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During a wide-ranging discussion, our panel of powerhouse women business leaders — Sarai Schubert, Cristina Iaboni, and Kim Marren, led by InterimExecs President Olivia Wagner — shared their insights about why acquisitions fail and the expertise they’ve gained leading companies through big and small, strategic and tuck-in mergers and acquisitions.
This insightful discussion dives into the critical aspects of navigating the M&A process, from developing a strong integration plan to fostering a positive culture for a seamless transition. You can get all of the insights by watching the full webinar here, or by reading through this edited transcript. Or get the highlights in this post that tells you how to ace the acquisition integration.
Olivia Wagner: Stats show that many acquisitions fail. But as we’ll explore today, an acquisition strategy can be really effective when it is coupled with a strong leadership team. Sarai, you have said that acquisitions have been successful, but it’s not by luck. Can you share a little bit more about your role in the M&A process and what you mean by that?
Sarai Schubert: Over the years, I’ve done different types of M&As. Having a good thesis and knowing what your company needs or what your company is lacking is super important. Otherwise, you’re going after specific companies just to do revenue acquisition or roll-ups.
If you have a strategic view of where you want to be and what your gaps are, that gives you a better view on what you’re looking for. What is the rapid growth that you’re trying to achieve? And you really are trying to add value. Once you know that, it should define the companies you want to go after.
Olivia Wagner: Kim, you’re an interim CFO who’s worked with over 25 clients in a wide range of industries. You’re an auditor by trade, which shapes your decision-making. Where have you seen the M&A process break down?
Kim Marren: You need to take off the rose-colored glasses and look hard at your current organization. And be ruthless in defining your weaknesses and where you need to shore up your financials and your operations. Take a look at what your data is telling you about your organization, your strengths, your weaknesses, where you can capitalize, what you need to fill in and be just as honest and clear-sighted when looking at potential M&A candidates. I have seen several organizations turn a blind eye to the actual data, to the actual results, to the problems they think they’re going to solve.
Merging with or acquiring another entity can be very exciting. But first and foremost, be realistic about who you are and be realistic about who the other potential players are as well. Because if we’re not, we’re just setting ourselves up for failure.
Olivia Wagner: And Cris, you view this through the people lens of a CHRO, but also having held a lot of operations roles. You’ve done close to 60 acquisitions at this point. What’s your take on why acquisitions fail? What makes for the winners?
Cristina Iaboni: I’ve seen a number of my clients in the past who have not had the right talent in-house to do the assessment, the financial analysis, and didn’t reach out to others to help them through that process. And so if you’re starting off on the wrong foot, you’re going to end up truly on the wrong foot. Because, as Kim said, the shiny, bright light can be very intoxicating for folks who are used to making deals and want to make a deal.
Olivia Wagner: When does growth through M&A make sense versus more of the organic route?
Cristina Iaboni: It depends. If the growth initiative is the acquisition of a new product that would take too long to develop internally. Or introduction into a new geographic market where doing a greenfield operation would take too long or use too many resources. Or moving into an adjacent industry that makes sense as an add-on to what you currently do but you don’t have the talent to develop it on your own. Those are really the pieces that make sense.
I’ve seen companies that had a lot of cash and needed to put that cash to some good use. Don’t go do that acquisition just because you have cash. Ask yourself: How does the combination of what you currently have and the acquisition add up to a bigger whole than just the sum of the parts?
Kim Marren: I agree completely. Those have been the driving reasons behind the acquisitions my clients have undertaken: Expand your geographic market. Expand your product and service offerings. Shore up an area where you may not be able to attract the talent or develop the sophistication as quickly internally as you can if you do an acquisition.
Be smart about how you’re spending your cash, because I’ve not yet seen an acquisition that has not been costly. There’s always some type of a surprise that happens that we didn’t plan for. No matter how seasoned we are at going through the M&A and the integration process, there are always surprises and there’s always that risk that we’re going to spend more than we had initially anticipated.
Olivia Wagner: Sarai, you’ve talked about the importance of having an integration playbook. What does that look like?
Sarai Schubert: I like to say it depends. The playbook is not the same for every acquisition. It all goes back to thesis. The playbook needs to be very specific to thesis. If it’s a tech play, if all you’re doing is acquiring something just for tech, then obviously there are very specific things that need to happen to ensure that you have product discussions, tech discussions, and going even a little bit deeper, having completely different tech stacks.
Having a defined playbook tells us what we are going to focus in the first three months versus the things that we’re going to do on the second phase. Otherwise, you’re focused on too many things and nothing will get done.
Olivia Wagner: Cris, could you speak to this and the questions you should be asking before, during, after?
Cristina Iaboni: I’ll give you an example. When I worked with a large specialty contractor, we did a lot of acquisitions. Construction is a very local business, and so those acquisitions were stock purchases, and they were just held as independently operating subsidiaries. That’s a fairly easy integration because that is a defined group doing a defined type of work with their current customers. They continue to operate the way they did, but they gave us a presence in a market that we currently didn’t have. Okay, that’s easy.
As far as the people go, we integrate benefits, we integrate general policies, those types of things. That’s relatively smooth. We offer services at the corporate level that become shared services, and so a very smooth way of doing it. And you can have a playbook for those types of integrations.
Another part of that business, though, was a service area, and the goal was to have service companies or service entities throughout the country. And so when we did those acquisitions, they tended to be tuck-ins, they tended to be asset purchases where benefits changed, policies changed practices, operational standards changed, because our clients, who were national clients, required uniformity of service. So that was a much more intense integration because were changing how people were doing work, the platforms they used, how they communicated with clients and customers, etc.
You can still have a playbook for that, and it becomes very prescriptive, but those take a little bit more time. So understanding why you’re doing it, where it fits, how it fits, can dictate how you integrate and having that clarity comes down to your strategy thesis, as Sari says. That is important because it can also tell you the impact you will have going forward with the integration.
It helps in negotiating a price as well, because if you’re going to change a lot of things and invest a whole lot more, once you acquire that piece of the business, it can tell you how you need to negotiate the price on top of it.
Olivia Wagner: Kim, what are people missing? What are the questions they’re maybe not asking?
Kim Marren: I specialize in the lower middle market space, smaller companies whose revenue is between $100 and $250 million. A lot of private equity. And the strategy, the reasons why we’re doing what we’re doing, absolutely needs to lead the integration plan. But so much gets lost in the details.
For the clients I’ve worked with, the difference between success and failure has been paying attention to the people and the details. When we’re doing an acquisition, people get scared. Doesn’t matter how strong the leadership team is, doesn’t matter how positive the communications are. People get scared. They clam up, they leave.
I try to go into these situations with clear eyes, but really value the people that are doing the work and understanding, rolling up your sleeves and really understanding what it is we’re looking at here and how processes, people, systems, and tools fit together.
Anything we attempt to do really depends on the finances, and the finances don’t make any sense whatsoever if we don’t understand the operations and the underlying processes that yield those numbers. So we tend to spend a lot of time working hand in hand with the team of the acquired or merged entity. Having the right people on that integration team is absolutely essential.
Every single one of these transactions is a little different. So if you’ve had someone who’s been through the process a few times with different types of industries, size, organizations, cultures, they’re not caught by surprise, and they can pivot and modify that playbook a little to make sure that they’re asking the right questions, capturing the right details, the nuances, making the entire team comfortable, so that we’re all able to openly share information and ask questions without feeling threatened, then the end result is much more successful. And obviously, that approach doesn’t simply apply to M&A. It applies to the way we conduct business on a daily basis.
Olivia Wagner: People are a huge piece of the puzzle, right? And when you think about the nerves that can come with a process like this, how do you deal with that? When do you bring employees into these discussions around the acquisition process? What are you communicating to them?
Sarai Schubert: There are two different elements. An integration where companies are coming together and you keep in talent, and it’s a nice tuck-in — integrate as early as possible and bring people in. But if it’s strategic where there’s going to be pretty deep cuts and synergies, I would keep that very tight or very close to the closing.
Cristina Iaboni: In general, the approach that has worked well for those that I’ve been involved in, is communicate as early and often as you’re allowed to, and be very transparent. People can see right through an obfuscation. As soon as you can communicate with the general population, let them know what’s happening, what the timeframes are, what is still being decided, and when they will hear from you.
Stay on top of feelings, emotions, as Kim said, people start to get defensive. They start to have ownership of things and not give information and so on, because the unknown is a fear factor.
The other point I would make is: be very careful in your due diligence process and who you’re talking with, because the old adage of, “if you want to keep a secret, tell no one” stands true. With a recent acquisition I worked on, our technology folks started to make inquiries about the technology stack that the seller had and how we would untangle everything as they were coming over and how they would fit into the existing systems.
And sure enough, they reached out to a partner of theirs and this company was the biggest client. Now they knew we were looking at purchasing them, were looking at maybe shutting down all of that. And those folks freaked out, and they went right back to the technology people on the other side who were not aware of what we were doing.
So get your NDAs in order before you start talking to people. Make sure that those are really tight, because you do not want this information to get out before you’re ready to communicate it in the right way.
Olivia Wagner: And what should companies be thinking about?
Cristina Iaboni: Culture is the one thing that, as much as the HR world has talked about all of the initiatives that you can do to merge a culture and make everybody feel good, it is a very difficult thing because culture is inherent. It’s ethereal. You can’t touch it. You can’t feel it. You just get this feeling as an employee. It is something that needs to be dealt with deliberately. The thing that works really well is to find the unofficial leaders in each company and get their buy-in, get them on board, get them to be the champions, because they will be the ones that will make it a success.
Take the good from either side and amplify it as you can and create a whole new culture. It’s really what has to happen, because the other option is one culture gobbling up the other one. And that’s not what you want to happen. What you want to do is create a new normal.
Sarai Schubert: I would say spend the time to really understand what is unique about that particular culture. One of the things I’ve seen is that if someone feels that, “Hey, it’s different over here. In my country, we do things differently.” Well, what makes that different? And are we really different or are we really similar?
I’ll give you an example: One of our acquisitions was in the Netherlands. The Dutch people love to be very direct, and they want to hear that from you, too. One of the things I learned is that sometimes we’re very soft in the way we answer. They see that as “ why are you not being transparent?” when you are being transparent. They want more directness. That’s the thing they needed to feel confident. And it’s important to understand that, because once you understand that and you talk to them that way, they feel secure. You calm a lot of nerves.
Cristina Iaboni: I think it’s important to have an executive champion or a couple of executive champions, people who have a good knowledge of how the operations work, who does what, where it stands. They have the gravitas to make things happen. Have those folks be in constant touch with both sides as you work through an integration. Remove obstacles, make introductions. They are able to say, “You know what? I know who can help you with that. Let me get you in touch with them.” Just being available, being present in all of that, I think makes a very big difference.
The flip side of that, though, is to also keep your finger on the pulse as an executive in charge of these things, as to where those stumbling blocks continue to happen. Because sometimes, and it’s unfortunate, there are folks who will just be resistant because they’re so fearful.
And you may have to take some action. You have to move the person and put them in another place or in another function or take some other action. If it’s stalling your integration process, there is no point in trying to fix it when it’s not fixable.
Olivia Wagner: Kim, what’s your take?
Kim Marren: I’m a proponent of open, direct, honest, consistent communication. People read between the lines. People figure things out. Sometimes we’re right, sometimes we’re completely off base. We don’t want key parties getting nervous, because when we get nervous, we don’t optimize our performance and we do stupid and sometimes bad things. Absolutely, there’s a time to share and a time not to, but when we get to the point that we need to start sharing information, overcommunicating is better than not communicating at all.
I love the idea of having those executive sponsors or that team to really keep our ears open. Not just at the C-level, but people throughout the organization who are approachable, the people who are doing the work, who are well networked throughout the organization, can walk into our office and tell us the truth so that we can address a situation before it becomes a problem. You know, these are human situations. People get nervous. We all want these transactions to be successful. But change is hard for everyone. So more communication, sometimes a little more handholding, encouragement, listening goes a long way.
I find that even the simplest bits of information and directions that I’ve attempted to convey, it’s surprising to me how that information, that direction, that process doesn’t always get acted on in the way that we wanted it to the first time through. So follow up in an unthreatening way.
And we get better outcomes when we really check on the details, we check on the people, we ask questions, the same questions in many different ways, or the same question across many different people, and then listen to the results that are coming back and then taking appropriate action when those responses aren’t quite what we expected.
Olivia Wagner: How are you tracking the progress post-close? And what do you do if milestones are ultimately being missed?
Sarai Schubert: Well, I would say if those milestones are the things that you’re staying completely focused on, these are the things that we need to do, then you should know that not halfway in or later. You should be talking about that every couple of days, every week, looking at results. So there should be no surprises.
I would caution people not to say, “Here’s the plan, go execute, and let’s talk every couple of weeks,” because that does not work. You have to be integrated. You have to be in front of it. You’ve got to be talking to different people. You’ve got to know that thing that we said we’re going to do this week is actually getting done, and not to the level where you’re micromanaging people, but just making sure that there are no obstacles.
If you have obstacles and you need to bring in a third party from external, or you need to find someone that has the right skill set, or more importantly, I think a lot of the times why things get delayed is that there are no decisions being made. Nobody knows who should be making that decision. Should we move forward? Should we not?
The other part is keeping people focused. We said we were going to stay focused on this. We’re going to get this thing done. I understand that we probably need to integrate this system and that thing and this other thing, but those are our second priority. Otherwise, what ends up happening is everyone in the company wants to integrate. Everyone in the company wants to do things. Oh, this team over here is using Slack and this team over here is using Team. Let’s go and integrate that.
But then you start having 20-30 different priorities, and it derails the process.
Olivia Wagner: And sometimes you might have to say, “Hey, it’s time for an outside advisor. We need some other skill set to bring in.” When does it make sense to bring in an interim executive or an outside advisor through the process?
Cristina Iaboni: It goes back to being truthful about who you have on your team even before you start an acquisition because we have to know what questions to ask before we even get down the path of signing that letter. If you don’t have a CFO on your team that can ask the deal team on the other side the right questions, you’re not going to be able to execute well on the due diligence piece or the integration piece. And that acquisition is going to cost you a whole lot more because you’re not aware of all of the things you should be aware of.
If you don’t have an operations person, a good IT person, depending on the type of acquisition you’re doing, that’s where you need to bring those interim executive leaders on the team initially, because you’re not going to be successful. As far as how do you keep track of all of these integrations and all of those activities that need to happen after the fact?
I can give you an example of, again, knowing why you’re buying something and how it translates to the final integration piece. One of my clients, a nonprofit organization buying a for-profit business with the goal of having a combined product offering that made much more sense. Okay. Gave them a level of robustness to this whole thing when you bring them all together. Now that the acquisition is done, the combined product is sitting on separate platforms. It was not a good way to go to market. It was not easy for their customers to access. So the big piece behind the scenes is consolidation of platforms for product offerings. The other stuff is smaller and happens on a much more frequent cadence, the follow-up, the check-in, etc.
Having the right people manage the overall project keeps the big stuff moving and the smaller stuff happening much more quickly.
Olivia Wagner: Kim, can you share your experience?
Kim Marren: When do you bring someone in from outside? I would say sooner than you might think.
We don’t know what we don’t know, but when we bring someone in who’s an expert in their field, we immediately see the difference. And once you start down that path, if you get far down the path and you’re heading in the wrong direction, or you haven’t asked the right questions or paid attention to the right detail, it winds up being a much more costly endeavor. So, you know, I tell my teams everywhere I work, and others have said it to me as well, don’t be afraid to ask for help. We learn from the best.
Olivia Wagner: Any parting words of advice for company owners that are looking at taking the M&A route?
Sarai Schubert: The one thing that has always helped me, is to make sure you are available. Don’t come from the top down to talk to your teams in a big presentation meeting. Do a lot of one-on-ones. Make sure people know they can call you when they have questions. Make sure that you reach out. Don’t rely on engagement surveys. Yes, those are great, but you need to be in the organization.
Communication is key. Don’t allow rumors. It’s okay not to have all the answers. Tell your team, “I don’t know that, but thank you for asking me. I’m going to come back to you and I’ll make sure I have an answer by whatever.” Let your teams feel comfortable. Let them ask you questions. Let them feel like you are approachable. The more comfortable they are, the more secure. The more they’ll make your customers feel the same way.
Cristina Iaboni: I completely agree. Know why you’re doing something. Be very clear as to where it all fits in your broader strategy. And have the right people on the team. And be genuine. Just be genuine.
Olivia Wagner: Kim, how about you?
Kim Marren: I would say, keep your eyes and your ears open. Pay attention to people and details. Don’t bury your head in the sand. Be prepared when something unexpected comes up. You know, as women, that’s part of daily life. And you just make accommodations and you pivot and you move in a new direction.
Don’t hesitate to ask for help. Don’t hesitate to ask questions. And admit when you don’t know the answer. And don’t give up. No one that I’ve met has been able to walk into any situation with perfect information and perfect vision of how life is going to unfold. You know, we make mistakes. We’ll make mistakes during these processes. It’s important that we recognize them and adjust and move forward and keep your team and the work they do first and foremost.
Read More:
How to Ace the Acquisition Integration with a Playbook
The 6 Times PE Funds Benefit from Using Interims
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