Managing M&A on a High Scale

Intro

I'm your host, Kison Patel, CEO, and Founder of M&A Science and Dealroom. Joining me today is Jeff Bender, CEO at Harris. Today, we're going to talk about how to manage M&A on a high scale. 

Can we kick things off Jeff with a little bit about your background and M&A experience? 

Absolutely. I've been with Harris and Constellation. I use those sort of two interchangeably, for actually, believe it or not, over 20 years. I looked at the calendar I was like, wow. It has actually been a long time. 

I joined Harris as its Director of Finance after starting my working career at one of the big accounting firms. So I'm a CPA, my background.

One of my first learnings, when I joined Harris, was even though I fancy myself as quite a reasonable auditor of financial statements, I quickly learned that preparing them was actually something that I was not very good at and actually did not quite understand. 

So I think it was a quick dose of reality when I first joined the Harris organization. And actually, it was at Harris where I started to learn how to deploy capital. 

So it took seven years at Deloitte. I had not done much in the way of M&A at all. So basically I, so it came fresh into Harris and the Constellation family.

And really it was Constellation, Mark Leonard and Bernie Anzarouth, and the Constellation board that sort of coached and mentored me over the years on how to do it. 

And then I just learned from the school of hard knocks and hands-on experience. So the Harris organization we've done over 150 acquisitions. So lots of hands-on learning and experience. 

And over the last five years, I've also been investing some of the words we use at Harris or one of our acronyms is TEA. So it stands for time, energy, and attention. 

I'm always working with our leaders to make sure they understand where they're spending it, how they're spending it, and perhaps how they can get a higher return on their TEA.

I spend some of my TEA now, actually working with private, so really to understand how they think about capital deployment, how they think about operating their businesses, and really creating value both for the businesses and clearly for their limited partners. 

So if I have a very good working relationship with TEA associates, and so basically I've been able to sit on some of their portfolio company boards as an independent director.

Get more of a firsthand insight on how they do it relative to how we do it, which again, we both do the same things. We just do it kind of differently. 

From what I understand, Harris is an operating group under Constellation. Can you tell us a little bit about that? 

Harris is definitely one of the six operating groups. There's been six for a while now. So I call them my sisters. So we have Harris the group that I'm responsible for with Volaris and Jonas and Vela and Perseus. 

And then some people would also be familiar, it used to be called TSS. Now we call it a Topicus. And actually, we just fund Topicus as its own publicly-traded company. 

So we still consider it to be an operating group, but it technically actually is its own public company as is Constellation. 

With no offense amended to any of my CSI colleagues, when I always explain to people how the Constellation structure works. I like to say that all of the magic actually happens in one of these six operating groups. 

Because really, it's the operating groups that have all of the employees, all of the customers, all of the products and solutions. 

So all of the businesses reside in one of these six operating groups, they're all very autonomous. Decentralization and autonomy are core tenets within the CSI culture and in correspondingly the cultures of each of the operating groups.

So the head office itself, I would say is I use the word lean, efficient. Again, not a lot of individuals there, and really their focus is to support the operating groups I think as it relates to our deployment of capital. 

Best practitioner has to do a good job of getting us to get together and to share that. And then they do use some of the high levels of financing and obviously the governance related to being a publicly traded company. 

And most of the businesses are in one of the operating groups. And then you have this sort of, this group of very talented professionals at the CSI level that is helping us to be successful. 

Financial or legal, I think. Not really strategic because I think, you know, the board level is more focused on capital deployment, whatever our hurdle rates are we thinking about it? 

Or are they comfortable with the opportunities that we're bringing forth in terms of deployment capital.

What kind of deals do you typically do? 

So I do need to correct you only because I'm going to be sharing this internally with our Harris leaders. So we don't do deals. We make investments. This is a pet peeve of mine. So basically a lot of people refer to them as deals. 

I like to call them investments or transactions. The difference for us and I think the reason I call people out on it and try myself not to use the word is really, I think it starts to tie back into our buy and hold forever. 

And really, one of our core focuses is once we have a business, we're very much focused on making sure we operate it to the best of our ability and make it the best business and that it can be. So we make investments as perpetual owners of these businesses. 

So we would do both platforms and tuck-ins, I would say we're agnostic as to what they are. We do both. I think if you were to numerically add it up, we probably do more tuck-ins than we do platforms.

Typically, platforms tend to be a bit larger. Obviously, the larger the opportunity, I think we're known as value buyers. So I think we're probably a little bit less competitive. 

The larger the opportunity, our opportunity to get into large platforms is probably limited. Whereas some tuck-ins where we tend to be more successful there but I'd say we're happy to do both.  

But one thing I think some people find surprising is we're quite happy to have a large number of small businesses. 

We're not very much focused on synergies that come from size. That's not something that we, not that we don't believe that they can exist. We don't still believe that's where the value is created. 

We believe value is created by keeping your employees and your customers and your focus on smaller groups of customers and markets.

So again, we might actually even buy companies that compete with one another and actually keep them separate. We don't always even combine them to try and create a larger entity. 

Sometimes we do, but sometimes we don't. The Harris Group, we've used that a couple of different times. I mean, we call it customer choice.

So taking to your customer a number of different solutions and letting them decide which solution best meets the set of criteria that they've laid out in terms of the decision that they're making. 

So we really would do a high volume of what most people would consider to be a small number of investments.

So again, high volume, but not necessarily, we're not doing typically billion-dollar transactions. We're doing lots and lots of small transactions. 

It's interesting. I gave the example of competing products. You still let them operate independently. 

It can definitely be challenging for sure. In our utility group, we first experimented with it. 

Not really by design, I think as we were looking to acquire some typical strategy or reality for us as once we get into a vertical with an investment, we then become very acquainted with what else is going on there. 

And then because of our inquisitive nature, we're always looking and then to build from that initial starting point.

So we did that in utilities, which is the foundation of the Harris when it was first founded back in actually 1976. And we were ended up buying a number of our competitors. And there was obviously market overlap. 

Some market, I would say, specialize or focus but some overlap. And we actually just decided to keep them separate. 

Because basically when you do a deep dive into what was happening in the market, and you looked at all of the win rates and who was winning. It wasn't clear that one solution was actually any better than the others.

It was really about the customer going well. In this case, this is what I'm looking for and we thought we would actually get more market share and create a stronger group of businesses by actually keeping them separate. 

My biggest fear when we did that was that we would drive innovation out of the business that we would not become, or we would lose some of our innovative capacity.

And I would say actually over the course of time has been the exact reverse like we were super innovative. The groups, even though they compete, they still share ideas and knowledge. It's been a very interesting way to go. 

So I think again, it was good learning for us to be able to not be afraid to experiment with different types of business models or even integration approaches.

It's not always just bring it in, tuck it into something bigger, and creating something bigger. We're actually quite happy to keep small things. Again, very focused on their markets. 

Between doing a platform and a tuck-in how's the approach different? 

Like most acquisitions that I think even though they all have similarities, they're all unique. Given our appetite for doing acquisitions and given our buy and hold forever and our commitment to our markets. 

We're super flexible on what the seller in most of our cases that will be the owner-manager is looking to do.

And we don't keep a bench of executives just like waiting for us to do acquisitions. We typically are reliant upon a founder or, you know, it could be the management team that the founder has built and developed over time. 

So again, it's very dependent on is it going to be a platform. So you know, what does that look like or if it is a tuck-in certainly? Obviously, we're going to leverage our existing management team. 

But that can be a great opportunity for the owner-manager who perhaps has a passion and strength. I call them superpowers, superpowers, and kryptonite. 

Superpower, perhaps for sales, perhaps it's for product development to return to their roots and spend all of their time doing the things that they actually love and are great at. 

Versus sometimes as your company grows and grows you have to spend a lot more time dealing with people and customers and things that you don't necessarily want to do. 

So we give them an opportunity to potentially return to their roots and extend their career further out into the future. 

That was like extending their life. 

Absolutely. Exactly. Or if they're looking to move on to their next chapter, a lot of the companies that we purchase, this is the monetization event for this owner-manager. 

And basically, they're going to move into their next chapter, which is likely some sort of retirement chapter could be. So doing advisory services or board work, but it's sort of in a non-operating capacity. 

So again, we're more than happy to facilitate the ability to do that. And we're trying to take care of the baby that they've created and the child that they raised. Because again, they tend to have a lot of passion for their employees and their customers and their solutions.

And again, we try and be able to let them know we are going to take good care of what they created. 

We have a couple of great examples of founders of smaller companies that we purchased. Actually, the first company that I was in charge of acquiring, you know, that I founded, nurtured and close. 

We call them by group presidents now. Basically, running multi-hundred-million-dollar portfolio.

And I think the company that we purchased back in 2002 was I think less than a million dollars in revenue. I was speaking to one of our leaders this morning before our call actually, and we just moved into the United Kingdom. 

So, you know, we bought his business, he stayed for a little while. Then he quit on me. He called me one day and said, Jeff, I just, I can't do this anymore. I don't have enough control. I'm not enjoying it. 

And he went off and did some other entrepreneurial things. And then I think realized perhaps the grass wasn't as green on the other side and came back as continued to move his way up in senior management.

And now, it’s again, having the next chapter, leading a bunch of our businesses over in the United Kingdom. 

Can I ask the volume of deals that your organization does? How do you typically source these deals? 

The bulk of our sourcing I would say would fall into two categories. So we have a team, a group of business development professionals that basically are on the phone daily calling out to prospect owners and managers to initiate a conversation or to maintain a relationship. 

So we would call that nurturing. So we have this nurturing function, at the Harris level, we're doing that in thousands, at the Constellation level where we're doing it in the tens of thousands.

Basically just this army of professionals who are making sure that we understand where the company is in their development, in their life cycle, in their thinking in terms of what might be important. 

As much as I think we would want them to say when it's time for them to look at the transaction to only bring us to the table.

I've tried to say I'm a bit more realistic. I just want them to think about us. I love it to be a sole source, but in today's day and age, with the amount of capital that's flowing in the markets today, that's not necessarily a realistic expectation. 

But as long as they allow us to be part of the process where we can, again, put our value proposition on the table and perhaps be able to do something.

So I'd say that's the main way that we do. And then a bunch of our senior leaders beyond our professional distance development group also would maintain handfuls of relationships over the course of time. 

I remember one of the companies that we acquired, it’s probably like a decade ago, but I had the relationship for a decade with this CEO constantly just talking, having dinner at trade shows until it was time or he was ready to transact.

So that's very typical of what we do. We track lots of statistics and data, but the average time that we would have to identify a prospect and then move to a transaction or make an investment, but could be upwards of four to five years.

So we're not just sort of speed dialing, looking for someone who is ready to sell. We're really trying to build out our relationship and an understanding of the markets that we're in and just positioning ourselves to be at the table when the transaction happens.

Number two then would be, we definitely also understand the dynamics of brokers and advisors. So I would say we spent a fair bit of time doing just like we will nurture an owner-manager. 

We will also nurture and develop relationships with advisors and brokers to make sure they understand what markets we're in, what types of businesses we look at, and what we're currently looking to do. 

Most brokers and advisors don't always love the price that we're willing to pay. Because I think as I said before, we were value buyers. But what they always appreciate is our ability to get a transaction. 

So if we're at the table, we have the capability, we have the financial wherewithal to actually get a transaction closed. 

And obviously, if you're a broker advisor, you're in the business of getting transactions done, and that's a super strength that we have. And then we spent a little bit of time. 

I would say the third sort of sourcing is we've had some great success over the years. What we refer to as corporate carve-outs. 

So basically large entities that they could be software entities. A lot of times they're not software focused entities, but over time they end up either thinking they want to be in the software business, perhaps they've acquired something else and they have acquired some software assets.

And usually over the course of time, if they're not really into software or they've acquired software assets that aren't core, there comes a time when they're willing to get rid of those assets. And we like to be there ready to do that because again, we can do the transactions. 

Okay. And very quickly we understand what they're looking for. And again, we feel that we're a good home or they're not going to end up in the paper with the buyer having done something terrible to the business. 

There's just disposal so basically, we know we take good care of these businesses that we're able to buy. So I think those are the sort of the three main ways that we source our investments.

Sometimes it's a great combination of a business development professional with one of our let's call it business leaders or business professionals. 

Because again, you can have such a rich conversation about what we're seeing in the markets, typically in other similar markets. 

Some of the challenges that we're having or that they're having. It could be a differentiating conversation than just an acquisition money conversation because we can talk about some of the same things that are important to the owner-manager. 

So we try and also make sure that we bring the right people to these conversations. Being able to talk about how they would fit within the broader parents with Constellation organization is typically top of mind for these sellers. 

Going back to volume and scale. What's your evaluation approach look like? 

Nothing fancy. So we're discounting cash flows. You know, discounting cash flows, we use after-tax money with the assumption that we own them forever. 

So again, we're not playing sort of terminal value games or making wild assumptions after three years or five years. Basically, we're building out very long-term models, ventures are what we really look at.

Our board sets for us the hurdle rates that we need to achieve. Typically, now they're geared based on the size of the business. So depending on what the size is, there would be a different hurdle rate that we need to model. 

We do first Chicago. So basically this means we create four independent scenarios of what we think would happen.

So again, we have a winner scenario. We have a modest win, we have a walking wounded and then we have a wipeout and then we probability weight, those scenarios. 

And then basically come up with a weighted average or expected values. Again, that might be a little bit different than some people do still all geared around just kind of cash flow, though.

There would be nothing special about that. So I said, Harris has done over 150, Constellation, I am assuming that I've lost track of the number of over 600 acquisitions, right at the Constellation level. 

A few years ago, we started using our own data. So actually, we made quite extensive use of base rates. So basically, we can use a number of metrics we understand what similar businesses that we've already purchased, how they've performed, again, relative to these metrics.

And then you can take the existing investment that you're proposing and the thesis that you're proposing to put forward or to execute upon. 

And you can actually graph it against the base rates and you can go, 

“Wow, I'm proposing to this business will be in the top, core top below the top 95 percentile of every business ever bought by Constellation. Does it have the same characteristics or perhaps, maybe my modeling needs to be? We should re-look at some of the assumptions that we put in our modeling. 

So again, we make quite extensive use of it as well, which again is probably a little bit different than some other organizations. Because again, back we have the volume, we have the scale to be able to do that. 

Take multiple views, really get comfortable with the transaction and what the potential is. Then you just sign off and you go at it or is there a formal approval process? 

It’s all geared right now on size. So because the operating rooms are fairly autonomous, what I do at Harris is not necessarily what my peer would do at Volaris as an example.

So in our organization, so basically I have approval up to a certain dollar value above that dollar value. It has to go Constellation for this case, it would just be the CIO, which is Bernie and Mark would typically take a look at it, and have a certain volume of our value story. 

Then it goes to the board of directors so they would actually require their approval. And then within the Harris organization, I have also provided a dollar value. 

We call them hunting licenses to some of our senior capital deployers who've done it many times themselves. They don't need my approval. I will look at it after the fact and provide comments so they can basically do it.

So again, this is all helping to try and again, operate at scale. We're doing a large number of transactions, you've got to be able to top a flow of how it works. 

So again, that's typically how it works as we grow. We just keep adjusting the dollar values as time goes by. The dollar value now that the CSI board looks at is larger than it was five years ago, the dollar value that I'm allowed to approve is higher than it was.

We're a very disciplined rigorous group. I can take our capital deployment very seriously. 

Our compensation system at the senior level is driven around return on capital because we don't sell our businesses. If you've done something and it hasn't worked out, it is in your capital base forever.

We just use it for storytelling. We have great stories and poor returns. We have great stories that have given us great returns. 

We have great stories that have given us horrible returns, and we like to share them both with everybody to basically make sure that we don't repeat the same mistake and try to accelerate the learning.

It's challenging for people to learn from other's mistakes without having made the same mistake themselves. We could find a way or a system to leverage that better. I think that would help us scale faster. 

We share lots of learnings, we share best practices, we do all of those things. People still seem to have to live the pain to actually go, oh, don't want to do that again. 

How do you own your results? 

We want to make sure that we have opportunities for people to learn where it doesn't cost a lot of money. So we're not doing this on big capital deployments. 

We're trying to let them learn on smaller deployments so that they build up their skillset and their experience in their repertoire. So that as they get to do larger and larger ones, they have a better foundation on which to deploy. 

Have you guys found good ways to share lessons learned across your organization? 

We do a lot of sharing across the constellation. We do a lot of sharing within the groups. Is it great? Is it perfect? No. 

Constellation, we put on an M&A conference every year where we have hundreds of people attend and we have all kinds of breakout sessions again on lessons learned and how to do this well. So we do that. 

We actually do it for M&A, there's one coming up next month on organic growth. The two lenses we deploy capital, we also operate our businesses. We do that on people, understand how they could drive higher levels of organic growth. 

So we bring people together, we share best practices, or we create content where we share it. I would say the best process we have although sharing is still somewhat complicated back to my comment on how people seem to have to learn from the experience themselves. 

As we have a process that was created by Mark at Constellation a few years ago called a PAR. A post-acquisition review. 

We typically do this about a year after we've completed the acquisition and we've operated the business and we sit down and I actually had one yesterday and we just go back through all of our major assumptions that we made during diligence.

And we say, what did we learn? Do we make a good assumption? If we did, what did we learn from it? And a lot of cases, do we make a bad assumption of why did we make that? 

A lot of the time when we're comfortable making that assumption or what we do to validate it that perhaps wasn't well thought out and then we try and share those learnings with everyone else.

We also have a checklist. So basically if you're proposing acquisition within the Harris organization and you're preparing, we have a financial model that we prepare using this first Chicago modeling. 

We also prepare an investment memo, typically in PowerPoint. There's also a checklist that we ask people to go through to also just sort of continually make sure that they're not making almost like silly or stupid mistakes.

So I sort of try and squeeze that part of it. It doesn't necessarily help you with really bad theses are just pure mistakes and diligence, but it definitely gets used to tighten up. 

And add that rigor to the process, which again is very important for us when you're operating at scale. So we have a checklist. We're constantly updating it.

And we just ask the person who's signing off on the investment to go through and actually just initial that they've actually considered or it wasn't appropriate for all of these different items. 

So we just want to have our theses, our return levers, we’re gonna increase some pricing on the maintenance contracts.

Well, did you review, are there any contractual caps or is it a timing issue, right? Where have you put it in the model at a time that doesn't coincide properly with contract renewal? 

Because again, these are lessons learned in the past that we don't want us to repeat in the future and you have them to go, oh yes I did or do you let me go back and make sure I did that. 

So you try and squeeze out some of the simpler things. I guess it doesn't help you on super complicated things, but it helps you on some of the simpler stuff. 

So powers of checklists, reviews, and typically we have lots of people with lots of capital deployment experience.

So again, if you're proposing an acquisition, it has to go through a couple of levels of review. I'll spend some time with it. 

Do you have some checks and balances in place?

We have some checks and balances. Yeah, for sure. It's a very disciplined, rigorous process, but it's so much a part of what we do is that it's no different than if you went into one of our businesses and you sort of looked at all of the operating things that they do.

It's a very similar playbook on the capital deployment side because again, it's not like we're doing onesies, twosies over the years. 

We've done over 600 and fast forward three years from now, we'll do another 600 and we're not stopping. So again, it's a core part of our DNA.

We move along through the deal and get in diligence. And this is where I see large strategics will heavily rely on internal functional leads and private equity will have a myriad of consultants that they'll leverage. What's your approach? 

We're pretty much self-sufficient. Although I must admit partly coming from my experience, working with private equity, and just seeing a different way of doing the same thing, I find it quite interesting.

Mostly we have our own internal legal resources and we have a team of internal lawyers. So we control our own process that way we definitely bring in extra lawyers to the extent if we're looking at something unique. 

Certainly, if we're entering foreign geographies, we would typically always be partnering up with a legal firm in a different country.

The core business diligence and modeling is probably 95% done by internal Harris or even Constellation resources. So basically a combination of our full-time M&A professionals. 

We have these full-time business development professionals. We have a team of full-time M&A capital deployment professionals.

So they're the ones in the data room doing the diligence, doing the analysis, preparing the investment memos, building the model. So we do it internally. We'll also involve business leads or resources. 

Again, if we're already in the vertical or in the space, and we think they can help us, whether it's finding the strategy, understanding the market, understanding the competition, understanding the feature and function set up of the product.

We might involve one of our technical, sort of R&D experts. If we're trying to understand the tech stack and we're concerned about technical depth or something like that. 

And then we're starting to experiment a little bit more with using some external professionals. So I think sometimes we don't buy a lot from private equity but we will sometimes buy some of our companies from there. 

Their expectation is to move very quickly. And sometimes I think internally we're not as fast as we need to be in. So they were willing to supplant some of our internal expertise and resource with a little bit of external consultant support.

So I'd say we're starting to scratch a little bit more at bringing in some external professionals. If we think they could help us speed up the process or just bring up a set of expertise that we may just not have internally, but I'd say 95% internal, maybe 5% external. 

We go into a new market, or new geography, or a new vertical. We typically will always do a fair bit of work to try and understand the market a little bit more. We don't bring it with us. 

So therefore we want to make sure we're understanding. One of my perspectives on our diligence teams all the time is “What the owner said, is not diligence. Just because he said it doesn't mean that's not diligence”.

Like you need to be, it's fine to listen to him or listen to you, but then you've got to go and basically validate that with you know, actual, real, external data. 

So whenever we go into new markets, new geographies, we try to reach out to external experts or professionals to try and make sure we understand the dynamics of the market that we're about to enter.

So it sounds like finance, legal it's essentially centralized for your group, but across the platforms, do they have their own HR function? 

It could vary by Constellation operating groups. Constellation again, back to this autonomy and decentralization and control at the operating level. So again, just because I choose to do it, well, it doesn't mean that one of my peers might do it slightly differently. 

And actually, they do some things differently. We definitely operate with a centralized G&A model. So finance, payroll, HR, legal, and IT are centralized services that are provided to our businesses. 

And then obviously provide it to our M&A function from this sort of central group of resources. Right now we've grouped all of the Harris businesses into sort of four larger groups. So a lot of that provisioning is at this group level. 

So each group has a couple of hundred million dollars. So there's this provision there and then as we get more geographical, you're getting a bit of a geographic overlay as well. Because obviously doing for Israel or in the UK or in Australia, you have to have some local expertise.

You can't necessarily just have sort of one head office. And again, we're Canadian being Ottawa, doing everything. So we tend to have our professionals spread out across the world. 

When we buy a company even though we are centralized the functions will often keep the G&A professionals that were at the company. 

They just join our greater corporate team and either provide services to the business as they were before or perhaps to additional businesses. 

So it's all about fastening in scale. We're always looking for great people. So if we find them, we try and find homes for them as opposed to exiting them from the business.

I'm trying to even imagine how you're communicating with thousands of people across all these different businesses while still maintaining the centralized structure for their support.

Communication is definitely more challenging today. We have over 6,000 employees, I would say it's not even just the number of employees that makes it challenging.

I would say we have geography issues. Now we have language issues. A lot of our employees don't speak English. I know it's not their first language or their second language. 

And we also have so many different verticals that what you communicate on can also be different. 

So I'm a fan of multiple communication channels. So I try to use lots of them and really let the employee pick and choose which ones they like, which sort of suits their preference.

I do use email as much as it's the old standardized. I'll send out company-wide emails, they just go out in lots of different languages. They were written by me then being translated from my starting English, but also had a lot of subgroups.

So basically again, communication with lots of subgroups. So again, I sent out an email every Tuesday morning to everyone involved in our capital deployment process. 

That basically has a number of statistics and data and encouragement to be doing certain things that I feel we should be doing. And maybe we're not doing them as well as I would like us to do them.

Every Friday I send out an email to all of our senior leaders, giving them things I like them to think about over the weekend. Typically also sharing best practices. 

If I've talked to a leader during the week, and we've talked about a best practice, I'll put a link or a document to my best practice that no may or may not be relevant to them. So we sort of have that cadences of communication. 

Every six weeks or so I send out what I call a food for thought. So they call it like a newsletter and say, it looks like a newsletter. This is just a number of articles and books and podcasts are other media that I've been consuming. 

I'm sort of a voracious reader that I think might be useful to people. So I actually, I rate the book, so I give them my, I have a five star rating system. 

So basically, I rate them and give you a little sense of what the book's about. And then perhaps if that's of interest to you, you can go do that. 

COVID has been challenging in many aspects, but one of the, actually the good thing is we're creating so much more content now. So we're recording almost everything, but recording a lot more of the content that we were not recording before. 

So we do a good job of recording all of the presentations that I'm giving internally, that I'm giving externally. And we're making those available for people to watch as you and I were chatting before we kicked off the podcast. 

I have my own little nothing compared to yours, a little mini podcast series where I try and interview Harris leaders. 

And again, just give people across Harris a different understanding of what's their background, what have they done? What is their career? The last one that we did actually, was the one I was most uncomfortable with.

And so we did one on inclusion and diversity as we had four of our different leaders really sharing their stories of inclusion and diversity, both at Harris and in some other experiences. 

So just trying to share with our employees different ways of looking at things and how we're thinking about different things.

They created this for me, I call it this quirky little avatar, but that kind of looks like me that sometimes I use when I'm recording shorter, slightly targeted messages, which reminds me I haven't used it in a while so perhaps I need to go back and use him. 

They try and use all kinds of different ways that connect with different people for different types of communications. But I do spend a lot of time thinking about it because of so many employees. 

I have to say I haven't been traveling for quite a while, but I did the lady that keeps me super, super organized, and making sure I keep my TEA focus where it needs to be focused. 

We would actually, at one point we were counting the number of employees that I would have that I got up and spoke to over the course of a year.

And I always wanted to make sure that number would be well over a thousand people. You know, what event am I going to? 

Okay. I saw 400 people here, I saw 50 people here just to make sure that we're constantly communicating with different groups of employees and making sure I don't get too internally focused.

You know the bigger you get, you can spend a lot of your time just talking with your very small leadership team versus getting out and speaking with more people. So I try and make sure that I get out as much as I can. 

Communication is key to make integration successful. What's your integration process look like and how are you involved with it?

My involvement is certainly nowhere near what it used to be. I think if I was, to be honest, that may be one of the things that I miss the most, I think it's spending more time with our actual business leaders. 

I have more of an operational bend to me. So I like getting into the details of businesses where, so before I would very often go onsite and do what we call the day one presentation. 

So we would typically when we buy a business very shortly after acquisition could be a day of just depends. Get them in a room, walk them through, introducing them here, here's who we are, here's what we stand for, this is what we're all about.

And then spend the day or a couple of days with them and meeting them and bringing them into the process. It's always good to remember, even though we might've been dealing with the owner and the senior team for months working through the investment, most employees find out about it on the day of close.

And I think again, that they know that they're not part of the process and I think obviously can be a very unsettling and anxious time for them. 

So over the years, we've tried to really hone our message down to being very much about the employee and really what they're going through and how can we make that easier.

Probably, it was terrible if I used to get up and give a three-hour presentation and you'd take it through the formation of Harris and Constellation to our strategy for the business. And obviously, yes, this is the payroll cycle and vacation policies and all that kind of stuff. 

And then we realized that you really just needed to hone in on the really important things which are, is my manager changing? Who is here and who is no longer here? And am I getting paid the same amount of money? And when am I getting paid? 

And then if you're, depending on what country you live in, if you're in the United States, what are you doing to my benefits plan? So we stopped with all the other strategies and this and that and we just got really focused on that. 

And then as the days go by, we share more and more as people get more and more comfortable with what it is we're doing. 

So the integration process itself depends on platforms, and tuck-ins would be different. So obviously if it's a platform acquisition, our process would be slightly different.

If it's a tuck-in, we have a mix of full-time integration professionals and because we're requiring so much, we have some people whose full-time job is to be an integration manager, lead integration management concept. 

So we have an integration manager for every acquisition that we do. Again, sometimes they're full-time employees, that's all they do. 

We also like the integration management experience we think is really good as a leadership development tool. 

So again, we'll often pull people from existing businesses and provide them with the opportunity to be an integration manager because typically it can be anywhere from three to six months. So again, it's a relatively short sort of experience. 

But it really helps them understand what it's like to be an employee, how we think about acquisitions, and that kind of thing. 

We have an extensive playbook, lots of checklists to make sure we don't forget the stupid stuff for the simple stuff but leave enough room for the agility of what you need to do.

We're fairly, I wouldn't say hands-off. So obviously we have a core financial reporting system and a reporting tool that sits on top of that system. Everybody gets on that system as soon as possible. 

We have one, I would say HR system so we use Workday. That's the system that we basically would roll out to all of our employees and all of our businesses.

The other systems, if it's broken, we're going to fix it. But I would say, we don't basically say everybody will be on this system. What we typically would do is say, Hey, here's five different CRM solutions that are used across the Harris family. 

Here are the businesses that use them and here's the business leaders that can tell you what they like and what they don't like about them. How about you reach out to them and decide for yourself what you think the best solution is for you. 

So we don't actually mandate the number, most of the systems that are there. And again, if they're not broken and there's so much going on in the initial integration that we try to really focus on fixing the things that don't work.

And again, really supporting the employees through that process, because they're the ones that are moving your product forward, engaging with your customers. We want them to feel as supported as possible. So we don't typically force changes. 

And then again, I mean the final piece, I would say every investment that we make has a thesis. You're going to do these things to the business to be able to earn the return that we think we need to earn. 

And that obviously links right back into our integrations to make sure that we're doing those things in the right timeline, so that we're able to earn the returns that we forecast to earn. So that might change some of the timing or the cadence around integration. 

Sometimes the reality is if you buy a company, we might have to part ways with some employees. 

Whether again, it's because we have a corporate group and we don't need those corporate employees. It's for a different reason. 

What we learned very quickly was that it's really important for the people that were in the room. And they don't know whether it's Kison, not in the room because he doesn't work here anymore, or is he just at home sick today or is he busy doing something else? 

And we never really would talk about the people who aren't there anymore. So now we go, no, no, no. We're going to actually acknowledge here are the people who are no longer here. Yeah. In a very respectful way so people can start the process of recovery. 

These are close colleagues or they could be friends of the employees who are still staying. And I think you want to be respectful to them of acknowledging what has happened as opposed to pretending like it doesn't matter, that we're afraid to talk about it. 

We're a very straightforward organization. And we really believe in being respectful but also hitting the hard truths when they need to be hit. And then starting that sort of recovery process from there. We're not going to sell you in five years.

Therefore you're going to be part of us forever. You might as well understand how we think and how we do things. 

What are key lessons learned? 

To be flexible and be willing to think differently about what it is I think is really important. Like understanding the cultural fit. I think of the senior teams, we've probably spent more time on now than we have in the past.

Whereas before I think we would just if it was for sale and we felt we could in our head return versus going to buy it. Now, I think we spend more time understanding the impact on the integration approach. 

If we think there's going to be challenges culturally, in terms of again, how the businesses, how they operate for so. 

We operate obviously now we're, you know, we're deploying capital globally, assuming that every business thinks like North America is just not a good way to do it. 

So again, trying to adapt ourselves to be flexible, to deal with that. And again, I think you just share the learnings. We share great success stories, but we're equally willing to share our mistakes.

We had a two-hour meeting yesterday on one of these PARs, post-acquisition reviews. And it's mostly focused on here are the five things we got wrong and here's why we got them wrong. Here's what we learned from it. Here's what we would do differently next time. 

But it's not like the people who were presenting it, I wasn't attacking them. It's like they wanted to share because they wanted to go again with their peers to explain what they were thinking, what they've learned, and how they're going to do it differently. 

So I think creating that culture where you can talk about the things that didn't go well so that you don't repeat them in the past. I think it is really important for people like us who basically deploy capital for a living. 

What's the craziest thing you've seen in M&A? 

We bought an OMS, an offender management system in business. And we wanted to visit one of the customers and see how the solution worked, which meant we had to go to a prison. 

My vision when we went was that we would not be spending time with the actual people who were incarcerated in the said facility. That actually, was not the way that the tour worked.

So the tour was basically, we were walking around actually with inmates, uh, you know, in between, as we were locking the gates with the guards who were giving us the tour. 

And I remember at one point a very curious individual. So I wanted to see what it was like to look at the inside of a cell. So the gentlemen giving the tour call hey, Kison, come down here and take Mr. Bender up and show him your cell. 

And so like this guy comes down and he basically goes, come with me and I have to walk up like two sets of stairs and into his cell. And I'm looking back at that as my group, we shoot down the hallway. 

As they're walking down the hallway, this guy showing me his cell, I was trying to learn more about the in-cell technology that they were using. So that I must've been, we left that out you're like holy cow, I just spent the morning walking around an actual prison. 

We had one where we had some key executives that had once been married and I would say perhaps were not fully over their separation, but it did not come up during diligence. So that made for a bit more of a fun integration after the fact.

And then one of my, one of my peers reminded me that we were doing diligence on the company and we discovered that one of our full-time employees was also one of their full-time employees. 

So that led to a very interesting conversation with the said employee. So obviously that was obviously not super pleasant. 

Because you're dealing with family dynamics a lot, I would say just lots of conflict between parents and children, brothers, the sisters, when it comes time to sell the companies is a very emotional time for them. 

And you can get caught up in some very difficult, very uncomfortable situations. So again, obviously, we've had our share of those, but the prison one was my favorite.

Ending Credits

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