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Proactive Deal Sourcing

“Just because something’s interesting in the market doesn't mean we will be a better owner of that company. Just because it's cheap doesn't mean we should buy it.” - Lisa Marchese

It’s been proven time and again that culture should not be ignored during acquisitions. In this interview, Lisa Marchese, Head of Corporate Development at American Express, discusses proactive deal sourcing with culture in mind.

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Lisa Marchese

Episode Transcript

How to look at M&A strategy   

"Strategy drives M&A, it's not the other way around. Just because something's interesting or hot in the market doesn't mean that we would be a better owner of the company."- Lisa Marchese

We spend a lot of time with our business partners talking about the strategic intent and the strategic theory behind the acquisition, which culminates in where we believe there's synergy value. 

It's rare that we are successful with the transaction in search of a business strategy. We often use our pipeline to help inform where the market trends are going and get a sense of what might be interesting spaces, but at the end of the day, it starts with strategy.


We rarely buy something that sits outside of our core as a standalone business. Instead, we focus on what are those product services capabilities that will add value to our existing card member, merchant, and network participant relationships. 

When we talk to our business partners, we really understand where there are gaps. These are the types of companies they're looking for and the types of technologies that would fill the gaps. So that gives us our basis for going out and screening potential targets.

We get investment bankers, VCs, and private equity firms and we educate them on our priorities so they generally have a good idea of the types of companies we're looking for. 

Our business partners are out in the ecosystems. We've had partnerships with some of the companies we acquire and know well. Other companies and our business partners have met through business-as-usual type operating agreement introductions. And so, it's a bit of both. Our business units also help us build a robust list.

My team controls what goes out as an LOI and there's a very standardized approval process for any LOIs that would get sent. And that's how we ultimately manage when the conversations start and who gets involved. 

  • My team does a fair amount of desktop research. 
  • We attend a lot of conferences. 
  • We do interviews like this so that people understand that we're acquirers. 

We've frequently had companies approach us because they've heard from other founders that we're a good acquirer. And that means we take good care of the people when we acquire them. 

We are respectful of how to integrate companies in a way that generates value for Amex but stays true to the company's culture that we acquired from an innovation standpoint. 

Approaching the Target

Approaches start with business discussions not led by us. If Corp Dev is the first one to show up in the room, everybody just sees dollar signs or they're too afraid to talk to us because they're not for sale. So neither place is a good start from a Corp Dev standpoint.     

You want the business to vet the company and the capabilities and the technologies before we show up and say, 'how'd you like to think about an acquisition?'   

The CEO top to top is when two public companies decide to buy each other or there's a sizable transaction that's happening. Our sweet spot tends to be capabilities and acquisitions, which allows us to really do that from a bottoms-up perspective because those capability acquisitions are more of the business unit. 

How to make my business plan more effective and how to make my strategy, how to accelerate my strategy, not I'm transforming the company. 

When does Corp Dev gets involved

We get involved once the company's been vetted and people think it's a real acquisition. So there's a little assessment if the management team is ready to be part of American Express and all that means. 

I step in from an early relationship standpoint to start to suss that out. And then obviously, if there are thorny issues that require either drawing a line, that's where I get involved. 

We've got a pretty good relationship across multiple levels in our business. And at the end of the day, the first question that people will ask is if they have someone from the Corp Dev team involved.

Very little when it comes to capital transactions happen without me and my team being involved. And that's just organizational training. And it's also a bit of living with the consequences. So if somebody gets too far over their skis and it's not the right deal for Amex, I have no problem stepping in and saying to back it up and start at the right place.

A bit of being the bad cop or the control function also comes with the job. So people have learned over time not to get too far ahead of that function. 

We know a lot of our counterparts in the business who have that business development function talking to the companies, and we have a shared understanding of the general script of you can ask questions up to this point. Still, the minute you start talking about acquisition and price, you need to bring somebody from my team in. 

How does culture matter when you're sourcing deals

It's probably the hardest to define culture, but it is very important. You want a management team, first and foremost, has the same values. When you go into diligence and when you have conversations and share a meal with someone, you get a sense of 

  • Are they being transparent with you? 
  • Do they have a good employee culture? 
  • Do their teams feel valued? 
  • Do they talk to each other with respect? 

The second part of culture is a group of people who are prepared to be part of a large organization and can come into a big company where relationships matter, and checking with people across multiple functions matters.

And you get a sense of that when you start to talk to the CEO, the founders, the management team and get a sense of how they will operate within our four walls. 

I'll describe it in two ways. The first is we are a bank holding company. And so, we follow a control compliance regime, and we expect all of our employees to follow whether they're issuing payments, products, and services, or not.

The second is more on what is the vision of success. Again, if there is a vision disconnect, you need to know that before you buy or sign.

Because then, when you ask a group of entrepreneurs to help you execute your strategy and your roadmap, you don't want them to say 'that's not what you acquired me for'. You need to have that alignment upfront

So if I could get it perfect, I would be a mind reader. So that doesn't happen. It is honestly through repetition and the passage of time. And if you think about a diligence process, you get a sense if they buy into your vision. 

  • Based on the questions they ask
  • The grim
  • The way they make their selves available to talk about potential roadmap ideas.    
  • The resistance that they have to change and if they bark at that

There's very little that's like the big red waving flag, which is why this is hard. It's a lot of little indicators and a lot of judgment. 

There are no subs for sharing a meal. COVID made it hard but it's very informative. Whether you have a business partner, like that's the same for operating agreements, investments, acquisitions, business relationships, establishing some common ground, super helpful.

Our HR team does a fair amount of diligence, and there's a lot of review of employee handbooks, vision statements, mission statements, communication styles, and mechanisms they use to communicate with their team. It gives you a perfect sense of how they run the company. 

They might not do it to the same degree or standard that we would as a large company. But if there's a shared understanding of why it is important, that's a better cultural fit for example.

I have a small integration team that helps with the PMO parts of integration. But they also have playbooks where we sit with the business and discuss what will be important from a long-tail integration standpoint.

Sometimes people think that they closed the transaction, paid the money, integrated, everybody has an email address that says Amex on it and we're done. 

But there's a long tail to making sure the product roadmap gets set, and cultures get integrated, employees understand the vision and how they fit into the Amex ecosystem. 

Walking away from a deal

It generally means we can't align on price or walk away early. We walk away before there's like a serious amount of diligence. 

Culture is something that's table stakes for playing. I like it when my business partners come to me saying they've been working with a company because they're already done the cultural assessment. We can assess, but they've already done the basics of integrity, transparency, and respect, through an operating agreement. 

Entrepreneurs by definition, don't take no for an answer. Part of what we acquire sometimes is a little edginess and business thinking beyond the BAU. Figuring out how to navigate an organization is important. We're not asking everybody to show up and be a replica of an Amex employee on day one. 

It goes back to expectation setting and vision. If there's clarity on the vision, then there can be clarity on this is what both sides bring to the table. And if we get the best of both worlds, it's a success. 


The hardest thing is you only know what you have experienced. So founders who have worked in large companies or founders who have sold a business before working for a large company have a way more internalized understanding of what it means to be a part of American Express.

If somebody has always been a serial entrepreneur, never worked for a large corporation, you start to have different conversations around having a boss and board members. They got private equity guys but they haven't had a boss. That is best discussed on a glass of wine or dinner not in a diligence session.

The Management Team

We also try to understand the management team's depth because it's very different if a founder or co-founder doesn't intend to be part of a big company over the long term. 

You never want to be in a position where you buy a company, and 90% of the talent leaves the day you close. So recognizing that there is a group of folks who understand the benefits of being part of Amex but are not prepared to have a boss. They can come for 18 months, help manage the transition then they're free to do what they want. 

Make sure you understand what is motivating, not just the founder, the next level of management, and the general employee population. Because what we're buying is people and talent. You want to be confident that you're retaining enough of it.

If the tech stack is the most important thing to us, can we retain the CTO for at least two years? Not if they have no desire to work for a large public company, and the day we acquire the company is when they start looking for a new job. 

Balancing Expectations 

We take a very disciplined approach to price. So people are selling because the price is fair and they want to sell. So we are never going to throw so much money at a problem that someone who doesn't want to sell suddenly changes their mind because of dollar signs. 

Whether you want to put that in the culture bucket or not, if it's not a willing seller, it doesn't feel good to us. 

"The management team has to believe that Amex is a great home for their company. You can convince someone to go out on a date with you, but if they really don't like you, it's not a good date." - Lisa Marchese 

We've got a group who spends a lot of time in the market and understands valuations, current market conditions, how hard it is to raise around, how easy it is to raise around, and what the alternatives are to selling.

We believe in paying a fair price, but we are disciplined regarding price and valuation. Because at the end of the day, we have to make a synergy case work. If you don't have that synergy value, you can't pay the premium, no matter how interesting the company is. 

Red Flags

The biggest thing that has caused questions is if there are inconsistencies in what we find in diligence. So you've got to go back and question, 'was it a miss or was it purposeful?'

So I go back to the integrity and the transparency piece, which we expect to flow through a 90-day diligence process. 

When you're involved in a diligence process, the more someone doesn't want to show you something or the more someone argues about what they need. So I can imagine a lot of terrible things. And if any of them are true, it wouldn't put us in a good spot. 

I have a lot of tools in the toolkit to solve problems. But if I don't understand your problem or your not being transparent, it makes it more challenging for us to get through diligence and feel comfortable knowing what we're buying.

In circumstances where you've got a little deeper in, one party rarely ends it unilaterally. I do believe when you exit a transaction because it's not working for either or both parties, you made a comment about being direct. There is a direct way to do that to preserve respect and trust. 

Bank process

So auction process is my least favorite way to buy companies. And if you're in an auction process, the first thing to figure out is what is the criteria that drive the decision. Because I will frequently say to my banker colleagues, we're not going to necessarily match the price. 

If, at the end of the day, the top price wins, let us know the number, and we'll tell you if we can do it or not. But price shouldn't be the reason we win or lose.

Do they want to be acquired by Amex? And I'm not asking someone who sits on the selling side to say I'd give up a hundred million dollars of the purchase price to be bought by American Express. But at some point, if you've got somebody willing to pay a hundred million dollars more than I am, go.

Email is the best. The hardest is, 'Hey, do you have five minutes for a phone call?' with no context and no subject line. Because the answer to that is I have no idea or maybe in three weeks. 

We have a process; we go to our business unit counterparts. Sometimes we know the companies and they've been on our screen. So it's an easy yes or no. But the first inbound, if it's an email, put some details in it so that we can run the tracks and efficiently and quickly get back.

Integration planning

"It is never too early to start integration planning. If I could start integration planning pre-LOI, that would be perfect." - Lisa Marchese 

One of my colleagues in technology, said it best. They have a framework for t-shirt sizing. So I can tell them the company type of business, whether they have PII or not, number of locations, and number of employees, and they can come back and give me a small, medium, large, or extra large from integration and uplift standpoint. Or they can give me four questions to ask to better size the t-shirt. 

That gives us a leg up in how we construct our business cases and what questions are most important to answer early in diligence so that we can get to a fast go, no go. 

We do it with risk, technology, and control and compliance teams. Companies that work with other banks generally understand what we're going to ask about regarding control, compliance, and risk management. 

Companies that don't work with banks have a different understanding of that. So how big of a lift it will be from an integration standpoint depends on how fundamental the risk is to the business. 

If we're buying a technology company and we're not comfortable with IP rights or the validity of source code, maybe it's the reason we don't do the deal.

Starting with the basic t-shirt sizing, it flows into the deal model, the questions that we ask from a diligence standpoint, and how we continue to iterate on the value creation case.

Working with the integration team

We all hold hands and walk forward together. The business unit sponsor needs to advocate for it. I need to show up and say it's a good, solid transaction. And we need to have a person who says, 'I know that I can integrate the company after we close'. 

If you don't have that alignment across all three parties, I'd be the first one to say we need to sit and have a question as to whether or not we should do this deal . If you can get one piece of it done but not the other two, value creation does not happen. 

We have an executive committee that approves the LOI and the transactions pre-sign, and that level of consistency as we go through the standard deal processes, which is super important.

It also creates a common awareness about what is coming because to integrate a company, you need risk, compliance, technology, HR, controllership, tax, treasury, like you need an army, I go back to it's a team sport. 

For every specific deal, there is a steering committee that is post-close. They usually are stood up for 12 to 18 months to make sure that we're getting integration and the general ledger systems done right.

But also making sure that the product roadmap starts to happen, and synergy starts to be realized. So those steering committees are customized to the transaction. 

Diversity and inclusion that fit the strategy 

From a company standpoint, we have a diverse set of customers, merchants, and card members. We want to make sure that the companies we acquire reflect the diversity of our constituency, which is super important to us. 

It's a cultural element; when you look at management companies, do they embrace differences of opinion? Do they embrace different backgrounds, and different life experiences? So that is a cultural pillar for us. And then I think about it from my team's perspective. 

I want to make sure that my team has a diverse set of backgrounds and experiences because thinking about it this way. If all I hired were former investment bankers, they would all have one way of doing a transaction, one lens to look through a transaction. 

"It's through that diversity of thought perspective experiences that you end up with the right set of questions and the right answer at the end that contemplates more than a single point of view." - Lisa Marchese 

Diversity vs. culture

The non-negotiables on culture are integrity, transparency, and respect. Sometimes we want a culture that's a little bit edgier and is a little bit more entrepreneurial. That's different than the Amex relationship. 

We've all known each other for 20 years and are kind to each other. You can mesh those two cultures together. The diversity of cultures is fine as long as you understand what the baseline is for values. 

Culture doesn't mean the same; culture means let's make sure we have correct baseline values. And then let's figure out how to mesh differences of opinion in a way that will allow us to create something truly unique. 

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