How to Run an Integration Led Confirmatory Diligence Process

It doesn’t matter if you buy the best company in the world, if integration is not done properly, value will be lost. And while there are a handful of companies embracing the value of integration and bringing the integration team in during the diligence process, some take it even further. 

Jim Buckley, former Vice President, Mergers and Acquisitions Integration at VMware, is one of these people, and in this article, he talks about how to run an integration-led confirmatory diligence process. 

“Corp Dev acquires value, and the integration team creates value. Having integration lead the diligence process firmly assures you're going to create value post-close.” -Jim Buckley

Corporate Development vs Integration 

Through no fault of corporate development, their role is just different from the integration team’s role. The primary role of corporate development is to find and close deals. As soon as one deal is closed, they are looking for the next deal and will hand off the entire transaction to the integration team. And according to Jim, 15% of the secret sauce is lost during the hand off. 

On the other hand, the integration team’s primary role is to create value out of transactions. Hence, corporate development and integration teams have different lines of questioning and mindsets.

The diligence team typically knows why the reasoning behind buying the company and will look for deal breakers during diligence, but they don't ask how the company sells. The integration team is all about the “how”, and when you understand the “how”, it allows you to plug other companies into the system. 

Lastly, the integration team does not leave until the integration is complete which is what makes them a better fit to lead the diligence process. 

Involve the Integration team pre LOI

One of the best things to start doing is to involve the integration team pre LOI. There’s an advantage when the integration team can hear the dialogue between the seller and the corporate development team from the very beginning because those conversations don't make it during hand-offs. 

In Jim’s observation, 90% of deals post LOI closes anyways, so might as well involve the integration team early. It doesn’t need to be the entire team, it can be the integration lead, finance, and HR only. 

Have Integration Lead ask the Questions

Since the integration team integrates the company post-close, they know all the right questions to ask. From there, the integration lead will coordinate with other functions and distribute findings accordingly, especially with corporate development regarding valuation findings. This process alone removes redundancies and will prevent burnout from the sell-side that could harm the business that is being purchased.

Also, as the integration lead starts do their own findings on matters to integration, they will start to formulate the integration plan. 

Best practices 

As an integration leader himself, Jim puts a big emphasis of always doing the right thing and always telling the truth. Never commit to something that you have no ability to fulfill because it sets expectations. The integration leader should act as a coach to everyone else on what to say and what not to say to the target company. The integration lead will have the data on what can and cannot be done so it has to come from them.

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