Transformation—Navigating Mergers and Acquisitions

Transcript

Narrator

The future of project management is changing fast. On Projectified™ with PMI we’ll help you stay on top of the trends and see what’s really ahead for the profession—and your career. 

For an easy way to stay up to date on Projectified™ with PMI, go to iTunes, Stitcher, Google Play music or PMI.org/podcast.

Stephen W. Maye

Hello. I'm Stephen Maye, and this is Projectified™ with PMI. I'm here with my co-host, Tegan Jones, and in this episode we're talking about mergers and acquisitions.

You might think this is a topic best left for executives or business analysts, but a lot of the work that goes into making M&As successful actually falls on program and project managers. 

And this is a big job, given that the way these initiatives are run often determines whether the newly formed organization will succeed or fail.

Tegan Jones

Plus, there’s just a lot of money on the table.

According to JPMorgan, the global M&A market was worth 3.7 trillion US dollars in 2017, and that was one of the highest grossing years on record. JPMorgan hasn’t released the 2018 figures yet, but there’s evidence that we should continue to expect these types of high volumes through 2019.

A recent report from Deloitte, for instance, says that 79 percent of organizations in the U.S. expect to close more deals in 2019 than they did in 2018. 

Stephen W. Maye

And when organizations are closing more deals, they need to be sure they have the right integration models and processes in place. That helps improve the likelihood of realizing the intended value or profit from these mergers and acquisitions. 

Tegan Jones

But according to Deloitte’s research, that’s not always happening. The 2019 M&A trends report found that about 40 percent of respondents said that half their deals in the past two years have failed to generate the expected value or return on investment. There’s a lot of reasons for this, but an increasing number of respondents say that gaps in integration execution were actually a major cause of this shortfall.

Stephen W. Maye

Tegan, if I was following your numbers there, you indicated that 40 percent of these executives surveyed came back and said, ‘Look, only half of these efforts are producing what we set out to produce.’ Those are serious numbers. 

To figure out exactly what it takes to deliver a profitable, productive M&A integration project, I recently spoke with Kash Ahuja, mergers and acquisitions program manager for Google. Obviously Google is a major player in this space, so we’ll hear some of the best practices they use a little later in the show.

Tegan Jones

But first let’s hear from Stephanie Blanco. She’s the VP of M&A integration and program management at Sound Physicians, a healthcare organization based in the U.S. 

She’s going to discuss how project teams can balance the need for transparency with the need for confidentiality on sensitive merger and acquisition projects.

Stephen W. Maye

That is a very challenging balance to strike. Let’s hear how she does it.

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Tegan Jones

Every deal starts with a desire. Whether an organization wants to expand its product line, enter a new market or just increase profits, each merger and acquisition has a specific purpose. And project teams need to understand that goal to deliver the intended value.

Stephanie Blanco

It’s really important to understand exactly what we’re buying, and why.

Tegan Jones

That’s Stephanie Blanco, the VP of M&A integration and program management at Sound Physicians. As a healthcare company, Sound Physicians provides medical services ranging from emergency care to telemedicine. Given the sensitive nature of this work, Stephanie and her team have to think carefully about what changes they can make as they bring a new organization into the fold. 

Stephanie Blanco

Especially the larger organizations we look at, they might have their own IT roadmap. So collectively, in those instances, I think we probably need to amend our combined IT roadmap for the organizations, and really look at what makes sense.

Moving a larger organization to something that’s incrementally better, you’d really have to weigh how much better is it, versus the disruption of moving, you know, potentially 80 percent of the combined organization to something new.

Tegan Jones

To make the right call on what should stay and what should go, Stephanie and her team work closely with the people who will be directly affected if things change. 

Stephanie Blanco

IT integration is hard work, especially for some of these larger deals. Working with each of these teams, having them identify their milestones, their dependencies. And then as a project manager, facilitating a recurring meeting where we have those conversations, where we have those leads report out progress against their plan, discussing their issues, discussing their dependencies. 

Bring in the deal-makers who are going to want to go off and continue working on new deals, but you need to help them bridge the information that they have, and share that with the functional departments.

Tegan Jones

The earlier these conversations start, the better. But many M&A deals are confidential, which means the potential for pre-integration work is often very limited. 

Stephanie Blanco

We operate in an environment with healthcare, where a lot of times, we’re not able to openly communicate with our employees until day one, the day the deal is announced and they’re effectively part of the new organization. 

In my experience, day one is often, you’re going live in a transitional state.

Tegan Jones

But once the work begins, transparency is the key to building trust with new stakeholders—even if there’s some information that still can’t be shared.

Stephanie Blanco

You know, you can be honest about what you can’t share and why. But you want to foster an environment where employees feel comfortable asking those questions. Whether it’s publicly on a town hall forum, or you might have an anonymous online forum where people can submit questions, or a shared mailbox or something like that. But saying things like, ‘You know, we’re still working through that, but we’ll have an update in the next two weeks when we have our next town hall.’

No matter how much you communicate, there’s always going to be someone who feels like you could have communicated better. And that’s OK. I think you shouldn’t strive for perfect. You should strive for quick, doing things as well as you can, working hard, doing things with integrity. But understand that mistakes will happen, and those need to be addressed. And it’s more important to achieve your deal drivers, achieve the goals of your deal, and to do it quickly, than to try to do it perfectly because it’s not a realistic goal.

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Stephen W. Maye

Change can be so difficult to adjust to, especially for people that have perhaps worked for the same company for a long time and haven’t had the opportunity to develop the corporate change muscle that some get from being in companies or industries that have experienced a great deal of change over the last few years. And if you don’t navigate that appropriately, you’re likely to see a mass exodus of talent during major transitions.

Tegan Jones

And in 2018 we saw several large global organizations go through these kinds of major transitions. 

Euronews Newscaster

The Swiss food group Nestlé has agreed to sell its U.S. confectionery business to the Italian company Ferrero Rocher.

TRT World Newscaster

The EU has approved German chemical giant Bayer’s proposed 66-billion-dollar takeover of U.S. peer Monsanto.

Bloomberg Newscaster

The drawn out battle between 21st Century Fox and Comcast for control of Sky reaches a climax this Saturday. A one-day auction will be held to settle who’s willing to pay the most for Europe’s biggest satellite carrier.

Tegan Jones

But the purchase is really only the first step of the process. So I’d like to talk for a moment about a big merger that happened in 2017 but was executed in 2018. And that would be the Whole Foods-Amazon deal. You know, this was a highly controversial merger for some of Whole Foods’ most dedicated customers—and it was also really problematic for a lot of the chain’s employees.

Stephen W. Maye

Yeah, and I’ve seen that Whole Foods’ sales have gone up, which was, I assume, a primary goal of the merger. But there’s definitely been negative press, as well. Legacy Whole Foods customers have been all over social media complaining about a decrease in produce quality and saying that products are consistently out-of-stock—and many of them actually blame Amazon for that downturn. 

But it’s not just shoppers feeling the pain of the transition. I saw that an independent analysis from Barclays found stores in various states of disarray, with boxes thrown around the store, long lines in the checkout lanes and understaffed service counters. Not good.

Tegan Jones

I also read that there’s been a lot of turnover, especially in the upper ranks of the legacy Whole Foods organization. But, of course, a lot of Whole Foods execs have stayed around and are asking for patience, saying that Amazon really can help the company make tech improvements that will help deliver a better customer experience in the long run.

Stephen W. Maye

Well there’s certainly a case to be made for that, and I hope that’s where they end up. But it is definitely a fine line that leaders have to walk to get there. 

It’s even harder, in many ways, for the people who are charged with making that integration a success. And that’s something I learned a lot about from Kash Ahuja, a mergers and acquisitions program manager for Google in Seattle. 

He provided significant insights around what it takes to retain key talent during an M&A integration project—and how to focus on the activities that will do the most to support those unification efforts.

Tegan Jones

It sounds like he has some very relevant experience. So, let’s hear what he has to say.

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Stephen W. Maye

Kash, it is great to have the opportunity to talk with you. You've done some fascinating things both at Deloitte and at Google. And I want to jump in and talk a little bit about your role at Google. So what are you responsible for as the M&A program manager?

Kash Ahuja

First of all, thanks for having me on. As a program manager focused on mergers and acquisitions at Google, my role is to make sure that we drive effectively the technology component of the program on the three major phases of any transaction, the first of which is the due diligence, which takes place before the deal closes. The second is the day one readiness, which is largely planned before the deal closed, but gets executed on the day of close. And third is the post-merger integration, which begins on the day of close and typically lasts months or years after the deal has closed. 

And my role on this involves defining the scope for all three phases, which means identifying the areas that we want to focus on and prioritize specifically for diligence; understanding the timelines, which are almost always incredibly tight; keeping all the stakeholders engaged, ensuring they, the decision-makers, have all the necessary information to make rapid decisions, which is what we need during diligence more often than not; and managing the risks and issues as they arise.

Stephen W. Maye

I’m sure there are some things that are unique to M&A efforts. When you think about the broad range of complex projects or complex programs that one can be involved in, what do you find to be different or unique about running M&A programs?

Kash Ahuja

I'm glad you asked. That's a really good question. Most of the challenges that are unique to M&A, I've seen them during the diligence phase. The post-merger integration phase of an M&A transaction is not very different from the large projects that take place. So, the uniqueness comes from the diligence phase, and it is really a very unique component.

Before I jump into the obstacles we face, just to provide a little bit of context, during diligence, both the buyer and the target perform diligence to figure out if they should go ahead with the deal. And if they should, what are the issues that they will need to resolve post-close? And once they'll agree to go ahead with the deal, it is usually contingent on a variety of external stakeholders agreeing to the deal, and these stakeholders include, for the most part, shareholders, regulators, customers, employees, partners and more. As you can imagine, getting agreement from each of these stakeholders requires negotiations, and it's difficult to impose timelines on stakeholders that are that important.

All the while, both the buyer and the target, they have to keep their diligence and integration teams ready to go when the deal finally closes. So you can't put the planning or the execution on hold just because you're waiting for approvals from certain stakeholders. So with that context, the unique obstacles that come up consistently across M&A deals are, the first one is the timelines. They're incredibly tight, but also very fluid. In fact, I have yet to see a deal in my seven-plus years of doing M&A where we signed or closed a deal at the date that was first planned.

This requires our diligence teams to be in a very fluid mindset—one that can absorb changes often and with very short notices. The way I've developed this mindset personally as well as with my teams in the past is by constantly thinking about and communicating with each other and reminding that none of the dates that we talk about are set in stone. And by ensuring that we're always thinking about options, not necessarily one solution that we all settle on, but different options. So what's our ideal solution to solve any given problem? What's our Plan B if the date slips by a day? By a week? By a month? What's our Plan C? And so on and so forth.

The second challenge that we face during due diligence is the scope changes. Diligence itself is essentially a fact-finding and analysis exercise. We are learning new things as we uncover different topics. And diligence itself can spring up findings that require you to change the scope of your diligence project. This means that scope can and often does change, and avoiding scope creep is not really an option. I like to state to my teams that we should prepare that we can't avoid scope creep, so let's stop fighting that battle and prepare for how we will deal with situations where the scope will change. It's actually pretty amazing what your teams can accomplish once they are outside of the mindset of problem avoidance and get in the mindset of constant solutioning. 

Stephen W. Maye

I want to shift our lens a little bit here and think about some of the considerations of what we keep, what we add, what we sunset as we're moving forward. Obviously you're looking across systems and processes and cultural elements, and everything has to be assessed for whether it's part of the future or not, and not everything can be. Are there a core set of questions that you ask yourself to help you think through that?

Kash Ahuja

Yes, absolutely. The questions around what to keep, what to integrate, what to discard, and the timeline you'd take in which to do it, I think the questions that help define that are effectively what's the objective of the deal and what's the strategy that we're going to follow to maximize the value from that deal. These are usually what drive a lot of the decision around systems, processes, cultural elements that stay in place.

So, for example, if the objective of the deal is to gain access to a different market, then it would make sense to ensure that, at best, only the back office systems are integrated, but all the processes and systems built around the front-end business functions—such as sales, marketing, engineering, product management—are retained.

The other example is if the key reason we're buying a company is because of the talent and how it works together, then obviously the cultural elements are incredibly more important than they are in most transactions. Albeit cultural considerations are very important in every transaction, but they take on a heightened importance. So in that case, we want to make sure that we are designing the packages for the key employees and giving them the right incentives to stay and be productive and motivated for as long as possible.

Stephen W. Maye

You talked about the need for teams to bring a kind of flexibility to the work, to expect things to change, to expect scope to shift. What are some of the other things that you do to prepare for what you know will be a dynamic environment, really preparing yourself and teams for the unknown?

Kash Ahuja

I personally live by the mantra of hoping for the best and preparing for the worst, and I encourage my teams to do the same.

And speaking specifically about M&A, during the planning phase, I like to make sure that our planning effort is as inclusive of as many teams and individuals as possible. This helps us make sure that our plan is well thought out, but at the same time, it is in the M&A space. So the information is limited to a limited amount of individuals. So it requires a constant balancing act of being inclusive in your planning effort and minimizing the information spread to avoid leaks.

So that happens during the planning phase. Now, during execution—specifically when you're executing on day one—one of the constructs that I've seen work very well in most M&A projects are day one command centers. These typically involve having the core project teams as well as subject matter experts from all the critical business areas available and online in case things go wrong, which is why I always tell my teams, we will almost certainly run into issues. The question is not whether we can avoid them, but how quickly can we get on them, resolve them and communicate them.

Stephen W. Maye

I understand that you have your PMP certification, is that right?

Kash Ahuja

I do. Yes.

Stephen W. Maye

Tell me where that plays a role in your work today.

Kash Ahuja

So I was a project manager long before I got my PMP, and I did a pretty good job overall, if I can say so myself.

Stephen W. Maye

If I do say so myself. [Laughter]

Kash Ahuja

But what kept me up at nights oftentimes was the question: What am I not thinking about about my project management process that could put my project, and as a result my career, at risk? As I took on more and more complex projects—and obviously M&A provides plenty of complexity—I realized the information and/or the questions that I was getting bombarded with were immense. And it was almost never given to me in a structured fashion.

So I needed to find a framework through which I could structure all of this information that was coming at me—and obviously the larger the program, the more complex and the more varied the information. What PMP gave me was three things. One is a comprehensive framework. Two is an exhaustive toolset, which I can use on any and all of my projects regardless of size or complexity. And three: a structured way of thinking about and communicating my project.

Stephen W. Maye

Of course, all of this that we're talking about—managing expectations, setting context, being clear about objectives—it's really all about delivering the value. In the midst of the 10,000 things that have to be done, what are the steps that you take to ensure that in the end, we're actually delivering value?

Kash Ahuja

I think the first and most important part of that is understanding and defining what value means in the context of every deal, and I think for that, you have to start with the strategic value of the deal. Why are we doing the deal? What is it that we are interested in buying in this transaction? 

This means asking those questions early on in the M&A lifecycle. Also asking, "How do we plan on being successful in what we're trying to achieve?” And, “How will we know whether we have been successful or not?" Coming up with OKRs, which stands for objectives and key results, is critical at important checkpoints. So, what will our OKRs be at deal close? What will our OKRs be at one quarter in? Two quarters in? A year in? And how will we measure these OKRs, and what will be our baseline that we're measuring against?

Just as important as these questions is to ask, “What is it that we need to ensure that we will get the intended value from the deal? Are there certain employees who are key that we want to retain for one years, two years, four years? Is there a certain technology or a patent that we need to retain exclusive use of, or does it need to be non-exclusive? Are there customers or partners whose participation is critical to the deal's success? And have we made all of the resources available to the core team that's working on integration, whether it's on the buyer's side or on the target's side, to make sure that our post-merger integration work is successful?” So I think these are all the critical questions that I try to ask to ensure that our projects deliver the intended value or the benefits that we want to get out of the deal.

Stephen W. Maye

You've been incredibly generous and gracious with your time, and I have one more question I want to ask you before you take off. So Kash, if you're talking to a project or program manager that perhaps has a great deal of experience but is going to move into the M&A space, what is the best advice you can give that person as they start thinking about what it's going to mean to succeed in that space, even though they may have experience in other areas and other types of programs?

Kash Ahuja

That's a really good question. The advice I would give to someone who's thinking about moving into the M&A space, first of all, is please do join us in the M&A community. It's a challenging area where scope creep and shifting timelines is an everyday occurrence; where you'll see a new set of problems every day; where your executives, your peers, your teams will demand a lot more out of you.

But it's also an incredibly rewarding one. You will get to work on mission-critical projects where impact is almost directly evident. You can almost always draw a direct line from your work to the impact it's having on many individuals around your team, company, community, country or even the world. And that's very rare. It's incredibly gratifying to know that not only are your efforts paying off for you, but also having the opportunity to shape the impact on those around you.

So, in closing I'd say M&A is not a world for everyone, but if you give it a try, if you like it and you become good at it, you'll almost never want to leave it. It's a pretty amazing space to be a program manager in.

Stephen W. Maye

Hey, that is an attractive offer. So I think you've, I think you may have persuaded some people to come over to M&A. Thank you so much. Kash Ahuja, you have been fantastic. I really appreciate you bringing your insights and experience and the advice that you've offered. Great to meet you, and great to talk with you.

Kash Ahuja

Same here. Thank you, Stephen, for having me on. It was, it was great to talk to you.

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Narrator

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