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Staying True to Culture in M&A

"You can always realign your business goals, objectives, and strategies for growth. But if you are fundamentally different from a cultural standpoint, it will never work. I don't think you can change individuals easily. It's always nature over nurture." - Trish Mosconi.

In this episode, Trish Mosconi, Executive Vice President, Chief Strategy Officer & Corporate Development at Synchrony, talks about the importance of culture in M&A and how it can kill a deal.

Trish tells a story of how they walked away from a deal because of cultural differences, the red flags she looks out for, and how they integrate the companies they acquire.

This episode is sponsored by S&P Global Market Intelligence. Access the most up-to-date and accurate data on private companies in a single web-based platform so you can get all the resources you need to create a winning pitch.

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Trish Mosconi

Episode Transcript

Text Version of the Interview

Why is culture important?

Culture is a critical part of an organization's identity. It's how people perceive an organization and how the employees perceive the organization and ultimately determines how it can achieve growth. 

And this is why Synchrony is the perfect fit for me because it's a company that focuses on culture as a differentiator. It creates a sense of belonging and is a critical part of the DNA in a company. It's a core part of our identity. 

DEI is a huge component of our culture. It's a business imperative. And I've integrated it into our approach to M&A and how we view the market and the different opportunities in the market to make sure that the companies we're looking at share similar cultures and would be a great fit. 

Different companies view it differently. And what's important is, it's got to fit you personally. I'm an extrovert; I'm a big people person. I like getting to know people. It's not all about the business to me, and Synchrony has a family culture. 

HR's Involvement in Deals

I have a very small M&A team. And so if we're looking at a deal, we're bringing in, quite honestly, folks across the entire company. And HR is core and critical to that. So they'll be part of the discussions almost from day one. 

They are a core partner in our diligence process. More often than not, in financial services and FinTech, you're buying people. 

So for us, HR is a critical component of that to understand the fit, understand the desires, understand where that talent wants to go and how they're thinking about growing and scaling the company as they become part of a larger corporation. 

And so in my mind, you can't bring folks in early enough to really take part and collaborate and own the integration and the success of that manager across all of Synchrony.

HR Assessing People

The soft side of it. When we bring senior executives into Synchrony, whether through a normal hiring process or an acquisition, you go through a people fit assessment. Are you going to fit the culture? 

We'll use conversational questions as we talk to the leadership teams across different organizations that we'd go into diligence with. And then we're also very much looking for what they're looking to achieve out of their careers.

If it's a brand new capability that we don't have, it's going to be extraordinarily important to us to retain the senior leadership team and run and scale that company. 

And so understanding what they're looking for. Are they looking for a quick exit or to help grow and scale that company and be part of the synchrony family? 

Those are critical to understand, so you have to communicate. You have to ask the questions and be willing to have conversations. So folks are fully aligned coming into it, and there are no surprises.  

Can Culture Kill a Deal?

Because I'm the chief strategy officer, I lead with the strategic fit and whether a particular opportunity will provide the right strategic growth for the company.

And so the numbers obviously need to make sense, but the longer-term opportunities around growth are what's critical. 

And so, as we were looking at a particular part of our business, we had determined that there were adjacent businesses that could be very important to our overall growth strategy. It wasn't in a space where we directly played but we thought the combination of what this adjacency could bring in and what we could do would be extraordinarily important. 

So we went out and did a scan of the market. We identified the top 10 players, and based on ownership and markets they served, we called it down to potentially three targets and started our reach out. 

First on our list was a particular company that we thought was the perfect size, location and had a lot of upside potential. So we went off to meet that company, and we sat down and met with the leadership team. 

And they were probably looking too overly impressed because of the way they chose to conduct themselves in the meeting. The CEO pulled up in a very fancy car and proceeded to run the meeting in a very commanding manner. He made sure everyone understood he was in charge. 

We walked out of that meeting about an hour and a half, two hours later. They might be viewed as the best candidate on paper, but the fit was just not right. And so, we walked away, communicated back to the rest of the leadership and the board that this company was not going to work for us, and subsequently, found a perfect fit. 

So yes, we do walk away. 

When to Walk Away From a Deal?

You will know it in your gut. At Synchrony, one of our core six values is caring, and we use it in so many aspects of what we do. And so, it's grounded in inclusion, collaboration, and respect for others. 

The lack of those things will not be tolerated. And so what happened in that boardroom that day was a total lack of respect for senior individuals who had come down to meet that company to potentially bring them as part of that company.

I don't think you can change individuals based on those characteristics, whereas you can realign your business goals and your business objectives and potentially your R&D and how you're thinking about the growth for the future.

You can come to terms with that and make necessary changes as long as you have fundamental respect, inclusion, and caring characteristics that are so quarter the culture at Synchrony. 

So much is nature over nurture, and as a mother of twins, I can tell you it's nature over nurture. 

What Else is Core to Your Culture?

It is an extraordinarily inclusive culture. When you're going to bring a team together to discuss potential decisions, everyone's voice is heard. 

We defer to folks who have the expertise for the business area, but it's a culture where we're going to talk about things. We're going to be transparent about things, and we're going to get input from others. 

You're not always expected to integrate everything fully. Still, you are expected to listen, take things into account, and ensure that we're making the best decisions for Synchrony overall and not a particular business area, division, or product area.

And a lot of mutual respect for the talents that each of us bring to the organization, which are different depending on backgrounds or areas of expertise.

How Does Diversity Help Growth?

It helps with the retention of our employee base. It helps with innovation. To me, diversity of thought, which usually comes through diverse backgrounds and ethnicities and genders coming together. You just get more creative ideas.

You get bolder about trying new and different things as to how you're gonna move ahead as a business. And to me, it makes us better business partners. Most of our business is B2B to C. We have very large partners and merchants as our core customers. They're all very different across retail channels, digital channels, small businesses, and large businesses. 

If you're not bringing diverse thoughts and responding to where each of them are coming from, I think we're not doing our best for our partners and our customers.

Now in particular, the whole talent pool has changed. We're working from home permanently if folks would choose to do so. We are not asking our employees to come back to work at all. And it's going to allow a diverse workplace to be part of the Synchrony family.

Will a Remote Model Make Recruiting Easier?

Without a doubt, because we had a handful of locations across the US and we were very much a present organization, we work in the office. It was very much part of who we were. And as a result, we only had access to folks in certain geographic areas. 

And I know I passed on some great talent because it wasn't near one of our key offices as I was looking to build out my team. It's amazing how 16 months of these zoom meetings have opened our minds to adjust where people can reside and how they can operate differently. And I think it's now no longer a barrier.

Reading Culture in a Remote Environment

I'd say in this particular case, there was an experience between the two companies before. So it's not a totally remote relationship. But that being said, we spent a lot of time on zoom calls, both individually with different parts of the organization collectively.

I agree. There's a certain vibe you get; there are certain feelings you get when you have the opportunity to walk the halls and get a sense and talk to folks more casually. But I'm confident that it's doable.

Expanding Diligence Due to Remote Model

I think references and other touchpoints, whether connection points across that organization that you might share, definitely come into play. I think you have to tap all your resources to ensure you're making some of the right decisions. 

And it also probably includes the broadening of whom we bring to the table on our side because you get a lot of different reads. And I think you're going to center in on it.

Testing Relationships 

We're pursuing that a bit. We've now taken a bit of a broader approach in that we've actually reached out to folks, companies that were interested in, what is just in their business model. I don't know if they're a partnership opportunity or, quite honestly, an acquisition opportunity, but we've started building more direct relationships.

So we take the bankers out with companies that we're interested in getting to know just to see if there's a potential. So we had a really interesting conversation last week with a frenemy; someone that could play in my space doesn't exactly play my space, somewhat of an adjacency. And it was leadership to leadership conversation.

And so I think I'm finding that we're taking more creative ways to kind of build relationships and learn a little bit more about companies than when things come through a process where you've got a lot of third parties in between the two.

And building relationships and getting to know the culture. Cause it would start to come through for those conversations rather than third-party discussions where they liked to over-manage the two parties on the other side.

Leaving the Acquired Company Untouched?

I don't think I'd characterize it as untouched. I think there's usually enough similarity that the assimilation is much more natural, so we will not touch the business processes that are running great, particularly in businesses we don't do. 

But the culture piece and the connectivity and fitting those companies into important management discussions on how we integrate through a lot of our senior leadership meetings and those types of things would all still take place. 

Culture Considerations During Targeting

Synchrony is not that large. We're only 17,000 employees, only 3,500 exempt employees. For us, we're going to be less apt to have something stand on its own because it's just not who we are.

If you're talking about large manufacturing organizations with multi-sites and adding different sites, allowing those to run independently or some are removed might be perfectly suitable for achieving the objectives. 

But given we're essentially a mono-line business,our bank is majority deposit based. And so I think just given the nature of that, we are very much focused on one particular area within consumer finance. It would be a little harder for us to allow that standalone, separate and distinct entity as part of our business model. 

Approach on Venture Deals

It's not all that different from our M&A approach, but we stood up the ventures team about three and a half years ago. I'm proud to say 12 investments today. Six are with diverse founders. And we just announced to the marketplace a $15 million investment into diverse funds. 

As we looked at DEI, as it relates to the venture community, which is very homogeneous, we felt that the best way to support that ecosystem was to target diverse general partners committed to building funds that would invest in diverse founders. 

And so that's been our target. We're excited. We're investing in four funds, three of which have been announced. The fourth round will be announced shortly and we are very excited to move into the investment stage.

We do not invest for financial reasons. We are not a financial investor; we're a strategic investor. So it's looking around corners and what's going on in the FinTech community and consumer finance community of which there is so much going on. 

Keeping Up With External Environment

I'd say our focus is very much on the FinTech space and less on traditional companies. And so, when I first arrived, we were probably looking at companies that were much more akin to what we were doing.

I think what you see us moving towards are much more adjacencies and capability plays. Some are more consolidation plays. Although I can tell you sometimes the multiples give us heartburn and why those companies expect a price-earnings ratio compared to where Synchrony trades.

So I've got a little bit over. I've got some navigation we have to do there sometimes. 

What's the most Difficult Part of Integration? 

We're good at the technology piece and the HR piece. And we get accolades for, you know, bringing people into our systems very quickly, and everyone gets paid immediately, and all those things are great. 

The important pieces that you've got to always work at are the people part of it. Ensure that folks are being integrated to the organization the right way and feeling part of the family and contributing to the family. 

It's important to stay true to the synergies that you are looking towards doing this deal, hold all of ourselves accountable around that, and be laser-focused around achieving those and pivoting where you have to.

Because it doesn't always play out how you thought it was going to play out during the diligence process, or even soon after the close. So you have to be flexible and agile to kind of build in the changes you need to do.

Stakeholder Alignment

There is never a deal being contemplated that the entire leadership team is not aware of. It's the Synchrony way and it doesn't matter how small it is. And quite honestly, there's nothing actually that our board's not aware of. It's just that kind of transparency and communication across the organization.

And people buy-in because they are part of it. So you, you end up creating ownership across the organization for the success of the opportunity, because people felt like they had a seat at the table.

Does Transparency Slow Down Decision Making?

Decision-making, as it relates to the investment or the acquisition itself, is a greater consensus level. So our management team, or 12 of the executives plus our CEO. Awareness pre-acquisition or agreeing to that deal that happens at the management committee level. 

So a deal, we don't need a hundred percent management to say yes, but we need a majority to actually move forward with that acquisition.

Post that, the management team that's in charge of that integration, and we're in charge of that business, we're in charge of that product, they own decision rights. 

But what I was describing was more leading up to that to say, "we want this business, we want this product, we want this capability to be part of Synchrony." That's where you've got the broader discussion deliberation agreement. 

Once we agree to take it on, if it's a particular product that goes to the head of product, if it's at a particular business area, it goes to the head of that business. Just like they're running other parts of their business, they would be running that business as to the expectations around growth and investments in those.

Any Techniques To Be Agile?

We've restructured through COVID. We were a heavy in-person culture, and we were having culture meetings like multi-hours of meetings over a week. 

And we've moved to an agile operating structure where the management team gets together twice a week for 45 minutes, and we do a round-robin. 

So if I'm contemplating a deal, if there are interesting things that pop up about other people doing deals, that's the round-robin that happens twice a week. And so we've moved to a much more agile and informative environment.

We inform our team of what's happening just to keep them in the loop. They don't have to make decisions.

So our meetings have become much shorter. You can't even make an hour meeting any longer on our calendar.  So we've had 40 to 45 minute or 25-minute increments, and they're much more decision-oriented, less pages, less PowerPoint.  We don't have meetings for the sake of meetings. 

What Can The Acquired Company Do?

Communication. In our culture, you have to get out there, meet people, and start to understand what makes the acquirer's organization tick.

I am meeting folks across the organization, getting involved, even in maybe less business-oriented ways. Just get involved in different aspects. 

I think of the acquirer's business; maybe non-business related will help you to at least understand and assimilate a bit, understanding what they're about, knowing that you're also looking to keep certain things intact, which made your own culture so special. And that was the reason the company was very interested in bringing you into their family. 

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