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M&A integration in tech has changed quite a bit over the last twenty years. Integration has evolved from integration volunteers, to large teams with detailed tracking, to dedicated teams and Agile approaches. In this article, Pat Belotti, VP of Corporate Development Integration at Zendesk, delves into the evolution of M&A integration.
"The integration lead is typically the individual with the most experience in executing deals and can bring valuable insights to the table during early discussions that can impact the long-term success of the deal." - Pat Belotti
Evolution of M&A integration
Corporate development teams used to execute deals and hand them over to the business for integration. Functional personnel were recruited to assist with integration, but the task was often met with reluctance as it was considered challenging, and there was usually a lack of organization, best practices, and learning retention.
Companies such as Cisco and IBM were among the first to establish dedicated integration teams that heavily relied on project management tools. However, there was a significant amount of overhead, and functional personnel were becoming more adept at their roles as they gained more experience.
As a result, companies began to reduce the use of project management tools and started to incorporate integration earlier in the process to influence deal outcomes.
Currently, integration teams are taking on the responsibility of due diligence management and are exploring more Agile approaches for transactions, rather than a one-size-fits-all approach.
When to involve the M&A integration lead
Corporate development needs to involve the integration lead before preliminary due diligence begins. An integration lead is often more experienced than a corporate development team and can provide valuable insights during early discussions that can ensure deal success. When communicating with a target company, the integration lead can also offer realistic expectations for post-close operations.
M&A integration’s impact on LOI
An integration team's impact on a letter of intent (LOI) is minimal, but it is advisable for corporate development to share an LOI with the functional team before submitting it to the target company. Functional personnel are experts in their field and can make a significant difference when formulating agreements. The integration team may not play a role in the decision to buy, but they may identify potential red flags that could be a deal-breaker.