Why 70% of Mergers & Acquisitions Fail (And How to Avoid It) | Innovantage Podcast #53

Speaker A: Foreign.

Speaker B: Hello there and welcome to another episode of the Innovantage podcast where business meets tech to bring you your competitive edge. As always, I'm your host Max, and it is my ongoing job and duty to explore this edge between business and tech and to find something interesting for you to listen to and for me to talk about. And today's topic is a very interesting one. Today we're going to be talking about M, M and A's, mergers and acquisitions, but not in a traditional sense of what it is, but rather what happens after an uh, M and A happens, whether or not it makes sense to even go that route. And what happens to both organizations when they go through that substantial transformation. And to help me on the journey is my wonderful guest today, Sabine Janssens, who is an integration strategist in the M and A world, involved in more than 40 integration projects over the past four years and has developed a pragmatic 100 day integration model currently used in buy and build context. So Sabine, welcome to the show.

Speaker A: Thank you uh, very much. Thank you.

Speaker B: So can you tell us a little bit about yourself? What is it that you do as a specialist? Where do you exist? Do companies come to you? When do you come in? And how did your career evolve to this place?

Speaker A: Uh, let's start with how it uh, evolved. Uh, I have more than 30 years experience in high uh, strategic marketing roles in big companies. But the last four years, indeed I have been involved into more than 40 integration and transition projects uh, due to mergers and acquisitions. And that happened because I uh, was working for or a company that uh, started buying companies uh, funded by uh, private equity and investors. And uh, so I was the first one um, to talk um, with the new people that were joining our company, the founders of the companies we acquired, uh, to prepare the internal communication and the external communication and also to define how their company would fit in our uh, strategic position, marketing position. So that's how I joined uh, and stepped into the role of uh, integration. And um, as it was a very extensive buy and build environment. So we bought many companies on the short term. Uh, I learned a lot in different processes and mainly uh, also I learned what are the best practices to make sure that uh, the people get well integrated. And not integration just because of integration, but integration because we want to create value for the company. So that is what uh, I'm currently doing today. I'm in between the intersection of what we could call, uh, the buyer, the seller and even the investor. And we often see that uh, not always everything is aligned in between them. So that's my major role, to make sure that we can create value for both of the parties in a very short notice. So that's a very short introduction, but very succinct.

Speaker B: Thank you very much. It makes perfect sense. I do love that kind of the complexity of it all. Like you said, the point between the uh, buyer and the seller and the investor. So can you maybe describe the portrait of those companies a little bit? Who do you usually work with? Who is usually the buyer, who's usually the seller? And what kind of investors do you come upon in your career?

Speaker A: M. So basically uh, I work mostly for the companies that buy, um, where you have uh, where the CEO is my major uh, point of contact. Um, and then of course I work with uh, the selling party because I want to understand also their role, uh, what their strengths are, uh, what they found important when they get acquired. And then with the investors it's very important to be sure that they create value. Uh, so that's also something that I want to be aware of. And um, yeah, that's my main. I always talk with the three people, most certainly with the buyer and the seller.

Speaker B: And what are usually the industries that you work with? Where do M and as mostly happen? Is there even an industry that is stands out among the rest or is it just kind of an even spread for you?

Speaker A: Uh, I could say that I personally work mostly in a uh, service minded environment, uh, uh, with uh, quite technical industrial companies also. Um, but consolidation is everywhere. And so it depends uh, really on the market. It's not that there is one specific market where you have really. Yeah, there are some. Uh, certainly when I talk about Belgium, every market is different. But in Belgium we see big consolidation on the level of accounting. Also on engineering companies. Uh, uh, we even saw a big uh, consolidation in the healthcare market for hospitals. So consolidation is everywhere. Or M and A's are everywhere. Big companies, small companies, you need to be more and more working together and combine strengths to be competitive in the market. So I think it's uh, I don't think it's also market research proves it that uh, M and A's is a uh, growing market segment.

Speaker B: That is true, at least from what I see as an outside observer as just somebody who exists in the business sphere, I believe that I just kind of anecdotally see a lot more of mergers and acquisitions than 10 years ago or something of this sort. Of course different markets are fairly different, but generally speaking across the board I can definitely agree with you. Um, but coming Back to your personal experiences then. What is the most interesting part maybe for you when it comes to integrations? And I think a lot of people look at M and as just something that you do once a company agrees to buy another. They do that, everybody's happy and, and they walk their own path from there and out. But I understand that that is not the simple case.

Speaker A: No, mostly there are a lot of plans and reasons why people uh, do mergers and acquisitions. But uh, in the strategy, um, the devil is in the reality. Putting the strategy into reality and uh, combining uh, the strategy with operations, with the technology, uh, with leadership and most of all uh, the behavior of your people. So that is uh, when you work on that, that's, I think it's the most interesting part of the integration, uh, phase we're going through is bringing all that together and make sure that uh, it's a success story.

Speaker B: So how do you do that then? Is there a secret sauce that you need to do right away or is it a long term plan that you need to have developed before you even start?

Speaker A: Yeah, a secret sauce. Uh, well, uh, I can say that out from experience. Uh, uh, I can say that talking about the integration project before the closing is a very uh, good starting point. Uh, and also uh, when you look at research, only 30% of the mergers and acquisitions are uh, successful and create value after the deal closing. And that's often why, uh, because um, it's not clear what the next step will be after uh, the deal closing. So the secret sauce is just very simple. It's uh, three points. Make sure that you know what the strategy is of the company that is buying the other company and how it's getting involved and what you will do the first hundred days to create value and make sure that there is an owner involved and uh, assigned to create that value. So that's, I would say my three secret ingredients for a successful integration or transition. Transition, uh, process.

Speaker B: And thank you for sharing those with us. I believe that they are fairly important. So all of them circle around value in one way or the other. How do you then approach to extracting and understanding that value between two different companies that are now being merged into one? Uh, is there something that the companies need to do themselves, ask themselves something before they start, or is it something that only is born throughout the process itself?

Speaker A: It will not go automatically. I think that's a little mistake that or uh, little. That's um, I think a common mistake that is often uh, made is that uh, when you look at after a deal closing Is that people just. Or the leadership thinks, okay, now my departments or the people will just get, start working together, we'll do one communication, it's done, and then everybody starts and it will run. So that's not the way it's going to work. Um, you really need to build on a strong plan knowing how you are going to tackle those first hundred days. I think that's uh, very important. And I just missed your initial question, so if you could repeat that, I can answer directly.

Speaker B: Of course, of course. My question was is there something that the companies need to do in advance in order for the integration to be successful? And since you talked about value, uh, where does the understanding of each other's value come from? Does it come from initial due diligence or working together for a time or just having a great plan?

Speaker A: Yeah. So indeed, when you talk about uh, what can the company do, I think uh, that they need to sit together up front, understand the strategy of each other. And because for instance, I give uh, an example when uh, a company is buying, uh, is very strong in for instance operational efficiency and has very strict and clear processes and all that kind of stuff and it's buying a smaller company that is very innovative and that uh, has uh, developed a new products. It's a completely different culture but also a different way of working. And um, if the buyer should really understand why he buys that company not only to get the, perhaps the product or the service that uh, it developed, but also the people are the ones that made that happen and they have another way of working. So understanding of which strategy you have, which operating model you have into the between companies and then knowing, okay, if we want to keep the value of the company we bought, then uh, we cannot touch, we better not touch on the operational efficiency so much, but we better leverage upon the, I don't know, innovative culture, uh, the speed uh, they are working on, um, because probably we are a little bit uh, less uh, fast and developing and there are a lot of processes which they don't have. So it's very important to acknowledge that from each other and to know that upfront. Because if you know that up front, a lot of frustration will disappear, uh, after the closing.

Speaker B: Makes m. Sense. Makes sense. Thank you very much for your answer. And then I'm guessing you don't always face the absolute best scenario. Right. Sometimes things go wrong and the integration does not go well. What maybe are the early warning signs companies can take note of when an integration does not go well?

Speaker A: Well, uh, after the deal is closed and you See that, um, all the different. I don't know if you work in a big company, it's all the different departments like Legal, HR ago had it. They start uh, uh, going through the company that is bought and there is a lot of chaos. There is no overview. Uh, you see people getting frustrated. Nobody knows the answer. The leadership is saying, uh, solve it. The communication is done. I think these are signs, uh, people that are frustrated, even people leaving, uh, are certainly signs that uh. You better try to create. Then I would say you are in a situation of um. How you call it in English, value, uh. Devaluation. Protecting the value devaluation instead of stimulating value creation. Yeah.

Speaker B: And statistically so.

Speaker A: And that's important. I would like to.

Speaker B: Sorry, please continue.

Speaker A: So I think that's an important one. Ah, also when you talk about integration, a lot of companies are more. Oh, there is a problem. Perhaps, uh, we should start working on it now because we detected a problem. Then you go into a uh, situation of uh, value. You try to avoid value devaluation. But it's always, um, more interesting to start to work proactively and to work on projects that create value instead of working on projects that try to avoid value devaluation.

Speaker B: So statistically speaking then how often do you see that problem of devaluation happening in integrations?

Speaker A: Well, I'm not a statistical, but I do a lot. I read some uh, uh, papers, uh, from people that know much more than me on uh, also M and A. Certainly on M and A. And when you look at big companies like Bain, like McKinsey, uh, Ernst and Young, they all mention the same numbers saying that uh, uh, only 30% of the companies that uh, do mergers and acquisitions are really successful in um, value creation. Of course there is also a side remark. Those companies who research mostly ambiguous bigger companies and uh, for smaller companies, when you look at the SME market, I assume that there is more smoothly. But nevertheless, uh. Also there I need to say that I experienced um. Ah, quite some uh, value devaluation, uh, situations also because certainly they don't have the experience, uh, with taking over a lot of companies. And then uh. Probably it's also about not knowing how to deal with it. Where you then uh, take the wrong decisions or you need to uh, rectify what you have been starting up already.

Speaker B: And what would your advice then be for the companies that are in those 70% where the mergers and acquisitions are not doing extremely well and where there are some problems, what can help?

Speaker A: Well, it's the uh, first thing when you see the things Are not going well into the integration phase is just uh, get the people around the table and make uh, the difficulties or the disalignments, uh, visible. And that's mostly the most difficult part. And that's where I mostly play an important role. To bring up the difficult points on the table to find the misalignment and really uh, trying to get um, a common ground to further build and define what the next uh, steps will be. And there I would say it's important to slice the elephant as I call it, because uh, we always see the bigger picture. It's very important, you know, the big picture just to be clear. Uh, so you need to know which direction we are going, uh, which is our strategy. But then you need to slice it and then you need to say what will create value within the first hundred days. And that's what we will be focusing on. Because creating value in the first hundred days, when you look at that, then it's important that you choose those projects that are feasible, um, and that will deliver results. And then in that hundred days when you created already some results, you build trust in the organization, you build a good way of working, understanding each other, finding the alignment in between each other. And then you can start on the more complex projects, uh, to work further on. Or what I would call continuous improvement projects.

Speaker B: Makes sense. Makes sense. So then that 100 day plan, who should be involved and what goes into the icon, a good one, and what needs to be there and who should be involved in the formulation of that 100 day plan?

Speaker A: Well when you start with the hundred days uh, plan, uh, it should start from the leadership team. So that's why I uh, always work with the uh, C level of the company because it's very important that uh, they understand and understand the impact and uh, that we align that we are sure that these are the points we can create value on. So I call it the growth pillars. So we define three or four growth pillars to work on together with the leadership teams. When the leadership team is ready, you can develop and start working. Uh, for bigger companies we set up work streams. For smaller companies, you define key uh, persons in the company, um, that will work on that growth pillars. And we define concrete actions that are feasible within 100 days. So I work either with the leadership team, certainly with the leadership team to define the big growth pillars. And then depending on the size of the organization you work with, um, what we call work stream leads or department heads. And uh, in smaller teams we design people that work on uh, those topics or would have the expertise on those topics.

Speaker B: Mhm. So those growth pillars then, uh, how do you identify them? Is it something that has to do with due diligence beforehand or is it again something that you kind of feel it out once you do the integration itself?

Speaker A: M. Well that's where my strategic uh, marketing experience of course brings a lot of uh, like added value because um, that's the intersection between what is the strength of the buying side and what is the strength of the selling side. So based on that, uh, and having a good insight, mostly I have to uh, I have meetings with both parties and running through on different uh, topics. Uh, both operational, strategic, commercial level. Uh, mostly these are in marketing level. And then uh, based on that we define a growth plan. Uh, I'm building like a little, you can call it like a little business plan, uh for the joint company. Uh, so how will we put our resources together? And with resources I don't not only mean uh, people and money, but uh, our strategy and how can we leverage that. And uh, mostly the commercial part is a very important, important part of that. Uh because uh, that's something that can uh, easily create value within 100 days if we do that very well.

Speaker B: That makes sense. That makes sense. Thank you very much. I want to talk a little bit more about the underlying kind of technical side of the integration. Many companies have many aspects to them. You have it, you have ops, you have, have finance, you have legal, you have many different faucets depending on what the company is. Uh, what are the common challenges that you see when integrating such complex systems in between themselves? I am personally interested in specifically integrating IT because that's the closest to me. But I'm not sure how much you interact with that particular side.

Speaker A: Yeah, a lot. Sorry.

Speaker B: No worries.

Speaker A: Uh, I uh, I uh, mostly uh, of course it is always a big subject into uh, integration projects. Uh, and uh, that's correct, uh because uh, it's a challenge. You need to collaborate together as uh, two different companies. So the easiest way is to get uh, uh one on the same IT tenant or the IT infrastructure. Uh there is the aspect of security where of course uh, the security of the data cyber attacks. I don't need to tell you that that um. And then there is the third part and that's uh, the systems that they are working with. And basically there, I think also there it's wise on a technology point of view to really define what is now um, what brings value to the company. If you see that the uh, buying company has a strong uh, uh, security IT system Well then it could be easy to define and to say okay this is for us a growth pillar. On an IT level, uh, we will merge the company into the same IT tenant environment as the buying company. But um, it could be different. And uh also if you need to work together closely to each other, you can decide also to move uh the people to the same working tenant. Uh also uh, on uh, using the same uh Microsoft environment, uh depending on how you are structured. If you are of course um, then on the third level on the operating systems, I think this is a little bit more complex. That depends on um, um what do you want to achieve. Perhaps people can from a finance perspective, uh you want to have clear insights in the financial results. Do they need to change to the same system or do we put uh a reporting tool, uh on top of that like bright analytics or whatever. Um the same with the working systems. Even if you buy a company that is in the same market as you and you use a different uh tool to register your projects or to uh, do the manufacturing or whatever, even then also you could decide uh, to leave that into the company depend. But that's something you, you really need to define. You cannot say up front if this is necessary or not. But mostly these are more complex projects and I would put them out of the hundred days plan. But for instance it could also be uh. One thing that I just want to add because there, the due diligence is also important. If you have done a technical due diligence and it seems there is a critical issue with regards to security, um, of data or uh even had the case that we needed to move company immediately uh to an IT tenant because uh ah they were working in a very old system that can also of course put some projects into the first 100 days.

Speaker B: And what are then the typical uh mistakes companies make during IT integration?

Speaker A: Specifically, what are the typical mistakes you are asking um, specifically on it I think um. M. The most um common mistake is about uh not understanding the business process of um the company that is bought. Because if you decide, if you decide as a buying company that everybody should move to your IT system operating system, uh, it's very important that you first take the time uh to understand how the business is working um, and what the impact will be because that's also a big change for the customers, uh on the, for the customers, for the employees, uh to make changes. And I wanted to talk about customers also because when you change uh certainly on certain platform, a certain software, when you move there to a new platform then um. Also be aware that there might be a change for the customers. And that's also something we often forget because uh, when you work on integration it's very attempting to only look at the internal uh, processes uh, and making sure that everybody is working in the same way. But we should not forget the external uh, impact what with our customers. Uh, and we want to protect the value we have. At least we want to protect the customers. We just ah, the customers we bought in between brackets. We want to protect that. So also uh, be aware of that when you force uh, people into new systems like CRM systems or ordering systems or dealing locators, whatever you are, or websites, even websites on a branding level, uh, be aware what the impact is there.

Speaker B: Mhm. So makes sense. Yes. That connection between the tech side, the IT side and the business side is always very crucial and it's often challenging to pinpoint and understand their connection. Even within the same organization. Sometimes there is a discrepancy between the good business goals and the IT goals and there is misalignment between what works and what doesn't. Uh, in our work, for example, what we see a lot is the value of risk and de risking uh during integration, specifically when it comes to tech and understanding those risks in advance and addressing those risks, finding those potential places of misalignment and fixing them, ideally even beforehand, before an integration happens, or afterwards if there is no time to do it before. Is that something that you also see kind of the de risking process somewhere within those 100 days or maybe before or after?

Speaker A: Yeah, well mostly what I say in the 100 days is uh, indeed, uh, you do not start the implementation but you get acquainted with what is happening at the business that we bought. So you bring together the right people to understand how they're working and then you note the risks and the dependencies uh, if we move to a new system. So what you are saying is indeed uh, correct. Uh, uh, it's good to have that clear insight before and to take the time uh, to understand. And that's mostly something we start up if uh, within the 100 days. It's how you call that, the devaluation. The de risking. Yeah, the de risking. We don't call it like that. We do uh, an analysis, uh, and the, how you call that the. We call it different in Dutch. We try to understand the business case from the company that we bought, uh, and see the risks involved if we would uh, move to uh, the new system. What are the consequences, what is the impact, uh, and how much time will it take because this is also something that you need to take into account when you are uh, moving when you are buying a smaller company into a big company, it's a smaller company that probably has less resources and then also uh, take time that we want to have the continuity of the existing business. So also there it's important to uh, map what the process will be if we move to a new system and what the risk will be and the dependencies. And with dependencies mostly it's a time constraint or even could be even a budget constraint.

Speaker B: Yeah, makes sense, makes sense. Um, we've talked about like specific teams and specific functions of companies, of the buyers and the sellers. I want to talk a little bit about the founders of the companies that get acquired. Where are they in all of this? What happens to a founder of a company after it has been. Been acquired?

Speaker A: Uh, well after he has been acquired. Some have mostly the day after a hangover of all the champagne. But um, besides of that which uh, uh there is of course something to celebrate. Uh uh, a little mistake they often make is that uh, they say now I'm done. It was a happy.

Speaker B: I would make the same mistake.

Speaker A: Yeah. But the day after it's about uh, getting it, announcing uh, it to your employees, uh and informing also your customers and uh, it's um, what message you're going to bring. And often uh, that is already eye opening because when you need to prepare the communication you also need to be uh, conscious about all the questions that will come from both your employees and your customers and then you will oh my God, um, I don't know the answer or what do I need to say? Uh, oh, I'm not aware. Um, so that's something that is uh, for the founders the first wake up call already after the first day when they think on what's the next step. Uh and secondly uh also something important it's good that they are aware of is that of course they um, they are often the bottleneck in the whole process. M because everybody is looking at the founder, uh to help him, to help them understand what is happening, what is going to happen and to guide the people through the process. And with people, I do not mean only internal people but sometimes also your customers depending on which service you have. Um, and it's very important that the founder uh plays a key role in building the trust and keeping uh, the organization um, uh on a continuous base going and uh, starting up feeling confident himself, uh to make sure that also uh, his employees and his customers feel that it was the Right step to take.

Speaker B: Okay, okay. Uh, and then. And that sounds like a lot. You know, you're celebrating on one hand, then you're the bottleneck on the other. And do you have your employees, your customers, you have so much communication that you need to do that is aligned now with this new polar entity. Uh, how does then uh, how do you not overwhelm the founder? What can you do to kind of combat that bottlenecking in the end?

Speaker A: Yeah, so there were uh, that's where I step in again. Mostly what uh, I try to do but this is not always uh easy because the process doesn't allow is that uh, a few days before the closing, even I would say 10 days before the closing mostly I tried to get already a call with um, uh, of course both the CEO of the buying company and the founder of uh, the selling company uh to prepare the communication. And we uh, say you prepare the communication. But basically what happens in that meeting is that uh, you share the strategy, you share what's going to change, you share what's not going to change. You share already what's going to happen in the first hundred days. Because these are all questions that will come from both your customers and your clients. So um, that's the best way to make sure and to get everything a little bit more calm and uh, uh easy to deal with. Uh for the selling company. So mostly from that side I work uh, for the buying company and I make sure that everything is already prepared. Um, that I had a conversation that I understand who is the uh company we bought and that we have a first uh plan to do ah communication ready m where we can discuss through the small things uh and align further on what's going to happen in the next days and already make a first proposition on what's going to happen on the first hundred days. And that's mostly starting from the buyer. So that's why I'm often working on uh, from a buyer side because uh we define that plan and then once uh you have that and you bought a company it's to sit together to understand how the business works and then you fine tune. Okay. Oh this was. We saw it in the 100 days. But seeing your uh, organization we will move that continuous improvement. But something popped up on the due diligence. We will put that in the hundred days. Uh do we agree and help and so you define your hundred uh day program.

Speaker B: Okay. Okay. Um, and I guess uh, like having that founder now have access to a larger usually organization with more roles, with more advisors like yourself. Is also very useful in the end where you don't have to do everything alone anymore or at least kind of not rely on yourself.

Speaker A: Yeah, yeah, yeah. But that's also um, indeed you do not have to do everything on your own again, but you don't decide on your own again. So this is also something that is uh, often very difficult, uh, for the founder, um, uh, who you don't decide on your account number anymore. Somebody else is owning your account number, somebody else is signing, signing off. Big deals. Uh, uh, if you say uh, oh I'm going to buy a new TV screen or a screen for my meeting room, well perhaps uh, you should ask, uh, uh, so there's. Yeah, this is also a big change for the founder the way, um, yeah, they cannot just decide themselves anymore. Um, there are other people to take into account and to align with. Yeah.

Speaker B: Does that ever become a problem like do all founders transition well or do some kind of just burn out from that change?

Speaker A: Well, um, and most of the deal making there is a kind of, uh, I say most, uh, the buy asks the selling company, the founder to stay for a few more years or for a year to make sure that everything is well integrated, uh, and aligned. But uh, indeed, um, I saw it more than once, uh, that it's very difficult for the founders, um, to find their way in. A bigger organization could be with more processes. But some have it really difficult uh, not to be the, their own boss again and not to be able to decide on how to work together, how to work, how to deal with issues with personnel, with uh, material, with customers, uh, other flows, other contracts and so on and so on and that say, okay, this is it for me, um, I'm not staying longer with the company. That happens quite a lot. Yeah.

Speaker B: Yeah. Well then your celebration becomes something more permanent, I guess at least like I hope that founders have made enough from the acquisition itself to have that choice to just walk away and maybe do something else. And I have interviewed founders or they

Speaker A: start a new business or they start a new business themselves and they do something else. But uh, I also had owners and founders saying to me that I uh, wish I never had sold because uh, they raised the baby. They raised their baby, their company, uh, they've put all their passion and their heart in it. And uh, then when you see uh, that when a company gets acquired and the people are not satisfied, uh, the sales is going down, uh, or the product quality is, yeah, lose, you're losing on the product quality and you as an owner you see that happening and you know, what you should be doing because you've done it before. But of course the new organization structure doesn't allow it. Then it's with pain in the heart that they see that uh, people are leaving or that uh. Yeah, even uh, I saw companies that were bought and three years later nothing else was uh, left in to the company. So that's uh, a pity.

Speaker B: True, true. But at the same time nothing lasts forever. And the babies that have risen, there's always an exit strategy in business one way or the other. You cannot at least like not all businesses can grow continuously, endlessly and become one of the few that are, you know, the top of the top. The huge giants that just never stop. Most businesses need an end plan and. Yeah, but I can still relate to that.

Speaker A: Indeed, indeed. An emerger or an acquisition could, could be the end plan for the founder. But of course there is also, I think it's uh, some, I must say also there. Most founders uh, want to have some continuity also for their employees. And of course when you have set a certain culture and uh, you want to build continuity and you see that you have made the right, not the right choice for your employees and other people are leaving, then of course, um, yeah, you have a lot of people that really uh, are entrepreneurial from the heart and um, yeah, that's what the real entrepreneur mostly is also. It starts from the heart and they want to build something. And in today's world I think it's important you care about your people. And uh, I see that a lot that people worry about uh, their employees and how they will be able to continue the business in the future.

Speaker B: That's good to hear. Hear that you see this a lot because uh, when contrasting for example to many businesses in the U.S. i think the U.S. has a very cutthroat culture in comparison. And we see this very obviously now when a lot of companies are just downsizing immediately, especially after mergers and acquisitions, to just showcase positive numbers on the P and L sheet. So that, that is in and of itself a. Any heartwarming.

Speaker A: Well it's good you bring that up that topic because indeed there are two types of uh, M and A. The ones that really go for the uh, optimized P and L structure, I would call it, uh, where you have uh, mostly investors that uh, are looking on the short term for quick wins. Um, but as you probably have noticed, I'm more into the warmer as you call it, uh, M and A, uh, deals. I would not call it warmer, but uh, real value creation. M and A Deals where you look uh, to seek for the um, the longer term growth and you support uh the company there. So um, both are okay, uh, depending on which type you are. But um, cutting down on people is not always the right solution to create ah value. Um, although I must say also in the warmer uh M and A structure or the value creation structure, I have been experiencing also a turnaround where you need to decide to make first the company more profitable and take some decision on cutting on resources. Could be finance or financial resources or even people resources to make sure that you have a ah, stable ground for growth again six uh, months later or one year later. But that's still another type of um, uh M and A. I would not put that with the first category.

Speaker B: Indeed, indeed. And that makes perfect sense again. And um, I wanted to delve deeper into this if you would allow M even like you know, in the warmer style, the value focused value creation style of M. And as I'm guessing there's still a lot of costly mistakes that can happen with you know, specifically or non specifically, um, by planning or not planning, by just happenstance or by dumb luck. Uh, from your experience, what are some of the most costly mistakes that are not obvious in the beginning of an integration?

Speaker A: Um, of course you cannot uh, predict everything. Uh and if you talk about mistakes people make, I think the most underestimated cost of an integration is uh, the efficiency of the people. Uh when uh you can talk but these are mostly not measurable. But um, uh when you look into the P and L structure, yeah you can see that uh, perhaps uh some processes on it uh mostly are very expensive, uh, or getting um, uh new software mostly it's in that kind of order that our uh, big mistakes make. That uh, it's uh, not valuable enough. But all it's all about people. Where do you put the effort of the people? That's I think the most common uh biggest expense uh in integration because everybody is working separately, uh not knowing which direction to go. Everybody tries to do his best and spend time and not focusing on the business continuity because it's very important um, if you do an integration that you safeguard your business continuity. And that's, that's something we should be careful with because before you know, you're so focused only internally. Certainly when it's a small company you buy, everybody is so focused internally that you see a decline in the revenue afterwards. After six months, say oh shit, uh, we didn't have the same revenue and the buyer says yeah, we bought you. And uh, you said you Were growing and look at the customers. And now we're six months later and uh, look at what's here. You see devaluation of the revenue. So that is I think the most underestimated uh, and biggest cost of um, of the integration. So make sure you focus and that you keep your eyes on your business continuity.

Speaker B: Mhm. And at the end of the day then it all comes down to people again. Because a lot of businesses are its people. Yeah, sure, you have the know how, you have the manufacturing, you have the relationship relationships. But it's still the people that make everything happen. Right. It's those employees that become integrated. And their opinions and their belief in a brighter future after that integration happens is I guess the secret to a successful one. Because if they don't, everything falls apart. If they do, then everything is successful. From your than. Yeah, please continue.

Speaker A: Yeah, that's true. And um, what we often, what I often say is involve uh, your keep the key people of your organization, ah, with your integration, uh, strategy, meaning let them be part of the 100 day plan or if they are not part in building it, that them be sure that they are aware of it and they can communicate it and support it. So they are also the voice into the company. Um, they can help you uh, to realize uh, the plan and to make sure that um, if everybody speaks the same message, you create and you build trust in the organization. So the more people, uh, if you have your leadership team or your team leaders that are involved in there, it's very important. And it's also very important. That's what I, it's one referring back to your earlier question. Uh, even if it's a man on the machine, you buy the knowledge of that man as a buyer. So you should be aware of it that every person normally in the organization, your bot has a role and should create value at one or another way. And if you are aware of that, then you think differently and you make sure you first understand the business before you take critical decisions.

Speaker B: Very well said. Understanding leads to the creation of that value. Right. Without understanding the business continuity, the people behind that business continuity, the history, the role of it that plays within a business, whether or not it's something critical or something supportive, uh, whether or not the whole market is in a state that supports growth or hinders growth, basically without understanding you cannot find value. And without value, like you said many times, integrations just will not happen. Or at least not without many problems.

Speaker A: M. Yeah. And when you talk about also their resistance, perhaps what I would like to add Add on is um. Indeed. When you talk. When I talk about uh, growth uh pillars, uh, mostly I always. Revenue is one of them of course. Uh, and then uh.

Speaker B: I know but what can you do?

Speaker A: Revenue uh, is one of the growth pillars. And what we see what is very important that uh. Like the. And that's in your business. And ah, um. It is ah a uh very important pillar to support that growth. But it's not uh always a support. It's not always a growth pillar as itself, depending on what organization you're in of course. But um, always it is involved and it in these days always, always makes a part of the integration project to support the growth pillars. Even if it's on a later stage. If you need to merge dealers or customer, I don't know, depending on which business you are customer, uh models. Well, probably they're working in two different systems. Okay, what will be the role of it? Uh, and that. It's uh. What I said in the beginning together with the systems we're working. If you want the customers to work on one single platform, okay, this has an impact but it's not the opposite around and often what we see happening is that we say okay, uh, what I call the support services like hr, it, Legal, finance are often um, in the lead of defining the growth pillars. No, I think it's important when you want to create value is to look from both outside and inside and define based on that what you're going to work on. And not on default saying every uh, department uh, should uh, work on the integration at the same level.

Speaker B: True, true. That is indeed the case. And this is the same thing that I see from my point of view of working with technology and working, Working with different companies undergoing digital transformation processes and just working on their digital environment is that sometimes it is a core pillar, like you say, uh, of the whole business and sometimes it is just a supporting function. Other times it is an expense that does not generate any business value like right now, but may generate some business value in the future. Or is it just. Just an expense that is just. It is what it is without any additional revenue pillars to connect to it. Um, but to kind of wrap up our discussion a little bit, I wanted to ask you one simple question. If you would take one misconception people have about M and as. What would that be and what is the truth behind that misconception?

Speaker A: I think the misconception is that integration uh, only starts after the deal. That's I think uh. So if you talk about uh, value creation, I would call it rather value creation only starts after the deal. People think they create value when they do the deal. No, it starts after the deal. Then it's the work that needs to be be done. Because when you do nothing as a leadership team or as a leader or as a CEO, you will lose value. So I think this is one of, this is the biggest message uh, that I would bring out to the world. If you want to create value within an M and A deal, make sure that you know how to create that value after the deal because there is where it's going to happen and otherwise you could see it uh, in your P and L after a few years that it's devaluating instead of value creation.

Speaker B: That's a great one. That's a very specific misconception that even I had honestly before this conversation with you today. So I will walk away hopefully without that misconception exception. But then what's your one piece of advice for leadership teams would be in order to succeed?

Speaker A: Um, know your clear strategy of the targets you're buying, understand who you are buying and then make sure that you know up front how you're going to create value with that deal and make sure that you can clearly communicate that and involve the people. That's, I think the three things making sure you have the business continuity in mind, certainly for the company you bought.

Speaker B: Yeah, makes sense. Makes sense. Nicely covers all the aspects of our conversation here today and I think it is great advice without dilution. So thank you very much Spin for your time and for your insights into the world of M and A and how to succeed in this value driven, pillar focused, uh, approach to M and as. Where can people find you? Where can people read more of your thoughts and hear you speak?

Speaker A: Uh, well, you can follow me of course on LinkedIn. Uh, my name is Sabin Janssens where I have also uh, my Notes on Growth, which is a newsletter I produce on a two weekly basis. And uh, for the people that are Dutch speaking, I wrote a book about it, uh, which is called uh, Acquisition, uh, how would you call it in Dutch? Uh, out of the box. Uh, so, uh, Overname Un Trafelt is my book that I published uh, the end of last year. So for the Dutch picking people, they can also find that book on the common channels, uh, online channels where you can buy books.

Speaker B: Thank you, thank you, Sabine. Looking forward to looking at an English version at some point, uh, in the future maybe. But yeah, thank you, thank you very much for your time and thank you all as well for listening to our episode here today. Today. Have you learned anything new about the M and A process? Are you a leader that is currently undergoing that process in some capacity? If you are, hopefully our episode has given you some insights into how to address your challenges. Regardless, thank you very much for listening. Do like and share the video and subscribe to our channel and do all the algorithmically pleasing things. It really, really helps. And looking forward to seeing you on the next one. Bye Bye.