Theresa Caragol, Founder and CEO of AchieveUnite, recently sat down with Mergers & Acquisitions expert and AchieveUnite Expert Jennifer Fondrevay to discuss the top considerations for technology companies to keep in mind as they undergo M&As.

In this episode, you’ll also learn why M&As fail, and you’ll walk away with relevant insights and best practices to help you successfully lead your employees, customers, and partner ecosystem through an M&A.

 

Listen to their conversation here.

 

About Jennifer Fondrevay

Fondrevay is the Founder and Chief Humanity Officer of Day1 Ready®, a consultancy that advises forward thinking business leaders, owners and C-Suite executives on how to prepare for and manage the people challenges of business transitions, particularly Mergers & Acquisitions.

As a Fortune 500, C-Suite Marketing Executive who led teams through three separate multibillion-dollar acquisitions, Jennifer authored the satirical survivor’s handbook, “NOW WHAT? A Survivor’s Guide for Thriving Through Mergers & Acquisitions” which became a #1 new release on Amazon. Her NOW WHAT? audiobook was launched in March 2021 to similar acclaim.

She shares her M&A expertise as a contributor to Harvard Business Review, Fast Company, Inc., Forbes and Thrive Global; is a sought-after podcast guest and keynote speaker for conferences and associations; and has advised numerous small and mid-market as well as Fortune 500 companies, on how to prepare for and lead through the multiple transitions of the M&A-deal journey.

 

Read the transcript of their conversation:

Theresa Caragol: Hello, Miss Jennifer Fondrevay, such a pleasure to have you with me today as one of our AchieveUnite Experts. Welcome to our expert community!

Jennifer Fondrevay: Thank you! That’s the fanciest pronunciation and introduction I’ve ever had. Usually, my name gets slaughtered. That was well done. Thank you, Theresa.

Caragol: Thank you. Well, tell us a little bit about yourself.

Fondrevay: I am a recovering Chief Marketing Officer. I went through three multi-billion-dollar acquisitions and wrote a survivor’s handbook that has turned into not just a handbook, but a playbook for executives. And now I consult business owners, executives, and private equity on how to navigate the people challenges of mergers and acquisitions and just business transitions in general.

Caragol: I’ll just share a little bit about why we brought you into our AchieveUnite Expert Community. Many of our clients are going through M&A and integrations from acquisitions. And you and I both know the degree to which you get certain things right up front is the degree to which you’re successful later. And obviously, the partner ecosystem is a big part of that. So why don’t you weigh-in, when you think about M&A, what do you think the biggest considerations are for the tech companies who are doing that today?

Fondrevay: Well, it’s the reason why I started the business that I did. It’s anticipating those people challenges. There is a 70 to 90% failure rate for mergers and acquisitions. This has been a consistent percentage for over a decade. In that 70 to 90%, typically what’s commented on are the unexpected people challenges. My reaction to that is, they’re not unexpected. You can expect them, you can prepare for them and plan for them. So that’s why I do the work that I do, which is recognizing that what looks perfect on paper…I’m sure you’ve had this experience right. The strategy looks sharp, but what you can’t always anticipate is human nature and how people are going to react. As you and I both know, and all we need to do is look at the pandemic to prove this: people don’t react well to change, especially when change is thrust upon them suddenly. So that’s what I focus on, is helping business owners, executives, sales leaders on how to anticipate and navigate through it.

Caragol: And what’s so interesting is we used to talk about our tech companies, and we talk about the customers and the internal employees. Well, now we have to look at it in a much broader context, right? It’s who are all of the stakeholders? So, you have employees. We have our customers. We have different types of business partners. We have the industry community. And each one of those, especially in M&A, has to really be looked at and incorporated ahead of time and part of the change, right?

Fondrevay: Absolutely. What’s interesting (and this is what I often advise executives around, particularly when they’re just in the consideration stage) is that oftentimes the thought is: our customers keep asking us…they’d love for us to be a one-stop-shop. A customer might say that but there’s also a recognition and a lot of baggage, negative baggage around mergers and acquisitions. So, customers might say that but they’re also not willing to give up the turnaround time. Right. So typically, what happens in a post-M&A deal is suddenly a decision that could have been made in a week. Now, there are layers of approvals as people are figuring out how the two systems integrate and who leads and who takes the customer relationship first. And so, customers, if you drill down, they’ll say one-stop-shop would be great but not if I have to give up the person who I’ve worked with, who answered my problems. The fact that the pricing that I used to get was superb but now maybe you used to sell me the high-end version of this, but now if I’m going to have to deal with somebody who’s trying to sell me a portfolio and I don’t want the portfolio, I just want what you’ve always offered me. All of that complexity weighs into how your customers feel about the merger or the acquisition. This is what I advise executives on when they’re considering. Again, looks great on paper, but think about what your customer wants and then also how this impacts sales. If your sales team has been used to selling your product, at the expense of saying, will these other guys don’t do it well, either they’re cheaper or they don’t serve the same purpose, but now you’ve brought them all together and I’ve got to sell a portfolio. Your sales team can equally be frustrated and say, well, how am I going to sell something that I used to say was terrible.

Fondrevay: All of those factor in. And that’s a big part of what I do when working with executives is to help them anticipate and think through that, as well as how to support sales.

Caragol: Just in a couple of thoughts as the devil is in the details. Right? We were just talking to the clients. And these are not the things you can do at the surface level. These are the things that have to go all the way to the core of the onion. Right. Or the core of the apple. So I think that’s critical. And then the second thing that struck me as you were talking is about, you know, we talk about the customer experience, we talk about the partner experience. And you have to anticipate ahead of time all of the implications on that customer journey, on that customer experience, the same thing on the partner journey and the partner experience, and for that matter, the other stakeholders that we started the conversation with.

Fondrevay: Right. And that journey scenario planning. Essentially, once we do the deal, one of the exercises we do is a pre-mortem. Right. So, we know the post-mortem. The patient dies and we try and analyze why. A pre-mortem is an exercise to essentially say, ok we’ve done the deal. Now let’s go through all the ways this could go wrong. What are the potential scenarios, both internal obstacles as well as external obstacles, and as you highlight, what does that journey look like? Let’s say a new government regulation comes out or a competitor moves and launches a product we hadn’t anticipated. You need to do that scenario planning to anticipate and prepare.

Caragol: I love the pre-mortem. That’s brilliant. Ok, so tell us about in your opinion, why do these M&A deals and maybe separate a big company type merger or acquisition and then a large company acquiring small companies, and tell us in your mind, what are the differences and when do they fail? When do they succeed?

Fondrevay: Well, that’s what’s interesting when I did my research. So, for the book, I interviewed 60 plus executives, CEOs, CFOs, private equity, HR, and middle managers. And I intentionally made sure that they were both practitioners and survivors. So, we had people who had been acquired, who were acquirers. And what’s interesting is there is no distinction. I mean, granted, multibillion-dollar acquisitions have variables that are unique to them. One CEO said to me, the bigger the billions, the bigger the bloodbath. The consistent thing was three things tend to come out and even other articles have been written about this. First, it’s a higher than anticipated complexity of systems integration. All of that drive different, difficult cultural fit is usually one of the top three that are noted. And then third, oftentimes and you’ve, I’m sure, seen this as well, synergies that aren’t realized. Right. They look to find efficiencies, maybe redundancies. And those aren’t realized because the systems either don’t talk well or one works better than another. But the transition to that system is overly complicated and delays the company’s ability to deliver products. But underlining each of these and it’s I referred to it earlier are the unanticipated people problems, how people adapt to change. And that happens whether it’s a Fortune 500 company or a mid-market company. That’s what I look to mitigate, is recognizing that aspect, the people aspect of the strategy and how to think that through and the not to have your productivity drop off the cliff to help your workforce, whether, again, you’re Fortune 500 or mid-market, how to explain the vision for why you did the merger or the acquisition in the first place and help people to understand how they can contribute to that often value that vision, translating it for people. That’s the part that’s missing.

Caragol: One of the things we just finished with a client, and it was so successful was they had two companies together and they had a new leadership team and a new team. The executive sponsored our ACE leadership program to help them come together and build trust as a team. It was so neat. And now they’re getting ready to look at the ACE: WE. We have ACE: ME and ACE: WE. ACE: ME is how do I operate in the organization? And ACE: WE, how do I achieve influence in the organization. And both of those are equally as important. Right? One is how I show up authentically and build skills to deal with this. And then the second part of it is how do I influence and operate in the group and with my partners? And so, I feel like those I don’t think one is more important than the other.

Fondrevay: And it’s why I’ve had so many people say to me, what you do is so unique because I’ve been an executive. I’ve been an executive through three multi-billion-dollar acquisitions. I know the reason for the deal. Right. It’s a growth strategy play. But the reality is if you aren’t prepared as a leader for some of the reactions, the stumbles that your team can go through, the organization can go through, it can be very difficult for a leader because one, exactly as you said, I’m figuring out, “what does this mean for me right now?” and for me and my view trades. And secondly, if I’ve been an authentic leader, someone who’s been very transparent, and now suddenly I say, hey, we’re getting acquired and we’re still determining the strategy. That puts you in a really tough position. I work with executive teams and individual leaders to help them prepare for that and then also how to lead. So not only they’re figuring it out for themselves, but able to lead their teams when things are still being figured out.

Caragol: And that’s part of why we’re excited to have you as an expert and then also your deep analytical knowledge and advisory skills in this arena as well. Thank you.

Fondrevay: You mentioned something too, Theresa, that I think is critical is the point about trust. The program that you just went through and how to build trust, because that is a key ingredient for success. When people in the company trust one another, you can cut people a lot of slack with trust there. Mergers and acquisitions tend to undermine trust almost immediately. And particularly if you’re front-line leaders had no idea this was in the works, they can feel blindsided. And I talked about this in my Harvard Business Review article. You can have this “us versus them” dynamic. It’s not just our company versus their company, but it can be front line leaders versus executives because suddenly, as a front-line leader, I’m looking at this saying, ok, I thought we had some trust here. I didn’t know this was happening. I’ve now got three times as much work. At least this is the impression.

Caragol: And we’ll finish with this, there is individual trust, organization trust, and there’s inter-organization trust. And the implication of these companies coming together and unifying their strategy is to whether they’re trustworthy as an organization for their partners and their clients.

Fondrevay: Yes. So, I was thrilled to hear that developing that trust was a key part of the exercise that the teams were doing because that’s critical.

Caragol: It is. Any closing comments?

Fondrevay: The one key comment that I would make, particularly knowing, knowing your audience, is to use what serves your customer best as the North Star. Because when companies come together, there’s always a tendency to say, “well we did it this way and it’s the best way” and for them to say, “we did it this way and it’s the best way.” And finding compromise can be difficult because you both think you do it best. When you use what’s best for your customer as your North Star, that can mitigate a lot of us versus them. Finding common ground can be found when you look at it from the standpoint of what will serve our customers best. Not my way is better than your way,

Caragol: And taking the emotion out, which is very hard. That’s a whole other conversation. Maybe that’ll be our next conversation! Well, thank you, Jennifer. I appreciate your time today.

Fondrevay: Thank you!