How to Build an M&A Center of Excellence from Scratch

Intro

Today, I'm here with Philip Pratt. Philip is the Director of M&A integration at Corning. In this episode, we're going to talk about how to build an M&A center of excellence from scratch.

Can we start off with a brief background on your M&A experience? 

I've been with Corning for 28 years, and about half of that I've spent in M&A. I Started off as an Integration Program Lead and worked on a number of integrations across Corning, both domestic and international. I'm now leading our corporate M&A Center of Excellence. 

Were you mostly on the integration side of M&A, or did you get involved in the corporate development as well? 

My job isn't within corporate development, but my scope of responsibility currently is integration. We do work closely with the other folks in Corp dev, as it relates to earlier stage activities like due diligence, but our scope is integration specific. 

What is an M&A center of excellence? 

For Corning, our center is a combination of two things. First, it's a community of M&A professionals. These are our M&A experts, they represent all functional areas involved in M&A integration, and these are the folks that are committed to developing and operating a world-class M&A process.

Secondly, it's a knowledge destination. This is where we offer our repository of M&A tools, but we also provide general information about the center, about our members, current M&A news, and information on training opportunities.

Why do you need this? What's the big value for the practitioners in Corning?

We were looking to contribute to M&A success. We wanted to help improve the return on investment on our deals. Having a center provides us the opportunity to execute a cheaper, faster, more effective integration.

We like to focus on less spending on integration and more synergies, and having the knowledge repository and the center in place provides that foundation for us. It allows us to avoid mistakes, especially repeating ones and allows us to capture and leverage best past experiences and learnings to improve future execution. 

When should companies consider developing an M&A center of excellence?

Certainly when M&A is an important driver of your future growth strategy, especially if you have, or will have an active deal portfolio, but also when successful execution relies on leveraging knowledge across your enterprise.

If you have enough commonality, strategy, and approach across your business units to offer learnings that will benefit others, having a center that captures that knowledge is particularly valuable. The third criterion would be when you have the commitment and the bandwidth to put the effort into building the center. 

What would you say are the main benefits? What problems does the center solve?

Having an M&A Center provides you the opportunity, the experience, the tools to execute more effectively, and you should be contributing to a stronger ROI.

If you capture best practices and lessons learned and can apply them effectively on your next deal, then you're improving the efficiency and the effectiveness of your integration. Another benefit is that it also allows you to capture and maintain institutional knowledge.

You're not having to start again from scratch after a lull in M&A activity. Typically, we see ebbs and flows in the M&A activity. What you would not want to have happened is to lose your knowledge when you enter an ebb.

With a center in place, you have it captured and you're ready to go when the activity level spikes. Ebb is a lull in activity, as opposed to its peak. 

Let's review the steps that go into building a center of excellence.

For us, there were five primary steps that we went through in building the center. First of all, we developed an initial concept. The second step was getting the green light from all of our stakeholders and the M&A Center team itself.

The third step was collecting, designing, and developing the process and contents of the center. Then we went into a launch and execution stage and then finally training. Those five steps allowed us to drive the Successful launch of our center.

The first one you mentioned was developing an initial concept. Can you walk me through some of the details in doing that and what that looked like?

The first step was defining the vision and mission, scope, and governance for the center, and this was the pre-planning activity. We do have a vision statement and a mission statement that lays out what we're trying to accomplish as a center.

In terms of scope, our focus is on integration, and we are now working to expand it, to include due diligence. Our job is to actively support the business, share tools, best practices, and provide counsel, so we need to be clear on governance as well. 

The second one was to define the roles and responsibilities of the team members. One of the key components of our center is the community of M&A professionals. We've got a core team of four of us. We are responsible for running the center.

We've got about 20 functional leaders from each of the functions involved in integration, who represent their function, own their functional tools and contents. We also have several business representatives that are active in an M&A activity and they help provide the business perspective to our center. 

What is your vision and mission statement for the center? 

Our vision statement includes the desire to achieve world-class status. Our vision is to be a community of professionals who are committed to outstanding M&A integration execution and are committed to ensuring that the businesses can achieve that result.

Within the center of excellence, is there a particular structure that you have set up, and then does the center itself report up to a specific board or group or person?

Each of the participants on our team reports to their various organizations. Our charter is maintained and executed as a team, so it's a joint commitment that we have amongst all of us to take on this responsibility and execute it. It is a self-sustaining organization structure.

It is under my leadership as the director of the center, so in a sense, the center itself does report within corporate development, but again, it's a partnership with all of the functions who support the effort.

So your team members within the center are actively working within different groups related to M&A, but they also have this additional responsibility of participating in the center?

That's correct. We have about 25 or so folks and 25 different scenarios in terms of what their role definition is and what level of commitment they make to the center. We've got some folks whose job is committed to M&A within their function, so they're doing M&A all the time, participating in the center as part of their role.

But, we also have other folks who do M&A on a part-time basis, who have a functional role that they're also serving within their function. 

What would be the ideal persona that fits in well with the center of excellence and it’s goals?

We have a very spirited group and these folks are all committed to M&A. Many of the top experts within M&A from Corning participate and part of their role is to ensure that the function continues to progress and strive toward that world-class status.

They're committed to that and they bring a lot of energy to it. We were looking for that spirit when we chartered the center and we wanted to make sure we got access to the top M&A folks within Corning.

You led recruiting the team, right? What was your approach? 

I did. I had led integration programs myself within Corning for several years, so I knew a lot of the folks who were already involved, and having that relationship made it easier for me to know who the key talent was.

Getting that commitment or that buy-in was very straightforward because people understood inherently the value of bringing the center together.

Recruiting the team was straightforward too because it was fairly obvious who the right folks were from the different functions based on their work experience and their energy around the topic.

I'm curious if there's any kind of metrics, whether the volume of deals or number of people involved in transactions, that would show where it would be an ideal fit to start getting that buy-in and proposing it.

I know everybody's situation is unique, but I think it comes back to how important capturing that knowledge and institutionalizing it is and how important that is to the success of M&A in your company.

It boils down to whether or not there is enough core foundation commonality when doing integration. If you're going to have several common steps, you can capture those, execute flawlessly and you are going to have the right tools in place for the next business. 

A center in a big company is going to look different than a center in a smaller company that might only do deals on a more of a one-off basis. You've got to decide what tools are important to you.

Those would be the tools that you would work on developing and maintaining within a center. Your resource for support would vary appropriately. Every company probably defines it a little differently, so you need to customize the center to meet your specific needs.

You mentioned refining the concept. Can you elaborate on that a little bit more?

I think developing a concept is a design activity, so your effort needs to be on figuring out what makes sense for you.

That would come down to what functions should be involved in the center, how active are they usually in M&A activity, and what tools are important to maintain centrally in a center. Then you refine and update it continuously as you evolve.

To be successful, you need to be flexible, willing to learn, and evolving constantly to the requirements and the needs of your M&A environment. You need to bite off a manageable bite, too. You don't want to take on too much, try to launch it and then find that you've failed in some way because you took on too much scope.

The next is the collect, design, and develop phase. This is when you start looking at the different tools that you'd have available and ways to Start grabbing information, organizing it, and making it distributable. 

That's right. That's when you're at the core of developing your knowledge repository. At this point, all the functions have their set that they own and manage directly, but there are also some additional tools that we developed cross-functionally.

As an example, we have an integration assessment tool, which helps us evaluate the risk complexity cost of integration during the early stages of due diligence. It gives us an early view as to how complex and how challenging the integration is going to be, so we can start planning for it early.

What a company would decide as important would be what goes in the center. The tools that they would develop would vary based on the type of M&A activity they're doing and how they approach it. 

When you start gathering all these different things, how do you centralize it, so it's in that single repository and accessible for others?

For now, SharePoint is working for us. We've developed a front end that's user-friendly that shows the user different categories of areas where there's information to help them. We have six major categories on our homepage where folks can just click and it will lead it to what they are interested in. As you get further down into the tool, it does break down into lists of documents. 

We have the functional leaders responsible for managing each of their areas. We also have these more general, cross-functional tools that sit above the functional level and are available within a program management section that we have within our site.

What we've found is that spending time designing how you want that flow to work is very valuable, as it allows the user to quickly get to what they want.

When it comes down to like maintenance of this, how do you develop that accountability?

I think the key to maintaining a valuable center going forward is maintenance. Our core team has set up a regular maintenance process. Once we've launched, we started quarterly and our core team went through all of the contents in our center and determined what's the frequency of review and update for this particular tool. 

We've gone through and defined that maintenance frequency for each of our documents and we use that tool as we work with our functional leads, each maintenance cycle to inform on the documents that are up for review, so we can upload them into the site.

It comes down to being accountable and responsible for the roles that we play here, which includes content maintenance and updating. We've now switched to a semiannual maintenance cycle, which is an indication of the need to be flexible and modify your approach as the center evolves. 

Moving from there, we get into the launch and execute stage.

At this stage, the contents are all developed and the site is ready to go. We wanted to communicate out to the M&A audience that the site was available. As part of that launch, we provided a webinar-type of training opportunities for people, where one of our core team members would essentially take them on a demo through the center.

We posted an article on the Corning world online, informing folks that the launch had been successful and that the tool was out there. We also asked our team members to spread the word by mouth.

Then we were waiting for the first activity post-launch, the first deal, to take advantage of the tools and, and to give it its most effective test drive. 

You mentioned the fifth step was around training. Can you walk me through what that looks like?

The center was created to allow us to provide that act of support with all the tools that a business might need.

To get the best of it, we developed a training curriculum to take a business through. The focus of the training was around leveraging these tools and making sure that the tools weren't just sitting in a SharePoint site somewhere, but we knew that they were actively getting used by folks and that they were familiar with how to get there.

I would think this is the hardest part because it's hard to get people's attention and get your team to reference it as they need it. It tends to become a forgotten resource. How do you avoid that pit? 

It's a challenge. I think that having our center in place with the professionals that we have in our center has a lot to do with our success here. When we do a deal and integration is imminent, and the business integration team is identified as part of the center, we take them through this training.

This points them toward the tools that have been developed and that they need to use.

We linked the functional leads up with the center leads so that they know that there's a resource available to them. It’s about providing that forum for kicking off the integration.

Is it presented as a requirement to go through some of the training? How have you pushed that level of engagement to make sure you're getting the value back? 

It is a requirement per se, that when an integration gets launched within Corning, there will always be an integration kickoff meeting.

That kickoff meeting will include as part of its agenda and scope a training program, so we have the opportunity to get in front of that team and essentially provide them the education that has been determined to be important for them to be successful.

Now, how a team ends up embracing that is team-specific, and it comes down to how valuable they see the tool being.

I think you got a really good point about introducing this stuff during kickoff because I found that to be the best time to introduce any new resources or tools.

I agree. With these training programs that we have, which we developed and offered, we now have a core set of folks within Corning who have been trained.

We know who the trained integration program leaders are, so typically when a business is going forward with the next deal, if they have one of these integration resources on their side, then those are the people who are going to be assigned to lead the integration.

If we have a new situation and a new program leader, we have the opportunity to take them through the training and outfit them with the knowledge that they need to be successful.

What are some of the biggest challenges you faced while developing an M&A Center of Excellence? 

One of the challenges is just recognizing the bandwidth of some of our functional leads to participate in maintenance activities and nurture their functions in the M&A community.

Participation varies, so they commit what they can, and we try to offer support wherever we can. Communicating what kind of commitment they think they can make, and understanding that, helped us as a core team with the maintenance process. 

Raising awareness of the center and the available resources that we have are also important, so every year we try to identify audiences that might benefit from hearing more about the center.

We also look for feedback. We've got an annual survey process about the center that we send out to the M&A community within Corning every year. 

I'm curious if you do one-on-one qualitative types of interviews, or you're just getting the information you need with those short surveys? 

We feel that the surveys and our interaction with the functional leaders in the center, are providing us a good take on the pulse of how folks are using the tools.

However, I will say that without understanding the context and knowing who it was that provided the feedback, you really are in a limited position in terms of how you can respond to it, but we have not yet felt the need to do the one on one interviews.

Do you have any other tips for others that are looking to pursue this opportunity? 

One thing we learned was that data does not equal information. We've spent a lot of effort into building the center and collecting the content. For example, with lessons learned we had a very impressive database of over 1500 different. However, we realized that having that database doesn't mean that it's in a usable form.

We had to take another step forward on that and realize that having the data is helpful, but the job's not done when you collect all the data. You need to be looking for how you can turn that data into content that's going to be valuable to the user. There needs to be continuous improvement.

Do you distinguish the difference between a playbook, which tends to be a big checklist of things to look for in a deal, versus what I referred to in the book as plays, as guides, that I mentioned as a technique to overcome a specific challenge?

Yes, definitely. I would mention two of the tools that we talked about earlier. One is a master integration plan and that's the checklist. It’s an Excel document and has over a thousand line items in it. That's our checklist. 

Our integration playbook is what I think you're referring to. It is more of a guide and it provides the context to a practitioner around what they should be thinking about as they approach an integration or around developing an integration strategy, components of that, or recruitment.

We see today different value props and benefits to each of those two approaches, but they are also different and distinct and each valuable on their own. You need to leverage both the playbook and the integration planning tool to accomplish what you need to accomplish.

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

We had acquired a smaller business, where the owner founded the business. As we went through our integration planning activity, someone brought to our attention, and asked what we are going to do with the company balloons? The company we had acquired had a company balloon that they used for entertaining customers.

It didn't fit within our culture or approach to things, so it was just a strange integration challenge to have to deal with.

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