Watch and Learn: Learning from Large Corporate Acquisitions

24min
Season 1
Listen directly on:

Kison Patel, the Founder and CEO of DealRoom, joins Dr. Ivan and Ryan to discuss the difference between large corporate acquisitions and veterinary industry M&A.
Listen in to hear the fascinating the convergences and divergences between Kison’s journey and veterinary consolidation.

Topics discussed:

  • The goal that Kison has for his book, Agile M&A, and the framework that developed from that;
  • Similarities and differences between M&A in disparate verticals;
  • Inefficiencies of the traditional approach to M&A;
  • The role that Kison’s company, DealRoom, plays in the M&A process;
  • A common post-acquisition problem and why good communication is the key to solving it;
  • People-to-people issues are what make or break a deal, so listening to the HR perspective is essential.

Helpful links:

Speakers

Transcript

Ryan Leech, Director of Sales
Ryan Leech

Welcome to Consolidate That! I’m Ryan Leech, we’ve got a fantastic guest this week. Ivan, why don’t you go ahead and introduce our guest.

Ivan-Zak
Dr. Ivan Zak

Hey, I’m Ivan Zack, very excited to introduce our guest today. Unusual guest but comes from the rich M&A Experience. Kison Patel, thank you for joining us, I’m going to go over a couple of achievements that you have in your background. Kison has a degree in management and information systems from the University of Nebraska. He also is certified in SAFe 4, which is exciting because that’s what I got certified in last year.

He is a founder and partner of Transatlantic Investment & Advisory Group. He’s a member of Forbes Technology Council and he is a founder and CEO of two startups. One is probably not a startup, it’s nine years old. DealRoom as well as Agile M&A. Kison, thank you so much for finding the time and thank you for joining us today.

Kison Patel
Kison Patel

Hey, my pleasure, Ivan. Thanks for having me.

Ivan-Zak
Dr. Ivan Zak

Just by the background, I wanted, to our guests, I want to introduce why we got so interested in inviting you. You have two startups in the field of M&A. What we do in the field of consolidation is really about M&A and the rollups in the vertical we’re in right now is veterinarian, we’re looking forward to go to the other verticals but we specialize sort of in rollups. So our listeners are those that are doing rollups in the veterinary domain.

I was very excited to chat with you and to start comparing things, what does it look like, the M&A in rollups, where it’s sort of rinse and repeat and what are those compared to large strategic acquisitions and is there a different strategy to them and how did you add Agile into M&A world ? Because that’s where I’m geeking out on Lean, Agile and that’s what we actually claim we’re doing, we’re creating the framework inside of rollup and creating an Agile framework.

Lots of questions. I want to jump in and start with, what is DealRoom and what is Agile M&A and how did you get there?

Kison Patel
Kison Patel

Sure, let’s just start with that, a little bit of the background story. I spent 10 years working in M&A as an M&A advisor and is a pretty typical founder story. I saw a lot of the pain points and issues firsthand. Noticed a trend of project management software tools stemming from the software industry, entering other industries and thought, “Eventually these large M&A transactions aren’t going to be managed in Excel forever. Let’s get ahead of it, create a technology platform specifically for M&A,” and that was the start of DealRoom in 2012.

It was a slog, it was extremely challenging and I think we may have missed the timing a little too early but along that journey, a friend of mine in marketing was like, “Hey man, you should do a podcast.” I was like, “What the hell’s a podcast?” “Don’t worry about it, it’s going to be the next big thing, you just gotta do one.” Eventually I said, “Why not? Let’s go for it,” and what that actually led to was developing a platform with a goal of enabling practitioners to be able to share lessons learned.

Because the bigger – when I got into the industry and the technology side, I saw this larger underpinning problem of how the industry operates in the silo and there’s a lack of standardization and really, evidence in the practices that we put in play when it comes to M&A. What I ended up doing after going through a couple of years of this podcast interviews, we published a book called Agile M&A.

The trend that we focused on was the way tech serial acquirers would utilize Agile techniques in their M&A approach and attributed a great deal of their success and scale by utilizing those techniques and that’s where we found it really compelling and identified this is a potential growing trend and created a book around that.

That really felt a nice adjacency with DealRoom and essentially being a project management tool, let’s really get into the methodology. I think Atlassian was another big influencer in that as well. I remember interviewing Christina Amiry over there and she stopped me and said, “Kison are you going to write another book?” I was like, “What do you mean?” She’s like, “Write more than a book, make it into a framework so other companies can adopt these practices,” and then she walked me through the way Atlassian approaches these ideas of Agile, how it’s part of their culture but how they also use these concepts of game plan and plays so that they can really isolate these techniques step-by-step, make them easier to share within their organization and encourage teams to structure their own game plan, essentially defining the operating framework by which their teams operate and how they’re structured, how they’re sharing information, managing dependencies, et cetera.

That’s kind of a little bit of a background and sort of what led from DealRoom and then into starting a podcast and the publication Agile M&A.

Ryan Leech, Director of Sales
Ryan Leech

Kison, that’s great information. What was funny is I looked through your website and as I’ve learned more things from Ivan about the different things he’s done, I thought that he might have been just following your round a little bit and learning some of the things he did because there was such a wonderful parallel between the ideas we’re trying to bring to consolidation and what you’ve brought to M&A.

What exactly is the operating framework that you guys have for M&A and can you give our listeners a little bit of background about that?

Kison Patel
Kison Patel

We started with something really basic, the book we published, Agile M&A, introduces very basic concepts. I thought it was interesting looking at your company’s website, you’ve really taken a lot of these ideas but expanded it into more of a detailed methodology essentially, expelled into these little details that companies can take into more practicalities of applying it. Where I feel like what we started with was a very broad, loose structure, with the goal of just getting people to think about Agile or understanding what Agile is and introducing them to the very fundamentals.

That’s sort of what it is and we always had the goal of, this has got to evolve on its own and it’s got to be contributed by other practitioners that have domain experience because M&A is obviously – there’s so many areas within it. There’s the project management side but then there’s also, every operational component which has its own uniqueness and how you manage them and that was the goal – can we enable practitioners to be able to start defining these other areas of practice?

Ryan Leech, Director of Sales
Ryan Leech

Have you found that people that are coming from a technology space have a different understanding of your view of M&A than people that may be, are strictly private equity or from other verticals?

Kison Patel
Kison Patel

I think, generally, everybody has this very typical, traditional approach, the very plan driven, think of a giant excel sheet, getting through this list, waiting, waiting, getting an avalanche of things that you need to respond to, then waiting, waiting, it’s highly inefficient.

Ryan Leech, Director of Sales
Ryan Leech

Yeah.

Ivan-Zak
Dr. Ivan Zak

That’s amazing. I mean, just for the listeners, this is not scripted at all, we’re just jumping into this conversation and I’m understanding how much of what we do is very similar. But our story’s different in that I came from the veterinary background and then built technology and then when we came out, I realized that there’s a better way to do this and because the domain is so, right now, involved in consolidation, there’s a big opportunity, there’s tons of private equity money, veterinary medicine proven to be immune to COVID virus so it went up since April, it went down.

There’s a lot of activity and then we wanted to solve problems and I said, “Let’s not,” because I built the software before for vet clinics and you struggle with onboarding people. We went the other way around, I said, “Let’s build the framework and then once we build a framework that will become requirements for the software.”

Then along the way, we said, “Let’s start the podcast,” and then now, we’re talking about writing a book. This is so – this is incredible to understand how you arrived to this sort of, from the other angle and that at least it proves that what we’re doing is similar and someone else has done it and it probably is a proven path.

I’m very interested in, where is the focus of the DealRoom? Are you focusing more on the sort of the front end and the deal flow and the stacking the deals, putting in the pipeline? Or it’s more of managing one case at a time? Because as I said, you know, the rollups is a rinse and repeat process. What is the focus of the software and the methodology?

Kison Patel
Kison Patel

It evolved. Back in 2012 our initial focus was diligence management that we saw as this troublesome pain point of doing this in Excel, highly inefficient. Then from there, expanded as a natural progression to get into integration management where we noticed in the industry a pain point was knowledge chasm between diligence integration. And when that knowledge chasm exists, you essentially waste a lot of effort and resources re-diligencing the deal all over again. The next one is, can we create the continuity between diligence integration?

Then, probably in the last two, three years, it’s been the pipeline and can we introduce and manage the pipeline and really create continuity through the stages and manage the deal through a single database? So that you’re not only enabling much better collaboration but that knowledge transfer goes seamless through those stages. That’s been the evolution of the product.

In terms of markets that we’ve been serving, we started with the focus on investment banks. I think the challenge with banks is their incentives aren’t there to really innovate and improve and create value. It’s sort of a disconnect where you have one person that’s selling engagements and have another group that’s executing but they’re not really motivated to drive efficiency.

We found early on, corporates were really the early adopters, where they’re motivated to make the process more efficient so they can do more deals and just a lot of incentives around it, great cultures and environments to work with and it was always interesting being able to get involved with different industries. It wasn’t long before we really identified consolidations were really the sweet spot where we had the greatest level of success. Just because of the scale and volume that those organizations are doing, you’re creating this really transparent value for them because they experience it every time they do a deal. They’re iterating in the platform with their processes, to make it more and more efficient.

I think that’s one area we have in common is sort of the area focused with the consolidators that there’s a great opportunity to drive efficiency when doing them.

Ivan-Zak
Dr. Ivan Zak

Yeah, absolutely. That’s great that you’re in the same even domain. You pointed out something, the problem that you were solving, the disconnect between the diligence and integration and then if you’re talking about the consolidation and the rollups, then there’s also further disconnect with the value creation post integration, right?

Initially you integrated and you probably get your first couple of points off the very first things when you do vendor management and some operational efficiencies that are baked in but then the further disconnect that we’re observing a lot in the veterinary industry at least is that, that the diligence is not really uncovering the synergies that are exact to the business acquired. It’s just sort of, buy anybody with a pulse and then as you buy them the M&A just doesn’t care anymore, they get the next deal or the business development and then the operations have to deal with it.

Is that the problem that you have seen in other domains and is that something that you focused on solely through this data continuity?

Kison Patel
Kison Patel

Yes, I like that you’re approaching it with a level deeper than we get into where there’s more of the actual technical executions and understanding the strategies that need to map to those activities to be able to deliver that value.

I would say our domain focus is more in enabling the collaboration, can we create the environment that creates this alignment with team members to really clearly understand and articulate their goals and act on it? So it’s that whole sense of project management. That’s probably our big area of focus is just making sure this collaboration is there so their teams are able to really align and execute well.

In terms of that actual direction and identifying those specific things, I think that’s where our next evolution is, is to partner with practitioners like yourself that have more of the M&A executive expertise that some of these companies are lacking and really being able to drive that model for them so that it’s a good win.

Ryan Leech, Director of Sales
Ryan Leech

Kison, do you think that the both sides of the acquisition should be as invested in it? Both the, for our example, the consolidator as well as the practice, do you think there’s things that the company that’s being acquired are missing out that technology or knowledge-base or a better understanding of the M&A process would benefit them?

Kison Patel
Kison Patel

I think that’s sort of the common theme I’ve seen from doing the podcast interviews on M&A Science is that a lot of times the target company, they don’t have clarity in what happens after close. They don’t really know what integration means, what’s involved, sometimes they don’t have real clarity on the post-close plan. They may get sold on some things to know that there is a smooth transition to get them to do the deal but there’s some bad parts too and just to be able to be transparent about it so they’re mentally prepared I feel like is missing.

A really good perspective, a couple of interviews I did was with Carlos Cesta and he is a 20-year M&A veteran, started at Verizon, then to Aegis, so a consolidator there. Now, he’s at Presidio. I really enjoyed his view where he would have this integration lead involved early in the process before even LOI where that integration lead is sitting down with the CEO of the target company and outlining a go-to-market-plan together and that that initiative to create this outline evolves into creating an integration plan that is a work stream that runs in parallel to diligence and iteratively evolves as they continue to get information through diligence and it’s deliverable by closing as this final integration plan that’s typically well-thought out because he was involved early enough. He had all the time he needed, he was able to keep evolving it through the diligence process but at that same time, he’s got the management team involved, like they know what’s coming. They are part of that planning process.

But I am curious if you have seen anything like that in terms of an approach or what your thoughts are?

Ryan Leech, Director of Sales
Ryan Leech

Well, you know that’s interesting. I was going to say that it is kind of unique in that idea that I think a lot of groups maybe are scared to start looking at the integration or sinking in the human capital of the integration prior to knowing the financials or seeing the LOI or doing some of the additional due diligence. But from what you’re saying it sounds like maybe that’s something that, the long term benefits of that integration are going to be outweighed by perhaps the couple of deals that don’t go through even if you are integrating with those people earlier on.

Kison Patel
Kison Patel

Again, another pair of eyes and you’re just painting the vision together and that person involved is one that ultimately to deliver on those predicted value drivers and what they are identifying but then you’re also inviting the target company to be a part of it.

Ivan-Zak
Dr. Ivan Zak

It’s interesting maybe to compare and ask you, so the specific problem that we are trying to solve for, I mean the big problem is a lot of those that you identify but what we’re seeing is that acquired hospitals, at least in the veterinary domain, everything like you described is happening. The people are sold upfront on the idea, basically either getting some liquidity or full liquidity of their assets and then if they are getting partial liquidity, they are incentivized to work after that because they’re not really retiring yet.

Let’s say they want to be in another five to 10 years of practice but have a job rather than running a business with some benefit at the end, so the industry is now transitioning into these sort of JV’s type or partial equity rolling into the entire consolidator but what again happens after is that these people are still arriving to the point where they, A, don’t understand that they are losing the autonomy, like that’s a big thing. And then also that it’s still them delivering the value and I don’t think like this really clearly outlined.

Then the bigger problem after that, that we are trying to solve for, is then how do you measure success because you can design the plan but if you don’t have the metrics that are associated with wins, then how do you deliver on that? On the data side, are you digging a lot at all into that side of things or are you more again at the strategic level sort of helping the transition through it?

Kison Patel
Kison Patel

Yeah, we’re still more of like the technology company. We’re here to help define and provide their infrastructure and really look and identify, what are the challenges when doing the deal? Our conversations are typically mapping out, who are the different key personas involved throughout the life cycle of the deal? And understanding what are their unique pain points?

And a lot of this falls on, “Hey, we have challenges at getting different functional leads involved in the deal to really correspond with each other because if they’re working off in silos, they are not sharing information and this leads to redundant work. It turns into more of a checkbox activity instead of connecting the dots and identifying the underpinning risk.” That’s sort of the things that we hear from the deal team.

And then even for the integration side, it is always 90% of the time, “I want to be involved earlier so we could plan this stuff better,” and so forth. So really focusing on how do you create that environment for those team members to be able to work together and manage the information more efficiently?

Ivan-Zak
Dr. Ivan Zak

The interesting part that you mentioned about the functional leads because at the level of organization, if you think about below the executive level, there is departments that their task is to create the frameworks to deliver on certain growth level post-acquisition and then they identify functional leads at the level of the hospital but then what happens as soon as the hospital is acquired, then the organization, all departments throw 10 processes at them at once and then inventory wants to establish new inventory process. IT replaces their stuff and they put new practice management system.

Then all of that is thrown at the person that felt that he is retiring today and then what the biggest challenge in the industry right now and that is sort of our core, what we are trying to solve for, is that they’re just leaving and then if there is no – yes, there might be incentive for the practice owner but then if there is associates that weren’t in the deal, they were just working for this person, they’re leaving and the problem, in at least veterinary domain, there is way more animals than vets out there today and that it’s hard to retain the human capital so instead of gaining the synergies post-acquisition through, you know, certain improvements, you are losing the entire provider of their revenue and then that becomes a completely different problem to deal with.

Do you see that in other verticals where people get through M&A and then they get to a frustration point and they leave and then it’s a different problem to have?

Kison Patel
Kison Patel

Big time. I think part of it is a learning curve that you sort of learn these things. We just interviewed about M&A communication and if you don’t understand that, you sort of are going to be very vulnerable right off the bat because as soon as deals gets announced competitors in their sector are going to look at it as an opportunity to come in, to sort of poach people from the company, try to pick up customers and things of that sort, which is why it is so important to have really good M&A communication in place, so people are comfortable with the transaction earlier instead of being in this position of uncertainty.

There is sort of that part of it and then I think a lot of industries do deal with similar challenges in different ways when you are running this post-close activities because it’s, again, that whole fabled failure rate in M&A, it’s sort of attributed of in a day to exercising all of your post-close activities to hit your target evaluation. I feel like that is sort of the common challenge across the board.

Ryan Leech, Director of Sales
Ryan Leech

Yeah, I think that’s great. I think a major takeaway that I’m going to have in all of our conversations with our clients on this, is going to be to not be afraid to allow both sides of the conversation to happen prior when the biz dev team is still having those conversations, let the integration team exist and be part of that. Don’t be scared of siloing off those parts because there are people involved.

Kison Patel
Kison Patel

Look at like IBM, Cisco, trying to think of some other ones, it’s just how they’re M&A’s matured. More and more emphasis on integration upfront, some of the Agile concepts of prioritizing the value drivers of the deal. I know Cisco’s completely repositioned their process to get away from having all of the magnitude of functional work streams during integration to just creating cross functional groups that really are aligned around those value drivers of the deal. There’s definitely things changing in multiple ways to really focus on those activities after close.

Ivan-Zak
Dr. Ivan Zak

Very interesting. I never realized we blew through 23 minutes already. This was very, very insightful and interesting. We ask two questions at the end and one of them we usually ask for is, is there anything that you’ve recently read, watched or learned about that you would like to share? But I am hoping that you will recommend your book and so if you can tell us what it is, where to get it and where people can get all of that, that would be great.

Kison Patel
Kison Patel

Sure. The book I published was called Agile M&A. It’s available on Amazon. Pretty simple, it covers the one-on-one’s of Agile but then builds the case on why it’s very applicable in M&A and then actually walks through the examples and techniques that can be applied, really simple concepts to understand that I am sure Ivan you’re familiar with. Doing steps, the stand-ups, the backlog approach, building cross functional teams, these fundamentals of Agile.

Just really good for somebody that’s not familiar with Agile and wants to know that’s more than just a buzzword in a corporate world right now.

Ivan-Zak
Dr. Ivan Zak

That’s awesome. Do you have anybody in mind for maybe your previous guest or someone who would be an interesting guest for our podcast to talk about M&A in our domain?

Kison Patel
Kison Patel

Well, I think Klint Kendrick. Klint Kendrick is an HR integration expert. He has sort of worked at several Fortune 500 companies and I think adding this sort of people lens out of it. When you look at M&A at the end of the day, as much as I can push project management tools and all of these things and we can say it is because of bad technology or whatnot, it’s always people-to-people issues. So I think the HR view is real powerful one that often doesn’t get heard as well and he’s just been great. He’s got a book he’s published as well around HR diligence, probably a great person to have on your show.

Ryan Leech, Director of Sales
Ryan Leech

That’s wonderful.

Ivan-Zak
Dr. Ivan Zak

Kison, thank you so much for joining us. This was very interesting and I am actually hoping we’ll lure you in one more time because that was not enough time, so thank you for finding the time.

Ryan Leech, Director of Sales
Ryan Leech

I wanted to throw out there as well, Kison does have his own podcast, so that is one another thing that I think was really important to hit on. Kison’s podcast is M&A Science, which is a fantastic piece to listen to also.

Ivan-Zak
Dr. Ivan Zak

Any other sources of how people can learn more about what you do, can you please just tell us the websites to go to and where to find you?

Kison Patel
Kison Patel

Yeah, I’d say our main website is mascience.com and on there, we have our different business lines. I think the more recent thing we started last November was an online academy, so it’s M&A Science Academy but that’s been real fun and exciting working on that, sort of disrupting the space for M&A training and really trying to modernize it with more of a micro learning content.

Ivan-Zak
Dr. Ivan Zak

Yeah, so if anybody wants to find out more about this mascience.com and Kison, thank you so much for joining us.

Kison Patel
Kison Patel

My pleasure, thank you.