executives.

Tesia: So then when you go in, you're not going in O Open, you're going in like, Hey, you're gonna be consolidating into the office and these three metros where you guys are located. It gets to that level. We have [00:42:00] our operations team look at some of their critical systems and make a recommendation of like, Hey, we're gonna get to a unified CRM system, for example, and that's all in there and all written down as part of that commit materials.

Tesia: So we have that to reference back to. So, yeah, as much of that as we can do early on, the better.

Kison: With that, I can see how you can accelerate things. Ultimately, is it the goal to [00:42:30] objectively integrate as fast as possible

Tesia: without destroying value? Yes. Yeah, this was great. Great answers. Thank you. I was gonna say,

Kison: because I, I, I can mesh, there's like pieces where you're.

Kison: One you kind of mentioned like integrate, not integrate, reverse, integrate. Mm-hmm. But then there's also a piece of like, all right, we want to, might wanna slow down that part. Like we might wanna wait a little bit and not just, 'cause there's some things that are different

Johanna: and that's why it's so important to be very surgical.

Kison: Surgical is probably the right word. Surgical

Johanna: is really the best practice. If [00:43:00] some parts of the business are not mature, like the go-to market vehicles, there's something Cisco has to change before you start integration. It's better to wait because you can't first of all optimize or perform the integration as you expected.

Johanna: So there's a sequence of happenings and you have to respect that. And sometimes that's the right thing to do. Yeah.

Tesia: Yeah. You just have to be really clear on what's generating value. And understand how that works. So you can then make decisions. [00:43:30] Again, that's why you learn about this stuff as early as possible and make decisions around, okay, we need to protect X, Y, or Z.

Tesia: 'cause it's critical to how we're generating value. As a combined company.

Kison: Do you have like general rules of, Hey, we want to integrate these functions in early versus other functions in later?

Tesia: Yeah, I, we certainly have guidelines. Guidelines, yes. Expectations, right? So things that move very quickly are anything on the employee side.

Tesia: We need one HR system as soon [00:44:00] as possible. One payroll, one set of benefits, all of that stuff. None of that lingers sites we're trying to be, also move that as quickly as possible. Rip the bandaid off and honestly anything corporate facing, 'cause you wanna make sure that. Your finance team has oversight on their finance team and that those teams come together very quickly, so we're making sure we're doing everything for all of that finance, close consolidation, [00:44:30] external reporting, done really right away.

Tesia: Legal, same story, any of the regulatory, compliance, tech, all of those we integrate very quickly because of the legal and regulatory issues in those spaces. Where we get more measured is things around engineering, sales, stuff like that, where we're really trying to be like, okay, what model works best for what we're trying [00:45:00] to do?

Tesia: Both for the business unit that acquisition is going into, and how the acquisition is structured and drives value

Kison: Surgical. Yeah. What's day one, like as a big party, you know, this is, uh, the win-win in buyer led M&A. How do you get. The best people experience for the incoming employees and the best people experience for the existing employees.

Kison: So they're really excited and just like motivated, you hear the horror stories where you don't communicate things right and you got FUD happening and people are [00:45:30] just like you've mentioned, the attrition metric.

Johanna: Yep. All of a sudden that's

Kison: in the red line

Johanna: and that is acknowledged as a critical process.

Johanna: So shout out to our employee experience team whose critical responsibility it is essentially to ensure that that, and they have a really smooth process for after close. There is standard methodology for. Clear communications and uh, how do we perform onboarding of acquired employees to Cisco so that they know the basics of how [00:46:00] Cisco works as a company.

Johanna: What does a standard set of tools look like? And of course get a face. So we tried to do as many of these onboarding for new employees in person. So I had a fortune of traveling to the UK for the Splunk acquisition to do that while coming in person. For the UK employees, it really is a good way of showing the human side.

Johanna: You have a party of transactions? We did have a party. You have a party. Yeah.

Kison: That's good. That's a good way to start things. It's like, hey, let's celebrate. How about schwag? You hook people up the swag. Oh, you

Tesia: [00:46:30] have to. Yeah.

Kison: These are the fundamentals.

Tesia: Yeah.

Kison: To make day one successful, you gotta have a party.

Kison: Gotta have swag. Anything else? Or like big day one staples.

Tesia: I'll call out announce versus day one announce we try and have one of the Cisco business leaders be there hand in hand with an acquired leader so they can articulate that joint vision. That is as soon as the employees are knowing, we typically do a private announce first.

Tesia: So they hear it from their leadership and the [00:47:00] new Cisco leadership to really hopefully get them bought in to you. Were operating towards Goal X as an independent company, now we're operating together to goal Y. But really getting them to understand that as early as possible and see the Cisco leader and see their leader together is really important.

Tesia: And that's an announce. And then all the good stuff Johanna talked about is that's in that next phase of the employee journey of, okay, what does it mean to be a [00:47:30] Cisco employee? And how do we help you give that white glove service as you move over?

Kison: Oh, so this goes back to like the big picture overall strategy.

Kison: So at announced you want to get alignment on strategy. Folks excited about this actually makes a lot of sense.

Johanna: Mm-hmm. And then day

Kison: one. Yeah, there's

Johanna: different day ones, right? So day one is when we announce, it's before the acquisition has even closed, so, so you'll

Kison: actually consider that day one announce,

Johanna: announce is when it's,

Tesia: when everybody finds out, that's day one of ever and you want that to go well,

Kison: right?

Kison: Yeah. So hopefully you're in [00:48:00] control of that and it's not just leaked out, but Yeah. Yeah,

Johanna: yeah. So that is really one of those, we call those moments that matter. It's announced, it's the first time the employees of the target are hearing about the acquisition. So having our chief product officer there is typically important, like the highest level of executive leadership team at Cisco is acknowledging this is a huge acknowledgement of the importance of them as employees.

Johanna: And then also showing their leader their CEO there together. So back again to [00:48:30] the why that's critical for that first meeting and hearing about the acquisition for the employees. So that's the leading cause of the private announce and what we try to convey as clear as possible.

Kison: Any, uh, things that happen after day one?

Kison: I feel like there's a lot of people, you got a clear plan in place. You got people fired up at this point, hopefully. And then is there anything that just Cisco does to give assurance that things are ultimately gonna be successful through the [00:49:00] execution?

Tesia: So we do a couple of things. We look to each function that's receiving employees.

Tesia: Okay, you've become a Cisco employee, but okay, what does it mean to be an engineer at Cisco? And how do we help you understand? So there's typically that receiving function. We're like, okay, how are you going to engage those employees? How are you going to help them function in a broader context? So things that have happened is we've done teams, or at least [00:49:30] executives visit each other if they're in different sites.

Tesia: We have people set up with buddies. We have those acquired teams getting pulled into their broader all hands, just making sure that they're connected with the rest of the employees in that function and those kind of cultural rituals and the things that they do. And then the other lens that we've taken is we recognize that it's sometimes hard to be a [00:50:00] manager at Cisco because there's all the performance rituals and the compensation rituals.

Tesia: All of that is surely different at Cisco than it was at some tiny startup. So we do a, like a acquired leader enablement that is very specific to. Hey, this is what it means to be a leader slash manager at Cisco. If we enable those leaders, then they can help disseminate that [00:50:30] to their teams so they don't feel like lost in the broader Cisco.

Tesia: We're trying to equip them with tools. So there's a couple of things that, you know, a lot of our people teams have developed. These are the M&A teams that sit in the our people in our HR function that have really developed some really fantastic programs like what I just outlined, to help make that an employee journey and not just a like plunk.

Tesia: Here you are.

Johanna: Yeah, and to add that is perfectly [00:51:00] described in terms of the execution. Just zooming out back to timing on when we do things. This engagement plan on how acquired leaders will need to engage with Cisco leaders and acquiring business units. Leadership needs to be engaged with the acquired employees to show how important it is.

Johanna: And all of that goes into an engagement plan at an early stage, which again, we're validating in due diligence. If there's a certain people risk, for example, [00:51:30] there's a heightened risk for attrition after close, then that will need to be detailed how it's going to be mitigated as part of that engagement plan or change plan.

Johanna: And so it depends on what risks we see, what level of effort we need to do in terms of the engagement plan and the engagement activities. But then there's also a standardized set of those functional onboarding activities that we do every single day. I got it. So

Kison: there's this broader engagement plan, and then you have initiatives to connect to people.

Kison: Mm-hmm. So they're really like fitting in [00:52:00] at home and then there's leadership enablement. Which I think would be like a whole podcast topic of its own, because it's one that I've noticed the companies that are really successful integration have a strong leadership enablement program in place, and the ones that aren't don't.

Johanna: Yeah.

Kison: So one thing we have not talked about through this whole interview is those corporate development folks out there, you took away diligence from them. So they, that's pretty much it. They just get the handshake on the L oi and then they're out.

Johanna: We do partner with them on a quarterly [00:52:30] basis, like Tesia outlines and I, I would like

Kison: that job.

Kison: I just say, I'll get to L Lo I and I'm out. That would be beautiful. Well, beautiful. Well, actually,

Tesia: and this, Johanna and I were talking about this as we were doing the prep, is they really manage beyond just doing deals. They manage an overall portfolio of investments in a full lifecycle of, Hey, what spaces is Cisco interested in?

Tesia: Where do we need to be engaged to see how. The technology is emerging. Okay? [00:53:00] How do we get investments in those companies? How do we follow that as it grows? How do we potentially take an ownership position? 'cause we'll typically have some sort of right of refusal if a company that we're invested in is looking like it's going to get bought.

Tesia: So they're managing all of that. Yeah. Deal making's a part of it, but it's just like the end stage of a broader kind of strategic portfolio management. There are

Johanna: [00:53:30] friends focused, keep them focused on our framework. Yeah, well shout out to our corp dev team because if we wouldn't get involved in an early stage, it wouldn't be setting integration up for success.

Johanna: So's true forever. Grateful for Karen Ashley, our VP, for building that relationship on a leadership level and enabling us to do what we do at such an early stage. You know, I thought we gotta

Kison: rebrand like it's almost in your organization. It just should be not corp dev and it should be rainmakers and value creators.

Kison: You mentioned earlier, [00:54:00] use the phrase M&A community. What does that actually mean? At Cisco

Tesia: for us, we really recognize that all of the functions that have standing integration professionals, so typically we've got a handful of folks in our major functions because we are a serial acquirer, and those folks really serve as the bridge of someone who knows integration and knows their [00:54:30] function really well.

Tesia: They really go in and take this integration and the integration strategy, and then using that functional knowledge say what does that really mean for it or for supply chain. Or for finance, what's the highest order work? What are the things that are gonna be the most problematic? And then they're pulling in their broader stakeholder teams, [00:55:00] like maybe it's the accounting team that needs to understand how to do a deal review and approval for these new types of deals that, that are coming in.

Tesia: Because we acquired a company, they're the ones that have to build that bridge and make that linkage. And they help us in the central integration team really connect and understand how this integration is gonna flow as you really go to this process that has to [00:55:30] change this system, upgrade this team that needs to go do something differently.

Tesia: They're what make that happen. We are very tied into that broader community. So. We have those leaders, we meet with them every two weeks as a integration leadership community. So within our central integration team, plus all of those function integration leaders to talk about what's happening on pipeline, [00:56:00] what's happening on Splunk, what's some top of mind issues that we need to be more on top of?

Tesia: Really the leadership levels connected, but then those teams are connected because that Johanna is an integration lead. It's literally pulling together all of those functional team members to understand and drive that work down to this finance process, this IT process. And we have quarterly all hands where we all get together as a broader community.

Tesia: So we [00:56:30] really recognize that we're all one team and if we're not all working together and pulling in the same direction, like this work doesn't happen.

Johanna: That's wonderful. Described. And we all stay connected not only through this meetings, we have a wonderful tool where we measure all the inputs, lessons learned, all value drivers, everything related to all of the deals that we do is all in one homegrown tool called M&A hub,

Kison: central source of truth, which I think is central source of truth, [00:57:00] which is really important.

Kison: Like in the M&A program. You need one place. Yeah. And collaborate priorities, central truth, and it's,

Tesia: that's how everyone you know really understands what's happening. Yeah. We have a full detailed plan. All of the aspects of full integration or compliance alignment that need to happen is all tracked there so teams can understand what other teams are doing that they're dependent on for work.

Tesia: And also centrally, Johanna, like an IL, can go in and [00:57:30] understand what's happening across the full scope of the deal. We have all of our metrics in there so people can see how the deal's performing from a financial perspective, from a retention perspective, all of that. Wow,

Johanna: that's awesome. And so I read all of that work with the M&A community for every deal, and we course correct when needed.

Johanna: Of course, when we see those inputs are tracking one certain direction, we're off on timing or we're off on. Sales could be other things. Anything. If it's off [00:58:00] track, we go and talk to the M&A community in the area which it belongs to. Also, of course, celebrates with the M&A community when things go well, so it is our M&A family.

Kison: Now, this got pretty complicated, pretty quick when we explained what the M&A community is, because in a small scale you usually have your deal team, maybe your lucky integration leader, it's incorporated, which it should be, and then you have like fractional folks in the functions. Mm-hmm. That's it.

Kison: Mm-hmm. In this case, you have dedicated folks pretty much in all your functions,

Johanna: both model, depending on a [00:58:30] function. So we have fractional in each function, or we can have dedicated resources. Well, yeah.

Tesia: Typically we at least have one or two that that's, and sometimes more. Mm-hmm. That's what I mentioned.

Tesia: It's, it's

Kison: in your model, it's like a mix. You'll have like dedicated plus fractional that they're sort of ing into. That's where it got so complicated quickly. 'cause then it's like, oh, you got some leads and then they got support. How many people are we talking about altogether here?

Tesia: 15. Like 15 functions.

Tesia: Cisco terms of functions.

Kison: How big M&A community. [00:59:00]

Tesia: Oh man. 180. Wow. 1 50, 180.

Kison: It's a tiny little country there.

Tesia: Yeah. Compared to whatever. 90,000 employees at Cisco.

Kison: It's,

Tesia: it is a tiny little country I know. Like, but emphasis on the tiny versus emphasis on the country. But yeah,

Kison: I go to, I go all these MA conferences, like that would be a whole conference.

Kison: So just, uh, and then coordinating it. You have these sort of reoccurring meetings. Keep 'em, everybody updated. And then tech, we talk about's a big thing. Mm-hmm. [00:59:30] Which I totally agree on. I've gotta learn a little bit about your tech stack too, which was just, you've just worked at it for so many years.

Kison: Mm-hmm. And it's like a very bespoke to how you do things. It's like really fascinating to get ideas and learn from it. Is there any other things that are like special for just aligning this M&A community? It sounds like this sort of like a qualitative kind of in-person conversation. Mm-hmm. And then having them, the hub look no matter what doing, it's all tracked in one place.

Tesia: Yeah. We do some trainings, we do some cohorts. [01:00:00] So we recognize when we get a certain kind of critical mass of new folks across the broader community, we'll run a few hours of training just to say like, okay, do we all understand how this broader process works and why we do what we do? Recognizing that they're gonna bring their functional expertise, but they need to understand what happens on an acquisition.

Tesia: 'cause typically, and this is true, even within central acquisition integration, folks come in with Cisco [01:00:30] experience but not acquisition experience.

Johanna: Yep.

Tesia: So they need to learn acquisitions as they come into the role. We have some training on demand. You can go check it out. But then we try and run an in-person session every few quarters.

Tesia: When you get a critical mass of folks that are new to the community to make sure that they understand why we do what we do, what's the value to Cisco? What can you expect from your central team? What do other [01:01:00] teams, because we actually bring in other functions leadership so they understand who's doing what work.

Tesia: So the people acquisition leader will come in, the sales acquisition leader will come in. We also bring in corp dev, and they talk about deal strategy and how they come up with deal strategy. So everyone gets this baseline understanding so they can then start putting the pieces together as to, okay, my scope is this very specific [01:01:30] thing, but how is it connecting into the broader picture?

Kison: Yeah. So continuing education.

Tesia: Mm-hmm.

Kison: That's really helpful to get a whole sense of what the M and community is. I gotta ask you something a little. 20. I don't know if this is off record. This will stay on record, but let's pretend it's off record. So when you see a large public deal announced, going back to the Splunk thing, I'm under the impression from enough of these interviews that there's secrecy.

Kison: 'cause you don't want a big deal like that to get leaked. Mm-hmm. Because it just creates ha havoc and like stock price fluctuates and it's, [01:02:00]

Johanna: it'll ruin its, it'll kill it. It'll kill a deal.

Kison: Kill a deal. We've seen that. Yep. We've seen that happen. Mm-hmm. Before, you know, you hear the stories like executives flying in the middle of nowhere to like talk about a deal or some really obscure things.

Kison: With that, I'm assuming that there's a very limited diligence that actually happens. 'cause at the end of the day, you see these deals transact on some premium over a traded stock price. 'cause the company's public. There's so much information that's really publicly available. Mm-hmm. And it's almost like that kind of [01:02:30] transactions look, you can do all your diligence, you want public information.

Kison: At the end of the day, our board's gotta approve it. And there's just shareholders that just are fixated on what that dollar amount's gonna be. And that's it. Nobody's caring about any of this integration stuff. And it happens like some of these deals get rushed and we hear crazy blow up stories of that going wrong.

Kison: And I'm just curious, how'd that really go down as Splunk?

Johanna: It's a really good

Kison: question.

Johanna: I was going to emphasize that because it's a public deal, there is so much information available, which makes our lives [01:03:00] easier when it comes to due diligence. But I also wanted to, just for the case of Splunk, we have many questions in due diligence and we got all of them answered.

Johanna: So it, it's still a collaboration with the targets in terms of due diligence. So it's not like we're relying on public information only, but it makes our lives easier when it's a public target. But when it comes to the number of people, then that's the critical matter. So it's not getting leaked because of how many people we typically involve in due diligence with our [01:03:30] functional structure, we decided to limit the number of people that were under the 10 for Splunk and actually took in outside support to do due diligence.

Johanna: So that's something we outsource. We typically do that in house, but for the Splunk deal, we decided to do a third party.

Tesia: I was involved very early on. Cisco knew we wanted to do a transformational deal before we decided on Splunk specifically. So there was a lot of work on [01:04:00] what did we think that kind of deal would need to bring to Cisco.

Tesia: There were a select number of targets evaluated against our strategy. Splunk came as what was a very attractive target, and then there was quite a bit of very senior executive level conversations with the corp dev team, the corp strategy, and like just a super small handful of integration people to really [01:04:30] start.

Tesia: Developing what this would mean. And we did bring in an external party to even do some customer surveying to get that validation of what was Splunk good at, what was Cisco good at? What kind of combinations might be interesting. So it's not diligence around Splunk per se, but diligence around the combination where Splunk was strong and where Cisco was strong, that helped inform some of the [01:05:00] synergy work that we did.

Tesia: So it wasn't,

Kison: that was pre LOI or was that after? Well,

Tesia: I mean LOI for a public company that started pre LOI, but we invested a little bit more into it

Johanna: after L loi? After loi? Yeah.

Tesia: Okay. So even though true due diligence, like what we do most of the time, 'cause we mainly buy like non-public companies, didn't look the same.

Tesia: But we did try and do different kinds of work to validate. [01:05:30] The deal thesis and the synergy cases.

Kison: So you didn't deviate, you stayed true to your model of how you create value, but there is some acknowledgement around the sensitivity. Yeah. Keeping the tent pretty narrow. Mm-hmm.

Tesia: Yep.

Kison: But you still did the work, like you still actually went through doing the reps and it wasn't just, we're gonna scribble a number down and see if we get thumbs up on it.

Johanna: Yeah,

Kison: pretty cool. Do you know the thing that there's culture that we talk about, like integration, that's such a big factor. I feel like the other huge one is go to market and that's one where it [01:06:00] happens. You buy the company, you financially model it, you assume you're gonna integrate all these revenue synergies and nobody like thinks through an actual go to market plan.

Kison: Or you're trying to figure it out after you close, how do you do it? What's the Cisco way of thinking about go to market?

Johanna: It goes back to deal thesis. Think about the customers. What would make sense? What would be a good customer story like in the world where the two companies are joints, what would be the customer story?

Johanna: What's aligned to strategy and what is going to help us [01:06:30] achieve that compelling customer story? So it's around what is the product story then around those customer use cases, and what do we need to enable that? So the next step is once we have the strategy, the deal thesis, from a go-to-market perspective outlined, it's about making the community excited.

Johanna: So with those proof points stories, and there's the operationalization around that strategy as well, like you have to get those pieces together. You have to be actually be able to sell the products. [01:07:00] So the transact ability, seller incentives, need to be in place. So. That comes more down to the execution part of it.

Johanna: But you have to again, start with a strategy aligning customer story and make that happen.

Kison: That's a whole big work stream of its own. Yes. Mm-hmm. Now does it, so you have this deal thesis that you do, even pre LOI is go to market in that deal thesis or do you look at it as a whole separate

Johanna: No, in the deal thesis and it's in the integration strategy.

Johanna: I mentioned commercial transition. It's one of the [01:07:30] primary sections of the integration strategy, like how are we actually going to sell with joint forces with product? Is the product going to be sold? Those are all decisions that are made as we form that integration strategy

Kison: and then that will continue, like we talked about earlier, that would shape as you go through diligence.

Kison: 'cause then you can flush out, yeah, integration, planning, those key points, the customer story, the product story. How do you operationalize, go to market? Then all the fun underpinning [01:08:00] things that makes it easier said than done.

Johanna: CRMs and other fun things. Yeah, sales come

Kison: quote to cash and

Johanna: yeah, goaling, there are plenty of

Tesia: aspects.

Kison: How do you test portfolio fit and seller and send is before close.

Tesia: That's what some of this external work on Splunk did is really just to say like how does the Splunk and Cisco portfolio come together, but more focused on who's gonna sell what and how. [01:08:30] For us, one of the things that we do have to think about from a go to market strategy for Cisco specifically is we are 90% plus sold through partners and that partner ecosystem is very important in how Cisco goes to market.

Tesia: And that is typically not how other companies or even Splunk goes to market. They had a partner motion, but they have a direct motion. But [01:09:00] when we think about, okay. When you're coming into Cisco and we're gonna try and sell through Cisco's routes to market, we really have to think about what's the partner play there, because that has negatively impacted South go to market synergies in the past.

Tesia: For us, if we don't think about, Hey, we're gonna take something that was potentially sold direct and we're now gonna sell it through a partner when it goes through Cisco [01:09:30] and how does a partner make money, how does the Cisco seller make money? All of that can be very complex and has made some things that seemed easy on paper, really hard.

Tesia: And this is pre Splunk for sure. A lot of our previous product deals. To get market traction when you shift from how the acquired was selling it, how Cisco will sell it has been challenging. We learned some of those lessons for Splunk, and [01:10:00] those are some of the places where we're not disrupting how Splunk is selling until we can get emotion that works that we're sure is not gonna destroy value.

Tesia: So those are some of those things that we really have to think through. Surgical. There you go.

Kison: That's why go to market is complicated. Yeah.

Johanna: Yeah.

Kison: What's the secret to make it work? Well

Johanna: assess where it fits.

Kison: Again, I feel like there's this big assumption problem. Yeah. Where you're just like, Hey, we're gonna cross sell.

Kison: Like I'm doing it right now. I'm looking at a deal. I'm like, [01:10:30] this is an fp and a software company. They sell in a similar customer base as ours. We could totally cross sell this product and I'm eager to do a deal. I'm like itching. Yeah. You're doing all these interviews. I'm like, I, when do I get to do an M&A deal?

Johanna: And

Kison: so I'm, I'm like the deal guy that's just like eager to do a deal and then, uh, so on. We pump the should we like partner with them first and validate we can actually cross sell. It's actually

Johanna: more complicated in real life than it is on paper because you have to get that count teams drawn together.

Johanna: You have to find those compelling customer stories, the use [01:11:00] cases, and then go sell with the one story to the customer of the joint offers the bundles. Or the integrated product Depends on what you're trying to sell. Yeah.

Tesia: And partnership at least helps you test that, model

Kison: deals that go smoother. Ones that probably already are partners where you already have that mm-hmm.

Kison: Emotion. Yes. Yeah. Yes. Versus just you assume it and then you just try it and it's whoa. Yeah. That's where you got that higher risk factor. Yeah,

Tesia: exactly. And nothing we're saying here implies Cisco's a hundred percent successful at that. Just full, full [01:11:30] disclaimer. Yeah, disclaimer. But yeah, we've done really well when we've bought someone that was like an already a partner or like an OEM, and we're like, oh, the value prop to the customer and the interest in the markets already been validated.

Tesia: And so then you make it one thing, one company rather than two companies partnering. And the other thing is we'll shift strategies.

Kison: What are principles that have helped you move fast on Splunk and just generally [01:12:00] be successful at M&A at Cisco? I

Johanna: think we touched a little bit on it already, like being.

Johanna: Very focused on outcomes, decision driven, and doing it early on. Be obsessed about the outcomes and be obsessed about what decisions you have to make and what time to realize the value. Hundred percent. Yep. And

Kison: just get in early. Yeah. Integration. Get a early thesis before LOI and during diligence, validate it.

Kison: Get a headstart on those tough [01:12:30] decisions you gotta make to make MA successful.

Johanna: Yeah. Mm-hmm.

Kison: I gotta ask before we wrap up, what's the craziest thing you've seen in M&A?

Johanna: I wanna tee it up with saying, sometimes the craziest things happen on the small things like you would think like the big decisions like strategy or.

Johanna: Price would be some things that will stir up things, but it's in the people perspective and sometimes the small things become the big things that can actually jeopardize the closing of the deal. So I don't know if you have a story on that. I'm about [01:13:00] jeopardizing closing, but man,

Tesia: we had VP level escalation and at least a couple of weeks of discussion about how a certain espresso machine at the Cisco site was unacceptable compared to the espresso machine that they had previously.

Tesia: And there you go. It's the little things that apparently people get very emotionally attached to. And so yes, we had an escalation and had to get a site exception to get a different [01:13:30] espresso machine installed.

Kison: Were they Italian? Because that should have been part of the cultural, the cultural, the cultural

Tesia: assessment.

Tesia: I know we should have known. Right? No,

Kison: This has been such a great conversation. I'd like to thank you both Teisa, Johanna, for taking the time from working on deals to have this conversation and helping me be the better M&A scientist.