Why Half of Acquisitions Fail

Welcome to M and AOC, the number one podcast in all things related to mergers and acquisitions, brought to you by Morgan and Westfield, a nationwide leader in mergers and acquisitions for small to mid-market companies. We bring you exclusive interviews with industry. Experts in business sales, valuation, private equity, investment banking, and more. It's our mission to provide you with insight and guidance on how to build your company's bottom line and maximize value for eventual sale. Here's your host, Jacob. Welcome to M&A Talk. My name is Jacob, president of Morgan and Westfield and your host of M&A Talk. And joining us today we have Mark Saroer in New York, New York. He's the co-author of the Synergy Solution How Companies Win the Mergers and Acquisitions. Mark analyzed over 1200 M&A transactions or acquisitions over a 24 year period of time, and he found that approximately half were successful. And we'll get into the definition of success, how we define a success. Why those were successful and why some of those weren't. And again, this is 1200 transactions over 24 years. So this is gonna be a very interesting show and Mark again is the co-author of the Synergy Solution. So Mark, it's good to have you on the show. Well, thank you, Jacob, for having me on M&A Talk. So why a book on synergies, by the way? Well, it goes well beyond synergies. It really is a book on M&A, and um we start at the very beginning, which is developing a strategy all the way through diligence, valuation, announcement day, uh sign to close planning and post closed execution. Synergies are obviously a theme that runs through the whole book from the beginning because you're paying for them upfront. What do you mean by that? Paying for them upfront? Oh yeah, and that gets to uh what I think is different about M&A. I mean, you pay it all upfront before you even get a chance to touch the wheel. Once you pay the price, there's no diverting the funding, there's no moving the funding and something else, you've paid it. Mm, it's kind of undoable at that point. Well, we'll get to that. The second thing is, when you pay a premium for a company, it's sort of a shock to the system because you're creating a brand new business performance problem that Never existed before, and no one expected. You know, if you're paying a 2030, 40, 50% premium for another company above its standalone value, you're making a whole new set of promises. And to your point about integration, once you do the integration that's so essential to making a deal work and realize the value, you've jacked up the exit costs. It's very expensive to unwind. So, M&A is different. So synergy, I guess the implication is that There's a relationship there between an acquisition and a synergy. Let me ask you a dumb question. Does there always need to be synergy for there to be value created in an acquisition? You're going to pay a premium, there, there better be. I mean, their shareholders could go up, and this is an old Warren Buffett comment, but your shareholders can readily diversify on their own without paying a premium. Very good point. So, If we back up a minute, kind of talk about your experience, and we go back into your experience, how did you arrive at the point where you decided to write a book on synergies? Well, that's a long story, but I'll try to make it a short one. So, I started out as a doctoral student at Columbia studying M&A and, you know, you're confronted in academics with 4 different literatures. You've got the industrial organization, economics literature, you've got the finance literature, and these are vast literatures, and they're 50 years old now. You have the strategy literature, and then you have the HR and change management literature. There are 4 separate literatures, and they don't really talk to each other. And so that got me interested in, you know, really on an applications of that. And when I started working with companies, you find the same sort of issue. You get the finance people on one side of the room. Uh, you got the HR people on, you know, the finance people say, hey, this is very simple. You excise 10% of the workforce, you capitalize the savings, and there you are, and, you know, you have the HR folks and change journey, change management folks on the other side, and they say, no, no, no, it doesn't work that way. You can't just move people from Silicon Valley to Milwaukee and think they're gonna stay. You know, and then the old joke was, then you have the strategic planning, corp development folks in the middle of the room, and they don't really like numbers or people. You know, it's all about strategy and position and competitive advantage and, you know, that sort of thing. So, that's what got me into this. And, um, So, I wrote the Synergy trap 25 years ago, which was the challenge that you're setting up for yourself and the oversimplified, but the challenge that you're setting up for yourself when you pay a premium, this issue of market reactions being important. And, um, I've been in the business now, you know, long story short, I've been in the business for going on 25 years, and, uh, you know, you learn a lot over time, a lot of innovation from the beginning with what does it mean to have an M&A strategy, and then Test the hypotheses that come out of that, and everything that comes after that, so. What did you notice in the real world? So you have experience at the the Boston Consulting Group, you're the global leader of M&A there. PricewaterhouseCoopers, you had a role there, and currently at Deloitte. So, in the real world, what did you notice with acquisitions and the realization of synergies? Well, You know what people will say about M&A. You know, it's just so simple. You have a strategy, don't overpay and manage the cultures right, and there you go. Uh, what I noticed pretty early on, I'll give you a couple of thoughts, is that all these pieces were disconnected. You know, people who deal with strategy, there might be different people working on diligence, post-merger integration was something that came later. And, uh, and these things weren't connected. The other thing I noticed, and this was way early on in my BCG days. You know, you look at consultant notes doing diligence on a deal, and you'd see people asking, how did this deal ever get here? Like, why are they even looking at this? And that got me into the reactive nature of so many companies as opposed to having a real well-defined M&A strategy in place from the beginning. That's interesting. We did another show with uh Raghav Ranjan, who's also with Deloitte, and uh he kind of talked about investigative journalism and Uh kind of taking that approach to, uh, due diligence and assessing the transaction and kind of connecting the normally disconnected pieces that the, the various teams and so forth. And, um, I really like that show cause it changed my perspective on due diligence and the potential to realize synergies. What if you had to define the success rate, and of course, I think we need to provide a definition of success. How successful would you say most acquisitions are? And what would that definition be? How would you define success and measure it? So there again, there's a, there's a vast literature on this. I'm not the first person that uh who studied M&A. We generally define success, at least the way, you know, it's been historically done, and it's been measured different ways, but the chief way has been shareholder returns. Adjusted for peer performance, and we call them, you know, relative total shareholder returns. And we look at them around announcement because, you know, if you think of announcement day and investors react, that's their initial forecast. And then we look at them over time to see if that initial forecast meant anything. So, and, and also, in general, when you think of superior performers, it's generally based on their relative total shareholder returns. Now, Uh, people have also tried to, to look at accounting returns, like return on assets or, you know, return on equity, but then you get a lot of methodological problems because comparing returns before versus after, how far back do you go? You know, do you go back a month? Do you go back a year, do you go back 5 years? And then what are you comparing it to in the future? So there's all sorts of issues and um plus you're paying a premium and uh and that changes the. You know, the amount of invested capital. How can you isolate that one variable when you're measuring shareholder return? How would you know that it's due to the acquisition? Well, you have to be very careful when you do this work, you know, when you, uh, when you do an M&A study, you have to put some conditions on it. You know, you're taking a sample from a vast amount of deals. So in, in our study, uh, we looked at deals had to be at least 100 million in size. The target had to be at least 25% the size of the acquirer, so it was significant. So it could have an impact. Yeah, and also the uh the buyer, the acquirer couldn't have done another major deal over the course of a year, cause if you start including those, you get a lot of noise. And you said in your study, what study are we referring to, by the way? So, we did a 24 year study. In the book, we covered $5 trillion of deals, over $1 trillion of premiums over 24 years. Uh, we looked at over 1000 deals, and, uh, so that's the study, and then we took it in several different directions. This is the foundation of data for the book that you wrote? That is correct, yeah. This is what gave us those major findings up front that transcend the book. Interesting, OK. Who was involved in the uh the study, by the way, 24 years is a long time. Thankfully, there's a lot of public data. You know, when I first started doing this work 30 years ago now, it was tough to get data. You had to really, uh, hunt it down, uh, so to speak. But when we did the study, I, I guess another feature of it was, or is, that we wanted to use publicly available data, public databases like Capital IQ. So it was readily replicable. And does that mean that these are all public companies? Yeah, that was the other condition. They had to be uh traded on a major US market, and then both acquire and Target had to be public. And so how many total transactions just ballpark and the data that you analyzed? Over 1200, 1,67 to be exact. And did you ultimately come up with one definition of success? I know you said shareholder value. Was there one that everyone agreed on or did you, did you kind of narrow it down to just a few different definitions? Nope. Uh, initial market reactions and how those companies did over the course of a year. Got it. What's the success rate? Well, consistent with the literature, at least most of it, we found over 24 years, about 60% of deals are met with negative marker reactions and 40% with positive marker reactions. And, you know, when you talk about M&A, it's about averages. So, on average, uh, acquires underperform their peers by about 1.6%, so negative 1.6% returns on average, uh, at announcement. And so, I would imagine you first looked at this data. And said, wow, this is shocking. And then I need to figure out why, and he figured out why and wrote a book. Is that kind of the the story of the uh trailer here? Well, not exactly. I mean, the what I just told you is just the starting point. And I'd done these kind of studies before. I, I did them in Cindy Trap. We had a cover story back in 2002 in Businessweek magazine that covered the 1990s deals. So, I'd done these before, but I hadn't really used the findings to drive a lot of what we were talking about, and I can go on on this. What do you mean by that? Yeah, so it's fine, chores on average underperform their industry peers, and you could say 60%. You know, 60/40, you could say 65, 35, you could even say 50/50, but that's not really the story. The story is the importance of these market reactions, these forecasts that investors offer, right on the announcement of a deal. And, you know, still to this day, you'll hear folks say, you can't judge the success of the deal by the short-term marker reaction, or market reactions don't matter. That's the other thing we, we tend to hear. Or you can't do something this big without, you know, hitting it hurting your share price. And so what we did is we uh divided the positive reaction deals into a portfolio at announcement, and the negative reaction deals in a portfolio at announcement, we tracked it out. And a year later, you know, if market reaction didn't matter, the positive portfolio should trend to zero, and the negative portfolio should trend to 0. Mark reactions didn't matter, but they don't. Uh, the positive portfolio stays strongly positive a year later, and the negative portfolio is, uh, Strongly negative a year later, but there's more. How big of a difference was there? A difference between what? Uh, between the two portfolios. The positive portfolio has, you know, roughly an 8% positive, and the negative portfolio roughly 8% negative, and that stays very strong over the course of the year. Wow, substantial difference. So how on earth could the investors get this right? Well, let me tell you one more thing on the findings, and we can get to what what do you think investors are looking at? Uh, so we went on with that, and we looked at, what about those positive reaction companies that stayed positive versus the negative reaction companies that stay negative, because some do turn around on both sides, and the, the, I think the real story is that uh there's a 60% point difference in returns between the companies that start positive and deliver on those initial forecasts. Versus the companies that start negative and confirm or deliver on that negative initial forecast, the 60% point difference in returns. And that's really the story, you know, which is, what's the difference between the good guys and the bad guys, so to speak. And, you know, it sort of gets to the fundamental premise of the book, you know, we, we start out with, look, M&A is different, different than other capital investment, capital investment decisions, you know, you, you pay upfront, you pay a premium, you create this brand new performance problem that didn't exist, and you've got exit costs that are sky high. But the other thing is that capital is luxurious, it's expensive to touch, and there are smart things to do with capital and less smart things to do with capital. What do you mean by that? Yeah, so your I think your question was, what are investors looking at? Well, you know, we devote a lot of time in the book to this, but this gets to the importance of announcement day, because you have this, you know, we, what we call a classic asymmetric information problem that that management knows more about the deal than investors do. And then, uh, by the way, stakeholders in general, you're not just talking to investors. And so they can only go by what management signals. And so if you're paying more for a company than anybody else in the world thought it was worth, and you're not giving them anything to track or monitor, you're injecting uncertainty into your workforce, and if the benefits you claim, you know, don't capitalize to the premium, it's just that you have an economic balance sheet. You know, I'm giving this gift to the shareholders of the seller, and uh investors are basically saying, uh, is it worth it? or asking if it's worth it. What's the typical uh premium that you've seen? The average changes year by year, but over the 24 years of our study, it was 30%. And uh that's, so that's the premium that's actually shared uh that's paid for the company, correct? Uh, that is the difference between the price of the seller before the deal and the offer price. Got it. OK. Let's cut right here and take a break and then when we come back, we'll kind of dig into the Into the why. I wanted to kind of set the stage here because I know that this is the beef of the book, if you will, the why, that some of these acquisitions aren't successful. So let's take a quick break and then we come back, we'll dive right into that. Experienced, focused, trusted, Morgan and Westfield specializes in the sale, acquisition, and valuation of privately owned businesses. Our small and middle market teams will commit their vast network of resources, including financial, legal, and other specialists to help you get top dollar for your company. Visit Morgan and Westfield.com today to learn more. All right, welcome back to M&A Talk with uh Mark Saroer. And again, if you're enjoying this podcast, don't forget to subscribe, hit that like button and subscribe so you can uh receive updates uh when we publish new shows. So, Mark, uh, the simple one word question, why? Why aren't these? Uh, is it 60%? Why aren't 60% of the acquisitions successful? So, you know, my sort of comedic answer to that is, uh, you know, it's what everybody says, um, you know, have a strategy, uh, don't offer pay and uh manage the cultures right, and there you go. And obviously, that's not a very satisfying answer because it misses so many things. We stress 5 themes throughout the book, and we don't explicitly actually say them, but these are the themes that connect the pieces of the uh of the M&A cascade, which we can talk about, but You know, one of them that I've already mentioned is, M&A is different. You're paying for this upfront. Capital is expensive. The second theme is that you have to know what you want and why, and how you're going to create value. The, uh, the third thing is, uh, understand the promises that you're making. You know, when you're doing a valuation model, and you're putting numbers into it, they're assumptions, but once you pay it, they're promises. And that comes loud and clear throughout the um connectedness. And um a communication starts at the beginning. Understand you're not just communicating with with investors, you're communicating with all stakeholders. And finally, how are you gonna deliver on your promises? How are you're gonna realize those synergies and all the other benefits that you're that you're paying for? How did you come up with these, uh, these solutions or themes? Well, it started with the M&A Cascade, really, which is, you know, what does a deal look like from beginning to end? And so it starts with M&A strategy. You come out of M&A strategy, not just with a watch list of your most important deals, but hypotheses that you have to test in diligence. And when you come out of diligence, you're not just saying this is a go or no go decision, you're coming out with inputs or testing inputs in your evaluation model, and you're doing early integration planning. Diligence has to give you inputs for early integration planning, especially operational and commercial diligence. And then you get to the evaluation stage, and, uh, you know, we go through DCF and it's sort of mirror image, economic value added and translating the what you do in a evaluation model to promises, and then it gets you to announcement day where you tee this all up, you know, for the world to evaluate, and then you're in the sign to close planning and post close execution, and we can go into more detail these as we go. Yeah, maybe we'll dive into those themes a little bit later in the show, but For those that are listening, corporate development, how does M&A compare to other corporate development options, cause a lot of people say, well, acquisitions aren't successful, and of course the follow-up question is, well, successful compared to what? Because uh some of the other corporate development options might have equally high failure rates. So how do acquisitions compare to other corporate development options? So, let me set something straight about M&A. I think going into this saying that most deals fail wasn't very helpful, because we know that 40% get positive reactions on announcement, and the deals that deliver have great returns. We know there are plenty of great acquires, so it's not that deals fail, it's poorly designed and executed deals fail. Mark, let's back up a little bit and talk about the cascade and what you mean by that. What exactly do you mean by the M&A Cascade? So, we think of M&A from the beginning, and I, I, you know, I should say that, um, you know, in the past, if you looked at topics on M&A, they're treated as separate topics. M&A strategy, diligence, valuation, announcement day is almost completely ignored, signed to closed planning, and even post-closed execution is, isn't well covered in the literature. So, for us, that's the cascade of things you have to get right, but more important, they have to be connected. That you don't just start thinking about sign to close planning after you announced the deal. That's something that should have been started during diligence. And um you don't just boil the ocean during diligence. Diligence is supposed to be testing hypotheses around how you're going to create value with the and it's a cascade that begins with what are the most important deals that need to be on our watch list over the next 12 to 18 months. Why do you think those pieces of the puzzle aren't integrated? We suggest that it's because many companies are reactors. You know, they have lots of ideas for growth. Uh, if you look at their vision statements or their strategic plans, and they have all these different adjacencies, they could go into new businesses, they could go into, and they haven't prioritized their pathways. And one of the big mistakes in M&A strategy is confusing pathways with criteria. And uh most companies spend a lot of time and diligence. They react to a deal that becomes available, they, they waste a lot of time and money on diligence, often looking at deals they have no business looking at in the first place, given what they've stated is their strategic priorities, or growth priorities, customer segment priorities, product priorities. So we think it starts out with being reactive, which is essentially spending your time playing not to lose. And instead of playing not to lose, prepared acquires are companies that know what they want and have made a lot of difficult choices. There's a lot of, you know, there's a universe of opportunities out there, but prepared acquires play to win. You know, they know what they want. You know, most successful acquirers might have, may only close 10 or 20% of the deals on their watch lists. So they're constantly looking at the markets, they're looking at what their peers are doing, what their customers want. So they're regularly refreshing their pipeline of deals. If you don't do that, Then you've sort of trapped yourself into being a reactor, and then you're just playing not to lose. Just to specify here, what would a reactor do? I, I'd hate to give an example of a reactor. I'd like to ask for maybe some model examples of some of the uh the best acquires. Yeah, the classic one is a, a banker brings a deal cause they think it's a great idea, and the company goes, All right, let's think about it. You know, and a prepared acquire puts themselves in position. It's very difficult for a banker or a board member from another company. To bring them an opportunity that that they haven't thought about. Sounds like a lot of work. It is. And that's why all this starts at the beginning of the cascade. I've got a universe of opportunities I can choose from, you know, one of the things that we find in pure M&A strategy projects is about 2 weeks in, the CEO will say, I didn't even realize, or the head of corporate development, will say, uh, I didn't even realize all these players were out there. And they're all different sizes. Some are big, some are small, some are, you know, you know, mid-market, and you gotta make choices. And, uh, you know, even when you get down to a watch list, you might start out with uh 500 companies in your universe. And even if when you get down to a watch lists with 20 deals, your most important deals that you're gonna pursue over the next 18 months. Each one of those deals represents a slightly different strategy, which means that the diligence you're gonna do is different. The plan you're gonna do is different, and and so on. It seems to me like you're describing a proactive versus a reactive strategy. The proactive, of course, meaning to sit down with your corporate strategy and figure out what your objectives are and what you want to accomplish. And then like you said, look at the universe of opportunities, maybe there's 500 companies in the industry and select 20 that you want to go after and then execute those transactions. The ones you can close, yeah. Mhm. And then it seems to me like perhaps there's a dispersed group of people on the team, and there's really not, um, this is a wild guess. Seems to me like there's maybe not continuity across the transaction, which is why the the strategy perhaps disintegrates and then at the end, there's not really much of a strategy. To what extent do you think that's the case? Well, you're presuming there's a strategy in the first place. So, I think of it this way. Most successful business, all, maybe all of them, they do pretty careful strategic planning. They have operating plans, they have strategic plans, 1 year out, 3 years out, 5 years out. M&A has to be thought of as carefully as the things you are are already doing on a regular basis. That's a very good point. Who should be at the head of this? Well, it really depends on the the size of the deal and the purpose. But on major deals that can move the needle, certainly the CEO and the board, you know, and the head of corporate development and strategy. Are there any model companies that you'd want to share that uh you think do an excellent job at executing acquisitions? Yeah, we write about a few of these in the book. Uh, Amazon is one of those companies that most people don't realize how active they are in M&A. You know, they started out basically as a bricks and mortar company putting buyers and sellers together. And today there's, you know, everything from the Kindle to AWS to the connected home, and Alexa, food retailing, you know, this, this didn't happen overnight. It was a long process of combining, you know, internal research and development with strategic and tactical M&A along the way across very carefully chosen pathways. And those were proactive, it sounds like, as opposed to a banker threw him a deal. Yeah, they're looking at deals all the time. They're looking at deals all the time. Interesting. What other companies uh have you seen that have been very successful in acquisitions? Well, we also write in the book about Ecolab. You know, Ecolab was for years a company did a lot of smaller deals, and then they bought Nalco, and they transformed the company with it. Interesting. And what would you attribute their success to? Well, on both those cases and successful choirs in general is, they know what they want. They know what they want, and how they're gonna create value. And that value creation process starts right up with M&A strategy into diligence. Into evaluation, and, um, you know, right through sign to closed planning and then executing those plans. The strategy in knowing what you want, I mean, you have a paradox of choices with the universe of opportunity. How do you narrow that down to exactly what you want? That's a great question. That is the grand question, and I'll put it this way, uh, developing an M&A strategy is an orchestrated process of making strategic choices. And that's the hardest thing for management teams to make, because the world is your oyster, you know, you may have been reactive to deals in the past that you didn't do. There's all kinds of choices, customer segment, product offering, technology, uh, geography, size. There's all kinds of choices. If you don't make those choices, someone's gonna make them for you. Someone's gonna bring you a deal that you'll do, and they made the choices for you. Why do you think they're not able to make those choices? Well, they're hard to make. I mean, they make them in the regular strategic planning. It's just you're confronted with so many opportunities, you have to make those hard choices up front. So, you know, for example, we usually start up an M&A strategy process, which is around, uh, and this is where the finance comes in very early on. You can think of it as, which businesses, uh, have capability gaps we need to close to improve their performance, or there are businesses that have advantages in the market. And we can exploit those advantages, better distribution, better product, whatever that is. And so, you know, right up front, understand which businesses are generating most of your returns versus others that aren't. So that's the first question is, where should we be doing M&A? What's the overall role for M&A in our growth strategy? Yeah, I think it was Steve Jobs that said, uh, I'm as proud of what we do as what we don't do, and I think it's very difficult for a lot of companies to choose what to focus on. And I think it's not. Necessarily hard to know what you want to go after, but it's hard to, to say no to to certain opportunities. Well, and that's why it's an orchestrated process. So, at the beginning of, if you've never been through this before, at the beginning, you never know all the things you're gonna need to know to make the choices. So you start with the easiest ones, like, say, size and geography. And then, as companies leave the list, you go to the next step that allows you to make the choices of which ones are more important than others. And that gets down to finer grain detail as you go along. So, you know, early on, it could be customer segment, product offering, something like that, but later it could be management depth, because, you know, as you go later, you start to think about how difficult would these be to integrate, because some are gonna be harder to integrate than others, for very clear reasons. That's actually a really good point. You had to consider the cost of integration. Post-merger integration thinking starts right in M&A strategy. Which is one of the themes of the book. And uh it's a very, if you've never done this before, it's a very intense exercise. I guess there's two broad sources of value in these uh in an M&A strategy process. Number one, you understand the universe of opportunities across different pathways. And, uh, the other one is, you've made choices along the way. You can always revisit those choices. You know, there was a Fortune 100 executive many years ago when we were talking about M&A strategy, and he said, the more you look, The more you find, the more you look, the more you learn, the more you look, the more you test your strategies. I like that. So it's a dynamic process. You don't just say, here's a shortlist and there you go, right, because competitors may buy companies on your shortlist, that may be that those are auctions you have to get into for competitive reasons. And uh so it's a dynamic process. And also, you know, the deals that you do. Like with our clients, one of the first things we do is we look at the deals that competitors have done. You know, we map them. Where are they making their deals, what business segment are they in, what customers are they serving, what are their product offerings, and you can get a pretty good look at the strategic intent of a company. Based on their acquisitions, by looking at their deals over the last 5 years, and some of them make a lot of sense, and some of them are all over the place. And so one of the things that, you know, we say to our clients, that we, we, we plot what they've done, and you, you say, here's your world of choices. To what extent should there be cohesion amongst individual acquisitions? Depends what you're trying to do. If you have a particular M&A program focused on, take Amazon and the connected home, you know, it took them 4 years to develop Alexa and the Echo speaker, and then they added ring. And they added companies along that connected home pathway. So it really depends, you know, whether you're focused on a pathway or multiple pathways. To what extent are companies's acquisition strategies shared publicly? Apple would be a perfect example right now. We want to start building electric cars. We're looking for these companies and and so on. Some are very clear about it. Some you can just discern by looking at their past deals. You can start projecting what they're looking for in the future just by by looking at what they've been doing. And so do you think there's ever a disconnect between the uh the announcement day shareholder reaction and those shareholders maybe not knowing the long term acquisition strategy of the company and their intent? That could certainly be the case, but I have to say that investor reactions tend to be a fairly reliable indicator, yet on balance. Of what we'll say a year or two down the road. What's important is that, and this is where it gets into the finance of it, you know, a company's value is the value of its current operations today and its growth value. So investors already have paid for growth value in the, in the shares, and so anything that starts to, if it adds to those expectations, that's a good thing. If it detracts from those expectations, that's not so good. Well, that's very interesting. Well, let's take another quick break and then when you come back, we'll talk about uh valuation, due diligence and integration, and to what extent those can have on the success rate of an acquisition. So we'll take a quick break and we'll be right back. At Morgan and Westfield, our only goal is to help you sell your business. 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So Mark, to what extent is due diligence important to the success of an acquisition? Well, it's obviously very important. You're testing hypothes at least you should be testing hypotheses about where the value is in the deal, and that's either on the, the, the revenue line. Well, I'll I'll focus on commercial and operational diligence. There's several kinds of diligence, financial diligence, HR, IT. But from a synergy perspective, uh, commercial diligence is gonna test the revenue opportunities in the market. And, um, you know, we say that that Deloitte, all the answers are in the market. Everything you need to know is knowable if you reach out to enough customers and market experts and and that sort of thing to test those hypotheses, whether it's the growth of the market, the position of the target in the market, The revenue enhancement opportunities by from putting those two companies together. And on the cost side is where we typically think of operational due diligence, you know, are the cost synergies real and you have to be very careful that you don't mix up already existing performance improvements programs with synergies. Because if it's already priced into the share of the target, if they've already communicated to investors that they're gonna decrease costs by 10% and and um those aren't synergies if they're already priced. What's the difference, so we can clarify that for the listeners, because I think some might be confused. What's the difference between commercial and operational due diligence? So, uh, I'll tell you how they're different and where they intersect. Commercial diligence tests the revenue line. Growth, margins. new offerings that, you know, are are to customers, are they willing to pay for them? Do they, do they want them? Are they willing to pay for them? How much are they willing to pay? Why would they switch in the process of switching. Operational diligence is focused on the cost line. You know, how do other industry peers perform, uh, and then there's the bottom up diligence piece of it, which is you're going function by function. And you're evaluating uh what the potential cost reductions are, you know, by function. And just to add to that, where they intersect is around margins. Cause if you think of, I'm assuming we're gonna get to evaluations, you know, what what are you doing in valuations? Well, it's revenue growth, margins, how long will those margins go on for, you know, etc. Capital investment required. So, you know, commercial diligence focuses on the revenue line. Operational diligence on the cost line, but also capital investments required to drive the plan, um, those one-time costs that might be required. And where CDD and ODD intersect is around margins, margin sustainability. How do you bring the strategy into the due diligence process and kind of test the hypothesis your strategy? That's a great question. You should be leaving an M&A strategy exercise with hypotheses that you're gonna test in diligence. Like I said in the beginning, know what you want, why, and how you're gonna create value. In diligence, you're testing your propositions about how you're gonna create value. Can you think of an example of hypotheses with uh from an actual company? Oh, sure. So, uh, hypotheses can be anything from how sustainable is the current business, the current operations value of the company, what's the stability of recurring revenues, and uh or they could be the potential of putting a new bundled offer in the market. And testing whether customers want that, are they willing to pay for it? How much are they willing to pay? Could you think of an example of that with uh a live company that you've worked with? So, uh, one of the things that we'll look at is, targets will claim they have a certain addressable market, but that doesn't mean they can serve it. And so the, the addressable market for a company is what you might serve with additional capabilities or market access, but the addressable market is what you can actually serve today. And differentiating those is really important. And, you know, the question I always ask folks is, uh, what do you think companies do? Do you think they overstate their market share or do they understate their market share? They tend to understate it, and you know why they understate their market shares? Because it leaves them headroom for growth in the valuations, gets you a higher price. And so it's really important that you differentiate. Between the addressable market and the actual serviceable market that they serve today. And there, there was a, uh, there was one time I was in a room with a private equity firm and uh we were serving, and the, uh, the Target CEO and CFO, and they said they had 20% market share, but they really had 40% market share. And so that would drive a very different valuation. And the, the CEO said, how did you do it? Like, how, how did you find that out? And my, this is the senior manager I was working with at the time. I love the guy. He goes, We just counted the butts in seats. You know, they were, it was a government procurement software. And, uh, we just counted the licenses, you know. And, uh, the, uh, the CEO of the Target offered my senior manager a job on the spot. But those are the things that you're really looking for, because remember what I said early on, diligence doesn't just drive a go or no go decision. It drives the inputs to your evaluation. And it drives the inputs to your integration planning. What do you mean by it drives the inputs to your evaluation? Cause don't you do evaluation before diligence? Uh, well, in many cases, yes, in that case, you're testing the assumptions that are being put into the valuation model. I mean, think about a evaluation model. It starts with revenues, today, revenue growth, and then you have costs, and then you have margins. So it's the sustainability of those margins over time. And then you have the capital investment required. You're you're working capital investments and your fixed asset investments. And if you understate the investments required to drive the growth, or you overstate margin or the revenue growth, and then you put a terminal value on a valuation with those overstated assumptions, you end up with an overvalued asset. Very interesting, very good point. Of course, if you're using DCF, which uh if you're valuing a public company, you probably are. Do you see a difference in how strategic acquires and private equity groups conduct due diligence? You know, we would have said so in the past, but I think these days, uh, that private equity is looking so much as they do acquisitions along a pathway, you know, not just standalone pieces where they're gonna improve performance by putting a new management team in. Both private equity and corporates are looking at growth. And, uh, you know, what the customers want and uh what the growth prospects are for the company in the future, along with the ability to improve costs. What do you think? I might have asked this, but I really want to drive this point home. What do you think most companies overlook in the due diligence process? That's actually a complicated question in the sense that if you start out trying to boil the ocean, you're gonna get the important things lost. And so, the way we think of, let's say commercial diligence, it's three major buckets. What's the market look like? What are the headwinds and tailwinds in the market? What's the growth rate of the market? Both the addressable and the serviceable market for the target. And then the second thing is, then, then it gets focused on the the target. How is the target position in the market? What segments does it serve well versus those that maybe it doesn't? And how's that positioning changed over time? Because positioning isn't static, you know, you can sort of, you know, look at who are the new competitors coming in and attacking that target in certain markets, where have they been able to improve, where they say, less well positioned. And then the third major basket or bucket is, um, what are the opportunities for improvement? And that gets you to your synergies, both on the revenue side and the cost side. So when I say what do you think companies overlook, what exactly are you saying that they overlook in the due diligence process? Well, one of the things is confusing the um addressable market with the serviceable market and overstating growth. That's a big one. On the cost side, it's mixing up already planned cost takeouts with cost synergies. There's a key phrase, I think this is the one you're looking for, if but for the deal. What is doing this deal allow us to do that we couldn't have done otherwise? And the answer to your question is the answer to that. That's a brilliant point because uh a lot of times you're looking at your corporate development options, and sometimes you can Pursue a strategic objective through different corporate development options. Whether it be an organic growth or a JV or so forth. And JVs can turn into acquisitions, right, right. Of course, perhaps maybe there's a competitor that you want to acquire that has the market cornered, and that's your only opportunity into that particular market. So I think that's a brilliant point, which let's talk a little bit about valuation. How do most companies approach valuation and to what extent do you think they handle that correctly? Well, let's start out with the presumption that let's take a DCF is that assumptions you put in a model become promises once you pay them, once you pay the price. And valuation, the critique of DCF. Is that sometimes it's the tail wagging the dog. In other words, most companies, if you're on the board of a seller, you, you, you have to sell your company at a certain price, and usually that's gonna be, they'll they'll anchor on, maybe it's a 52 week high, maybe it's the, the price of other comparable companies or comparable acquisitions in the market. Could be based on even down multiples, and uh if you sell for less than that, you're gonna get sued. Well, they're gonna get sued anyway, but, so then the DCF, unfortunately, uh, because it's sensitive to small changes in revenue growth, margin sustainability, capital investments required, you can pretty much reach any price you want, meaning if you manipulate the inputs enough. Well, it's not even manipulating, it's massage them just a touch. Yeah, just go into a 10 year model, add 1%. Whatever you thought your growth rate was in revenues, just add 1% a year for the next 5 years and then slap a terminal value on it. You're going to get a much higher valuation. How much would that change the evaluation by? Oh, I don't know. It it depends what your cost of capital is. It depends what, you know, what you've done for investments and working capital and and fixed assets. So, I think it's worth thinking about valuation a little bit more. It's not just about putting numbers in the models. Maybe we can kick this up to a higher level for a moment, which is when you look at a company, You look at a total market value of a company. You have the value of its operations today, if it never got any better, and then you have its growth value. So, you know, those are your listeners who are who have a piece of paper in front of them. If you just took your net operating profit after tax, For the last year and capitalize it at your cost of capital. That's roughly your current operations value. And the rest of it is growth value, that's expected improvements, you know, profitability. What do you mean by growth value? How do you define that? Well, think of it like this. If investors thought my notepad today was stable, net operating profit after tax was stable, was never getting any better, you wouldn't have any growth value. You know, and those valuation folks who are listening along, sometimes we call that a, you know, present value of future growth opportunities equals zero. And you usually put that, you know, as a terminal, that would be a, you know, more conservative terminal value, but you could do that today. You know, if you thought the company was never gonna grow from here, but it was stable, you'd be trading at your current operations value, you know, your capitalized notepad, so to speak. So there's a lot of information sitting in the growth value already. And this is where paying a premium really matters because, so let's let's take a billion dollar company. Billion dollar company, let's say it has $400 million in current operations value. That's just it's capitalized notepad. I'm oversimplifying a little bit, it's pretty close. And so it means it has $600 million in growth value, which has to be driven by increases in notepad over the years. When you pay, say, that average 30% premium for that target, where's that 30% premium show up? So suppose you're gonna pay $1.3 billion for a $1 billion target. It's a direct addition to growth value. So instead of having $600 million of growth value, now you have $900 billion of growth value, and you're paying for that right up front. That's why I say it's a brand new business performance problem that didn't exist before and nobody expected, cause if they expected it, the country would have been trading at that level. They would have had $900 million of growth value. And that's the valuation problem, and I, I, like I said earlier in diligence, don't mix up already existing performance improvement expectations or ongoing cost reduction programs. Don't mix those up with synergies, because if you've announced those performance improvement programs to the market, they're in your growth value. And the same thing in valuation, don't mix up synergies with the valuation of the company as a standalone. The bar gets set higher with the acquisition, much higher, 30% higher. You set the bar a lot higher, and, you know, if you wonder, sometimes people say, what is an ordinary person in the company? What does a 30% premium mean? Well, just ask them, could you drive your, you know, you have sales goals today, let's just call it 10 million. Do you think it's OK to up your sales goal 30% tomorrow, starting tomorrow? And that's the thing, it's that that's the challenge that you face in diligence and in valuation that you already have to work hard just to achieve the growth value that's in your shares. So when you pay a premium, you're driving up that growth value. So I like what you said earlier about the tie-in between uh diligence and valuation. What exactly, just so we drive this point home, what exactly should companies be doing during diligence to ensure their valuation is sane? Well, like we said before, you're testing the assumptions that you're putting into your your evaluation models, but at the same time, and this is what I said earlier, diligence is gonna drive either you're gonna test numbers you've already put in your evaluations, or you're gonna develop the inputs, the sensible inputs. But at the same time, you have to start thinking about how you're gonna realize that value. And this is where early post-merger integration. is essential, you know, you should come out of operational diligence and commercial diligence with a roadmap of what's gonna happen when. What are the areas that are gonna require the most attention? What are the areas that are gonna require one-time cost? Uh, what are the areas across functions where we already know there are gonna be interdependencies that have to be managed, so that when we get to announcement day, we're ready to kick off sign to close planning the day after announcement. What in your research in the book, what did you find that The most successful companies did to ensure a successful integration process. Biggest thing, don't waste time. You announce a deal, you presumably have told investors and employees, customers, everybody that's listening, the trackable synergies from the deal. Don't waste time. Start that sign to close process the next day, and, you know, it all begins with setting up an integration management office. You have to pick the right leaders. We often say, you know, pick the right leaders, not the wrong ones. You have to pick leaders of an of an IMO that understand the business and have gravitas. Uh, you have to set up the right work streams, whether it's functional work streams or where the integration's actually gonna happen, or if you're actually merging businesses. That has to be clear. Uh, you have to pick the right leaders for those teams. There has to be a steering committee that's not going to make the decisions, but it's gonna ratify decisions or resolve conflicts. If they get serious enough and has to get escalated to them, and there has to be, you know, kickoff meetings, workshops, there has to be a weekly cadence to meetings that take you all the way from sign to close, and presumably a flawless day one if you've done it right. Would you say that a lot of companies just look at integration as kind of an afterthought? We've done a couple of shows in integration, uh, one of those was the, the head of uh integration at Walmart, and he set up their uh their integration office there. And um another uh with Amira El Adawi, who handles international integration with many large companies and both of those shows, my take on that is that many companies look at that as an afterthought, and they just don't put that much energy into it. To what extent do you think that's the case and and why do you think that's the case? Well, depends what you define as afterthought. I mean, if you wait 3 months, then you're down, you know, 7-0 in the first inning. And it goes back to why M&A is different, you know, capital is luxurious. You're paying this up front, so your cost of capital clock starts on day one. And, you know, investors are wondering how, do you have a plan? How ready are you to start delivering on these promises you're making. So, if you just use the word afterthought as something to think about after you've announced the deal, you're you're already behind. Why is speed so important? Cost capital clock. I mean, it's just like you've paid for it upfront, clock is ticking. You've got the growth value that was built into your shares, growth value in the Target shares, you've got to still, you know, stabilize the business, make sure that the businesses are still sound, and um you've got to build a new organization at the same time, because they're gonna be some parts won't be affected at all, and some parts will be, will have whole new operating models, and how they how they run the business. And um and then you have to deliver the synergies. So, the sooner you get started on that, sounds kind of obvious, but the sooner you get started on that, the better, and that should start during your diligence process. Well, very interesting. This is another good place to take a quick break, and this will be our last break, and then uh what we'll do in this last segment here is we'll walk through these. Uh, 5 themes, uh, very briefly, and then, uh, let's take a quick break and we'll be right back. Thanks for listening to M&A To sponsored by Morgan and Westfield, a nationwide leader in business sales and appraisals. Our goal is to provide you with insight and guidance on how to build your company's bottom line and maximize value for event. sale to view the show notes on this episode, including contact information for our guest and links to resources we mention in the show, please visit Morgan and Westfield.com. If you are enjoying this episode, don't forget to subscribe and leave a review. And now back to today's conversation with your host, Jacob. Welcome back to M&A Talk with Mark Sarower, and again, if you're enjoying the show, don't forget, please leave a review that helps us, uh, keep the show going for you and don't forget to subscribe. So Mark, let's talk about the 5 themes of the book. Uh, let's go through those one at a time briefly. So what's the first theme of the book? First theme is that M&A is different, capital is luxurious. You you, you pay upfront before you get a chance to touch the wheel. When you pay a premium, there's a brand new business performance problem that you've created, and uh when you start integration, the exit costs are high. It's very expensive to unwind acquisitions. In a summary, because M&A is different, what's the solution to that? Well, and that gets to the second thing, which is, you have to know what you want and why, and how you create value, and that's knowing what are the most important deals. And we ask CEOs this all the time when we start, like, what are the most important deals you have to do over the next 12 to 18 months. If you don't know, you don't have an M&A strategy. That's the second. The third is, this gets to the valuation problem, which is understanding the promises that you're making. And, you know, I, I'd add to what we said before that because a premium is sort of a shock to the system, you know, just saying you'll do a little bit better every year is not gonna work, which is why it's common. For good acquires to announce a ramp up of performance improvements that are gonna come into full impact over the next 2 or 3 years. That way they're trackable. And so you're trying to instill confidence into investors. Promises that you're making to who? Oh, well, to investors, your customers. And, you know, one of the things we say as well is that culture starts an announcement. Uh, when you start using the word synergies, uh, that's frightening to a lot of employees. Why do you think that is, by the way? Well, because synergies often involve um job cuts. Sure. And, um, so, you know, employees have a lot of questions and understand that employees and investors have a lot in common on announcement day. They, they both have a lot of questions, you know, how are they being impacted by this deal. And so, you know, there's a lot of things you may not be able to tell employees right from the very beginning, but you can certainly tell them when they'll know. Well, that's interesting. So, and what's the 4th synergy? Well, the 4th 1 is communications. So, uh, communications with all your stakeholders, customers want to know how they're impacted, suppliers wanna know, regulators are gonna wanna know, depending on the the concentration in the in the industry, and obviously, investors want to know what they should expect. So, communications throughout. And does all of that begin after the closing day? No. Thinking about your communication strategy needs, if you think about it, it's, it's a diligence question. What exactly are you gonna tell investors and other stakeholders when you bring this deal public on announcement day? You're not gonna wait till announcement day to figure it out. That should be the outcome of all the work you've been doing up to that point. So if you're changing the strategy, if you're doing a major deal, you're gonna have to explain why the change in strategy. You know, if you're deviating from a business model of M&A that you've done for 10 or 15 years, and this is much bigger, different business, you're gonna have to explain that. So, the, the work on communications begins way before announcement day. That brings up a good point because not only does the acquisition need to be successful, as in the business outcomes, but don't the investors need to perceive that it will be successful? You know, you'd say, well, we think we're going to get $2 billion or a billion dollars of synergies, or $100 million of synergies. There's no way that investors can track $100 million. You have to tell them where they're coming from in the business. Which ones are cost synergies, which ones are revenue synergies, so they can track them. If investors can't track it, then they just won't believe it. How is that communicated? You tell them. I mean, you, you, you look at great investor presentations, you know, I'll think of one, you know, we, we write about a few of them in the, in the book, but, you know, when Nextar acquired uh Tribune Media, they're very clear about where the cost reductions would come in their business, where the revenue enhancements would come in their business. And they also You know, because they had done a prior large deal that was successful, investors had a certain degree of confidence even going in. But they gave them with hard numbers that were trackable that they could report on, and they said that they'd realize all these synergies within a year of closing. That's a pretty strong signal of confidence. And it seems to me like if there was a disconnect there in that acquisition that you made, and it does just doesn't really seem like it falls in line with their strategy. It seems to me like that'd be a tough one to communicate to investors and the other stakeholders as well. Sometimes, it happens sometimes, and I would go back to market reactions. So, 2/3 of negative reaction deals do not turn around. And when you talk about stock deals, it's close to 3 out of 4 don't turn around, but some of them do, and sometimes a company will have announced something that seems to be a deviation from It's prior business model, and then they'll have to get on the road and explain it to investors. So is this the classic strategy versus execution paradigm? Well, I think the whole process is execution. I, I really don't, I don't think that that's where you start to get into, oh, is it strategy formulation or is it strategy implementation. I think the whole thing is executing, you know, you're executing on Given the capabilities that you have and the markets you serve, and the customers you serve. Yes, but for the deal, what can I do with this deal that I wouldn't have been able to do otherwise. And so that brings us to uh theme 5. What is the fifth theme here? And and that's delivering on your promises. You know, we, we talked a little about sign to closed planning, which is setting up that structure we call the integration Management Office, this living, breathing, temporary, it better be temporary structure that allows the integration work to be separate from the ongoing businesses, the stability of the ongoing business, and um, So that involves picking the right leaders, the right meeting cadences. There are cross-functional work streams beyond the functions, you know, HR, marketing, finance, accounting, uh, IT, but there are cross-functional work streams such as synergy planning, organization design, day one readiness. So, you know, within that integration management office or IMO structure, we have cross-functional uh work streams that are separate from the functional work streams like HR, IT, finance, accounting. Uh, etc. and those are synergy planning, the employee planning, the employee experience, organization design, and day one readiness. And so, the planning structure that gets you through to close. And um but then you have to execute, then you actually have to deliver on all this planning, and post-closed execution is one of those topics that people talk about, but they talk about it at such a high level, you know, they'll say accelerate synergies or, you know, uh, you know, deliver with a purpose or things like that that aren't particularly helpful. We think of post-closed execution as a, and it's the longest part cause it could go on, you know, if there's, you know, major IT initiatives, they could go on for 12 to 18 months, where you might actually have an interim operating model where both systems, both ERP systems, you know, exist in parallel until the final cutover. But we think of, uh, post-closed execution as a series of transitions. You know, the that IMO has to transition to business as usual. You know, if you're a work stream, you have to be able to graduate from that IMO structure. All the work that you've done on designing the new organization and picking the top-level leaders, that now goes to talent selection and workforce transition. Uh, the work you did in synergy planning, all those initiatives and milestones and projects, that has to then transition to tracking and reporting. And all the work you did in the clean rooms around growth, because You know, competitively sensitive information, uh, that has to then transition to the actual customer experience and, and real growth. And finally, all the work you did in the employee experience and getting employees where there are changes to come in their roles or in what they're doing in their day to day life, getting them ready for that, that gets into the actual managing change and building that new culture, how work gets done. And building that into the future. So, post close is a, it really is a period of, it better be a period of transitioning from the planning to executing on those plans. Would you say that there's a lot of companies out there say, OK, we're done, we've acquired this company, let's just throw our integration team at it and have them button up everything and then they move on to the next acquisition. Is that a fairly common, uh, The theme here. That's the bad old way. That's the bad old way where you come in with piles of templates and the IT guys from both sides fight it out for six months on whether it should be Oracle or SAP and uh that that's the bad old way. Um, there are things that are not easily delegated to an integration management, such as what's gonna be your major ERP system, if you're gonna change. You know, what are changes in the operating model? You know, we, we worked for two cruise lines, a few years ago, and, uh, they serve very different parts of the market. One served the super premium market, the other served the mass market, and they were gonna keep those brands very separate. Even the marketing was going to be very separate. But as you start to go into the systems and back office, the operating model for that was for the target to transition to the acquirer's systems and procedures. And you can see the cultural, you know, we throw this word culture around a lot, the cultural implications about about about how work gets done on a day to day basis. So those sort of decisions that people will end up fighting about if you don't resolve them early on, are really important to be made from the beginning. And so the integration teams can focus on building the, the blueprints, uh, for the end-state vision of their functions or businesses. I'm reluctant to ask this, but I'll ask it. Anyways, we've done a few shows in integration. I think people kind of hear the term and maybe uh it means different things to different people, but in a nutshell, if you had to boil integration down, what does it mean to you? How would you define that in a nutshell? Well, first of all, post-merger is the wrong time to do pre-merger planning. How about that? That's kind of my overall view of this. So, think of what integration is supposed to accomplish. Number 1, you don't want to mess up the businesses as they were before, so you have to make sure the businesses are stabilized. Number 2 is you're building this new organization. Some things aren't gonna change at all, and some things might dramatically change. So it's being very clear about where your operating model of how you go to market, how you run the businesses, where the change is gonna come. Look, there could be a big part of the workforce that they don't feel any change at all. But other places there are, so you have to be very clear about that as you put these two organizations together. And finally, integration has to enable you to deliver on the synergy promises you've made by paying a significant premium for another company. That's a very important point. You've paid this premium and now you have to execute to realize that premium, and that's done after the acquisition, not before. When do you start the integration planning? That should have already started before announcement day. In due diligence, before that? In due diligence, absolutely. Actually, as you're developing your M&A strategy, when you get down to a shortlist of companies, you may find this great asset, but it's gonna be really difficult to integrate. And that's OK, but that's when you start thinking about it. You may find this great tech company that's You know, on the, on the other side of the world, and you're gonna have to figure out a way to integrate that. That's another good point, cause I, I would assume during due diligence that you should be assessing to what impact and how easily you can integrate the two companies. I always say an M&A strategy as you get to the later phases of defining your most important targets, and again, you're refreshing this on a regular basis, but some companies are going to be harder to integrate than others. They're more geographically dispersed. They may be early on, you can start to think that they, the ways that they do business is different than the way you do. I always use the, yeah, Fox News and CNN and try integrating those two and see what happens. But the people in accounting aren't very different. The back office folks at Fox are going to be just like the back office folks at CNN. You might have some cultural clashes, but you're right about accounting. Not the way they do their compliance is compliance. So as you're doing, uh, as you're performing diligence, what can you look for that would distinguish, that would help you determine to what extent that you can integrate a company and how difficult it's going to be to integrate? Yeah, there's obviously would be very specific things, but broadly, Are you going into a different market that you don't know, and one of the issues in M&A's strategy is today's adjacency is tomorrow's core. You know, everyone likes to talk about their adjacencies, but once you get into an adjacency, it is one of your core businesses, so you might be opening up the door to competitors you haven't dealt with before. So that's a big one. Certainly cultural issues, just the way they do business, you know, the way that work gets done around there, and so certainly the things you can observe about culture, but it, it can go all the way down to product offerings, the technology roadmaps and the companies might be very different. So it's all the things that you have to ultimately integrate. Uh, the more that you can start to think through those early on, the more you can differentiate the companies that are going to be easier to integrate versus companies that are harder. So of all the things here that we've mentioned in the show, is there one or two that you would say that kind of lead the pack here and causing the most failures? Well, yeah, I'll go back to my original thing. You need to have a strategy, you shouldn't overpay and you got to manage the cultures right. So, you know, I'm saying that tongue in cheek, but really, you have to know what you want. You know, you've got a universe of opportunities in your existing markets. There may be new customer segments, product offerings, technologies, approaches to go into the market, you know, etc. and you have to make choices on what's most important and where you can be the most successful because you're gonna pay for them. And that gets to the valuation pieces. You have to be very clear about what you're promising, and that premiums require pretty aggressive synergy ramp-ups to be believable. And then that gets to, you know, culture and integration that certain parts of the organizations are gonna have to change. Other parts may not get changed at all, but the acknowledgement of that and the one-time costs and interdependencies across the things are gonna change, have to be clearer earlier than later. Well, that's really interesting. That's a very nice wrap up, and I guess my final question to you is, what's your words of advice to those out here listening to the show and uh, That are thinking about the next acquisition that they should make. So that's a great question, and I put it like this. M&A continues to be, it's a highly risky decision, but for companies that do it right, they can earn extraordinary returns. And think of it this way. Would you like to start an announcement day with a positive market reaction or a negative market reaction? And so it's start doing those things early that will earn you a vote of confidence from investors and employees right from the very beginning. And uh ladies and gentlemen, if you want to learn more, you can read Mark's book, The Synergy Solution. And by the way, your role, uh, currently at Deloitte M&A strategy, uh, who can you help and who is most suitable to reach out to you and how can you help them? Any company that's contemplating, doing deals, Maybe they have a deal on the table, and they want help with diligence, and also early post merger integration planning. Mark is the co-author of the Synergy solution with Jeff Wyres, and again that's the Synergy solution How companies Win the M&A Game, and that's available both in Kindle and Hardcover. Available of course on Amazon, and that's the Synergy solution and if you'd like to reach out to Mark, you can visit our website where we will have his up to-date contact information. That also be in the show notes page in the application that you're listening to the podcast on again, Mark Saroer with Deloitte and author of the Synergy Solution, and Mark, thanks again for coming on uh M&A Talk. All right, well, thank you, Jacob, likewise, thank you. M and A Talk is brought to you by Morgan and Westfield, a nationwide leader in mergers and acquisitions for small to mid-market companies. 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