Name: Buyer-Led M&A™ Masterclass: How to Build an Integration Playbook That Drives Deal Success
Uploaded: 2025-06-17T16:30:40.265Z
Duration: 59 min 32 s
Description: Buyer-Led M&A™ Masterclass: How to Build an Integration Playbook That Drives Deal Success

Transcript for "Buyer-Led M&A™ Masterclass: How to Build an Integration Playbook That Drives Deal Success": Alright. So the goal of this session, I'm really excited about who we have for our SME, but we really wanna make this content engaging, so we wanna keep it interactive. During this session, if you got some questions that come to mind, feel free to put them in chat, q and a. Look at this lively audience we got. We got top notch, all different corporate developments, m and a attorneys, VC side, private equity. It's It's gonna be a great crowd. So I'm expecting some good questions. With that, I think we'll cover our, introduction. I like to introduce my cohost for this session, Carlos Sesta. Carlos has over a hundred years of m and a experience. He called close to close to a hundred years. When you started Verizon, it was the first spot. No. I started back in Brazil at a private equity firm. Okay. So private equity in Brazil, they did a a run over in corporate development team at Verizon, then he was heading m and a at Dentsu Aegis, heading m and a for Presidio, now heading m and a for MP Digital. Did I get that right? Yes. That's correct. Alright. We're free flowing here. No script. I know, Carlos. This is it. I'm so excited to have this opportunity to collab on this. I'm really excited about this topic because this is something I truly learned from from you, the the master himself. So So and we're gonna share a lot of this and we'll also have some, some of these handouts as well that you can reference from from our conversation today. Thanks for having me. So the first thing what I wanna talk through is just buyer led as a general framework. It's something we advocate from. It's something that originated from reflection on doing over 300 m and a science podcast interviews and working directly with about a 100 corporate development teams and just seeing how corporate development teams evolve where their first deal may be a very seller driven process, the traditional bank auction, you know, reactive. And now we really see that when company and the, corporate development function evolves, it turns into a buyer led, function where it's very proactive having a defined strategy, and and being able to, act on it and keep integration through the process. Oh, you know what? Let me change I can change the slides here. So this is kind of a contrast of, like, a buyer led approach when you run everything proactive, everything more centralized, and you're really leading things on the buy side. I'll just talk to a framework real quick and then I'm gonna hand off to Carlos so we can do a deep dive on our topic today. So first and foremost, you don't just impulsively buy deals. Right? Just not, you know, responding to stuff that gets thrown at you and then trying to build a business case. You wanna really flush out crystal clear strategy. So that way that criteria can really dial in which companies are gonna go pursue and make it really, simple to get to a go no go decision. Well, it's never simple, but at least faster. And then the second, really centralizing all your information. You know, when you can centralize it across your stages through life cycle of deal, you save a lot of redoing work especially when it comes back to doing the integration. And we're just seeing a lot of referenceable to have single points of truth. So as you bring more people in the deal, it's easier to get them up to speed. So this is a key thing we're gonna talk a lot about today is, like, really synchronizing the diligence integration process. If you want continuity there. If you don't have continuity, again, you spend a lot of time just re diligence in the deal all over again. You don't get that smooth, you know, good start on integration and then things just take way longer than your, investment thesis doesn't look as pretty when things are said and done. And then build for scalability, when you look at concurrent deals, how do you optimize for that with these resources you have? You know, you got folks functions that are running full time jobs and you're doing multiple, m and a transactions. So how do you sort of build models to really scale that out? And then last but not least, for the people, really creating a win win situation for the people involved on both sides of the deal so that they're motivated and, you know, working towards, the the greater goal and and targets. So today's topic is how to build integration playbook that drives deal success. Carlos, you wanna kick it off? Yes. I'm gonna kick it off. Thanks, Keeson. The topic is completely aligned with, the bio led m and a framework that Kison has, been, successful preaching, and I'm, I'm totally converted to it. So I think as we start, I'm gonna be just, building on Kison's framework. So I'm gonna assume that everybody thinks integration is important, that it should, start at diligence. But I'll I'll add, like, three propositions to it to begin. Integration really starts at the diligence, but you need to be modeling it at, at at the time that you price it. You need to have it in mind when you price it. And I'll I'll I'll back that up, with some of the material that we're gonna go through. My second proposition is that is that, integration strategy is part of a m and a success framework that I'm gonna put on this on the slide with two other factors, which are, due diligence and deal structure, and those three interact and interfere with each other. K? So that's proposition number two. Position number three is, I will argue that m and a success is not random, but engineered. And smart buyers, they understand those three factors and how they interact, and they let the negotiation process reshape these interactions, into their advantage. So, that is probably better explained with, that spiral slide. If you can just I think it's two slides ahead. There you go. Okay. So I, started to think about m and a successes, since I started to run m and a department. Right? Some in your career, you you get to be like a a person that does diligence, does modeling. But as you go through your career and you you need to be, you're responsible for delivering value, you start connecting all the dots. So my reaction to the traditional block arrow that you've seen, an m and a, flow, you know, LOI, diligence, and then it's it's this. Because, what's important to to understand is that the the I I have these three factors in in in these, in in the spiral. Right? And then what the spiral means is when you have variables in a process that interact with each other, what you do is you design the first, take a touch back at the first one, advance to the second. By the time you're the third, you know, you notice that you have to reshape the first one. So the idea is that you go through these, factors until you sort of converge to, where the where the final stage should be. So, just to define, what I mean by that, and then I'll come up with, examples, which I think the examples will really bring it to life. When I talk about deal structure, I'm talking about, you know, cash equity, any sort of consideration, earn out, escrows, bonuses, rollover equity, any of those, items would would would would picture in there. And and the way that, it sort of interacts with each other is, if you have a deal that is heavy cash upfront, it's simple, but brings the risk much more to the buyer. If it's equity, there's long term alignment, but you've bought possibly have dilution and seller influence if you want that or not. Earnouts bring risk mitigation to the to the equation, but you know what it does with integration. It delays integration or makes it a little bit more difficult. Right? So that's, for me, the first topic. The second one, due diligence, is not only what you find in diligence. Let's say you find that, you know, earnings are overstated, there's accounting risk, or, there's, there's lack of sophistication on the forecast. But also, for me, that means, your ability to do the diligence. Let's say you're looking at a company whose revenues are not contracted, there are reoccurring revenue as opposed to recurring. How do you diligence that? There's just so much you can diligence and and have faith on the, on the forecast. So for me, when you get to the point, you can have established a deal structure. When you get to the point and say, you know what? I really can't verify those numbers or my level of comfort with those is not great. So I might have to revisit the price again or maybe I do something with integration that, will take risk out of the table. And then, the integration strategy is really how you deal with people, go to market, and function. Functional is sort of the back office. How you, normalize or bring together the the platforms, so you can facilitate or, the, the go to market. So, in my mind, those three always during the deal, you find something, you revisit, and you keep going from one to two to three until you converge. I like the whole like, how to just think of the whole picture and these pillars and just the way they're interconnected. Because I feel like it gets lost. I'm always thinking, Carlos, it's like the timeline of stages. Yeah. You start evaluating the deal, then you go to diligence, then you go to integration. But I think the the big thing I'm taking away is, like, you know, you have a lot of assumptions. But as you go to diligence, you're valuing those assumptions. Can you bring that back into the model? And then it goes the similar with your integration thinking that maybe that you actually got a real sense of what those integration costs are. I think do you feed that back in the model? Exactly. That's exactly what I did. I got it. Yeah. You got it. So I and I think you bring it to life with, with really with the examples. I think the next slide, it's probably where we should go. So, here's an example. Your diligence finds out there's all overstatement in the pipeline quality. The buyer then wants to either renegotiate or put a earn out tied to these bookings, and then that directly affects how we integrate. So the integration plan is gonna slow down. Now if you were thinking about all cash upfront and just full integration, it's not the case anymore because now you have this risk factor to be to be dealt with. So example a, example b. Okay? So this is example b is your typical banker process. Seller is on a fast track and high valuation. There's, like, you know, dozens of bidders. So, in order to get to the valuation of the buyer, throw some equity, and some post control provisions. And then, again, that slow down integration because you want to keep the seller engaged. Example c, integration is core to the to the to the thesis, meaning I need that capability to just start generating to make to make my my, my deal work. There's probably some synergies associated with this to make it to in order to make the deal work. Buyer pushes for more control and reduce seller influence, and then that influences your your diligence. Then you have to be more aggressive on the diligence and put tighter deal terms. So that's that's the idea of that, of that, spiral. I have actually and this is a interesting topic. I have put, for download, I think after we'll figure it after the session, another eight examples, where, we we we, we sort of analyze the the direction between those those three, dials. So just to have an idea, one of them is integration speed dictates rotation structure. The other one is founder led business with no succession plan. Next one, high synergy potential with complex IT stack and so on. And so I think that brings the, the the structure that, the framework that I'm trying to describe here, to life. So then we can go to the next slide is is when we actually go back to the whole, topic here. Everdeal is a balancing act. As I was talking about, if it's smart buyers, they will look at, how things progress in diligence and reshape the other two or three factors. Highlighted, bullets three and four integration isn't an afterthought. I think we all agree with that. And you have to model that integration early and expect to compromise. So with that, I think we beat it, beat the the the topic of integration being part of value, to the ground. So let's move to the next slide. And, the way I use the integration, due diligence is is just adding adding another, due diligence stream just like I have, finance IT legal. K? And I'm trying to, extract from it is, test the buyer and seller chemistry, and reveal the real culture of the company. And then, you know, post close org structures is really a given. You really start there, when you're looking for, when you're planning integration and work your way back around. So let's, move, two slides. Do we have any q and a's at this point? No. But I can give you some if you want some. Go for it. Okay. So, you know, the one I like the way when you explained, like, when you go through a deal, you know, there's obviously a big alignment, like, where you're trying to get to the end state. And then when you go through that, you know, even before LOI, you talked to me a lot about having a, like, a, like, a thesis on how you're gonna integrate, you know, essentially, like, an an outline of a go to market. And and I guess what what I'm I'm trying to get to is I I feel like there's it's just so much limited information in the beginning. Right? At the end of the day, people just wanna get to the terms to get assigned LOI. Right. So, like, how much of it, like, do you really wanna be able to click into for thinking through integration? You know, because again, I guess, so much of the information you gotta unravel in diligence to even do that. Yeah. So, what I try to do is prior to LOI, you do this preliminary diligence. And that preliminary diligence is, you know, we have to be time efficient because sellers are not gonna, you know, open Kimono for you just with a with an NDA, not with an LOI. But I try to be as much commercially focused as possible, in terms of what the capabilities are that we're buying, personalities, and then and then the deal terms, how how receptive to the deal terms they're gonna be. And I'll give you an example. If you're in a in a banker process, it's probably not gonna be any ability to do, structure on the deal. So you you gotta be completely convinced that the combination of how much diligence you're gonna be doing, is is enough for you to come up with a, integration strategy. And it's usually, the other the second the second approach that I do is, I try to be or at least have access to the management team and start talking about how they envision integration. I have some some idea of, are the founders staying or, what what is the second line of management, qualities. So you start pinpointing those things. But you're you're right. There's not a whole lot of information, but, you gotta make some assumptions around integration because if you don't, I think or this file tells you even if you don't do anything, you're already making decisions about integration. And not not making any integration decision is already, a decision in itself. And and, and it's fine as long as you, during diligence, can reverse things. But usually, if you don't have a a a at least some idea of where you're going with integration, you're like you're like to retrade the deal even harder. And then you and you and you know how till that goes. Retrading I'm wondering if that's, like, the approach because if it's the goal is just to get to LOI, people are always excited about that. Right? They wanna sign LOI. And I can look at a business and say, okay. Rule of thumb, you know, the company that we're looking at are probably, like, three x revenue. So I can quickly do that. I can draft an LOI and just quickly look at your p and l's and say, okay. You know, they're not burning through too much cash. We'll do three x revenue and I get the LOI out and do I play on that and then say, okay. You know, as I come across things that the quality of revenue isn't as good as I thought it was and then you go back and and you you negotiate. I is that better to do that or, you you know because I feel like like like you use example of an auction process. You know, you start doing little things like that early on or you're starting to nitpick at stuff and the seller gets more weary about it. Yeah. Yeah. And I think it's right. I think as a strategy, you could do that. Like, listen, it's all it it's a framework that prepares you for what's coming, you know. So if you and and the other thing that that I wanted to point out, Thiessen, is that there's not not one, answer for different buyers. Right? Different buyers have different drivers. Right? So NLP Digital, for example. I know that we're super focused on integration and and capturing the value. It's because of the personality of the other people that I have. ICO has sold companies before, have bought companies before. So they are operators that are focused on integration. And and and to some extent, less less flexible on how to integrate, relative to other other deal terms. So, if you're if you're a serial acquirer and you just, you know, you're you're aggressive and you just wanna get into the process, just be prepared to really, you know, do on one eighty maybe on certain certain of those levers during the process. I think administratively also works. What is really interesting about that as well is that that reveals to the seller, the culture of the buyer. We're gonna talk about culture in a little bit here, but as if I if I were a seller and start seeing, you know, what matters to the buyer, it's a great give on, you know, what what is the culture of this company? Oh, they they are serial acquirers. Okay. They, they favor in integration. They want people to stay. So it's a it's a it's a it's a, I like to use those as a as tools to, to verify, how, cultures come together. So I'd say I got two deals I'm looking at. Right? One deal investors just wanna get out, and it doesn't seem like there's gonna be much, you know, continuity going forward. The other one is more of the founder business, which they're looking to to real you know, they're basically doing a recap and the founder wants to stick stick around and keep growing the business. Yep. Like, really different strategies there. Yep. But seems I I am again, I'm trying to sit at just getting the LOI, you you know. And then and what I and I I guess with the founder business, you know, is it, like, is there something there? I mean, obviously, we always talk about, like, a better together framing Mhmm. Which is, okay. You know what? We're gonna be able to help you cross sell. We're gonna accelerate the growth of your business. Yeah. You know, and maybe there's more of that, like, where are you gonna fit into the picture post close versus the other deal where it's like, they just want a cash offer and they want You'll never get the shop. So that's fine. And and and absolutely. I've I've used that in the past. I mean, depending on who I was working for and and and the culture of that company, you know, I've been in places where well, we wanna keep the entrepreneurs. So part of that of the sell process was, us trying to get to the entrepreneur and say, hey. We want you part of this, you know. And then the the the funny part is that when there's a a banker, obviously, the banker doesn't want that. Doesn't want that direct contact. But what you're trying to do is, in the management presentations, show that, your where intentions are, your culture. Just just like, you know, put put a shine on your culture. You ever go around the bank and just start talking to Target directly? Go around the bankers? Yeah. And just start talking to Target directly? No. No. Within within the process, I I I usually follow process. But what he tried to do as a serial buyer is not being banker processes. You You know, try to find companies that are not for sale. I agree. That's what I'm focused on right now. Yeah. Exactly. That's, I think those those are, more interesting. I What do they do when you threaten to hire a banker? That's when I threaten to walk away. Yeah. Listen. There's there's, I think there's there's places for everything. I mean, in in highly competitive, you know, high EBITDA, high margin, high growth, you know, PE sponsored, they they will use a banker, You know? It's it's more about the economics anyway. So, there's nothing wrong with that. But what I'm seeing today, and I'm thinking about programmatic, buy side m and a through cycle, you know, those are the kind of of of, companies that I'm that that I look for. They are the ones that are not for sale. Okay. So we have a thesis on the integration even though a lot of unknown variables, and that's where you have those cycles in to to shape the model up as you continue. Yeah. And you have to have, like, a a team that also understands that. Right? Again, unfortunately enough that I work with folks that have done m and a on both sides, but there's no one size fits all. There shouldn't be for for these deals. Oh, I integrate this way and I, you know, I price this way. No. It's just counterintuitive. Right? Every time that we start negotiating, risk factors are gonna be negotiated, you know, escrows and all that. And your ability to get comfort around those would dictate how you're gonna respond, in those three levers. So that shouldn't be that shouldn't be one deal that is like each other. And I I I was I was I was actually joking for serial buyers, you know, sellers, when they sell to a company, they talk to each other what what what's the deal the deal that you got versus the deal that I got. And I have no shame in saying that, like, they're gonna be different deals because you negotiated differently. K? So that's the so Aniko. This is good. I, I see one question from Matt. Just as it can be undervalued, have you ever seen an integration strategy be overvalued and arm a deal? Like, doesn't that happen all the time? Yeah. Yeah. I've seen. Yeah. But it it was it was more about who was who was running the, the integration strategy and, overemphasizing it kind of thing, where, and really when that happens, you start bumping into the other two, levers, diligence and and and and and deal structure. Yeah. I'm not sure if I can talk about the specifics, but, absolutely. You you can you can there is such thing as spending too much time thinking about overthinking about integration. There's it's a process and the negotiation will will sort of guide you where it should be. What about, like, expenses integration? Like, you know, your rules of thumb? I was talking to one of them where they were, like, cost a dollar to save a dollar. Yeah. I know. We're we're we're jumping ahead of the slides, but let's talk about it. Yeah. So, so with, integration expenses, there there are usually and I get that question a lot. They usually not much of a problem when you're buying everything upfront and you know your expenses and you're probably pricing that into your deal. You should be pricing that into your deal. But to the extent that there's some sort of structure and, you know, for you you have you have payments that'll be based on whatever criteria, you know, revenue or EBITDA, cost coming to place because there's one approach that is not to integrate the, the functions at all. And in a way, you're just sort of kicking the can down the road and and building what we call, like, the integration debt. Right? And the other approach is to fully integrate and that but they're gonna be cost. I mean, usually, you buy a company that is smaller than yours. So to the extent that they don't have systems that are as sophisticated, like, you know, integrating Salesforce, for example, it's a problem. So what what I usually do is, show the value to sellers of of of this light touch integration with definitely some points that integrate and and cost associated with it that are going to be impacting, profit. We try to be reasonable, obviously, you know, given the side of the company. But I'm really I'm a 100% transparent about that with and then in the diligence process, so much so that usually ends up as a as an addendum to the SBA cost associated with each one of those functions and the maximum that could be charged, in in relation to the to the earn out. And I'll I'll tell you, like, being upfront about it is it goes a long way with sellers. So it's never it's never an an easy sort of negotiation, but, I will take that, transparency with sellers anytime because it's part of, it's also part of, you know and I'm I'm I'm already jumping ahead on the on the slides here, but this is so conversational. This is fine. Those tough conversations during dealers during, integration are actually a great way to start, figuring out the the cultures, aligned. Is is imagine a process where there's you know, everybody's just excited. Oh, you accept my price and, you know, let's let's keep going and and you don't touch the the tough topics about integration costs or or reporting lines, then you're just kicking the can down the road. Right? When you have these conversations during diligence and you see the reaction of sellers to your propositions, it's a great way to to start understanding their culture. It's not you know, culture is not how many, you know, foosball tables they have or how many how many, holidays. It's really about how they react to things. And and, you know, nine out of 10 times the culture of companies are reflection of how the owners or the sellers are behaving in a in a conversation like that. So it's a great walk away point as well if you don't feel that the personalities are not gelling. Okay. So I'm just gonna go back to the slides here. Where are we? The next integration playbook. Okay. Right. So I think we can we can probably skip to the next one because I already talked about it. Yeah. Right. So this is just the the visual illustration of how integration is another, dual billers work stream for me. And the one thing that I wanted to talk about that is there's a there's a there's a deliverable that I like to have in the integration, work stream, which is the integration plan. That is a document that it will not end up anywhere on an SPA, but it's a sort of handshake between buyers and sellers as to how they envision the integration going. And it it it could be super detailed. In in fact, the ones that I like, to use the most start with the idea, the principles, like a, you know, a manifesto and what we're solving for first and foremost. And it goes down to finance, IT, legal, HR, how we're gonna integrate those timelines, specific timelines, and and it becomes naturally sort of the road map for integration. So it it is, I don't know, a document or a PowerPoint, whatever it is, but something that is ready for a project manager to start executing on on day one. I found that, that process is, very appealing to sellers. They like to be part of it. And as I mentioned, it's the it's the tough conversations part of it that are still also, very helpful to, to uncover, culture. We can go to the next one. I think I already talked about this, using, the integration works too for a cultural deal diligence tool. Any any questions on any q and a at this point? What's, like, the key thing around this? Like, you know, because I I feel like, any of these podcasts I do, it's all culture, culture, culture. Culture is gonna blow things up afterwards. And I'm like, okay. But you talk even one I'm looking at right now, it's like, I can barely tell that there's not gonna be a good culture fit. Actually, the deal I looked at last year where my VP of engineering is, like, huge culture differences between engineering teams. So, like, I don't care. Like, this deal looks good on paper. Like, we're gonna do this deal. You you know, I mean, it's great. It's like your problem to figure out. Like, how how do you how do you look at it? Because I I don't ever I never hear about deal like this is totally gonna, you know we're gonna walk away from this deal because of the culture thing. You know? But, I've I've seen I've seen I've seen people walk away because of Telstra. Maybe it's like you're a services company. You're literally acquiring people. Get it. But I'm in tech. Like, I'm buying tech. Okay. And the people Yeah. I know. So that's that's a good point because it comes to the point of of what you're solving for is what are you know, the buyer is solving for for, for the acquisition that they they wanna make. If it's if it's people based, it's one thing. If you're a wireless company buying buying network, it doesn't matter. Right? So the framework is generic, but, like, integration for if you're buying a spectrum on a on a wireless company, it doesn't it doesn't matter. So, but I think most times they're not. There's people involved in in the process, and that's when and that's when the thing the value of the framework really, comes to life. But you're but you're right. If you're buying technology, then then it really listen. You put less weight to that. Right? So you wouldn't be you wouldn't be you wouldn't be as worried if you find something in diligence that has to do with culture. Like, okay. But these people are gonna be gone or I'm I'm just absorbing the, the idea You know, I mean, is it I guess I'm almost wondering too is it because like I said, I I'm not gonna, like, run away from the deal just because they're a culture issue. I'd rather say, are are you gonna adjust your integration plan instead of a full integration? Maybe it's a partial integration and these two engineering teams kind of work separately. Exactly. So you now you're getting you're getting the the the spiral now. Exactly. So you don't you don't walk away, but is there something that I can change here? Like, oh, yeah. May maybe I can change. Yeah. I see there's a lot of integration people on this call. Like, quite a few integration leaders. Like, I'm really curious because like I said, I've done a bunch of these podcasts. I always hear this is the number one thing that blows up integration is the there's cultural differences. But like I said, like, I'm I'm not gonna walk away or any deal person I know is very reluctant to walk away from a deal because of that. Pay as many red flags as you get. Yeah. So, like, we're we're like, is there anything you could do early to mitigate that, you know, and we're talking about adjusting the integration plan? Well, I because I I don't know. Like like I said, I'm not gonna walk away from the deal from it. Right. So Or at least you know what you're going to as part of diligence, I can identify where those cultural friction points are, and then maybe you can at least try to address the mitigation plan early. It's it's about if can you leave with that? Does does it does it fundamentally go back to the the validated time to extract on the deal? If it doesn't, it's it's not a factor. What I what I feel is, like, there's we we we did a, we are we're a long way right now, into the m and a sort of community where we are discussing integration where, you know, it used to be someone else's problem. Right? Now I see I see a lot of people saying, oh, that deal didn't work because of integration. I was like, okay. But what about it? That's we we we should get down to the detail and understand the valid drivers, but also it's not a it's not a, it's not it's not an exact science because the buyers is solving for what the buyer thinks is is, is is the value of the deal. Right? To your point, if we're buying IP, you know, people are secondary, or at least the the the most of the most of the folks. So Well, you Right. I I think you had a really good point of, like, looking at culture risk and how that would affect value of the deal. So, like, I know you know, because I'm I'm sort of look I'm telling it's more of like a go versus no go decision. But I think you the way you framed earlier was, like, you click in and it's like, okay. There's a risk on culture. How's that gonna impact the deal value? And then, like, the integration folks says, yeah. You're gonna get some people there. You're gonna work together. Yeah. Okay. What what does that what does that actually mean for value wise? I was thinking about this and I of the three levers, well, I'm thinking the buyers have reservation prices or no negotiable in all of that. Right? They just have to make sure that once they alter that, they're not gonna be, setting themselves for, like, breaking those. So there's there's give an example. You always have a reservation price on on on the valuation itself. That's that's one that's easy. But there's certain nonnegotiables, for example, on diligence. Let's say, oh, you know, I'm never gonna get comfortable with a company that, for example, doesn't have contracted revenue. It there could be a buyer that are like like that. Let's say, you know, manage services, for example. Everything is recurring. Do you have tolerance risk tolerance to buy something that is not recurring? The same way with integration. Right? So you have reservation prices on all those three and it varies from buyer to buyer. That's a good point. You know, I got some questions I wanna run by you here. Christophe asked, what is your view on how broad and deep you should use the former owners for communicating the integration measures to the target employees, especially if the owners should stay for some one to two years after close? I would think that's, like, your best thing to do is let the, you know, owners kind of be the familiar leaders to talk through it. What do you think? I would agree with that as well. I mean, later on down the line, you you can evaluate if if if you should, you as a buyer should step up and and be more proactive on that. But I think, absolutely. I would I would be I I would use the the buyers, for that process. If if it especially if they're staying. In fact, it sounds almost like I I we do our own diligence in interviewing people, but also take their guidance to say, hey. Who are your key people that you wanted to stay for this new phase? Right? And they and they and they guide and, and communicate to them. It's all in a in a way and it's and it's so funny because there's there's cultural differences in in this that I that I learned, just this year. Sometimes in US, when you you have, like, a second layer of management that you want into the deal, you extend, employment agreements that they didn't have before because employment is at will. In other countries, extending employment agreements is a it's a it's a no no. It's a okay. What what are you trying to do? Why are you trying to lock me in here? Anyway but I absolutely follow the need of of of the business leaders. Christina, perhaps not enough parties walk away due to culture, thoughts, regrets later. You know, and you learn the hard way. Have you seen that where your process or the corp dev functions you've, like, evolved and all of a sudden because you've been burned on the culture side, you know, now you're putting, like, this consideration that will walk away from a deal if the culture really looks off. So the the the problem with m and a, as you know, is you're you're spending time and money with diligence and diligence providers and, you know, there's momentum and you don't wanna throw all that away. I have seen cases where, where but it's it it is it is rare. It is more common for you to go back and adjust the parameters around the the spiral than to than to walk away from a deal. But it it has happened. You know, heated discussions during during integration. Can't say the name, but it's, yeah. It's personality, man. Like, it happens. Got can can innovative versus old school and rigid culture makes a big difference in tech and m and a when integrating, cause a lot of clashes. And then, Tony, if you're acquiring people, culture is always an important factor. This is especially true of their cultural differences, leadership, you know, big time. What else we got? But why don't we come come through with more of the slides and we'll we'll come back? Oh, I got more common questions. Okay. The operating culture within the diligence process, can help identify potential gaps and variations. Moreover, once announced both early executive interviews and operating model design activities and form detailed plans can reveal a lot about culture and integrity. Passionate about this, after this. Yeah. We can do a whole deep dive on there. Oh, look. We got a top HR m and a integrator on here, Clint Kendrick. Cool. We're now seeing hard evidence that culture alignment makes a financial difference. There we go. Culture minded acquirers are 40% more likely to meet synergy targets, 70% more likely to meet revenue targets. That's exactly what that's exactly the point I was trying to make. It's just it it is it is part of the of the economics of the deal. 100%. Yeah. It's a little celebrity here. Big time. Clint Kendrick. Cool. Where on the slide? I think we probably covered everything. Oh, no. Actually, bringing to life. Let's go to the last section, actually. So one of the things that I I it just tactically, wanted to do is, what I like to have is, during integration process, checkpoints with stakeholders and sellers as to how things are going. And I really I I what I usually try to do is one control panel of one page that says, you know, green, yellow, red, how's finance integration going, how's IT, how's go to market, Just so we have like, it and it saves a lot of time. You send this to the to to, to the stakeholders and and have a a pretty good snapshot of how things are going and where you have to adjust. Now what I don't like to do is make those usually, like, a one once a quarter, but I don't like to make those, this formal process. More of a and mister Seller, how are things going? Is there, you know, is there anything that we should adjust here? Because, when you start integrating, a lot of people get together and and you wanna, filter the noise from what's really going on. So I think we have an, a slide with, an example from DealRoom of that, there you go, of what what that kind of, report looks like. Yeah. This is, like, tying it together. But this is an example. We use our own software because I get free access to it. I, but, yeah, if anybody's interested in in looking more, this is kind of how we sort of put a visual around tying it all together and then, example, visualizing dependencies. Exactly. Let's see. I think I think this is all his lives. So we got everything covered. You know, open to questions, folks. You know, if you got anything we can try to stump Carlos with, we talked about this one, the former owners. Ownership. You know, I I guess some of this stuff I'm just curious just learning from your experience. I'm always thinking about these deals. They're a little different scenarios. I I just I I wonder about like, I'm kinda looking at deals right now. They know, like, very close to our core. So I I feel like sometimes you you have, like, a bit of confidence that you really know this business ins and outs. And then you look at businesses that are further away from your core. You know, I'm just curious, like, what are your lessons there of, like, how you would change your approach? Because then there's a bunch of, like, don't know what you don't know and they're Exactly. So, that's another example of how, the m and a factors really are dependent on on the buyer, the buyer experience. So one example that I was giving you is, you know, obviously, recurring revenue commands higher multiple, and if you get there and there's, on diligence and there's a reoccurring revenue, you might adjust your your, your your your integration. But but if you're if you're a buyer that are used to that, that understands, it's not might not be a factor for you. Right? So to your point, you know, Kisum is making an acquisition. It's close to the core. Oh, I've I've found I've found this kind of, you know, someone that does diligence, for example, one of the accounting companies will raise it to you and say, oh, we'll find an issue here. It might not have an issue for you because you your understanding of risk, it's very, very deep in your industry. So in that place to your advantage because all of a sudden you can play with the other, parts of the deal, it to your, to your benefit. You know? So definitely proceeding with more caution further away I go from the core? Absolutely. That's that's the message. Yeah. Away from the core, you you you start being more conservative and and and using more traditional approach to, occurring, reoccurring, you know, one time, one off revenues, that kind of stuff. Is that just part of what I gotta accept is, like, you're gonna pay for your lessons learned getting into this new space? It is every yeah. I every learning curve has, you you pay with time or you pay with money or or both. But I yeah. Yeah. So so and and that's that's that's the other part for me that we're getting into a capability that we're more removed from the core, then you start leaning a little bit more on the the sellers. And, you might want them to stay for longer. So let's think about integration that way. Let's, let's paste integration and get them involved, for a longer time. I got a question on AI. It had from Lydia, have you started the AI tools being used yet to automate aspects of bringing it to life beyond the standard aspects like the DealRoom can take away manual aspects. I don't know what your case on. You're you're in the in the but I I have not seen integrate AI being used on integration. I I can see their use cases, but I haven't really seen maybe you're not I've talked about it. There's definitely a lot of stuff emerging really soon. I just talked to an AI startup today. I talked to another one yesterday. Definitely see a bunch of tools in the front end. Our approach is we are building, like, two foundational levels or layers of AI. So there's document side, which last year was, like, contract extraction. This year, it's becoming document analysis. You can actually do some analysis and get full readouts. So you're almost, like, using an agentic AI approach. Right? For For me, it was like I used to do a lot of EPA. I worked in oil and gas. So, like, I would go through this big EPA report and it's always like, number one, is there any contaminations? Two, like, what's the history of any contamination records? Three, is there under any underground storage tanks? You know? Four, like, when do they need to be replaced? Now you can just, like, run those as prompts and get a whole summary back, like, in a minute, which is really cool. So that that's kind of already the document level. Then the process level, we just actually announced it last week, but using AI to build out your whole diligence process. I actually just used it right now for one project I'm working on where you could just really go through and then give it something that'll prompt you all these different information, metadata about, the deal you're working on. And it'll automate building up the whole diligence process. What's really cool is, like, if you come across a binding so for example, Emerson is one of our r and d partners. So they if we model out, like, they're buying a factory in Lithuania, it'll, like, dial that initial diligence. But they come up finding that, oh, there's these five employees in The UK we just found out about. Well, now you can hack an ad and say, okay. I need the HR diligence of those five employees, and it'll pull up, you know, all your two p workmen's group and and just start, like, expanding on that. Where we see that beauty, the potential for the integration side is we start connecting those two things together. Because now you can start getting AI at the process level and as you start moving through diligence, you're collecting all your comments back and forth. But now you can start mapping it, you know, from what you extracted the documents, and that can really help enable you to build some early, you know, plans for integration, leveraging AI. Because I think it's always this conundrum we see that the deal people wanna keep the tent as slim as possible, you know, despite so LOI. And then, you know, they still keep it pretty slim even to a point and then a lot of people integration get involved and like, I feel late to the party, why can't I get involved earlier? So it's always this push and literally, like, 90% integration people, it's number one thing. They wanna be involved earlier. So, I I think there's some things emerging you'll see in the coming months that they'll start gravitating towards that. And then sorry. Any comments, Carlos? No. I was gonna say, on the impact of of AI and and and we were talking about, like, you know, value levers. AI is introducing a whole lot of, uncertainty back on this on on this, on the on the on the success levers because I think I was reading MIT track review and, I don't know if it's KPMG or EMI. They're they're making, like, real predictions about expected margin expansion based on AI. I know anywhere from, like, 9% to 18%. So again, we have, like, a diligence and certainly there, that I think will, have people being a little bit more conservative when doing diligence and and and finding stuff. But I think there's gonna be, and this is not I'm not just in diligence per se. I'm just saying, you know, there there's gonna be an expectation of savings related to, AI. And, I wonder what that can it's gonna do for, for evaluation multiples. So it's very interesting times. Yeah. And I will give you a whole, like, bunch of AI use cases or across m and a. I think Daniel kind of mentioned here agree AI is mainly on the front end sourcing DD and around contract analysis and integration for years now. Yeah. I agree to contract analysis, but it's really crazy. Like, last year, we spent three months to build contract extraction. If you look at all the prior tools, like, they're completely obsolete. Like, the generative AI has just you know, three months, we're able to be able to build something that completely outperformed all the legacy providers. So it's it's I I think it's been around, but you can just see, like, the improvements. Accuracy is really seeing good momentum. They're starting to see it on a more accelerating work plan and TSA development as well as integration process. I see that too. There's like AI that's really starting to get more into, like, each individual function, you know, like automating, creating offer letters, and all those things. Right. Correct. Alright. Oh, what are some of the key skills that make an effective integration lead manager you would look when selecting an individual from within the seller's business who may have no prior experience in integration? Is that good? That's a good one. So this is, so this is so interesting because, like, you know, two jobs ago, we're we're doing, you know, seven to 10 deals a year and, integration became its own I I I had a, like, director of integration reporting to me because she only focused on integration and, and she would, manage the the integrations of of all these portfolio companies. So, we started to think about this is such a great opportunity to train, like, early, early talent because the exposure that you have in that position is just, it's just great. Right? It's it's so broad. You have as far as operations to how finance is playing in the whole thing, you have access to the management teams. So what we were looking for, like, internally, first, to to manage the the integration with someone that with with potential. Like, because, you know, it's gonna be, the person's gonna be exposed to so many facet facets of the of the of the of the business process that it's, it's just a great development, development tool. Now within the seller, it's usually, like I usually look for the CEO TOO organization or whatever the equivalent is and someone that is supporting the CEO, some some like a product person. I don't know. But what I don't like to do is to label that person that is gonna be do integration as a project manager because because it's not. It's absolutely not. It's it's so much more than that, and and and, I would liken it to an MND, you know, COO like, like role. Nice. Why I'm looking I look force force for first, add someone that we can in their extend operations because they could probably, you know, add the the finance part of it, the sort of relationship, but, you know, the COO organization first. So operator, cross functional operator, basically? Correct. Yeah. Yeah. Yeah. This is great. Anybody else have questions? Clint Kendrick, you gotta come and do one of these master classes with us sometime. I think we could go deep dive in a lot of this, areas around HR integration. Yeah. Anybody else? We have a few minutes left. If anybody else has some questions, try to stump Carlos, your winner prize. Sure. No. Don't do that. There's one here. Where have you seen this file mostly most, commonly disrupted? Deal structure, d d d to integration, integration back to deal structure? D d. And I think, because not only because you find you find certain things on the the diligence, but I think you walk in with certain and again, it's so it's so buyer dependent in where where you are in in in the in in the and just where where you are making acquisitions. Because if you're making a business for smaller companies, chances are there's not a whole lot of finance systems that are in place and, you know, right on recognition, all that stuff. So it really depends. I think I'll probably rephrase my answer by saying if it's if it's on on the sort of middle market, you'll find more in due diligence. I think as you go up in in deal size, then integration is the is is is gonna what's gonna drive. I think so. Because with big companies, so much can get lost. Listen, I work for big companies. So much value gets lost in middle management and the confusion that it happens when you're integrating two big companies that it becomes a real risk. That's a good question. Any other questions? I think we're I think it's a wrap. This has been a great session, Carlos. I appreciate you taking the time. Like I said, this is something that really helped me early on because, again, I used to think about m and a as, like, linear stages. Yeah. Yeah. Thinking about it as a cycle that you should be continuously going back to your model and deal structure and updating it. And then same thing, if you got a thesis on integration, you know, I actually kind of think in, like, parting thoughts here. I almost feel like there's almost this mindset of when you do diligence and integration, you know, how do you really, like, keep those things aligned, you know. And I've I've heard this expression like an integration led diligence, you know, and kinda having leads are gonna do the integration, lead the diligence. Yeah. Yeah. I think you're right. Like, I I'm a I'm a I'm a proponent of that. I'd like so today, the person that does the integration works through for me is my HR person and hey, Michelle. How you doing? She's a she's a dynamo. Because she not only she understand the people part of it, but she understand the business. So I mean I mean, heaven with this with this person. So in a way, she's doing what what you just said. It's like integration led diligence. I I I think it's I think it's a great, idea and and a framework to to explore as well. Because I didn't that's what they do. I mean, you're finding stuff here and there in diligence and there's but it's easy to find out there's risk here and there's risk there and we're gonna put this, you know, in the NASRO, but the the the real success factor there is how we integrate. So if anyone wants to pick that up as a topic, reach out to me. Integration led diligence. I I might know some folks. Actually, Jonathan's comment here. I think this is actually a topic too. How often do you end up doing significant transformation in the buyer business to create a platform for growth to integrate into? That essentially, you're a business to acquire and integrate businesses. Yep. And I I feel like that could be a whole session on its own. So if anybody wants to talk about that, because a lot of times you don't and then you find out quickly. Yep. But everything thanks again for the time for joining us. Hopefully, you got these handouts and we'll send some follow ups as well. Till next time. Here's to the deal. Thank you for having me.