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Navigating Mergers and Acquisitions with Kison Patel

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Talk-Commerce Kison Patel

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With so much technological disruption, it is important to stay relevant and I can think of no better way than merging, acquiring, or being acquired. However, these transactions fail because critical deal processes such as diligence and integration, are being poorly conducted without proven success techniques.

We interview Kison Patel, CEO, and Founder of M&A Science. As a former M&A advisor, he has seen these challenges first hand and set out to develop tools and techniques that address industry failings and enable M&A practitioners to drive growth and maximize value.

Transcript

All right. Welcome to this episode of talk commerce. Today we have Keyson Patel Keyson is the CEO and founder of M and a science. Keyson tells us a little bit about what you do from a day-to-day standpoint and maybe one of your passions in life. Hey, thanks, Brent pleasure. To have this conversation with.

W as CEO of MNA science, we run a business. That’s pretty much all things. I’m an a, we provide education, training, resources, frameworks, and also software products to help manage them in a process and make it smooth as you can. It tends to be complicated when you have hundreds, if not thousands of people that are going through one of the largest magnitudes of change management that can possibly happen in the business.

And trying to do that without having them get pissed off and quit their job.

Yeah. And I, in our green room, we did, we talked a little bit about, some of the, some of what I’ve gone through with selling a company and then integrating and still being on board with the leadership. So maybe we could talk about a little bit about what does it mean to merge and what does it mean to acquire, and is it really a difference anymore?

I don’t think there’s such thing. I think there was a thing and there’s some type of a financial vehicle around it. But today now, because I then have the day one management team takes control of the other management team. So it’s essentially is an acquisition one way, how you look at it or another, I feel like the merger part is more of the PR placement, trying to make it cute and friendly to the public.

But Publix wise, they know what M and a is. And I think everybody at this point has this. That it’s a change of control. Yeah. And I think if you think from an accountability standpoint there has to be somebody who is accountable and suddenly you can’t have two parties that are accountable.

You have to have at one at ultimately there has to be one at the end. So when you’re bringing on somebody or you’re talking to somebody about a mergers and acquisition or an acquisition, do you come down through a bullet point list of here. Here’s the things you should be worrying about and here’s there, here’s the things you should be upfront about.

And maybe you could walk there from a high level standpoint, walk us through that process. You can look at it from either side, the buy side or the sell side is probably one of the big dividers of this whole conversation. Then from there you can get a much better sense of what you need to focus on to make things.

I think a lot of the big things, when you think about the buy side is preparation to take a company presented for sale and actually transact on it because it starts off really simple. You need some basic high-level information, but as you go through the process, it intensifies and becomes more complex.

There’s more information that gets reviewed. That’s going to be requested back and forth, more clarification. More people involved, spending time doing their diligence, trying to understand the business what’s represented and make sure it’s accurate. The more you can prepare for that upfront, the best position you’ll be.

That’s one of the most critical things that sometimes gets overlooked and then the rest of the process will be even more taxing as it already will be. I think that’s, if you can work with them like an advisor to do some of that prep work is ideal. I think being creative about it, a lot of people just run into the local investment bank.

You could actually find folks in the industry that’s done that. Maybe there’s like a CFO person that has been involved with a couple M and A’s and the industry. And if you’re going to identify that person, bringing them in as a contract so something sort to help prepare the business, but find that advisor that could really do it.

I think the other part is when you look at how you want to sell a business, right? Do you want to play the long game or do you want to play the short game? Do you have this urgency timeframe? And if you had a really tight team timeframe, say less than six. You probably want to engage investment bank and run more of an auction process so they can go out and run through their network of folks.

They know, and folks they don’t know and reach out to the whole universe of buyers via private equity, family offices, high net worth individuals and institutions corporates, and then be able to go through the funnel and to get this interest down to some options for you to consider. That’s a good way to do it, and it’s tends to lead to the highest price, but sometimes it doesn’t lead to the best buyer or suitor to take that company to the next greater place of growth that person or buyer could potentially be warned off from that whole auction process.

If you win an auction process, you’re not really sure. A lot of the smart savvy buyers, aren’t going to participate in a highly competitive auction process. So if you go back to, if you didn’t have, they’re going to see, and you’re going to play the long-term exit six or six months or greater, then that’s when you want to get to know the buyer’s universe and take your time.

You as CEO of the company and start understanding where corporates are. They have a corporate development function that’s in charge of their MNA activity. Who’s in charge of that. They have a head of corporate development. That’s your job is to be out in the market and knowing the potential acquisition targets and companies like yours.

So you should be on that person’s radar at least have the introduction meeting. So you know, of each other and there’s nothing wrong. I think it’s good to have that conversation. Some of those organisms, same organizations are likely to be really good partners for you. So think about your space, who are those likely acquirers of your business?

Make those introductions build those relationships. It’s just better terms when you have a good relationship with that company that you’re likely to get acquired by. You can know each other, know the cultures of the different organization really spend the time and the consideration on all these things that could go right.

Go wrong. When you’re in this auction process, your timeline’s compressed, especially in this market right now. It’s so crazy. They’re not even getting an exclusive. You have to just be competitive all the way until close that throws all this consideration and smart thinking out the window and you’re buying rationally that’s where I, there’s a lot of value in terms, if you want to put if you want to make sure the transition goes well, that you’re making sure the business goes to the right.

A culture that will fit well together for there to be growth for all the people that took that ride with you to create the value and get the business to where it is today. So I think one, one question I guess I’d have for you would be, I know there’s a difference between the larger deals and the smaller deals.

I’m assuming. The more information that you have not information. The more processes that you have developed in advance is going to help both buyer and seller and from a buyer standpoint how from a buyer standpoint it’s easy to see the processes from the seller standpoint. It’s not as always, it’s not always as easy to learn about the buyers processes until after the fact.

So the question is how much should you insist on as a seller, seeing some of those buyers process. You should. I think the way things are evolving, the buyers are getting more savvy to it and we’ll throw the term around reverse diligence. How do you get the company you’re acquiring to better understand your organization and what the different business look clot looks like, where they would fit in had that understanding.

So they’ll be better prepared for that transition when. That’s that’s essentially the reason you want to do it is because you’re going to work better together on the, all the post-close activities, all the integration work. And if that goes well, people are happier and they’re going to stick around and they’re going to achieve goals and create values for the business.

I think it’s part of a bigger piece of creating this process. That’s connected together. With a vision with the vision, what the end state’s gonna look like when we’re going to buy your organization and what are we planning to do? How do we see it coming together? What’s our go to market going to look like?

In fact, we should be able to sit down and outline a go to market together to get as good sense of. This is where, what it’s going to, what’s the, what the customer experience is going to look like are we are combining the sales teams together. Are they going to be selling? We’re both, I’m going to be selling one giant portfolio of products.

Are we going to let you guys run independent? And when we just sell yours this whole separate product line, what’s that go to market, gonna look like what’s that strategy. And if we can outline that, I think the other critical component is the values of each organization to understand that. Leader to leader and be able to identify that with the company culture, to understand the real people, the leadership, how they operate and manage the respective teams, because there’s things that we can acknowledge are nice commonalities and then some unique differences.

But then there could be some stark differences that we could identify some potential conflicts. If you operate on a pure top-down strategy. And we’re very much about. Managed company, that’s going to create some frictions. We can just integrate our organizations together. You, we need to think of this throughly, how it’s going to actually work, because if we don’t figure that out, then maybe this deal isn’t going to make sense to do.

I would say that. And then the other piece around that is thinking. This vision right. Of what you’re trying to achieve in the end state and building into pillars of value drivers and being able to align teams around those value drivers, is think of them as, okay. Ours they’re defined and all the tasks that need to be executed can roll up to these OKR because the big problem that you lose sight of all the potential values when people.

Lose that end state goal of what they’re trying to achieve. And they don’t know where they fit in and what they’re doing. So the better you can align that by using these OKR hours and prioritizing and creating teams around those OKR, specifically to deliver on them. That’s where that critical part of being able to execute the integration activities, because you’re not buying a company and an operating it, and it’s going to make money for.

You need to buy it with a model that lays out potential synergies. You can capture through cost, energies, cutting costs, where you can economies of scale and whatnot. And then the increasing revenue, are we going to start cross selling the products? What are we going to do to generate the additional revenue?

Is that going to bridge our technology roadmap so we can get to market faster than. So I think having those OKR is what helps keeps those teams, that big picture alignment there, because when you lose that big picture alignment, you lose, everybody loses their focus, it’s in the wrong direction.

But I think those are the big pillars to think on the expand off of having that target company understand you are the new buyer should. So I think in this, on the sellers regard, That is something that you want to know. It’s part of it. And I think the seller, a lot of times have that disadvantage because there’s not a frequent, reoccurring thing, that theme that they do most time, it’s a one-time life event.

So how do you develop that comment that’s where you get, depending on some of the advisors, but the challenge with advisors is you basically pay them to a close, so they don’t have a lot of post-close considerations. They’re not sitting there analyzing that end state and the go to market and helping to calculate the probability that going on, the cultural fit, these sort of things, all the postmark marriage activity that you’re going to have to commit to for the rest of your life.

They’re not, they’re helping you to analyze that and look at it. They think of everything for you up until that day, they get their shoes. Yeah. I That’s you bring up a really good point. So in your role as a, as an, as a advisor, would you stay on with that? So if you’re helping the buyer to navigate this.

Would you stay on with the buyer until some end point? And I think back on we, we both talked a little bit about entrepreneur’s organization or, and there’s also a thing called EOS entrepreneurs operating system, where there’s an implementer that comes in and they help implement some process for you or an entire process.

That role is usually hung onto for two years after that’s been implemented. Hey, do you do that? Or, and B, is that something that, that you see buyers that will need that post-transaction now that you brought a really good point out? This is where our business has been evolving. When we started with software with a basic software diligence management tool, and we got to understand the problem of diligence on management really well.

And the nice Nashville adjacency was integration manager. So we developed a competency around integration management, catered, iterated, a lot of the software functionality. And then we did the front end pipeline piece. Then we had this full, comprehensive lifecycle management solution. So we’ll work with corporations and digitizing that lifecycle manager.

A lot of times they’re just using Excel across the board and stuff’s pretty scattered out there using maybe a data room, like an old school data room. It’s funny. Cause it was back I think, but 15 years, 20 years ago, they would come to your office and scan all your documents and put them on servers. And that was the virtual day.

Do your own business for you? They charge a lot. They used to charge like a dollar 25, something like that per page. You got thousands of pages that need to get scanned in front of the web. They made quite a bit. What’s interesting is today they still use that same per page billing. But there was nothing being scanned or nobody going to the office or nothing.

Are we doing the office in general right now? But they still charge. They’re still charging and maybe not as much it’s in the cents per page, but I think it’s interesting because it’s still playing that model of here’s a company, a lot of data. And then next thing they’re spending a million dollars a year plus for this high security data.

That’s how inefficient this was. It’s that. And then your process flow is all done in Excel. We built around that. I think it was probably six years ago, a friend of mine and marketing was like, Hey man, you should do a podcast. We started getting into that with a mission of enabling MNA practitioners to be able to share their lessons learned.

And the idea was because that was the problem we saw. We kept working with these companies and they all had a different way of thinking and looking at them. But there’s industry itself is lacking standardization, best practices. The real science as very started this theme of MNA science to the podcast was eMoney science.

As we kept learning, we started documenting all these things that we’ve learned, and we took transcripts of these podcasts. And I think it’s the date we have over 350 published blogs. You build a community around it. We have these practitioners that show up to our events. They started an online school.

They’ll get, take horses, get badges certifications. And it’s all of this pursuit of getting good, optimizing M and a getting really good at it. Looking at our industry as this practice. And that, yeah, there’s a swarm of bankers out there, and most of them are out in their self-serve serving regards, but to be an actual practitioner and sharpening your skills in all these areas that really are what generate value in a deal.

And they’re not models. They’re not always math formulas. It’s a critical part of. But when we look at the actual doing the diligence through executing integration, that’s real people, skills, that’s real leadership skills. It’s more about managing change than anything else. So I want to put Magento out there as a Guinea pig on, on success.

And failure specifically, Magento was purchased by eBay in 2011. They had a different vision and I’m of course I’m speculating because I wasn’t part of. Their team at the time. But I was a partner with them and I’ve, I found firsthand on how they dealt, how E-bay dealt with with the users and how eBay dealt with employees and then how they dealt with partners.

So that’s my perspective on it. And I know that after two years eBay came back, did a reset and said, Hey. We actually care about our users. We care about our community and we care about our partners. Do you see that happening a lot in this space where, Hey they’ve taken a little bit of time realize that they need to make some changes and then they go ahead and make those changes.

Please don’t have a choice nowadays because things are moving pretty quick. And if they see what’s working, like when Adobe ran that Magento product, they had a much better ecosystem to support a product like. Where they can foster growth and they immediately saw the value, which is why they pay the high amount for them, for it forum.

E-bay. It’s interesting that you say that too, because just recently there was an open letter that was written by the Magento community to say to adult. You have to change something or you will lose the majority of your community open source customers. And the message, the problem was there was some transparency and messaging.

It turns out, we don’t know everything yet, but it turns out that Adobe was on the same page, but they didn’t have that messaging in place for that open source side of the community in terms of Magento or Adobe. The M the open source probably is 95% of the install base. And the CA in the commercial version is 5%.

And again, I don’t know if these numbers are accurate, but it’s a big proportion that are on open source. So there’s a lot of open source users that are skewing the sort of usability or communication channels that Adobe has that. So it Adobe then has now come back and said, Hey, we do care about you.

We are going to support you and, helping to convince the community in general or the users in general that we are behind this vision of open source software, as well as the commercial version of it. And here’s how we’re going to do it. It just took them a while to get there. Crux of managing change.

The gap year was the communication that the intentions were good and there were there. But as part of doing this acquisition, the comp plan didn’t cover that part. That there’s this suspect sus or subset of people that they didn’t get the right messaging to, to have them clarification about what was happening, why and how it was.

And in your process, do you go and help them identify those gaps or there’s a whole comm department from that corporate development, the leaders should be helping to shape that and they should continuously iterate on it throughout the project. We don’t work with companies directly on it. There’s a whole bunch of consultants that specialize in that alone, but in our academy, we’ll cover offerings.

Teach people, the basics around stuff like that. I guess some of my points here, or at least my, what I’m trying to illustrate too, is that it’s it it, no matter what size the deal is and no matter how mature the company is, it seems like there’s always going to be issues that come out of it.

And I think to your point, the sooner they can manage that. The more successful, they will be in that acquisition and then transition into whatever’s next for that particular business. That’s the hardest part. If you can get good at that’s your whole competency of M and a, if you create change for the greater good that you had this vision of how you’re going to make value from purchasing the company, they’re able to execute and deliver it.

That’s it. That’s the whole M and A’s all about that. That part is the part that makes it the most challenging is to be able to do that. If you can understand that part, it’ll allow you to make that part of your success by managing that change, knowing how to align people around priorities and have them achieve and change, achieve goals, but then not have to the big, typical problems like attrition, Cain shows back.

You’ll get frustrated. They leave. All the headhunters around are after them, after deals announced. So there’s, especially in this market, they managing that change. It’s it allows you to really bring things together in a nice way that happens quickly communicates well. So people are in the know, they don’t feel all this fear and certainty if they have a job or not, or, and it just, I think a lot of it, you just gotta be real clear and transparent because people can take the bad news.

They just can’t take notes. As you can keep communicating it saying, Hey, we are going to let some people go. That’s the whole point of this deal. Like we’re going to save some. And then we’re going to use other resources to make the company overall much better, provide better value to our customers, but we’re going to create a lot of other new jobs and these other areas, the good far outweighs the bad obviously there’s opportunities for those people that you know, are going to get affected and if they can transition to it.

But that’s the thing. If you can get really good at managing change, that’s your whole competency around invest a good M and a. Acquire businesses and have them continue to grow and be healthy. It’s really hard to do so many people screw it up. So many corporations we see just seeing them sometimes just murder some of these companies, especially these little startups start integrating them, caused them to turn in.

So it was follow every little large corporation process. That’s not what they signed up for. Yeah. And again, we’re having a little bit of a technical problems with Riverside, but okay. So I just been riffing. No, you’re doing great. And I hear you the whole time. I just I’ve tried to do that’s good.

Absolutely. All right, so just, let’s just wrap it up here with attrition. I know that I heard you say attrition and I wanted to talk about like when Adobe purchased Magento, they, everybody stayed on. I think part of it was, they just moved people into different roles. So part of that change management has to be, and I heard you say communication quite a bit.

It sounds like communication and transparency as much transparency as you can get with each of the employees is a key factor in that. Yeah. The way it’s difficult. Cause you can’t sit down with people one-on-one like, ideally. And the change is going to be hard regardless. Everybody’s gonna have challenges with it.

Plus just the projects, your scope of work. It’s just a lot of change. And if you don’t feel you’re up to speed and what’s going on, I that’s, the, what we’ve seen is the hardest part to really manage it. When we look at a lot of the clients that we work with, it’s not like the technology or stuff like that.

It’s really, they bought a company that need people to do stuff and have everybody really motivated and do it. That’s really hard. Yeah. So setting those expectations and helping everybody’s aligned with the new vision of the leadership is the key to success from the anti attrition.

They call it anti attrition is as you’re trying to bring people and keep people on. Yeah. Cause that’s the thing it’s like the gravity is the attrition. You really just naturally going to, especially like the, seen this. It’s hard to keep them when we’ve seen it happen a lot where it just does the innovation.

You have to keep people that leave. And then it’s over. We see one of the big IOT companies. All right. Let’s just back on Google for a bit, like their nest acquisition that turned off to be a big disappointment. They came out with. Great products to start the business, built it up, got acquired at a great valuation.

I remember it was two or 3 billion, but they didn’t keep cranking out products. A lot of their leadership team left and it happens a lot, assessed as I one example like that’s why it just happens a lot. It’s a big, hard thing to do. And having all that organization upfront. I think in the very beginning, you, you said having all the planning in place, especially from the buyer’s standpoint is important, but the seller having they’re having some kind of a transition plan is just as important.

It should be something that’s joint that’s working together. And then I think at the end of the day, people tend to forget about the customer for maybe both of you, both sides of the table, working together with. Things aligned around the customer’s perspective might be the way to really do it.

Yeah. I’m with you there align around the customer. Look, how are we going to do this? We’re just going to, if we create value, it’s all through customer experience. We can just bill out. Are we going to actually make customer experience better and compelling, and really think that through from the time you start working together and at that, in that journey, understand each other’s cultures, the value.

And then you’ll get a good sense. Hey, this would be good partnership that’s happening or leading in like a partnership of us working together to achieve this. And then it could be a really good net positive things. When two organizations come together for the greater good, a lot of value gets created.

We see it happen a lot by companies. If things go rive pretty quick and that’s it, a lot of value gets dot gong. I wrote down the company doesn’t grow to the next big thing that everybody wanted them to. It’s just things fall apart. And yeah, and I’m assuming, Adobe still has a vision that that they’re sharing again with everybody and they are going on to the new, great things and I’m crossing my fingers, that it will continue to be a success.

Are they doing? They’re doing pretty good. We’ve got a great confidency. I know one of our MNA science alums just joined their M and a team. What to see? I depends on their con department, how friendly they are loading people and it gets some airtime on a podcast, but we will find out soon enough. Keyson we have used a lot of time up here and unfortunately we use it up in, in technical difficulties.

So we might have to do this again in the future. We should do this again in the future. I’m going to rephrase that. So as we kind of wrap things up here I always give everybody a chance to do a shameless plug about anything you’d like to. Go ahead and plug something today. A very, we can talk a lot about mergers and acquisitions.

If anybody’s interested in learning more about mergers and acquisitions, it’s hons of content on M a science.com. Yeah, anybody interested? We have a diversity scholarship program to promote diversity in industry to give a couple of years on the academy program. So it was a great opportunity. Expose people that have not familiar with M and A’s or career path to understand, learn about it.

It’s an interesting world that we often associate with just the bankers and we’re working in the boiler room operations, but there’s so many other roles that involve some of the things that are more important. What we’ve been talking about. And how do you align people around these goals to make things happen and manage this large magnitude of change?

That’s it? Yeah, that’s such a great point too, because people are what makes your company run and making sure those people are happy people, happy employees make happy customers. Thanks again for bearing with me today on our, on the podcast and some technical problems, but I appreciate you being here and I hope you have a wonderful.

My pleasure. You too, Brett. Thank you. Thank you.

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