How to Run a Successful Cultural Integration

The importance of cultural integration in M&A

The doctoral dissertation was always on my bucket list. I had been retired for a number of years, just doing board work. I had started my doctorate at that time but ended up coming to run TricorBraun. I'd been a board member before, and it was a great opportunity to help grow this company, so I had to put the doctorate on pause.

During COVID, when I wasn't traveling as much, it was a chance to restart it and finish that up last year at Pepperdine. I studied not just cultural integration but also 12 private equity-backed companies that are serial acquirers. 

These 12 companies made 268 acquisitions over the course of five years. We looked at how they approached cultural integration and the importance of cultural similarities or differences to the success of those acquisitions.

There is very little academic research on this topic within private equity-backed companies due to their privacy and confidentiality. I have extensive practical operating experience, having been involved in over a hundred acquisitions myself, and I've also done extensive academic work studying cultural integration in the acquisition space.

Academic research on cultural integration in M&A

There were many insights. The obvious question is whether cultural fit matters and the answer is that it depends. If you're buying a company for growth reasons and the people are a big part of that growth, which is often why we buy companies, it matters a lot. 

It might matter more than anything else. Some companies in the study were acquiring other businesses for scale benefits, cost takeout, or intellectual property. In those cases where the people aren't all staying, the cultural fit may matter less.

For the growth companies in the study, cultural fit mattered a great deal. The companies that excelled in cultural integration spent an immense amount of time on it. What was really interesting in the study, looking at those 12 companies, was the size and scope: the average EBITDA was about $50 million, average revenue was about $500 million. 

The average company in the study doubled revenue and EBITDA over five years. Each company did 22 transactions on average during that period and 11 of the 12 companies sold during that five-year period. All but one of them sold for more than three times cash on cash.

This demonstrates that M&A can be a great growth strategy. When focused on growth and cultural integration, it can be incredibly successful.

If the people are going to stay, you want to ensure it's a place they want to come to, and everyone can work well together. Many of these things, in business and life, are common sense but often hard to get right. 

It takes a lot of discipline to do them continuously and improve over time. We can talk more about what some of those really good acquirers did and how they got very good at acquisitions and cultural integration.

The role of culture in M&A and business strategy

It's critical to our company, which is why it's so important for our M&A. We're in the business of developing unique packaging solutions for many of the largest CPGs on earth, as well as for new emerging brands trying to figure out their packaging and brand position in the market.

The ability to develop a custom solution is a human capability. It's less about factories, inventory, and buildings and more about people. If a business wins on the caliber of its people, then culture is the way to build and sustain that. By definition, our culture has been a massive part of our business strategy and success for over 120 years.

If we're adding to that, we've got to get it right. It goes back to strategy, the reasons for M&A, and why your company wins in the marketplace. It's very important to us, and it was also very important for most of the companies in our study.

Critical, and the development of something unique for your brand to help it stand out in the market. That's developing new intellectual property. You need a very capable, committed, and knowledgeable person to help you do that. 

Also, we need someone who can work well with our supplier partners and with an internal team. Someone who can work well with a customer and internally across functions and the supply chain to build a custom solution. That's a special kind of person.

A unique M&A strategy focused on family businesses

Our M&A strategy is somewhat unique. We're largely buying first, second, and sometimes third-generation family businesses. This is important in all elements of the M&A process, not just the cultural piece. 

Often, the sellers we're dealing with are experiencing M&A for the first and only time. They've likely never bought or sold a company before, so the process is very unique for them. We often help them through that process.

At TricorBraun, we've acquired 44 companies, and the vast majority of those sellers are still with our company. In many cases, their kids come and work at TricorBraun. We want them to stay. 

We buy great companies that are doing well, and then we help them get better. That might involve capital investment, adding more salespeople, or expanding their supply chain. We want good companies with great people that we can help grow even faster. Because we want those people to stay, how they'll fit in our culture is a critical part of the assessment.

Integration strategies for acquired businesses

It depends on the geography. If it's a new geography we're entering, the integration would be less because there's nothing to integrate into. But we frequently have full integrations. One important element of our culture is that we tend to be fairly decentralized. Many decisions are made in the local market.

In my dissertation study, I found that serial acquirers, those doing many deals, are not only thoughtful about what they're buying, but they've also structured their company to be highly receptive to the companies they acquire. 

Our decentralized structure allows us to bring new companies into our system and programs while they can still run their local business as they see fit. Of course, this is within some parameters, which might be new for those used to running their own family business.

We're set up to integrate these companies in a way that allows them to stay, thrive, and be successful as part of our broader, multi-billion-dollar company.

Sometimes, one of the factors that influence this dynamic integration approach is the size of the acquisition. We've done acquisitions with one or two million in EBITDA and others well into eight figures.

In some cases, we've bought significant platforms in a given market or geography. Some of these remain largely standalone, still on our systems, part of our culture, and team but with more autonomy and possibly retaining their brand.

We've also had smaller acquisitions that are fully integrated. In all cases, it's about keeping the people, helping them win, and succeed over the long term as part of the bigger company. For us, failure occurs when the people we acquire leave. That's not a good scenario.

Almost all of our deals are proprietary. While we certainly work with a number of bankers around the world and sometimes receive opportunities we weren't aware of, we primarily focus on proprietary deals. 

We have a large corporate development team, and each geographic leader around the world is responsible for getting to know the key players in their market.

The cultural fit is crucial, and it's almost impossible to assess that in an auction process. The way to assess it is by getting to know someone personally over months, years, or even decades in some cases. It's about understanding their culture and ensuring they understand ours.

These entrepreneurs and founders are often transacting their life's work, sometimes even their parents' or grandparents' life's work. Their name is on the business, so where it goes matters a lot to them. What happens to their team members matters a lot to them.

We are interested in long-term relationships to assess culture and fit. It's equally important for the sellers to feel comfortable with us. Our main ask is to be their first call. It's not about the price we pay; it's about whether we are comfortable with each other and if the fit is strong, ensuring it's a great home for their life's work.

Building relationships and structuring deals for long-term success

Especially with family businesses, the reasons for selling vary greatly. We're not trying to convince people to sell. It might be today, next month, a year from now, or even ten years from now. 

We just want to get to know people, and when it's time, we want to be the first call. Everyone's reasons for selling are different based on factors like kids' interests in the business, investment requirements, changing competitive dynamics, or systems investments. We leave the timing to the seller but maintain ongoing relationships with them.

Each deal is different, and everyone's needs are different. We always listen to what's important to the seller. Ensuring a fair and full price is crucial, along with aligning financial incentives for the future. What that looks like can vary based on what's important to the seller, but we always want people invested in the ongoing success of the larger enterprise.

At TricorBraun, we've sold to private equity six times over the last 30 years. I've been involved in two of those. Many people who have sold companies to TricorBraun have stayed with us through multiple private equity sales, and now even their kids and grandkids work here. 

This is what it's all about for us. It's quite unique in the market, but it's why we've been successful and have been here for 122 years.

They're happy with their options. Yes, but everyone who comes contributes to the success of the enterprise. They are a key part of building it together. Our strategy is to buy great companies, bring them in, and help them grow even faster. By definition, the people coming here are great people who have already built very successful businesses.

Sometimes, we'll do earnouts, rollovers, equity, and different structures in different situations. We are truly global, so we operate all around the world. Obviously, tax situations and legal situations are different depending on jurisdiction and the seller's needs, and so we try to be flexible to meet those needs. 

Approaching cultural diligence

Everyone here is responsible for cultural diligence. One of the things I found in my dissertation is that people who are really good at M&A have dedicated teams, not just the corporate development and integration teams, but also within HR, finance, and IT. These teams are used to doing diligence and integration.

You're always assessing cultural fit, and the seller is assessing it with you. Often, in a family business being sold, you may not have access to many team members, so you're somewhat limited in those interactions. You assess culture before and after dinner, walk around the office, and observe interactions. This mutual assessment is ongoing.

If you've left cultural assessment to the point of an auction process where you haven't met the company before, it may be too late. We want to assess over the years—dinners, breakfasts, lunches, coffees, trade shows, text messages, and building good human relationships.

Identifying culture fit in an auction

You do everything you can. A lot of it happens in between times—chit-chat before or after calls, watching interactions with others and observing how they interact with advisors and team members. 

In our company, everyone helps each other. You watch if it's the same with the person you're talking to and walking around with. Nonverbal cues are significant and become obvious quickly, though it's harder in an auction process.

It's important to get lots of people to think about this from different angles and compare notes on diligence discussions and interactions. There's always a tough point in the process, whether in SPA negotiation or something else. How does everyone handle it? 

When working together, you solve problems together, so what's that interaction like? The best approach is to start early and spend time getting to know the people before the time comes.

The long game in the relationship is to be collaborative, experienced, and involved in the integration. We have a phenomenal integration leader involved from day one, who's probably worked on a hundred integrations over his career. 

He has great experience and will be the person doing the integration. An early understanding of how everyone will work together and talking through integration topics also gives a flavor of how things will fit together.

One thing I wanted to mention is that the fit being two-way is absolutely critical. We want people to come here, thrive, and grow. If we present a false idea of what the company is or how things will work, and it’s not that way when they get here, and they’re unhappy, we’ve failed even if we acquired the company. 

We spend a lot of time talking about our operating principles, culture, decision-making, and how we run the business to see how they react and feel about that.

If you’re an owner of a smaller business, which is mostly what we buy, you're the leader in that business today. Regardless of our decentralized and flexible decision-making, there is still a bigger company you're part of. How will they interact with that? How will they deal with that? That's a big change any entrepreneur needs to consider when selling their company.

Assessing cultural fit in M&A

When we dig into conversations, it all comes down to the relationship with team members, decision-making, and customer orientation. The key elements of culture are focused on decision-making, empowerment, and whether the company's orientation is external, i.e., taking care of customers, or internal. 

We're very externally oriented; we would do anything for a customer, and that's the DNA of our company long before my time here. It's a great DNA to have.

Not every company has that. Some may focus on operational excellence and internal processes, and there's nothing wrong with that. The key thing about culture is that there's no good or bad culture. 

There's a cultural fit with strategy and cultural fit between the two companies. We're not assessing if someone has a good or bad culture; we're trying to understand how they treat team members, how decisions are made, and how important customers are. If we can figure those things out, we can match them with the TricorBraun culture.

We're not using a cultural assessment tool or asking 20 cultural questions. We're assessing it as part of everything we do. In the study, the 12 companies did an average of 22 acquisitions over five years. 

For most of those companies, culture was at least moderately important, and for many, it was very high because they were acquiring for growth reasons. None of them used a cultural assessment tool, but culture was assessed in every question and interaction with every person in the business all the time. To me, that's a better way to assess it than using a handful of questions.

We do not put it in a complicated matrix, but everyone weighs in on an opinion as we discuss the deal. At any given time, we're working on multiple deals around the world with different teams, sometimes the same teams, depending on geography. 

We're always talking about how this fit would work. Would they enjoy it here? Would we enjoy working with them? Could we solve problems together? Can they transition from being an owner-founder operator to being part of a bigger company?

We talk about that internally, and with the owner-founder, we discuss different scenarios. Given the autonomy in our system, how will life be similar to what you do today? But also, how will life be different? Because now you have a boss, you have to report on financials, and you have to do things you probably don't do today.

Walking away from a deal due to cultural differences

Sometimes you look at a deal and think, this is a great company. The financial model is really good, and there are a lot of synergies. But can we all work together? Those are the toughest ones. 

In my experience, trying to fit in and thinking it will be okay despite not being perfect generally doesn't work. I've seen this not just at TricorBraun but in other M&A experiences as well.

Interestingly, in the dissertation study, these were incredibly successful companies. Almost everybody sold again for three times plus cash on cash. The average company doubled revenue and EBITDA over five years. 

We interviewed 30 people across those 12 companies, including the CEOs of each company. Every one of them had at least one fairly major mistake. What's important about M&A is that most deals serial acquirers do are in small, low-risk situations. 

When people talk about a 70 percent failure rate in M&A, they usually refer to big public deals with high risk and teams with limited M&A experience. However, dedicated teams that work on multiple deals every year become skilled at assessing and learning from mistakes without them being catastrophic.

Yes, those are tough situations. When they happen, the acquired team isn't happy, the acquiring team isn't happy, and it's hard to collaborate on solving problems. The deal is hard, and integration is even harder. 

The ability to collaborate, get along, trust each other, and assume good intent is critical for a strong integration over 12 to 24 months, working together seamlessly in the end. We spend a lot of time thinking through these situations, and we will walk away from deals when necessary.

Red flags in cultural fit between LOI and closing

Yes, we have, and I have as well. Often, you can come to a mutual understanding. In my experience, sometimes both sides agree to exit because you're trying to work through issues between LOI and close. 

There are always issues, and if we're struggling to find solutions now, it raises concerns about working together in the future. We're very good at finding solutions to get deals closed, but if we're struggling this much, how will we work together later?

For us, cultural fit isn't about being good or bad; it's about whether things will fit together. The level of integration is also a key factor. If a business is going to be fully integrated into what we do, perhaps with another business in that market, we have an even higher bar for cultural fit. 

If it's a new country, geography, or end market and isn't being closely integrated with something else, the bar might be slightly lower, but it still needs to be considered. In those situations, it's still buyer beware.

That's the sunk cost of where you are. You never want to do a deal that's not going to work for both parties or where people won't be happy. We've seen situations where exiting was the right decision, both here and in other places I've been.

How to ensure a successful cultural integration

I don't know that you can ensure anything in M&A. You have best practices, great people, detailed plans that you follow every time, and you do a great post-mortem to learn from every deal. Even with all that, you won't get it right every time because it's incredibly complicated.

We focus on mostly proprietary deals, probably 95 percent. We maintain relationships with many people, getting to know them and ensuring they get to know us, as well as their teams. Think way ahead about the integration strategy and be incredibly open about it. 

You're not trying to sell or spin them. Be very open about what will happen after the deal, both good and bad. Ensure they have a chance to talk to other companies that have been acquired.

We pride ourselves on this. We will give potential customers a list of all 44 companies we've acquired. Most companies have a list of three or four references, but we say, look, you can talk to anybody we've ever acquired. 

We keep our word about what we will do. One lesson we've learned is that saying nothing will change is the cardinal sin of integration because something always changes.

From our perspective, it's easy to say nothing will change because there's still a lot of local autonomy, decision-making, local P&L, and locally driven bonus structures. But at the end of the day, you now have a boss, you have financial report outs, and you need approvals for capital investment.

Those are changes. It is crucial to be very sympathetic to the owner-founder sellers' view of how those things will change.

We now spend a lot of time going through these details. We probably still don't get it 100 percent right, but we make sure people understand what things will look like after. You might say this could be detrimental to getting a deal done, but if the success metric is that people are glad they came, the only way to achieve that is by being very clear upfront about what will and won't change.

Earlier in my M&A career, I would say not much will change, but now I spend more time detailing what will change. This has been a big lesson for me over time.

We do have detailed plans, not just on cultural integration. We have hundreds of dedicated Gantt chart items, and the cultural piece is a big part of it, along with non-cultural aspects.

Here's what I can share. Post-mortems are important to reflect back on during a deal. Having a detailed plan and strong leadership is crucial for driving success in cultural integration. Transparency, reverse diligence—helping the company learn about your organization—and being sympathetic to the changes and their impact are key.

I also think having a structure—whether that's organizational, IT, compensation, or P&L—that is hospitable and welcoming to incoming acquired businesses is important. This company is organized to acquire companies and make it a hospitable, welcoming place for people to bring their life's work and build on it here.

We are structured to allow for good cultural integration. Good cultural integration is only possible if you're acquiring a company that is a good cultural fit because you cannot change culture. It's like DNA; it is a company's DNA. You have to get the assessment right. If you do, then all the things you listed, plus being a hospitable place, can make it work. And we have made it work.

Building an organization for successful acquisitions

The key thing across companies that are good at this is treating M&A as a functional professional expertise, no different than accounting, IT, or sales. The biggest mistake is treating it as a one-off project. 

Companies that are good at this recognize it requires expertise. If they don't have that expertise, they get it through consultants or hiring the right people. They have dedicated teams that do multiple small deals, building a detailed target profile of what they buy and why.

One great quote from a CEO in the study was, "The problem with M&A is if you squint hard enough, everything looks like a great deal." Without a detailed target profile to compare against, it's easy to fall in love with a deal. That target profile is critical.

Having a detailed diligence and integration process is essential. You can have a consultant help you build it for the first time and then follow it, updating it with each deal. Post-mortem every deal to understand what went right and what went wrong. Update your process and repeat. Every deal is different, and you learn every time.

I've been involved in over a hundred deals, and even the best ones come with mistakes. We post-mortem every deal, regardless of size, constantly updating our playbook to get better each time. This builds a great loop for improving at M&A. One-off M&A is incredibly dangerous. If you must do it, get outside help. It's like doing your taxes without an accountant.

The importance of seamless handoffs

We have a corporate development team that's really integrated into all these functions to make the deal work. And to build on that, think about where the handoff is. You have a corporate development person who’s maybe been building a relationship with a founder-owner for years—sometimes even 10 years. 

Our executive chairman has been in the business for 42 years, with relationships spanning that time, sometimes with people’s parents and grandparents. The corporate development person builds that relationship and often advises getting outside legal and banking advice, which makes a deal go better. We aim for a fair deal that everyone is happy with.

During the deal, the corporate development person may talk to the founder more than their spouse, working through the LOI, QV, diligence, and SPA. 

Then the deal closes, and the corporate development person moves on to the next deal. This is the person the founder spent the most time with on one of the most important things in their life, transacting their family business, and then they’re gone.

To address this, our integration leads are involved from the start. The founder gets to know all the integration folks, not just corporate development. The business owner of the geography or line of business where the new acquisition will become part is involved early. 

So, the new family—the people the founder will work with every day after the deal—are very involved over time.

We have heavy corporate development upfront, then integration starts as soon as we begin the diligence process. We build the integration plan together within our framework, and during that time, the business leader who will work with the new acquisition gets engaged. 

When it’s time for the handoff from corporate development to integration and then to the business leader, it all overlaps. Everyone knows everybody, so the founder doesn’t feel abandoned when the corporate development person moves on.

The most successful acquirers in our study were very thoughtful about these handoffs. They planned integration early and built relationships throughout the deal's lifecycle, ensuring smooth transitions. After a year or two, the integration leader moves on to other deals, but the business leader remains the key person.

How do you ensure smooth handoffs? By having significant overlapping chunks of time where these teams work with the founder-owner, getting them through what can be a stressful but positive life-altering event. We've significantly developed that muscle over 44 deals.

Keeping stakeholders comfortable during transitions

It depends on the deal size and location. We've done deals ranging from a million in EBITDA to eight figures in EBITDA. My level of interaction varies from deal to deal and based on geography. However, the right people spend a significant amount of time not just with executives but with all team members. We want everyone to stay.

We have a super detailed day-one process to ensure everyone understands what the integration plan is, what's going to change, and what won't. People are most interested in changes to their pay, title, reporting relationships, and benefits. They want to know what to tell their significant other about medical benefits, pension benefits, and so on.

We spend a lot of time discussing these topics and getting people comfortable early. This could involve me, geographic presidents, or regional presidents. We have a phenomenal leadership team, and we ensure the right level of involvement in each transaction.

Anyone good at M&A has a meticulous day-one plan. We have a minute-by-minute schedule for the first day, covering every single detail. Executing this plan requires multiple people. On day one, we might have five, six, seven, or more people on the ground to have one-on-one conversations with every person about their specific concerns.

And it's still hard. Even if you get all of that right—great cultural fit, great people coming in, being very clear about what will be the same and what won't be the same, sharing everything as transparently as possible—there are challenges.

Until that person is working for someone for the first time in their life, especially if they grew up in a family business, they don't really understand how they will respond until they are in it.

When we mention a monthly financial review, they might intellectually understand it, but when they do the first one, they realize it's a lot more detailed than they're used to. Even with amazing partners, the early days are incredibly hard. You have to keep working with people to get them to the right spot.

The biggest challenge in dealing with culture

Most of our acquisitions are founder-led businesses. The culture is set by the founder, and transitioning from being an entrepreneur to being part of a larger, multibillion-dollar global company is tough. Smoothing that transition is critical to success. We want these people and their teams to stay, so ensuring it goes well is crucial. We've done well, but it’s incredibly hard.

The biggest challenge is getting people through the first three to six months. Life is different, decision-making is different. There are many benefits: better benefits programs, better supply chain opportunities, access to a broader range of suppliers at better prices, improved freight programs, and access to world-class design and engineering centers. 

These things allow them to be more successful, but decision-making changes, and they may need to do more detailed expense reports.

We try to keep things as light as we can, but they are still becoming part of a big global company. If you're coming from a small family business, even a company with 2,100 team members can seem very large. 

It’s important to get people comfortable, introduce them to their new team members, and help them understand how to use all the resources available to them. It is key for them to focus on all the benefits and opportunities they get from the transition rather than just the changes.

Best practices for M&A integration

I don't know that there are hacks. I wouldn't call it a hack. Our track record speaks for itself—44 acquisitions, and those people and their kids are still here. We buy good companies, invest in them, and add people. It's not about cost-cutting. We bring in tools and spend a lot of time explaining the plan.

It's hard to execute. We spend a lot of time talking and thinking about this. These aren't complex things—get to know the companies you want to partner with, be clear about how things will stay the same or change, build great relationships, and have multiple layers of relationships. 

As CorpDev rolls off, ensure other people are still comfortable. Build the integration plan together, focusing on the real benefits for everyone. It's about disciplined execution and application every time.

The second challenge is systems integration. We have state-of-the-art, cloud-based systems. You're usually going from something like QuickBooks to a more capable but complex system. 

Being transparent and helping people through the systems integration is crucial. It's hard, challenging, and a lot of work. If you get those first three months and the systems piece right, six, 12, or 15 months down the road, you hopefully have a team member for life. Even a perfect systems integration is incredibly painful.

Working with private equity partners for long-term growth

We've sold six times over 30 years, roughly every five years, though it varies. We see these situations as having a great financial and business partner for that leg of the journey. This company is 122 years old, and we think about how it will be here for the next 122 years. I'm a steward for a period, and we'll have multiple owners during that time.

We've been blessed with phenomenal owners. Currently, we have co-ownership by Aries Investors in California, the Ontario Teachers Pension Plan in Toronto, Canada, and AEA Investors from New York, who have actually owned this company a couple of times. They're all super knowledgeable about packaging and are great partners.

Sometimes club deals can be difficult, but these three parties have worked on multiple deals together, and we feel really fortunate about our partners. These partners will change again at some point because that's the private equity model. 

We'll have another set of financial partners down the road. This is a great company that has made fantastic returns for everyone who has invested in it. We'll have great interest when we look for the next partner, and I'm sure we'll find a phenomenal partner for the next round.

As a board member, we're heavily invested as management across a large number of people in the company. We have multiple seats on the board, and each of the owners has multiple seats. We all sit around the boardroom table like it's a kitchen table, discussing how to make this company better for the long term. 

When selecting a partner, it's about who shares our vision of growing a global packaging leader. This shared vision is not just for next year or five years from now, but for a hundred years from now. That's what everyone is focused on.

I'll be here for some period, and we'll have a great steward when the time comes, both the financial sponsor and the next leadership team, 20, 30, or 40 years down the road.

Good vs. bad partnerships with PE Firms

I was retired for several years and worked with public company boards, private equity-backed firms, and family-owned companies of all sizes. I’ve encountered a variety of private equity firms. 

My advice is that when you're talking to firms, everyone says they’re collegial and team-oriented when numbers are good. But there’s always a bump in the road during every hold period. The key is how they handle those situations.

To find that out, talk to people who experienced those bumps. Do your homework, use your network, and talk to references not provided by the PE firm. Ask about relationships, and problems, and get the straight story.

There are very different types of private equity firms. Given our focus on people, customers, and long-term vision, we tend to attract sponsors who value those things. It’s obvious when you spend time with our team that this isn’t about quick fixes, cutting costs, and financial engineering for a fast flip. 

By definition, we attract high-quality sponsors, and it shows in how we run the business. It’s not about good or bad. Some firms make a lot of money with different approaches, but it's not the right fit for what we’re doing.

Your best source of reference on a PE firm would be the CEOs and management teams of those portcos. And how was it when it got challenging? That’s the only question that matters because everybody is great when the business is good.

That's what we tell people, you can talk to 44 acquisitions, and we'll give you the whole list if you want. No one wants to talk to 44, but pick some at random, and not all of them went well, not everybody's still here. Like nothing is perfect. We didn't get everything right but always honest, high integrity of our word. And that's all you can do.

And I always wonder if someone has only given you three references and you don't want to talk to those three, do you want to talk to the other ones?

Advice for corporate development practitioners

We’re blessed with a phenomenal team in CorpDev and integration, and the integration teams within each functional group. It all comes down to professionalism. This is a professional function, no different from accounting, finance, HR, IT, sales, marketing, or operations.

Every deal should align with our target profile and strategy. What's the cultural fit? What's the business reason? The easiest trap in CorpDev is getting bogged down with financial modeling. The spreadsheet estimates are inherently wrong. It’s an estimate on an estimate on an estimate multiplied by another estimate with false precision.

Do the modeling as accurately as possible with multiple scenarios, but don't over-focus on it. What about the people? What about the fit? What about the strategy? Does it hit the target profile? These are the key things to focus on.

Again, that detailed target profile, because so many interesting things come up and you just think we're good at this, we can make this fit. This isn't right down the fairway, but maybe this could be good, and maybe we could make it fit. When you start talking like that, you're probably down the wrong path. 

So that detailed target profile, which is still pretty expansive for us in terms of the types of things that we're interested in buying always matches it back up against that.

CorpDev reports directly to me. I talk to the CorpDev leader all the time. The CorpDev team, a big chunk of them are based in this office. We talk constantly, and I'm involved in diligence. I'm out in deals. We're talking about deals all the time. 

Deals are an iterative process. We learn through iteration, dialogue, and conversation. I certainly do. We challenge, test, and question each other. So this isn't “come to give me some big pitch or the board some big pitch, and we'll stamp it or not stamp it.” This is all of us together. The best idea wins. Let's debate the heck out of this thing. 

One of the things I like to do sometimes with corp dev, and we might do it with our executive team, is to take the biggest proponent of a deal and say, “Hey, you got the con case.” You're going to argue in five minutes why this is the worst deal with the most pessimistic person on a deal. 

You've got the pro case, and you'll take five minutes to argue why this is the best deal we've ever looked at. This will put every issue on the table, open up thinking again, and ensure that the best idea wins.

We're blessed with a team that does that. We've got differing levels of experience on the team, which is great. We're bringing along some great younger folks, and younger professionals on the team, but this is a profession, and this profession is not based on how good you are at modeling.

It makes people mad because they hate the deal. I'm like, “You got to tell me why this deal is phenomenal and show me why you're a good debater.” And then that starts to expand people's minds because no deal is perfect, no deal is all good, no deal is all bad.

Why culture in M&A is important 

To those who don’t believe in the importance of culture in M&A, first, consider if it matters for what you're doing. If it's about cost-cutting, buying IP, or closing something down, maybe it doesn't matter. 

In my case, and for most of the companies we studied, growth is the goal, and growth is based on people—their knowledge, relationships, and ability to thrive in your company. Then, there's probably nothing more important than culture.

Assess it and know how the fit will be. There's no good or bad culture. It's about the fit for a company's culture and strategy, and the fit between the cultures of two different companies, which I think every M&A practitioner has done.

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