The Role of CEO in M&A

Defining the CEO’s role in M&A

Be under no illusion. My board of directors holds me accountable for everything, as they should. Beyond that, it’s essential to consider the core role and responsibility of an organization's leader. 

I come down to four essential jobs that the CEO should focus on, and I speak passionately about this with my peers. First and foremost is strategy. Strategy is about making choices in light of all the external and internal factors.

The second job is capital allocation. When considering choices and constraints organizations face, such as human or economic capital, the key is to allocate capital for the best effective return.

The third is culture. Culture isn’t something you can simply configure and expect to work perfectly every day. It’s like a mosh pit; as a CEO, you have to get in there, help define it, cajole it, set boundaries, foster it, and grow it positively. When done right, culture becomes an incredible lever for success.

The fourth job, which is less commonly discussed, is battle rhythm. In a world where 70% of the world's GDP has been digitized, speed has become a crucial byproduct. Companies that can move at speed tend to win more often. As CEOs, building a faster pace and creating that battle rhythm for the organization is vital.

These four roles also apply when viewing M&A through a CEO’s lens. Strategy is about determining where to grow capabilities and whether an inorganic channel is the best way to achieve that. With capital allocation, the question becomes whether we should invest more or less in inorganic expansion.

When we find a target we love, and after thorough diligence, we still love it at a price point that makes sense, we move forward. Then, we enter the mosh pit with the other side because, at the end of the day, people are involved and need to be integrated into the new organization. 

Whether it’s an acquisition or a combination, which I prefer over the term merger, it's about making them part of the family.

The integration phase is fragile for any company. Moving through it quickly reduces risk. De-risking is one of the least talked about, yet most important, aspects of being a successful acquirer.

Shaping the M&A strategy

Many people approach M&A with their own style or disposition. Some people are effective acquirers who are value seekers. They will do a deal at a certain price but not at another. I've heard the phrase "buy your way to success" versus "sell your way to success." For some, that's a proven success formula, but it can be disastrous for others. 

Then there are those who prioritize strategy above all other factors, where price doesn't matter as long as you pick the right asset that fits your strategy. That can work for some, but for others, it’s a quick way to go broke—spending whatever it takes to get a deal done and later regretting it.

I'm a confluence of all of that. Strategy plays a big role at the table. You have to look at where you're trying to go as an organization, what will foster growth, and what your market wants from you—not just today but in the near, medium, and long term. 

What are you building toward? Where does your market need to go? How do you disrupt your space, mildly or wildly, and continue growing? 

This leads to the quintessential question: Do I build it, and can I do that at the right pace, or do I buy it to accelerate my journey? Is my capital better used to go faster through acquisition, even with the implied risk, versus building it, which also carries risk? The strategy lens of how assets in the world plug and play into your organization matters.

There's also a competitive intensity factor to consider. Do I disrupt the market? Not to the extent of violating antitrust rules, but some moves can accelerate your strategy in a very powerful way. I lean more toward being a value buyer than an exuberant, any-price-point buyer.

For example, we looked at our federal market, which was too small for us on a legacy basis. It was hard to justify investing in that business organically because the returns to scale weren’t there. 

So, I faced a really interesting challenge. Do we exit that vertical? I think it’s important, not just on a sell-to basis on a serve basis. But, as a trading partner with the threat we face for our clients, that's 80 percent nation-state and organized crime, I need a good trading relationship with my federal counterparts around risk and threat beyond serving.  

I need to be in this business, so I need to find a way to get there. Inorganic growth was a great lever to pull, but the list of assets we looked at was long. The disposition or attitude of the folks we gave prices to—those who wanted more, felt they were worth more, and in some cases, were even offended—is a long story. 

I know where we would strike value and what it was worth to us. They might have great pride and admiration in what they built, but I know what it's worth to us. I also know that when we combine what we can build together and offer them a piece of that future journey, it is a great deal for all. 

However, I reached a point in a deal where there was a line. It’s not about ego or emotion; it’s a logical line. When you go beyond it, you're giving up something fundamentally important to you. At some point, you have to ask, "Why am I doing this?" So, I approach M&A not just as a value buyer by disposition but also by being very strategic in our choices.

Balancing market share and capability in M&A decisions

Market share and capability all play a role. In the federal example, it was a case of both for us—gaining scale and reach, acquiring a client base we cared about, and bringing in talent we didn’t have in the space. 

There were also certain capabilities we were good at, but not great at, so all those attributes came into play. However, there are times when you have to look at acquisitions that are more polarized to one or the other—either gaining scale or market share or gaining capability with less market share. 

Without disclosing too much, I can tell you we've been looking at an acquisition over the last four to five weeks as a leadership team. There's no scale there, but we like what they've built so far, and there's differentiation in terms of capability.

That's no less attractive to me than looking at a place with real scale in a vertical where we aren't big enough. Both scenarios have their merits; it’s context-specific.

Navigating imperfect M&A fits

People have viewed M&A as a continuum of activities for a long time, but what I see as challenging for many organizations is that they treat these activities as separate process steps in an elongated value chain.

In other words, the person who does the deal often doesn’t care about the integration, and the person handling the integration lives with the consequences of the buyer's actions. This handoff is a tragic mistake. 

To your point, when you say the deal isn’t perfect, how do we know? What lens are we using to determine that? Maybe we find something minor during due diligence, like an accounting issue, a cash issue, a debt issue, or a liability issue. We then must consider things like escrow reserves and exposure and whether they indicate a bigger problem. These are important but very tactical concerns.

Or it could be something more substantial, like discovering that we don’t like how the company sells—maybe it's too transactional and not relational, or perhaps we don't like the culture, which could make integration difficult.

What a leader should do is apply a strategic lens and ask the tough questions. I would argue that the absence of an integration thesis at the deal table is a big mistake. Truly effective acquirers think about integration; at the same time, they think about the deal construct. 

They might not be doing it in depth or at scale yet, but any great leader has a thought in their mind about what they’re going to do with the asset. I call this an integration thesis. While practicing in this space, I ensured every CEO client I worked with had this in mind while considering the deal. 

It didn’t matter if it was in PowerPoint, Word, or scribbled on the back of a napkin; what mattered was that there was a thought process about what to do with the asset if the deal was successful. What are the boundaries? What’s the high-level operating model? What’s the pace of integration? 

Is it a merger—a term I don’t love because it implies two equal parties coming together, which rarely works—or is it a real combination where you bring together the strengths of both organizations? Putting that thought process down on paper helps shape the deal. This gives senior leaders a great lens to consider strategic issues. 

And to your point, maybe the deal isn’t “perfect,” but why isn’t it perfect? Is it something we can remediate? Is it material or non-material? Let’s use the right lens to have that dialogue. If you do that, you avoid bad deals and do really good deals you've thought through comprehensively.

Crafting a strategic integration thesis

People can take that guidance in many different directions and depths. I'd caution against building a 65-page integration playbook based on that thesis. Keep it simple, keep it short, and keep it organic, and write it with passion. 

The best deals I've been involved with had CEOs who could take that thesis, whether it's in a document or a napkin, and sit down with the other side after getting over the deal points. When you're past the regulatory review or otherwise, you can sit with the other side and make it less about the size and share beyond the price point and what was paid. 

Get out of the deal documents and definitive agreements, and focus on what you saw, why you're here, and your thesis on how to come together. That’s a powerful moment.

If you're the acquirer, I can guarantee that there's an enormous amount of uncertainty in that environment based on every sentiment analysis I've done in any deal. And in a vacuum, people will fill it with the worst possible conjecture. 

If you walk into any acquisition and stay quiet about your intentions, the questions will be answered, just not by you. They’ll be answered at the water cooler, usually in ways you couldn't have imagined. There’s a degree of mistrust and uncertainty, and it’s your job as a leader to fill that vacuum. 

It’s not about telling everyone that things will be rosy and perfect; it’s about transparency. Share what you can say at that point, the directives and imperatives you want to implement, and why you thought the asset was a great addition to your business and portfolio.

You’ll never eliminate uncertainty completely, but you can significantly reduce it. I would argue that doing so will make you much more successful on the other side of the deal.

When to communicate your vision for the acquisition

For every M&A engagement I’ve been involved in as a practicing professional, every C-level officer I served would ask the same question. Let's discuss the term often used in deals—synergies, especially headcount reduction. 

When should you talk about it? Should you even bring it up? There have been studies on this, but they’re inconclusive. I always tell people it's a choice. I could argue with data on either side—whether to share or not that information. 

The data doesn’t lean strongly in one direction or the other. So, if you’re the senior leader, especially the CEO and the data is flat, take the high road and say more rather than less.

Of course, you must consider the legal and regulatory aspects of any M&A transaction. If it’s a scaled transaction under regulatory review, there’s a period from reaching a definitive agreement to an actual close. 

This is a productive time to plan, but you must leverage legal counsel, both in-house and external, to understand any boundary conditions. You don’t want to trigger regulatory concerns that could jeopardize the deal.

Despite those constraints, my experience leans towards sharing more rather than less, focusing on the vision rather than getting into granular organizational details. Talk about the art of the possible and address the tough realities.

For example, if you’re looking at a 5% headcount reduction, which is common in scaled deals, you must handle that carefully. You lose credibility if you tell the organization there will be no reductions. If you say you’ll evaluate it over time, that’s also a credibility issue. 

Instead, frame it as a natural part of the process, emphasizing that any decisions will be made with objectivity and a duty of care.

It’s also important to remind everyone that the remaining employees should expect the company to use its capital wisely, generate returns, and create growth opportunities. The discussion about synergies shouldn’t be about making the CEO look good but about creating economic value that can be reinvested to benefit the company and its employees.

So be transparent, visionary, direct, and honest in your communication.

Someone could make a very cogent argument 180 degrees different from what I just said, but I’m speaking from a long history of taking the higher road. It has worked well for me. However, someone with a natural bias or comfort zone should take the route that suits them best.

I had a client in a public environment, and while it wasn’t my area of counsel, I appreciated what he did. His investors pressed him to disclose the synergy amount in a deal, but he refused to answer. I respected that stance. 

If I were facing an acquisition tomorrow, I wouldn’t want to get down to the exact dollar amount in synergies. I wouldn’t want to do it publicly, privately, or with my employees—only with my board or the investment committee, considering the totality of the deal’s economics and synergies involved.

However, I wouldn’t shy away from acknowledging that there would be synergies. Transparency is important because your brand and the organization’s reputation matter. If you ask people to follow your strategy and leadership, your brand is crucial—don’t tarnish it over something so simple. 

Leadership is about handling tough choices and delivering difficult messages, not just thriving in the sunshine and happy days. So, face it. Don’t be afraid.

The fundamentals of capital allocation

Let’s set the M&A part aside and just talk about capital allocation at its essence. Every organization has some degree of constraint—whether capital, people, or pace, there will always be limitations. 

As a business leader, it’s essential to plan ahead, consider the performance period, and consider all the market signals you’re receiving, whether from customers, influencers, analysts, or employees. What’s the market telling you?

You, along with your executive team, need to practice operating discipline. This means discerning between choices—considering short-, medium-, and long-term orientations, return potential, and the degree of risk in execution. 

I also look at who’s leading the initiative, evaluating them as if I were an investor in that person, not just the initiative. What's their track record with the capital I’ve invested in the company?

Another factor I consider is whether an initiative is a necessity or an aspiration. As your business grows, existing parts will consume a lot of capital. One of the dangers as a CEO is allocating all your capital to the business of today and none to the business of tomorrow. While optimizing the current business is important, you must avoid giving away future value.

We use more data points than just these; these five provide an effective scoring matrix. It helps me see how much we’re allocating toward new ventures—what I call the business of tomorrow. 

I don’t think 80% of our capital should go there, but if it’s zero, that’s a problem. I usually look for about 7% to 15% of our portfolio to go in that direction, focused on core but expansive opportunities.

You also have to feed the existing business, but you need the discipline to ask whether it will make an economic return or make people feel better. Over time, certain parts of your business will be commoditized, and you have to decide how much capital to put behind a commoditized business. 

You must be willing to make disciplined choices, run the business well, and harvest returns where appropriate.

Now, let’s bring M&A back into the conversation. Many might ask how much of your capital should go toward inorganic growth versus organic growth at the beginning of the year. I think there’s a danger in framing the question that way. 

If you allocate capital upfront for acquisitions, you risk falling in love with assets and doing a deal just to spend the money rather than doing a deal because you believe you can make money.

So, I’m always cautious about that approach. It’s okay to think about available capital and the likelihood of engaging it, but I never make it so precise that I’m trying to fill it in like I would with an initiative around the business of today or tomorrow. 

I always think of it as if I find a really good asset that would make a big difference—whether in scale, market share, or capabilities—I’ll look at it carefully and find the money somehow.

Moreover, you should consider time to value. Is it important this year? Is it important three years from now? That signal matters a lot because businesses go through different seasons. 

For example, a business that is more susceptible to interest rates might be going through a tougher time now with higher rates. Or if it's a commodity-centric business, inflation could significantly impact their P&L.

As a leader, I would focus on more near-term practical actions in businesses like that because generating economic value today is crucial to getting through destabilized times and reaching better days ahead. 

Conversely, if I’m in a business less susceptible to such factors, I would make some near-term choices but also consider longer-term ones. So, I believe time is a very important consideration.

Managing complexities in leadership

Maybe I’m a complex guy, or maybe I’m just a simple guy who grew up on a farm. I’m not sure, but I’ve never shied away from complexity. It’s okay for complexity to arise. 

When I think about my leadership team and who I bring to the table, I’ll tell you one thing—I don’t look for homogeneity. I like diversity, not just because it’s favorable today to say that, but because diversity brings perspective differences, and with that comes insight. 

Insight is gold. I want people at the table who think differently and who are courageous enough to say what they think. I don’t pack my leadership team with people who want to say yes to me. 

I look for those who will tell me the honest truth and share their perspectives. Someone will ultimately decide—there’s always a delegation of authority in any business—but making that decision with more information is invaluable. It’s not about consensus; it’s about being well-informed.

One of the hard filters for me when considering a leader on my team, or when I’m influencing leadership down the organization, is their comfort with saying no. It’s easy to say yes but much harder to say no. 

People with operating discipline who can discern through facts, figures, and perspectives and are comfortable discussing yes and no with their direct reports are on their way to great leadership. If it comes down to a transaction and someone says they love it, it’s okay to say no. 

If you have five investments but only enough capital to allocate to two, it’s better to say no to three rather than under-invest in all five, hoping for a differential outcome. This might sound harsh, almost Darwinian, but it’s not about being harsh to individuals; it’s about doing the right thing for the totality of the business, which ultimately benefits everyone.

In my 38-plus years as a leader, I’ve seen less of this discipline than I’d like. If I had one lever to pull to develop my team, it would be around this operating discipline.

Communicating the capital allocation approach

Communicating the approach to capital allocation is about understanding the substance and then the engagement. Not a day goes by that I don’t appreciate being part of a private, private equity-backed company. 

In my opinion, it gives me a lot more latitude and range to work within. Public company CEOs have to operate with transparency, which requires a different set of skills. I recognize that I have the privilege to operate in a private environment.

When you think about choices, capital allocation, and even M&A transactions in a private environment, the role your board plays is crucial. The beauty of being in a private company is that you can condition and work with your board in a broader way. 

The board has a governance role in a public environment and is observed from a public perspective. There’s a trust with shareholders that has to be established and maintained, which is vital.

The board has the same fiduciary responsibilities and oversight in a private company, but I believe you can take it a step further. You can use your board as a thought partner, leveraging their guidance, counsel, and vast experience in governing decisions and shaping them. 

This doesn’t mean giving up management’s authority or asking the board to take over management’s role, but rather engaging them in a way that precedes their decision-making authority. It’s called thought partnership.

How do you tap into the wisdom that boards often possess? It’s something I’ve studied and thought long and hard about in every organization I’ve been a part of. When you underutilize this resource, it’s a waste. But when you fully engage them, it’s an incredible benefit.

I engage our board in conversations about capital allocation long before it appears on a PowerPoint or Excel spreadsheet. We discuss market signals, risks, the organization’s ability to seize opportunities, and how we size those opportunities and allocate capital. This isn’t about giving up management’s role or asking the board to decide for us. 

Instead, it’s about seeking their thoughts on critical issues. By doing this, you condition a relationship with your board that’s very powerful. They become more engaged in the business, more passionate about your choices, and, I would argue, more supportive. 

This approach doesn’t subrogate their objectivity but instead fosters a deeper affinity with your choices and strategy, leading to a more robust dialogue about those decisions as you move forward.

The isolation of the CEO role

Someone mentioned this, and I’m sure there are studies about it, that in the modern era, the CEO has become one of the most isolated jobs on the planet. It’s an interesting isolation. If you look at it on a two-by-two matrix with isolation on one axis and responsibility on the other, it frames the job. 

While everyone says, "Oh, it's a great title; it's cool; it's sexy," when you think about it, you might wonder, "Why would I want to do that?"

I often think about that degree of isolation and wonder, how do you change that? There are plenty of ways to avoid it. Don’t be isolated. If you work in an ecosystem business like ours, get out on the road and spend time with your ecosystem partners. 

If your business is talent-centric, spend time with your team. If your job involves customers, get out in the field as it should. My job isn’t just about sitting in an office, looking at spreadsheets and dashboards, and telling people what to do. 

That’s part of it, and I’m accountable for that, but my best days are spent in the field with clients, listening to what they need and helping our teams find the resources to deliver on that. So, take this notion of isolation and smash it. Let’s get rid of it.

This approach applies to the board as well. Why would you wait for the frequency of a board meeting, whether monthly or quarterly? We meet quarterly, but why wait for that? Why wait to get in a room with the board and have a dialogue, even if they’ve had the briefing document beforehand? Why only tap into all that wisdom and capability once every 90 days?

Why let their relationship with the organization and their knowledge of what you’re doing be limited to such a small fraction of their time? Why not engage more frequently? Respecting their time and other commitments, why wouldn’t you engage them periodically to seek their perspective or give them an update?

This creates a more dynamic relationship with the board. It’s not about trying to hoodwink them—far from it. I believe in transparency with my team, the market, our shareholders, and our board. So why wouldn’t I propagate that every day?

Fostering cultural fit and addressing cultural concerns

Culture is one of the most important things you can do, and yet, it's probably one of the least invested areas of an M&A deal. Some folks have started using AI as a tool for cultural sensing, which is an interesting marketplace. 

Some firms offer cultural diligence—I've never used it, but it's available. However, I believe it's an area you need to dig into yourself. You can ask people to work around social media footprints to see if anything notable comes up, but diligence alone won't give you the full picture. It will, however, give you better insights than having nothing at all.

Culture comes down to two key dimensions. The first is diligence—looking backward. Are you seeing something that's just not a fit? Are there differences in how the company operates, sentiment issues, or a culture that’s no longer vibrant? If the people are unhappy and don’t trust leadership, that's a lot of work to improve. Building that trust again is essential.

The second dimension is the go-forward basis. If you complete the deal, what will you do to focus on culture? How will you invest time and resources to ensure you understand and hear from them directly? How will you map your culture in a consistent way and discuss where there’s a natural connection and where there are differences? Where can those differences be seen as positive?

The CEO plays a unique role in this. It might seem like a simple task, but it’s crucial. In the early days of integration or combination, the CEO needs to get involved directly with senior leaders and influencers in the organization, having open dialogues. Even if you have nothing concrete to say about the integration, just being there to answer questions is vital.

For example, we made an acquisition that was very people-centric. The people who stayed were phenomenal—high integrity, mission-oriented, and incredible work ethic. However, there was a lot of uncertainty about what we might do that could be perceived as negative. 

One of my favorite comments from a meeting was from someone who said, "I've always worked for a small company. I've never worked for a big company. You guys are huge, and I'm worried about what will happen to me."

Working for a company of about 2,500 people felt small compared to where I came from, which had 40,000 professionals. But for this person, our company seemed enormous. Perspective matters. You won’t understand these concerns until you ask the questions and show the courage to stand there and address every concern.

Can you solve all the concerns? No. Will everyone be happy? No. But in that particular case, we retained over 89% of the performance staff—people who are not just numbers on a spreadsheet but great professionals who are now part of our company. 

We achieved this by engaging with them, having a dialogue, addressing their questions, and learning from what they had to say. There’s power in that.

Invest in building relationships, finding opportunities, and making what seems big to them look smaller—just as what seems big to me now feels smaller compared to where I came from. It’s all about perspective. Work it, and change it.

Evaluating culture during executive conversations

You can get surprised in executive conversations. It's not a one-size-fits-all situation. Thinking back on all the deals I’ve been involved in, there are so many archetypes that we don’t have enough time to cover them all, but I’ll share a few.

You’ll find organizations where the CEO thinks the company is just like they are—but it’s not. Whether they’re the acquirer or the acquiree, they’re often isolated, with their team just telling them what they want to hear. They don’t know what’s going on. In transactions like that, it becomes evident quickly. 

As you start to sense if there’s consistency, you might see issues after just one layer, and after two or three layers, you know there’s a problem. I’d run in the other direction if I caught that in diligence. If it shows up during integration, I will double down on fixing the culture because it’s a massive risk.

In other places, the CEO is so central to the organization that the company mirrors everything they do. They talk the same way—maybe a bit too homogeneously—but in these cases, what you see is what you get. The ability to leverage and scale in such environments is fantastic, so you go after it with vigor. 

It’s very context-specific, and I’ve seen it all. I recall a situation where I was advising a large tech company on their biggest inorganic acquisition ever. It was a bold move, and the CEO of the acquired company packed his office, shipped everything home, and never came back after the definitive agreement was signed. 

This deal went through a lengthy second review and regulatory period, so we had time to plan thoroughly. But imagine the signal it sent to the people who had been in his care all those years—it was like saying, "I don’t care about you." It was one of the most horrific things I’ve ever seen.

I’ll never forget the CFO of that company during the early integration phase. He raised his hand after we discussed processes, timelines, and roles and asked, "Can someone in this room tell me what you want to do with our business?" 

My client hadn’t yet put their thesis on the table despite my advice to do so. Thankfully, they had listened enough to prepare something, and once we shared it, the leadership team got on board with planning the combination of the businesses.

While staying on their fiduciary side during the regulatory review, that leadership team didn’t break trust. They got on board with the integration, and it became one of the most successful integrations I’ve ever been part of. But if you had asked me before that moment how it would go, I was deeply concerned. The CEO just walking away was horrific.

Convincing companies to sell

I have convinced someone to sell their business. 

I've been at the table many times trying to do just that. If someone isn’t signaling that they’re open to the conversation, that’s a warning sign for me. It’s not about my ability to convince them—it's more about recognizing when I don’t want an unwilling participant on the other side. 

Having been on the acquired side, I understand that resistance might be due to genuine belief in their strategy and performance. If they’re holding off, that should signal to you that this might not be the right time.

However, if someone signals they might be open, even if they’re challenging you to make a compelling case, that’s different. They’re giving you an opening. If I detect significant resistance in the diligence phase, I’d probably walk away. 

But if I find that resistance during integration, I’d double down on efforts to address and align the cultures because it presents a massive risk if left unaddressed.

On the other hand, if someone is open to the conversation, then yes, 100%—every day and twice on Tuesday. The CEO or senior leader plays a crucial role in these situations. I’m not suggesting they negotiate on their own, but they need to be involved and use their team effectively. 

You might be surprised if you think a corporate development leader alone can close the deal. Having been recognized for my M&A skills, I know that real power lies in the relationship. 

It makes a huge difference if the business unit leader or CEO can articulate why the businesses should come together. It’s a personal decision for the seller. There’s money and success involved, but it’s also deeply personal.

When making the pitch, I always start with principles. I explain how I think about the deal, what we see in their great business, and how it fits with ours. Then, we discuss value. 

As a leader, you have to be prepared to hear "no" and deal with some failures. But when it’s the right fit, you’ll find great affinity with the other leader. You’ll reach terms that make sense, and the lawyers can handle the details.

When both sides fundamentally see the world the same way and can negotiate terms that satisfy both, you’re on the road to a successful transaction. There’s still a lot of work to be done, but you’re off to a great start.

Even if you're a "robber baron" acquirer, let's put that on the table. Sometimes, you'll look at an asset—maybe a distressed one—and you might have to be that "robber baron" acquirer. It happens from time to time, and even though it's a tough situation, what matters is whether there's a shared vision. If there is, the goal becomes taking that struggling asset and improving it.

There’s a lot of nuance in this. Any great leader who’s operated on their shareholders' behalf knows this is nuanced. You have to talk with your stakeholders about whether you're selling in a down environment. 

Are we trading down for whatever fundamentals or external factors might drive that? Is the world worsening as we’re selling? That’s one type of conversation. Is it improving? That’s a different conversation.

If we set out on a five-year operating plan and we’re halfway through it:

• Are we selling early in that cycle? 
• Are we being paid for what we’ve built? 
• Are we being paid for the future prospects? 
• Are we being paid for what we can or can do in concert with others? 

These are all questions I’d spend time on with my stakeholders if I were selling.

If I’m buying, I should be thinking about the same things, though I might articulate them differently. Am I buying at a premium because things are on an upswing, and I have price point risk? Am I buying on a downswing and might have market and economic risk? Am I buying early? 

I need to ensure that I allocate enough capital. Back to your persistent question about capital allocation. This is a work in progress. If I don’t allocate enough capital to it next year, even a great acquisition could result in a poor final outcome.

It's a nuanced process. This is a landscape, as you know better than I do, given your approach to the market and M&A science. It's a landscape tragically littered with failures and highlighted by incredible successes. It just depends on whose study you want to look at.

I did my study, which was much more scientific than the rudimentary "one-third succeed, two-thirds fail" narrative that’s often repeated. But it’s a landscape that’s not easy. This is where the arduous tasks are tackled by those who are courageous and great at what they do. 

If you're not prepared to do the hard things, if you're not prepared to invest in the right way and deal with all the risks, don’t enter—because it's not a risk-free environment.

Driving speed and growth with battle rhythm and clear expectations

Speed always starts with expectations. I believe in the people within an organization—their goodness, strength, resilience, capability, expertise, and industriousness in their chosen fields. Many leaders are afraid to ask their teams what needs to be done, so it’s crucial to set clear expectations first and foremost.

Next, it’s about logic. You need to create the imperative—why does speed matter? Let’s talk about what we have to get done. 

Then, it’s about incentives. If you ask your organization to go faster, which means doing more, ensure you show up on payday. Ensure your team participates appropriately and understands the vision in the near term and long term.

When we put these pieces together or string of pearls together in a series of acquisitions, this is where we will sit. This is why we’re doing it. It’s not about the CEO and the glory of being an acquirer. 

It’s about creating more opportunity, growth, and economic difference, allowing the organization to reinvest in itself and its people.

As the organization grows, it creates opportunities for more leadership, which means progression, promotion, and advancement. Growth isn’t easy; it’s hard to do, and inorganic growth carries even more risk. But the goal is to serve the market we choose, our people, and our communities.

Sometimes, there’s a bias toward focusing solely on growth, and the covenant with employees gets broken. That objective covenant around growth creating prosperity should involve everyone, not just shareholders.

I’ll never run for public office, but I’m passionate about this—having that conversation with those you lead, creating a covenant around doing great things together. This serves everyone, including customers and the communities we serve.

We’ve failed to have this conversation recently and have created entitlement instead of a merit-based system, which is dangerous. As leaders, it’s our responsibility to get back to having that open conversation, creating a connection between performance, reward, and growth. 

It’s a positive, upwardly motivated cycle. Whether you’re starting with a strong foundation or turning an organization around, this is where we need to focus. Inorganic growth is just one element of that.

Challenges and best practices in M&A

I've been a practicing professional and now a consumer of practicing professionals in this space for a long time. Like all markets, I believe there’s a science to the market, logic, and order. The real trick is finding what that is.

I used to be frustrated with my legacy organization. We would go out and tell clients, "We're going to help you be successful." Then they'd ask, "Okay, what are my chances?" We’d note that one-third of deals are successful, while two-thirds are failures. 

The logical follow-up was, "How many of your clients have been in that one-third?" And we couldn't answer that question. That always frustrated me.

So, I embarked on a study. I looked at 2,500 organizations—a sufficient number to be statistically relevant. I focused on size, filtering out smaller companies to concentrate on those that were material. We assessed them from an acquisition basis, asking, "How effective have they been?"

People often suggest looking at the share price a year later, but that bothered me because there’s so much extraneous data in that. Who knows what’s affecting that number? 

So, I didn’t buy into that metric. Instead, I asked us to look at operating fundamentals. What happened from the base case to the post-effect case? Whether it was a single acquisition or a serial acquirer, did we see changes in their operating fundamentals?

So, did net income change? Did cash flow change? Did days receivables change? Did the headcount change? We got down to the fundamentals and created an index based on those. We then stack-ranked companies into four quartiles. While they weren’t perfectly aligned by quartile, this was our directional frame of reference.

You won’t be surprised that the quartiles revealed a more challenging landscape than the one-third successful, two-thirds failure statistic suggests. Only 11% were successful at the top, while around 38% were significant failures at the bottom. 

The second quartile was roughly in the low to mid-20% range but was effectively flat on a non-risk-adjusted basis—nothing changed. This analysis showed that not one-third of deals are successful; it’s closer to 11% or 12%. 

However, 11% to 12% were extraordinarily successful, creating substantial economic value, while everyone else failed.

What interested me wasn’t just the statistics but understanding what drove the difference. I wanted to move past correlation and get to causality. So, we compared the practices of the top quartile with those of the bottom, using data from interviews and public insights where possible. This comparison provided some really interesting insights.

Many factors make an integration successful. I won’t stand here and claim it’s two, three, or even ten things. There are 10,000 variables in a deal, from inception to the final integration stage, that matter. Success comes from executing that entire continuum with those thousands of variables in play and doing it incredibly well.

Five powerful themes emerged, and we’ve touched on many of them today. 

1. Integration thesis from the start - The first is that successful acquirers had an integration thesis. This thesis coexisted with the deal. It started loose and rudimentary, but it was a vision. As the deal progressed and moved into integration planning, the thesis became more detailed, eventually evolving into a comprehensive integration plan ready for execution.

2. Go-to-market focus over functional integration - Successful acquirers didn’t view integration through a traditional functional lens. While having a strong finance team, IT connectivity and HR are important, and they prioritized a go-to-market perspective.

They focused on the client experience they wanted to deliver, the customers they aimed to attract, the value proposition they would offer, and the brand statement they intended to make.

Now, regulators and attorneys might be cautious about what can be done under regulatory review. However, effective mechanisms like clean rooms and deal desks allow for pushing the client-facing side far down the field and opening it at the right moment.

3. Emphasizing the talent experience - Despite all the buzz about AI and next-gen technologies, organizations remain people-centric. The truly great acquirers understood this.

Alongside their focus on client experience, they also emphasized the people or talent experience. They carefully considered what the first day of integration would look like, addressing uncertainty and messaging.

This wasn’t just about communications. They didn’t just hand it off to a communications team and say, “Tell people a bunch of stuff.” They made it personal, defining the experience they wanted to create, discussing benefits over time, and outlining pay philosophy. The talent experience was central to their integration strategy.

4. Building a unified culture - We’ve talked much about culture, Kisan. It’s one of the four essential jobs of the CEO, but in successful integrations, the entire leadership team gets involved. They demonstrated the culture, found bridges between the two companies, and worked together to build a new, unified culture.

5. Capturing value and speed - The fifth theme is about value. We talked earlier about synergies and synergy capture. The truly great acquirers focused on getting value fast. They combined value capture with a strong battle rhythm. They made the hard choices early on—they didn’t wait or defer. 

These five themes consistently appeared in the successful 11% to 12% of deals, and they were completely absent in the bottom quartile, which was devastating regarding shareholder value destruction.

Are these the only five things to focus on? I don't know. There are certainly 10,000 other variables to consider. However, when I enter any deal, I focus on these five themes based on that scientific study and my 38 years of experience. These five things matter a great deal. If you get them right, you're setting yourself up for a much better chance of success.

To clarify, the third one is about people. Alongside a well-thought-out client or customer experience, you must also focus on the talent experience. What will your employees experience on the first day, the next day, the first year, or the second year? It's crucial to land a positive and cohesive talent experience.

People sometimes ask if the talent experience and culture are different. They absolutely are. The talent experience includes the annual review process, compensation philosophy, promotions, and finding help with benefits. Culture, on the other hand, is more amorphous but equally, if not more, important and powerful.