Mergers Vs. Acquisitions
with Keith Conley
So Keith, we use the word, or the words merger and acquisition, m&a, we just kind of use them together. But there’s a big difference between doing an acquisition and doing a merger. Which of those do you think is the better approach?
Yes, you know, there’s different risks associated with those two models. If you’re doing a merger, which means that you’re creating a new company, we like SunTrust and BB&T, right, right. Very different cultures, very decentralized local cities. SunTrust or Regions bank was one of those two, much more hierarchical corporate, very different cultures and they created a Truist as a new company. And we did the same thing when DTI bought Epiq and we merged together. So you’re creating a new vision, mission, set of values. Then you have to determine what processes in the company to use, the hiring processes. It’s easy to say you take best practices, but then you have an integrated leadership team and who’s determining what’s best practice? Well, the best practice is the one I’m used to! The other person says, Well, no, no, that’s my process. And so it conceptually take the best practices right? But politically, right, people are kind of stuck in their ways. And get to rebrand yourself and so forth. So I have found I went through that with DTI, we bought a public company, brought them private, and chose to merge. And we had a blended leadership team. And we tried to blend things as much as we could. But that when you do that, one, it takes a lot longer, two, your attrition early on will likely be less. But in the long term, it’s about the same. And if you acquire and impose your processes, vision, missions and values, the voluntary attrition will be a little bit greater, but it’s faster. And it’s less risk. Right. So I think if you look at other case studies, and you know, the Bell South at&t and so forth, when you have these mergers, it is harder, and it’s riskier. So if you have a choice, my experience be one or the other, you know, buys the company, and not that you can't tweak things, but you try to apply the existing vision mission values, and don’t work all that and, you know, just have the other company adopt that and move on. And you can do it with some velocity there. And you can get back to focusing on clients a lot quicker than have your executive leadership team and off site meetings, thinking through what the mission is and what your new values are. Merger can be very distracting to the senior leadership team and take you away from being focused on client. So that’s been my experience, there’s so many cases where it makes sense. But all things being equal, the risk is a lot less when you acquire a company.
I would think it’s a big challenge with the client as well. Right. So if you’ve got that merger situation, I think there’s a lot more question as to who’s serving me now? And how are things changing? As opposed to when you’ve got that acquisition? You’ve still got messaging for the clients of the of the company that you acquired? However, I would think it’s a little easier, particularly with bigger companies, because you know what they stand for, their mission vision.
Yeah, because when you’re doing the merger is two fairly good sized companies coming together? Right. And, you know, I was on calls with clients of both companies ahead of time announcing these changes. And you always say that, hey, we’re not gonna change your account manager. And we’re gonna keep the people that are supporting you in place. And they go, Oh, you have two salespeople that have been supporting my company now, like, how are you going to deal with that? Yeah. So there are a greater complexities there, when you do that, for sure.
So let’s talk a little bit about culture. We can because you did touch upon that. And I think it’s a really important one that that came up actually, this year in our survey mark is one of the top challenges. It’s interesting, because we run this question around m&a, we run it year over year, and culture came out as even more important this go around as being a top concern. So talk to us a little bit about, you know, you’ve got two companies that well, first of all, when you acquire a company, let’s let’s use that example. Does the culture even come into play as part of due diligence? And I think I probably know the answer to that. And then when you’ve acquired that company, and you’ve got two fairly different cultures, like how do you really what’s the most successful way to bring them into one?
Yeah, I remember as a management consultant, we talked about culture, how important it was, but when you run companies and you buy companies, you realize this is not to say it is the glue. And if you don’t address it, the probability of success that acquisition is going to go down very low. Because you know, What is culture? No, it’s the beliefs and the values that your top leaders exhibit, not what they say what they exhibit, how they walk their talk. And you know, when you’re buying another company, their culture likely is different. But if it’s very different than you know that the integration, if from a change management perspective is going to have to be much more significant, if you don’t want a lot of voluntary turnover, and sometimes you may want to capture additional synergies in your buying them for their software or something. But in general, understanding the culture in how you integrate the companies is really, really important. If you buy a company, and they’re smaller than you are, then you pose your culture. Right, that’s easier, right here, our values is how we operate. This is our norms, this is how our leaders behave. And you’ll find out fairly quickly who’s on board and who’s not the ones who are not on board, you know, you need to get rid of because it’ll become cancerous in your organization. Right. So you get to do that fairly quickly, early on, to help stabilize it from a culture perspective. Right. But but it is extremely important in the due diligence perspective. You know, as you’re talking to the target management team, and you know, how they do business, you get a good feel for what you’re dealing with, and what the challenges are going to be. So you just have to be very, very intentional. And try to bring people along and explain your culture. And this is who we are. And this is how we operate. And this is who we are, right? And this isn’t for you understand this is this is our core values. This is how we operate and want to bring it on here. But if this isn’t the right place for you, and so forth, understood, we’ll help you with the next day. And that’s typically how we, we’ve handled that. But yeah, if you don’t get the culture correct, you’re gonna have a really difficult time.
You know, Keith, one of the I don’t want to miss what you said there. Because I think that’s really important. And what you said was very quickly, having the company understand that’s being acquired what your culture is, your beliefs, your vision, what we have found is that a lot of companies will say, you know, they’ll talk to us and say, Okay, we’re just not going to go there, we’re going to leave them alone, for now just let them run as is. And, you know, just leave it be and let things settle down. And, you know, we’re called and, you know, I’m speaking about clients that we’ve talked to or colleagues out there, and they’re, they’re failing those acquisitions. And, you know, they, they believe they’re doing the right thing by just letting things go. But, you know, my belief has always been I’d like to sounds like your belief. But I’d like to hear that is it doesn’t matter what the message is, as long as the message is clear, I think people just want to understand what’s ahead. And what your beliefs are. And we believe I think Mark believes this, too. I think you do, that the leaders that aren’t clear are the ones that are really lose out in the end, you know, regardless of your position during m&a or anything else.
Yeah. I mean, I think it’s that clarity of leadership, as you said, Keith, which is really the tricky part. It’s what they demonstrate. It’s what they do. Right. And I think you’re right, Michelle, people are looking for clarity. I mean, we’ve just been through this entire change over the past couple of years. And people are looking for clarity. They’re leaders. Right. And so yeah, so m&a. I think same thing, clarity, but Keith, let you comment on it, because we’re kind of like, sorta answering the question.
Oh, you know, we did 24 acquisitions. So we got good at acquisitions. Yeah, we got this process in place where myself or someone on my executive team would would fly out on the day of close right there, day one, right in the, with the entire company and have videos and so forth. And we would lay out why we bought them how we’re going to operate together, what our values are, how we, how we view our employees, we would say there’s some redundancy, right? And you will know by the end of today, whether you have a job or not, right, because we just learned pulling off the band aid is it’s just a process. And you know, everyone know, by the end of the day, right? We’ve talked about the name change, right? In 90 days, everything’s going to be this name. And just lay it all out and then we’d have all hands calls every week and then we’d have Q and A’s going out every other day. Right did the company because all these questions coming up policies is not it So we got really good at that. And but it was the engagement early on by the senior executive team, in that company, small or large, we would treat it the same way. And then they just had to walk the talk.