How Positive Relationships Can Drive Success in M&A

The importance of relationships in M&A

To me, relationships are everything, but what I found in M&A is that it truly makes everything better when it's at the forefront. From a professional services firm, the way that we do acquisitions is a little bit different, maybe from some other ways of doing it. 

Talent and clients are number one priority for us. We want to retain that talent. We are acquiring these firms because we truly want their people, and we also want their clients. So in order to make both of that work, we have to build relationships. 

We cannot allow these firms to run as subsidiaries because that doesn't provide us the value in the deal. To us, we have to have those relationships built between our side and the incoming firm’s side. Because as you can imagine, there's a lot of tough issues that come up in M&A, and having hard conversations when we're talking about short-term pain for longer term gains is made a lot easier when you have that trust initially built with the other side.

Another part that causes issues in M&A is uncertainty. A lot of the anxiety-inducing reactions from both our firm as well as the incoming firm comes from uncertainty. Uncertainty can be a little bit more tolerable when you've taken the time to build that positive relationship to  lay the foundation of trust. Because then, you're not making an assumption that the party is coming with ill intent. When you're making decisions, you already have that solid foundation of, “Hey, we are in this together. We are one team. Yes, this is going to be painful for the short term, but this decision is being made with the most positive intent in mind.”

Starting from the top, if you don't have the trust of the top leadership of that firm, how can you expect them to turn around, announce to their associates, and get their associates on board if they don't trust you? That, to me, is just almost impossible.

Key people to build relationships with

From a corporate development perspective, a top priority is having a relationship with the executive leadership of the firm that is coming into Wipfli. These are typically the people that really have made the decision that they are ready to sell into Wipfli. 

A phrase you'll hear from me is we're looking for firms to sell into Wipfli, not sell out of their current business. So we need them to have a positive intent. We need to build a relationship with them because they're the foundation of that message to their firm once it's announced to their associates.

That's really step one. It also makes it easier if we take the time to build relationships with those executive leaders to set expectations, to have hard conversations of, “Hey, the first six months is going to be really, really tough for your people, but know that we are here to help you through this.” And if you don't have that positive relationship with the executive leadership, they're not going to come to you with issues and then things can spiral out of control. So that's one really important group. 

The second important group is the executive leadership within our firm. So the way our corporate development function works, we have to work very closely with our executive leadership team because they have a view of the whole company. Whereas we only have a slice of the strategic plan, so we need to rely on them for changes in the strategic plan. We need to inform them of changes in the M&A market. So us being in tight connection with each other and always collaborating is huge.

We also have to prepare our executive leadership when we acquire a firm, because we're a firm that truly cares about the people that are coming into our organization and to show that our executive leadership team does engage with them. So if it's an onsite firm, if they have a big onsite presence, our executive leadership will be out there. They'll take the time to talk to the associates. They're the ones presenting during the announcement. And so it's our job to make sure that our executive leaders are appropriately prepared for those conversations. 

I have a couple more groups. So the leads of our integration teams and due diligence teams are a huge one for me specifically. I work with these people day in and day out. And if I haven't done my job at building relationships with the people in our firm, they're not going to trust me when we have to make tough decisions. Or if we're making a decision that puts more work onto their plate because they don't understand the intent behind it if I haven't taken the time to lay that trust foundation and maintain that positive relationship with them.

Another big part of my job is to challenge people to think differently. That's a lot harder to do if you don't have a good relationship with someone. So when I'm asking clarifying questions, when I'm challenging them on assumptions, it can be really hard if I haven't had the time to build that relationship with them. And as I've said before, tough conversations are always easier when you have a positive relationship with someone. 

A couple more groups include the acquired people. This one can be a little bit harder depending on the size of the firm, but our team members like to take the time to get to know the people that we're acquiring, to sit down with them at lunch, to learn a little bit more about what they do, to be there physically if we can on site supporting them through these integrations to see “Oh, hey, you're a human just like I'm a human and you're here to help me. You're not forcing this awful decision of change on me. You're here to walk this alongside me.” 

Another one is brokers. I know we talked about this during the open office hours, but I truly see an amazing path forward if corp dev functions are able to build a positive relationship with the broker if they have an opportunity to. Because what we've found is brokers are able to manage their clients a little bit better.

So manage the expectations of what this process is going to look like, manage the expectations of the amount of time that the people have to spend during due diligence and negotiation. And if you don't have that foundational relationship with the broker, it makes the process really, really difficult and actually impedes the process and likely will draw out timelines. 

So those are my main groups of people that are extremely important to keep relationships with. And the lawyers, we do have internal and external counsel. So that's a little bit more out of my purview right now, but eventually that will be something that's vitally important to maintain and build that relationship with our internal counsel, as well as our external counsel, cause we do use both during our transactions.

And I've got a little bit of a cool story about the acquired firm employees. So when I was in my IT role, we acquired five to six firms in the Chicago area. That kind of built out our presence in the Chicago market. 

The first acquisition we ever did in Chicago was pretty bumpy. We went through a lot of technology hiccups, but we were able to overcome them on site. And about three years later, as we were bringing a bunch of offices together, the admin staff actually remembered me and ran to give me a hug during the office consolidation, just because I had taken the time to sit down with them, to walk them through even the simplest five mouse clicks to get where they need to go. People remember that, they remember you for the time that you took and the kindness that you show to them during times of really challenging integration steps. 

How to foster and develop relationships

The first point I want to start out with is at Wipfli, our culture and our cultural training are unique compared to other firms and companies that I've seen. What I mean by that is Wipfli started this culture training based on the Arbinger training of outward mindset. Outward mindset is basically turning your chair and understanding the impacts of your own actions on someone else.

So if I'm completing this action, is that impacting my direct report? Is that impacting my peers? So having that awareness of the people around you and the actions that you're taking and the potential consequences of those actions. 

The second element of our culture that makes building relationships, honestly, very easy within Wipfli is we have this practice called meet to learn. So a meet to learn is used both internally and externally with clients. So we tend to use this language with our target firms as well. And a meet to learn is basically a conversation. You're coming into the conversation with the intention to learn from the other party.

The practice is encouraged by leadership. It's encouraged across all areas of the firm to really sit there and from a client perspective, what this shows is that we're listening to the needs of our client. We don't show up to the meeting, assuming that we know what they need. So the intent of a meet to learn or meet to give, we use both, is:

• You're curious about what someone else is doing. 
• You're curious about their challenges. 
• You're curious about their role. 
• You're curious about their world.

And when you start to view, when you learn more, when you see people taking the time out of their day, even 30 minutes to get to know you, that just is an easy way to develop a relationship, it’s by listening. So that's kind of the first point of why it's so easy for me to build relationships at Wipfli. 

For our internal teams, as well as the incoming firm executive leadership, for me, over communication. It's hard to keep everyone on the same page in the very chaotic world of M&A. So over-communicating when I find something out is important. 

So let's say that I found out something from our HR team that I know is going to impact IT and may impact finance. You can bet I'm going to include both of these teams even if it may have an impact because I find that keeping people on the same page is truly vital to success. And I do think that that's a piece of helping build and maintain that relationship with both my team members, as well as the incoming firm executive leadership. 

Listening to others. So make sure that you're truly listening to others, not just pretending to listen to them. You have to truly listen to them and then use your emotional intelligence skills to be able to assess and respond to what they're saying. So if I'm noticing that one of my team members, maybe he’s having a really bad day, I have to use my emotional intelligence to kind of figure out Is this the right time to have this discussion or is this something maybe we should discuss on a day where they're not feeling super overwhelmed. So to me that just shows respect for the individual and where they're at. And if it's not a super urgent topic, then we can talk about it at a different time. So kind of that respect between people. 

Giving credit where credit is due is another one for me. Everyone that's involved in our M&A process knows that we have an open door. If you have an idea, if you're seeing something that isn't working well, bring it up. It would be super easy for me or my other team members to claim credit for that, but I don't think that's fair. If you're asking a good challenging question, if you're challenging an assumption, if you're thinking outside the box, that should be rewarded and that should be called out. And that's part of cultivating that positive culture within our M& A team and building that trust to build others up. 

A key piece for all of the groups is seeing people as unique human beings. So we're all very different. We have different interests. We approach problems in different ways. We think about things differently. And so taking the time to get to know someone, to understand the context of where they're coming from, to understand what are their hopes and dreams, to listen to a vent. 

To me, being able to acknowledge someone as the unique human that they are, and when able, adapting your style to the way that they best either learn or respond, is an amazing way to be able to start that trust journey with someone. I just think that that's vitally important for all areas of the stakeholders. 

One tactic that I truly love is asking clarifying questions. So if you ask me what my brand tagline is, it’s “My name is Nicole Markowski, and I have a million questions.” I'm just a naturally curious person. So one way for me to truly build relationships with people is clarifying a question and or confirming understanding. 

It may seem a little weird, but building that trust really comes from seeking to understand and then confirming that you see things, you see what they said in the same way that they see it by restating what they had said in your own words. To me, that goes a really, really long way with building trust with anyone, taking that time to show that you respect their opinion and that you're trying to understand where they're coming from. 

My final one is honesty and expectation setting. This one is probably more at the executive leadership level of both our firm as well as the incoming firm, and brokers and bankers. Knowing that there are boundaries of honesty in the workplace, we can't all be completely open, especially around confidential matters. It's great when you can be as honest as possible and then set expectations where appropriate. 

Because let's say I had an expectation of the broker to be managing their client, but the broker doesn't normally operate that way. If I haven't said that expectation out loud, how are they going to trust me? If I'm expecting them to do something that I haven't outright said. So, to me, honesty and expectation setting is almost more on the forefront, but also could be part of maintaining relationships.

How to engage with key people

Even if you don't in your organization necessarily have the same cultural values that promote that relationship building that Wipfli does, I will take the example of the incoming firm leadership like you laid out. So as we get close to and or sign that LOI, we basically flat out say, “Hey, we would like to ideally have an in person meeting with you for a day and a half, if you can swing it. And during this meeting, what we want to do is we want to get to know you. We want to get to know your firm and maybe expectations that you have of our firm during this process.”

We lay out expectations of what we expect from them in the process, not only following the process, but the kind of face, for lack of a better word of what the messaging that they have to give to their associates. Up front, if you can say we want to be with you in person. You are important enough to us to spend a day and a half of our work life, to travel to you to sit down and help educate you on the process, help lay out expectations, understand what you expect from your side. 

And then ideally, if you can have a more informal dinner, lunch, or something like that, to truly get to know them as people, that's a great way to kind of set the stage of: we care about you and we care about building this relationship. And I write all of this in an agenda. It is a written out agenda. This isn't just spoken. We tell them that we want to do something like this. We are going to be in an expectation setting. We're going to be educating you on the process. And we expect you to come with your expectations of us so that there aren't any surprises in the end.

Approach to build relationships 

Usually, we ask them, especially in that first meeting, “Are you interested in going to dinner with us?” So a little bit more of a formal approach in the beginning to let them know we're interested in spending time with them outside of the walls of this organization. We were more than happy to field questions about work during that time, but truly tried to set the tone of getting to know you during this dinner and you as a human, not you as the individual at work.

So we tend to start out with more formal approaches to dinner. And then maybe it goes a little bit more informal. So, for instance, during our associate announcements, I may not be presenting. I may be present just so that I can kind of mingle around at lunch. Talk to some of the people, see what they're having heartburn about, take an interest in what they do at the company.

How many years have they been there? How did they like the city that they live in, if it's a new market for us? So more of those informal approaches, when we're doing structured things, we can also take an informal way of trying to get to know people by having enough people on site to spread out and have conversations with people. Because if you have one person there, you can't get to everyone. So it's important for us to have enough people out there to build relationships across that firm.

In the IT world, I had it down to a science of how many people we needed to support a certain size and or type of firm when we were bringing them in from an IT perspective. I was assessing how tech savvy they are. Are they able to join these meetings? 

So for instance, we've definitely had transactions where you can tell their people just aren't tech savvy. They've been handheld in tech. They had someone sitting in their office that could walk over and physically do the fix for them. And unfortunately that's not how Wipfli is staffed. We're an international firm, and so we've got a centralized help desk area. And so I knew that if the technology knowledge of that incoming firm was low, we were going to need more support people because we're completely ripping apart their technology world.

When we give them their new Wipfli computer, they've got to relearn where their data is. They have to learn a whole new practice management system to enter time and expenses. Their email is going to look different. They have to put their email signature back in. It's extremely overwhelming.

On the flip side, if I noticed that it was a more tech savvy firm, we might staff down, but have virtual support available for them. So to me, it's all about assessing the characteristics of the unique firm that you're acquiring and adapting to the needs of that firm.

People assignment for developing relationships

I'll take an example of a traditional firm. Let's say we had a traditional CPA services type firm that we were acquiring that was low on the technology savviness scale. And let's say they had about 35 people. So the first thing that we had to do is to figure out how challenging is the actual process of integration going to be.

• How many pieces of software do we have to bring over and install on their new computer? 
• How much data are we migrating from their servers onto ours? 
• Are there any super unique setups for the desk? 

So for instance, in some of the acquisitions, we completely redid the entire desk. I'm talking about mounting monitors, plugging in docking stations, making sure that the computers physically work with everything at the desk. That requires a next level of onsite hand support to be able to complete all those desks at the same time. 

So then I looked at more on what types of questions are they likely to have? So if they're really heavy on, let's say CCH documents, and they're going to be coming into our caseware, we know that's going to be a level of change that we need to staff up for. We need to have maybe three people there instead of one person there in a firm that's going from caseware to caseware. 

It's all about understanding how much time you are going to have to spend on specific tasks during the actual IT integration weekend. And then, what is the profile of the clientele, basically? Do you need to staff up a couple people because you think that one person's likely going to be sitting at someone's computer for two hours? Or can we staff down a little bit more because it's just going to be a quick question about, I need to click this button?

Delegating tasks in building relationships

I don't know if we had a truly formal process for that, although I could see where there was more formal training or the lovely word “expectation setting” for the people going on site. What we ended up doing is, as we had people on site, we were taking note of the people that the incoming firm was responding to. 

If there was someone that was always raising their hand, because usually we would sit in a conference room and we would let people know that if they have an issue or a question, they could come into the conference room and ask us the question. So what myself and the leadership of it started to do was notice the people that were raising their hands to go help the individuals and then taking stock of how that interaction went.

So getting a summary of, did they get the issue resolved? Was it a bad interaction? Were they yelling at you? All of that kind of stuff. So taking stock of the skillset of the individuals on our team, and then honestly, what it morphed into is the people that had the skill set we're great both technically and with people ended up coming on M and A's more. 

So naturally we just started to gravitate towards the people that were excelling in that environment versus the people who maybe weren't as comfortable talking to people, which again is totally fine. Not everyone is a people-person, but we needed the people-people front and center when we were on site supporting the staff. 

Now what I could see being helpful is almost like a kickoff call. So the week before everyone goes on site, “Hey, this is going to be a really stressful five days. We understand tensions are going to be very high. You are representing not only our firm, but you're representing IT, so we need to keep positivity front of mind. We need to be accommodating to these people. We've got to be organized and we have to be responsive.”

Everything goes back to expectations. Having that initial conversation to set them up for success of what we're expecting of them from support to me could go a really long way.

Key acquired company people to build relationships with

It's so hard to just pick one, but honestly, I keep going back to the leadership of that firm that is coming into Wipfli. Again, this is under the assumption that they're a great leader in their organization, and they have the respect and attention of the people underneath them. This all blows up if that's not the case, but to me, that is the leader of the organization and that is the person that we keep going back to. 

• They are the ones that have to positively message this. 
• They are the ones that potentially have to deliver some bad news about a short term decision and why it's going to be better for the long term.
• They are truly the head of change management for their people, because as much as we want to be those people, and eventually we will be, once we've had the time to develop the relationship out of the gate, we don't have the trust of those employees, but that leader should. 

And for us to set that leader up for success:

• We have to build a relationship with them. 
• We have to coach them.
• And we have to make sure that they are appropriately prepared to deal with the situations that are going to come up in M&A. 

That is the most important factor in the success of the integration, because the instant that that conversation starts to turn negative from that leader to their associates, what do you think the associates are going to think of it? I mean, if they trust and respect that leader and the leader is saying, “Well, yeah, they decided to make this decision, but I don't agree with it.” Great. Now we're all the way back to the beginning of the change management scale. We have zero adoption, no buy-in, they don't even want to do it at that point. So it's truly important that that leader keeps a positive tone, even through tough messaging.

Handling resistant groups 

I can tell you, we have run into this situation probably on every single M&A. Like you said, it can show up in any group of people that you're working with. I take those on as a personal challenge, so my competitive side comes out a little bit, assuming that I need to keep a long term relationship with them. 

So let me qualify that. If we're talking about a broker banker that maybe we are interested in keeping a long term relationship with, I'm going to do my darn best to try to build that relationship with them and show them that I am a reliable person. I am listening to what they are saying, but they also have to respect and listen to what I'm saying. On the other hand, if this is going to be a long term, like if they're coming into Wipfli and they're going to be one of my co-workers for the long haul, it may be a little bit of a different approach. 

So I'll start with the broker side. So if on a call, let's say that we all end up joining early and we can have a little bit of small talk. Let's say that they're in California and I'm in Wisconsin. I can kind of razz them if it's the middle of winter like, “don't even tell me about your weather because it's snowing and you know negative 40 here.” So trying to bring like a little bit of humor with small talk to get them to loosen up a little bit. 

I try to go back to seeing each individual as a unique human being. So I try to start understanding why they are having these actions? Do they feel stupid because they don't understand the new change? Are they just so stuck into their own ways and they're unwilling to compromise in certain areas? 

So what I would try to do in that situation is okay, “we can do it your way, even though it's going to cause some hardship on our side, but then we're going to need you to do it this way for this other item that may cause a little hardship on your side.” So almost trying to take that more compromising route for the short term relationships can work. 

Now, there are definitely going to be situations where I have not been able to build relationships with people. I'm not going to say that I've been able to build relationships with every single person that either I've worked with in a transaction, or has come through a transaction. And if it's a shorter term relationship, then it's business. Then we're right down to business and we're going to do what we need to get done and we're going to work together in a professional manner and that's where it's going to rest, and that's fine.

People problems and how to address them

Each one may require its own different style of trying to break through and build a relationship. For the person that doesn't have self awareness, being able to have maybe an individual conversation, one-on-one, is a lot easier than if we're in a group setting. 

So for instance, let's say that this individual was going off in a meeting about something and they weren't being professional. Their speech was not professional. You could tell that they just weren't getting it. They weren't picking up on context clues. To me, it's the afterward, the reaching out. “Hey, I noticed in this meeting it seemed like you were either really upset or really frustrated with this issue. Is there something going on? Because to me it didn't seem like it was that big of a deal. Can we talk about it? Can we get to the bottom of why this is frustrating you so much?”

So again, it comes back to that Arbinger, the “turn your chair,” the meet-to-learn, the “try to dig a little bit deeper,” ask those questions and maybe you can dig up. Maybe they're having a really bad day. Maybe one of their top performers quit and so now they don't have the mental capacity to be able to separate out what's professional and not professional. That, to me, is taking that step back and having that individual conversation is huge for that scenario as well as the lack of self-awareness.

People who lack self-awareness

There was definitely a situation where this individual, I would say, lacked that self awareness, lacked that bedside manner of communication with other people. And unfortunately, it was an individual that was in that leadership role–the leadership role that I expect to be the champion of the deal going through integration. 

And we were in a meeting with other leaders of that firm. So it wasn't just this individual, but this individual was kind of at the top and the tone was very different from any other meeting. It was very much like, “Oh, well, I pushed back on that and they said no. I don't understand why they're doing this. This seems really stupid.” And it was in front of this group of people. 

And so I had to take a step back after that conversation because it upset me. When I put my trust in you to be the champion of this M&A integration effort, and then you turn around, and basically blow it up in one conversation, that hurts me personally.

So I took a step back. I gave myself a little bit of time. I walked away. I took a little walk. I processed, and I came back and I wrote an email and I said, “Hey, the tone of that conversation seemed really different from any other conversation. Is there something going on that I should know about? Is there something that has been left unaddressed?”

And the response came back and the individual basically said, “Oh no. Like there's just a lot going on in integration right now.” I'm like, “Hey, you know, I'm here to help you. If there are things that you want to talk through, if there are things that maybe we need to find someone else to, to take that off of your plate, please let me know because I'm here to help support you.” 

So one, making sure that you know that you saw there was a change in the tone to me is key to bring a little bit of that self awareness that other people saw something different in this individual. And then the care and concern of “I care about you as a person, is there something going on that I either need to know about or I can help with?”

Selfish people

I still like the questions. I still like making clarifying statements, but to me with the “selfish people,” you almost got to build up their ego. So even if it was a joint effort to solve a problem, giving the praise and the kudos to that individual to feed the ego is a way to build a relationship with that selfish person.

Feed into that, play off of what their natural state is, because you're not going to change them. At this point, it is up to themselves to become the individual that they want to be. So my whole way of doing it is approaching it and trying to use their natural tendencies to get that relationship built.

The one thing I will say is we do a pretty good job at looking at the culture of the firms as we're going through the prospecting process. So to be perfectly honest, I haven't run into that a whole lot, at least outwardly. So I don't know that I've ever had to, unless I did it without knowing it. I don't know that I've ever had to be in that type of situation because most of the leaders that we work with are most concerned about their people.

At the end of the day, I have to remember, and this is something that I continually work on. I'm not going to have a relationship with everyone. Not everyone is going to like me. Not everyone's going to like my style. And at some point then you just have to be resolved to, “okay, then we have a professional relationship.” And it is what it is. 

Dealing with hard-headed and stubborn people

I try to take the nice approach first for these people. I tried some of those other methods. I try asking the clarifying questions, digging in a little bit deeper, potentially even playing into maybe what they want. And if I'm not seeing changes, I basically have to make a decision of, is this worth my effort to continue to try to build this relationship? Or am I going to have to start playing hardball back? 

And if I have to start playing hardball back, the relationship isn't going to develop. I know that, but at the end of the day, I have a job to do and we have to get it done. So to me, that's more of almost the lost cause area of getting to make a tough decision at some point as to whether it is worth your effort to continue to try to build this relationship. Or if you just got to go down the, “we have to work together. If you want to play hard ball, I'm going to play hard ball back.”

Expectation setting 

It is what it is. And you have to just know that there are those people out there. And luckily this is a short term relationship that we're dealing with more of this hardheadedness. And so I don't necessarily have to care about the long term impact of not being able to build a relationship with them.

Advice to first time practitioners

I have a couple different pieces of advice that I think are really cool for a new time practitioner. The first piece of advice is when you get introduced, take the time to get to know the people you're working with, and I caveat that with if the environment is safe to do so.

I can't think of an example where it would be, but I always like to caveat statements because I'm very risk averse. So the best way to get to know people for who they are is to do it in person. You can try over zoom, and yes you can build positive relationships over zoom, but there is just something different about being face to face with that individual and looking them in the eye while they're telling you about their life or while you're telling them about their life. Making that a priority at the beginning of the deal is going to make overcoming those rough patches way easier.

Second piece of advice is patience is essential in developing an M&A process. You are going to have people who are stuck inside the box, the hard headed people, the self-involved people, the resistors, but M&A truly is a continuous improvement journey.

Every transaction is different from the last, even if it's only slightly different. And that means that you really want to take the lessons that you're learning from each transaction to make your process better every single time, not just rest on your laurels there. 

And the third one is my favorite piece of advice. Realize that no deal is going to be a perfect transaction, whether it be integration, due diligence, negotiation. There's this quote that has stuck with me and I can't for the life of me remember where it came from. But it basically said, if you're looking for perfection, M&A is not for you.

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