How to Execute an Integration Plan (Day1)

This is the first time on M&A Science that we have a duo who worked together and they were on opposite sides of the table.

Working on different sides of the deal

JM: Being on the sell side, it's intimidating to have a company that has a market cap of $54 billion. And at the time ours was probably we're 13x smaller than what they were in terms of market cap. 

One of the things that I've found throughout my entire career is that you can't go with your tail tucked between your legs. You have to come in there with a level of confidence that you want to deliver success, that this acquisition makes sense for everybody and you want to move forward together.

So one of the things I did was I basically went through the entire roster of executives, as I saw them in the buy plan and I just started emailing folks and calling them to spend five minutes to get to know them. 

I think I did 20-something outreach and just expressed that I’m here to be a part of the team. I want this to be successful for everybody. What can I do to help make your role that much easier?

GH: That has not happened actually in the previous acquisitions that ICE made, so it really stood out. John, he's a really genuine guy, so it's definitely his core, honestly. It was a great kind of step just to get John more ingrained and more kind of in the mind of becoming the leadership team at ICE. So again, that was a great first step for sure. 

The timeline of events   

GH: On the Ellie Mae deal, it was the first quarter in too well. So ICE had that strategy to look at building its mortgage portfolio with MERS as the first and then it was Simplifile. Mortgages in the US are very paper and analog, and ICE has been very good and tried going from analog to digital with a lot of the different kinds of pieces that they built. 

So mortgage was the next floor and Ellie Mae is a great asset. When we started planning, especially on the integration side we walked through: 

• What are the technologies?
• What are the people? What are the processes?
• What are the functions that we need to keep to it 
• Which ones do we need to integrate? 
• Do we have redundancies or duplicates in the process? 
• What's the plan for each of these?
• What’s the timeline? Short term, mid term, long term?

We need to go in and learn exactly what they're doing, and how they process. That's where really John and I started walking through it and him being part of the TMO and helped us figure out what the projects look like and how do we figure out how those integrations happen? That was that very initial discussion.

JM: I didn't hear about this until everybody in the company heard about it. I was running the IMO at Ellie Mae and I was just wrapping up a recent acquisition of an AI company. 

The moment I heard about the news, which is the Q4 of 2020, it was perfectly fine. I had some frameworks that I brought with me from prior integration work. Also, I received great mentorship from the ICE side when I began talking to more people. 

They said the thing they cherish the most here in their culture is just keeping things simple. I was certainly listening to many things being said from the cultural perspective at ICE, and try to blend that with what we're doing at Ellie Mae. 

So after things closed and we really started to plan for Day One, there was a very short period but through that, I was working again with my counterparts over at ICE. As we lay out the workstream leads and all the folks that are part of the work streams, where are all the moving parts? 

So that was another set of activities we had to do. After we did the launch, which was effectively day one, we had our first hundred days. 

Gene and I probably built the best relationship together during that first hundred days because there was so much to get done, not only from the financial side but from the HR side, from the IT side, there were so many things that were moving.

We were just weaving into each other's conversations throughout. For me, I love to learn and I was learning as much about the ICE culture, as  I knew about the Ellie Mae culture, trying to find ways that we can create that bond between both companies in a way that wasn't disruptive because the worst thing you can do is create a very disruptive work life for our key folks.

After we reached our first milestone, it was time for the next set of workstreams so we can hit financial milestones.

Making Sure Things Get Done

GH: Planning is a big part of it, but execution and decision are really the biggest pieces of it too. ICE was very good at making decisions, they're very quick and very nimble at making certain decisions.

That's one big piece certain integrations or M&A  projects don't go out so well or take longer than usual. Just because the decision-making process is either long or has too many steps, too many people.

I think one thing that I would love, that I to strive for and make sure that we do is to have the right people, the right leaders who have the right skillset, data-driven decisions, informed decision, but following the 80-20 rule figuring out what would happen for certain decision if we've made certain decisions and also have the authority to make that decision.

The biggest piece that will kill a project or slow down integration is when you have to go up 14 chains of command to get one answer.

So having that authority, having the trust, having that skill set to make those decisions, you have those at key places where each of these functional and technical project plans are at, you have one person that can make those decisions and that it gets done and you execute.

Having that is one of the biggest, drivers of trying to get into successful and timely integration done.

JH: Decisions in terms of the pace at which we made them, there's a varying degree. Some decisions could be made within a 30-minute meeting. Some took two and a half weeks, depending on the severity and the size and scope of the decision being made.

Now, other things take a little bit longer, so that decision with Gene was probably eight hours of some back and forth between different people.

So from my perspective in the IMO, once that decision is cemented, it's documented, and we go with it. That's how I like to run. Now some decisions take possibly three and a half weeks, multiple meetings.

For example, it'd be like legal entity consolidation. That's a bigger scope and conversation that takes two and a half, four weeks to weed out.

I like the agility of those folks who can make that choice and make that decision vetted on their own, outside of the proper circle, just to make sure that they are on the right track. 

That is what I think is critical from an IMO perspective, which is the ability for folks to vet what they need to, execute on that decision, and then be done with it and then we move on to the next one. 

So from an IMO governance perspective, we're always trying to drive to that decision so we can keep moving to our next milestone. 

Decision-Making to Execute Integration

JM: The responsibility of the IMO is always first and foremost to deliver the best possible value from the acquisition or divestiture. That means that from the IMO, we are always asking questions every day. It's like, are we getting the best out of the decision?

Do we have the right people at the table? 

It's one of those things where you just have to ensure that everybody's working to their optimal level, making sure that decisions are being made with the best possible information they have, and then you keep moving forward. So from the IMO perspective, it's about our ability to ensure that we're governing the entire process. 

There are a lot of consensus-driven decisions that are made at Ellie Mae. And so there are a lot of things that happen in the periphery, but at the end of the day, the IMO's job is to make sure that all those conversations come together and that they congeal and that they are the documented decision that we move forward with. 

Why? Because there are many things that happen consequently to that decision being made.

GH: The IMO office help gather the right information to make those decisions quickly.

Having data-driven informed decision is a hundred percent key. But again, is it culture, or is it framework? A lot of it is both.

The framework is built by the culture of the company, management team, and so forth. So if you have a culture of a management team or organization where they trust their employees, it's not always the CYA mentality because you have a lot of decision seekers and not a lot of decision-makers.

If you have a lot of decision seekers, that's where you fall down. I think that's part of the company's culture to drive that, to trust and give the authority. You have the right skill set, mindset, and education to make those data-driven decisions. 

If you're a ramification kind of punishing authority or organization, you're gonna have a lot of decision seekers and not many decision-makers. 

So if you have a culture or a process where you're allowed to make mistakes, you are allowed to make those decisions, and if you make the mistake, you own it, you fix it, and you move on. 

Then you drive that culture and build that framework by itself. And that drives a lot more efficiencies and quicker project timelines than if you have the other way around.

The Process

JM: The one thing I tried to emphasize during every launch day is this is the official set of leaders for the work streams. Here's where the IMO is. And here's where our steering committee sits. 

But below that, everybody is still making decisions on their own; where you do not feel comfortable making a decision, just move it up to the workstream lead. The IMO will step in if they feel like this is a cross-work stream decision. 

That part of our job is to ensure that we keep the communication lines open among all work streams and no one is working in a silo, where it is a highly impactful change that's required, those will go up to the steering committee. So, it would be things like 

• legal entity consolidation 
• the impact on our organization 
• the impact on our tax structure

So those have to move up to the steering committee, but otherwise, we try to empower the teams within the work team to make those day-to-day choices.

Because when you have two AR departments coming together, they're going to be working together eventually, so they might as well get used to working with each other now and making those decisions in the first hundred days. 

So that's the way that I feel IMO should run is the ability to provide governance and guidance, but allow folks at the day-to-day transactional level, let them do what they need to do because they do it best. They're in it every day. I am not. 

So that's where I see things operating from an IMO perspective. 

GH: Tactically, that initial charter of who's responsible and who's accountable is when you lay that out and manage the expectations.

Starting in day one, you have to lay it out and be very crystal clear about who owns what, who's responsible for what, who do you need to communicate to if you have questions. 

And if you can lay it all that out and communicate that in a crystal clear way and also manage the expectation about timelines, and SLAs, that'll make everything smoother down the road.

So if you can't have any gray like a group or a whole bunch of people is responsible. No, it’s one person. One person is responsible and you can have a lot of people who can help you inform decisions but there’s a single person accountable. 

When to Start Planning the Integration Plan

GH: Obviously, it's pre-deal, whether it’s on the acquisition side or on the buy side, we're planning before the actual kind of full deal is executed or right when the deal is executed. 

You look at every function and you look at all those pieces, HR, order to cash, procure to pay, you, go to a legal entity, taxation, IT operations, legal compliance, everything. Figure out initially what the guidance is, or target is. 

• Are we integrating? 
• Are we taking what they have or 
• Are we deduplicating slash synergizing certain things?

It’s the framework we used to go through to say what we are trying to achieve. Obviously, things can change as we go through and as we  work with the different targets, but we always like to put that framework from pre-deal; that's why going through it to see where we are. 

Using our diligence information, we'll make a framework and high-level direction before we go into the nitty gritty. From there, we will refine and figure out how to plan for that integration slash migration. But I that planning starts pre initial review. 

JM: In the case where Gene and I worked together, I wasn't brought in until after the announcement was made internally to the company. 

One of the things I cherished the most about who my boss was that she was extremely open to the idea of the concepts around integration being a little bit more structured. So she took parts of what I had in my framework and broke it down into what will work with ICE.

So we revamped the steering committee of a larger readout to a larger audience. In doing so, we took those decisions Gene and will be making, document it, and roll them up into this massive email to say where we are in terms of timeline and decisions and expose it to everybody. 

So folks knew where they needed to contribute and where things were getting done. And then we just kept the ball rolling and the machine moving in that way.

Key Lessons Learned in Planning an Integration

GH: The first lesson is to learn that you're gonna mess up. There are lots of things that there lots to do with integration and kind of what that fully entails. It's pretty much everything.

You're trying to put together two companies with all facets of the front office, middle office, and back office. So there are lots of moving parts and things that aren't going to work correctly. 

Most importantly is how you pivot, how you come back, how you fix and remediate things is the key to it.

What do you need to do? What's the framework for trying to fix those things, and how quickly can you do it? 

JM: I'll give you a perfect example. We were looking to bring together two systems that were the knowledge base between Ellie Mae and one of the other companies.

And what happened was through that process, we thought we can get some cost savings here if we end this contract early, and then we just migrate all those records over. 

Somebody forgot to mention the fact that there were 90,000 closed archive cases that we still need to have because there was a lot of intellectual property and knowledge that in those cases that we could still extract and either make it into an article or turn it into a knowledge-based item for self-service. There was just a lot there that we could go with 

I was already pushing hard to migrate over and deprecate the old system and when we found out about this new piece of information, it would take another two months beyond to migrate all that data over.

So, being in the IMO, that probably wasn't the best decision to push hard, to try to get a few hundred thousand dollars in license cost and synergy. So we had to say, we'll have to extend another two months. 

Did we pay more for it? Yeah, probably more than we should have, but we did. Because it was something that we didn't know at the time, but given the amount of information we needed from those 90,000 cases. It was worth the cost because the opportunity cost for losing that would've been greater than the license fees we had to pay. Lessons learned. 

JM: Another thing is there was no blame. In my example, nobody blamed anybody, not knowing that there were 90,000 cases left that we had to go search through. 

It was like a new data point, we made the decision. In like four or five days to just extend the contract another two months, get that data out, and then move on. That's the kind of culture you want to instill in two companies coming together, which is: 

Stuff is going to break, we're going to mess up on some things. People may withhold information, so you just factor that in and just don't blame anything. Don't blame anybody; just make sure you keep moving forward. - John Morada. 

JM: Well, given that our transaction was happening during the pandemic, I couldn't do what I'd normally do. Typically I would go out there, introduce myself, and meet folks. That was something I had to learn differently. And I think I'm probably better off for it now. Not that I would next transaction where I can actually get on a plane, I won't defer to going digital.

I actually will get on the plane and go because there's something to be said for meeting people, engaging with them, building great professional relationships with them, making friends with them and having coffee. M&A is a very people-driven type of activity in my opinion. 

GH: The one thing is just expecting the unexpected, especially when you're dealing with people.

You're integrating systems and processes, but the human beings who are running them know the processes. And you have a whole group that probably won't be there in the future. So that is a navigation of landmines already in the whole process inherently. 

At the end of the day, they're all people, we have to be treated like people, and they need to understand how we communicate, what the future state looks like is very important.

ICE is very good at trying to communicate as soon as possible. If there are reasons to have synergies and so forth, I do respect them. I ensure they value those relationships and the people and skillsets they have. But again, It just might not be needed going forward. 

So lessons learned of how we actually communicate, how we touch base with people, and how we go forward with that, with those conversations, I've learned a lot of lessons just on how to have that conversation, how to present certain information. 

So, every time we go through it, nuances here and there are invaluable lessons learned as we go from one target or one acquisition, one M&A project to the next. 

JM: People are very important. I'd say that executing an integration plan is 99% of people, 1% about the framework. So if you're getting it right with the people, then the integration will go a lot better. 

The Duration of Integration

GH:  Usually, the timeline is - as soon as possible. It's really the initial outset, but I think there's some calculus to it. 

• How many systems are you integrating? 
• What systems? 
• What functions are you integrating?
• How big is your organization? 
• How many people?

When you're looking at that and calculating the scope and how many and so forth, you just added all together.

ERP with one entity might take three months, you got 12 entities in a more complex, it'll be 12 months. Our average acquisition target for an ERP migration was about 12 months for the NYSE deal, for the Ellie Mae deal, for the IDC deal. 

So 12 months was, on average, our ERP migration integration, how long that take. The billing system took the gamut of six to 18 months to integrate.

You add up all those pieces and are now talking about functions. Also, you're integrating groups and processes. So it all depends. I think the one thing that is how fast you can make those decisions also drive what that timeline is.

On average, I used to pretty full end in integration in about 18 months, which is our target goal. 

JM: Never forget that you also need to look at what the by-plan said for timing and the synergies that you were expected based on the buy plan.

Because the buy plan is what was approved by the board. So the closer you're to the number created from value or cost synergies, the closer to the eventual goal. And the IMOs job again is to derive the best and optimize possible value from this transaction.

The IMO, once we get the project going does not mean that we re we recuse corporate development from their responsibility and accountability. We need to work closely with them to determine if we are on track to what they calculated in the buy plan. 

And if not, how do we recalibrate? Because there has to be some justification to say if we're gonna make it early. Awesome. What did you do? What were the lessons learned? Can you repeat that? And then if you're not gonna make it, what are the decisions the steering committee has to make?

Or how do we allocate further investment necessary to ensure that we get it done properly? So again, I would never recuse corporate development from participating and being a value-added member during integration, just because we're so closely tied at the hip around driving the value from the buy plan.

‍