For those of us who are unfamiliar with the world of financial mergers and acquisitions, the topic can seem quite intimidating. Sure on the surface, combining two separate entities might seem simple since companies that go through the merger and acquisition process tend to be complimentary, but in reality, it can be quite complex. An extraordinary amount of planning and due diligence is required to ensure that integration is as seamless as possible. 

“There’s a lot of different elements that come into play when you’re integrating two businesses together and the biggest mistake or one mistake we see is people trying to fast track that. Not really giving enough time and energy into making sure that processes and change management is put in place to really get those businesses functioning and operating together,” Jeff Hiddemen explains. He is a current Principal at Bridgepoint Consulting and part of his job there is to consult on client mergers and acquisitions. 

“When you short-change the diligence upfront, there’s a cascading effect to the results that you see. You’ll end up with sub-par business decisions that are made, you’ll end up with systems that don’t do everything that you’d expect, and really, you’ll end up with management not seeing the results that they really hoped for when they went into the acquisition.”

But planning and due diligence are not only required of consultants and the organization accumulating the other. It is also the responsibility of the company that is seeking to go through the merger and acquisition processes, Scott Gardner explains to host Dan Dillard. Gardner is currently the CFO of Fluence Bioengineering and has over 20 years of experience in corporate finance. It’s just as important for companies that are intending to sell have arranged all the materials necessary to do so. Being prepared and organized makes the company more attractive to potential buyers. 

You can hear more about how utilizing proper planning, organizational and managerial strategies during merger and acquisition processes just makes good business sense in the fourth episode of Growth & Scale Insiders. If you like what you hear, be sure to share this episode with a friend or colleague. And, if you haven’t already, be sure to listen to the first three episodes of Growth & Scale Insiders.

Growth & Scale Insiders is a founding_media podcast created in partnership with Bridgepoint Consulting.

Host: Dan Dillard, founding_media

Guests: Jeff Hiddemen, Bridgepoint Consulting

Scott Gardner, Fluence Bioengineering

 

Transcript:

this is a founding media podcast if welcome to growth in scale insiders I’m your host Dan Dillard. on this series will be exploring the constantly changing world of organizational leadership and financial transformation on today’s episode we’re sitting down with Jeff filament and Scott Gardner Jeff is a current principal at Bridgepoint consulting and Scott is the CFO of fluence bioengineering from best practices in financial mergers to explain the modern day data rooms Jeff and Scott tell me all about the details entrance the come with running organization specifically during times of mergers and acquisitions June thank you for being on the show Jeff I’d like to start with some background sure yeah so what really attracted me to bridge point was really the team and kind of family culture of the organization  when I first met with one of the other partners Michael Johnson I was struck by how you know natural the conversation was in talking with him about that really the values the core values of the organization it it really was about empowering its employees being behind them and having their back at all times and in really treating each other like family in that really resonated with me I was looking for a place that you know I wanted to call home for a long time a place that I would be challenged and and certainly work on great clients and and improve my professional skills but also another place were I wasn’t treated as a number  but really treated as a key member of the team and so you know that as I’ve moved into my role as a principal of Bridgepoint has been probably the number one thing that I’ve use that’s kind of driven how I wanted to manage and grow the team and and so you know we’ve got people that you know leave what we call boomerangs they leverage point to go pursue another endeavor and they come right back pretty soon after because because that culture because of the people they work with and and that is usually one of the most proud moments when we have a boomerang that comes back and they say you know I’ve worked at three or four other places and I’ve just never found another organization like bridge point to actually have a term for that speaks volumes yeah yeah okay Scott you’re drinking you some background fluence bioengineering and you’re older you bet good to be here so I’m the CFO it was bound junior been there about three years now and I was brought in as part of my hiring process to get prepared for him in a process of this topic today is very germane to acquitted fluence recently fluence itself is a year of manufacture they make LED lighting fixtures particularly for the horticulture space so that would include things like commercial agriculture which would be  lights that would help make plants grow inside of the greenhouse destined for the grocery store or it would be vertical farming which is a brand new phone industry where they’re starting to take over buildings and grow up on the floor after floor as opposed to out like has always been done the third industry that a lot of people and gets a lot of talk is the cannabis industry certain legal states in the United States Canada other countries where cannabis is gone legal for medicinal purposes or recreational use I imagine that’s blown up very very fast growing yeah so I mentioned that’s a really expanding business right now with the cannabis industry I just can read articles all the time about how quick that’s growing so you guys would be more like will someone shovels to the gold miners absolutely so we don’t actually touch the plant make lights and they can be used for any number of purposes like I mentioned before but in this case  they can’t grow the canvas outside in the legal states they need to contain environment that’s where the lights come in very interesting that’s really great thanks for sharing with of that background  so now the topic at hand so this is something I’ve been really curious about for a long time  I think Richard Gere made popular back in pretty woman thirty years ago when he was you know by doing mergers and acquisitions and at that point thirty years ago like what is that right and over the years I’ve learned a little bit more about mergers and acquisitions but still there’s this curiosity around what it is and  so it’s great to talk about the show so Jeff you consultant with companies are going through  in today from what I understand their rigorous and detailed undertakings can you take us through a typical client engagement so first I’ll start by saying you know it’s critical to not short changing fast tracked the requirements gathering in design planning phase  typically when two companies kind of merger one acquires another there’s a tendency for people to want to get them integrated quickly  get the process see set up make sure the systems are functioning together and and really be able to show that we’ve got the systems and businesses together look how great it is the reality is a heavy amount of due diligence has to be performed up front to make sure that you’re getting aligned on people on process you know sales marketing human resources there’s a lot of different elements that come into play when you’re integrating two businesses together and the biggest mistake I think or one mistake we see is people trying to fast track that not really giving enough time and energy into making sure that process sees and and change management is put in place to really get those businesses  functioning and operating together in in identifying where there’s gaps  getting aligned on what is really needed from my overall system standpoint but also a process standpoint when you short change requirements gathering when you short change the diligence up front there’s a cascading effect to the results that you see you’ll end up with subpar business decisions that are made you’ll end up with systems that don’t do it everything that you’d expect in really you’ll end up with management not seen the results that they really hope for when they  went into the acquisition so I’m assuming the right the right amount of planning is done truly the integration of those activities the configuration of systems really works pretty well it’s it’s amazing how well people do  designing to a system or designing to a process when there’s very clear objectives clear outcomes clear milestones that need to be hit it’s when there’s uncertainty when there’s not a clear objective or goal  because not enough do diligence been performed up front where people end up not being able to liver execute what they what makes less sense makes me think you’ll get two different companies and at some point there was a decision that okay we gonna either merger this one’s on the car the other and they’re used to doing things their own way and if you just okay just get together and play in it you can remind me of football team and a plane goes I’m used to playing this way I’m just playing that way but you get a new coach says here’s what we’re gonna play you both need to learn display yep and and essentially in layman’s terms that’s what you’re talking about this is you you’re bringing that new plan that says here’s here’s the best way for us to kind of sink up and that’s exactly right yeah yeah a lot of times we’ll see you know two software companies that come together well what could be so different about two software companies they both sell software they both should have ferries fairly similar revenue recognition needs billing need service needs the reality is every company is unique and should should be treated as such and so you may find that those two teams that you’re talking about is not to NFL football teams coming together trying to operate it may actually be a NFL football team and a rugby team and there’s a lot of similarities but there’s definitely some differences and there needs to be alignment amongst those different organizations on process and how things are going to be done going forward to make sure that you know the the systems in process and procedure that’s put in place you know really works for the the new collective group that makes it Hana sense Scott even in corporate finance for what twenty years plus you have been a long time now so would you take us to speak to some of the Yemeni strategies using the market yeah an interest to extend what we talked about earlier I think one of the ways that I look at this is theirs before the transaction after transaction some of what he disposed to was the after the transaction but another thing that can because failure or at least not an optimal situation is not doing the preparation and much of that is to be loved due diligence before the transaction because of one of the other things we didn’t speak to yet is the intangible factor of culture at these companies yeah that can create two different organizations right there yeah and if you aren’t looking very carefully at the intangible of the culture of two companies if there’s not going to be a good fit there it’s probably not wise to continue that’s huge it’s absolutely huge and so that’s completely off of what we had been talking about but if you look at the before the after for someone like me that’s going into a company knowing that we’re probably going to go through an M. and a process is very important to do all the prep work up front so if I am intending to sell this company it’s incumbent on me to spend months of work prepping the the audit that needs to take place that you have some financials you can show the acquiring company the data room that you need to set up now and put all of the documents that someone’s going to want to look at during the due diligence phase and so forth because if you don’t have that prepped and ready to go when the bright lights of the process come on you can get really ugly fast how much and then all the things I agree how to present with what he said then after the transaction now you have to bring those to hopefully culturally aligned entities together and you don’t want to speed that up too fast because if you rush it you’ll many times you’re talking about a larger company a smaller company and of the larger company tries to speed that up too much they can effectively kill the little company bearing them with process yeah with data with requests and so forth you get let it develop at its own pace within reason but at a pace that won’t  take down the smaller combat is an acquired that’s a great point and use you think about that it’s like you’ve got so many more people resources in the bigger company can I mean when has it been yeah one of them yeah sorry when it when it go with a company that I’ve heard about  is there was a little company got acquired they had maybe fifteen people who had a very valuable technology and the acquiring company was a multi billion dollar company and they came in day one with twenty five people the company don’t have fifteen and they started telling him all the things they need to do any clearly overwhelmed them so they need to slow that down well handled the legal and accounting stuff first then we can address HR then we can address all the various work streams that are involved in integrating one company into another well that’s releasing it makes me really think there’s just too many cooks in the kitchen sometimes and we know how that and so that’s very temperate  perspective Jeff since you’re working by you I mean  Bridgepoint work with many companies that  come to cross road by selecting the go for strategy their technology and systems to the combined company I wonder what some of the trends you were seen in the area of imminent sure yeah I’d say one of the biggest trends were seen as a desire to consolidate you know a hairball of disparate applications and business processes into a smaller set of industry leading applications so so in myself being more in the technology space many times we see companies that are going through an acquisition and you know there could be a business has been around five ten twenty years that over the course of that time they’ve built up dozens and dozens of applications that do a real select set of functionality right in their home grown their on premise it’s a nightmare for the I. team manager and I. T. team to manage that and so the ones that do this well when they’re going through an acquisition really take this acquisition activity as an opportunity to look internally look at the systems are using identify what do they really need to operate what’s core to their business operations and what you know enables them to  to thrive in the business markets in in what is really just we’ve always done it this way so we need this application because we’ve always done it this way and so those companies that really look internally and try to streamline and standardize their business process and leverage more kind of off the shelf applications streamlining and and really consolidating the number of applications is is really a key trend that we see  typically you know sass applications cloud based tools that you see today very common place but a lot of these companies getting acquired I’ve been around long enough that they have significantly more proprietary applications and so there really needs to be a technology transformation to update that application stack simplify it M. you know make sure the process that’s been put in place is leveraging kind of current state leading product principles and practices in the industry it makes me think about even the medical industry where lawyers doctors have to upgrade their systems right and so you have this in regular business well we have certain business that we’ve just operated this way for like thirty years and it works well for us but the now the acquiring company  the merging companies I’m not we can always bring you tools and the time it takes I would imagine to kind of get the new team to step up the the technology can exactly and so you know one one example I’d say is you know when you have two applications that are integrated back and forth you really have one integration right it’s going back and forth you add a third application that now needs to integrate with those two now you have three integrations that need to be performed one to each of those you had a fourth application so the more applications you have the more overhead the greater cost and resources that are needed to support those and so you know we have these companies that they have twenty five applications and really leveraging this just simplify that streamlined it down to you know maybe if there’s five core applications and that makes management of that organization so much better and quite frankly you’re you’re leveraging new age technology and and systems that have built in business process that you no longer have to do things one way because that’s what the way we’ve always done it because a developer fifteen years developed it in a particular way you can leverage what the industry is using and and follow kind of standard business process what you Scott have you seen any of the trends in in the industry absolutely a few and so one to pick up on what Jeff was talking about right there so when you put together multiple systems like that not only is the complexity harder but from a legal and accounting standpoint I always think about what is the inherent risk for data problems so when I go to do an audit and I have to be able to point to good verifiable information numbers data etcetera you increase your risk with more systems that way too so another thing that I would say is which and yours will get to the question you ask in terms of trends yes  another trend from technology standpoint it used in the in a industry knows the data rooms so when I said a room a little while ago I think back in the day people used to picture literal conference rooms where the attorneys the finance people and so forth would show up and they would have lots of paper documents and they would go through them and so forth that is transformed over the last few decades now to online data rooms and so nobody has to leave their workplace anymore the lower standard law offices and accounts stay where they are in the business the respective businesses stay where they are and everybody logs into a website and a low documents in there and they review the documents and so forth and that has very much sped up and made much more efficient due diligence process nowadays an imminent so Scott beyond technology what else are you seeing in the in the world yeah in so I think there’s some developments that have happened over the last one or two decades on that I mentioned  making more like tronic the data room due diligence process I think that’s a big one it’s really transform the industry I I think another one that’s really key is how picking the right investment banker to work with if you are either buying companies were selling companies finding that right fit between your own company culture in whoever that investment bank is going to work with to do the transactions key and is part of that if you were hoping to sell your company trying to get the bankers helped to create competition in the market so that it’s not one on one with a potential acquiring company you create the element of competition so that hopefully the purchase price goes up help you get a better deal in the end with better terms and that’s been going on for some time now but I think it’s really starting to come to a head so to speak in terms of the process yeah and then the last thing I would mention this is more of a  finer point but there are some changes that are happening as it relates to the terms of a contaminated  nowadays so prince is one example I would give is there no insurance policies that you can buy at the time of the transaction call reps and warranties insurance and as a seller you will give a list of things to the company buyer called reps and warranties things that I say I won’t do or things I didn’t do what I did do you attest to those and during the next year or two years if the buyer feels like they can come back and say you didn’t do this they’ll take money back from the transaction so now you can put an insurance policy in place total reps and warranties insurance you pay a premium if something like that were to happen you can save your money while so my point is that there’s a lot of different things like that that are now happening so getting good counsel and advice from both the lawyers and investment bankers are transactions can be key that’s really cool on that note I you want to ask how does a company get started in either a merger or acquisition is that something like this the founders thinking I need to make what have you seen them yeah great question so oftentimes will happen is the founders have been at this for some number of years they’ve created something of incredible value also has great place for that because of lots and lots of start ups to get a certain number of years into it they say I’m gonna value on the table here in terms of the value of my business that I think I’m gonna go off and try and sell this and put that money in my pocket go do something different and so they can begin to interview investment banks to see if there’s any interest out there and the banks typically will know for their particular industry segment if there’s gonna be some interest for something like this so yeah we can help you with it you go through a selection process with the banks and they run a nine to twelve month process that hopefully will result in multiple buyers vying for your business and you cash out of always been curious about at what point do you are you just waiting for someone to come be a sale I like your business did you hear all the time this person acquired by another person or disposing of corporate other business in in frankly that can happen  for instance influence that was already starting to happen unsolicited enquiries Hey we we see what you’re growing there and you guys are doing really well  would you like to think about selling the business and that’s often times a good indicator that you’re probably have created enough value and you’re probably in the right state  to run the process yeah that sounds like eat even if those inquires coming you still want to find the right investor banker absolutely right just to protect yourself and create an element of competition that I mentioned  to get the best deal so what point does someone seek advice like what we talked about investor banking but without consulting great when I’ve got a good example that for fluent so our little accounting finance team could only handle so much work between their regular day jobs and other things going on and so casually you need some temporary help that due diligence process can be quite consuming an overwhelming it’s practically all another person so what we did is we chose to bring in a consultant for a period of time I want to say about three or four months to help us get all of our records in order get in place in the queue and the due diligence data room in the right place help us with some schedules on the audit and so forth in a way that we didn’t just have to full fledged hire full employee right yeah and I’ve added you know beyond the acquisition after the acquisition has occurred in many cases were brought on to help companies is now they’re trying to combine these two entities and  maybe trying to simplify things a little bit you have to organizations that have their own business process their own culture they use different pieces of technology so they have their own accounting software they have their own sales software their own e-commerce software and really a significant amount of diligence needs to be performed to take inventory of that identify how the new organization that’s going to be coming together wants to operate is there one sale software that one company uses that we think is better than the other and that they would be able to support them and if so it be great to try to consolidate that into one platform same thing with business process with organizational alignment we’re looking for ways to really streamline and standardize things there’s no doubt that is going through an M. and a activity you know companies are looking to identify efficiencies where they can really come together and operate more effectively and bring value to customers with less internal costs right and so being able to identify that and come together  is is an active that we get brought in to really help customers  skews me help companies after they’re going through the acquisition makes sense so Jeff what factors contribute to companies failing to achieve any goals and technology yeah one thing I really see is around people and change management you know when to businesses merger one acquires another there’s great uncertainty with the employees at those organizations they’re they’re curious as my job safe and am I gonna lose my job what are the new expectations for me and my role is my responsibilities are they gonna change where will my management structure change how will I be  you know rewarded and recognized and evaluated as an employee and so with that comes great anxiety and uncertainty and so one of the most important things that I found is having a really solid change management plate plan in place right so real good change management management plan really lays out you know that the implications and the impact of what this changes for the benefits of it really trying to you know provide transparency eliminate confusion and uncertainty with people so they understand what is this change why are we going through this change and why does that benefit me and the company and I I I’d say the biggest key of that is really having genuine and authentic by N. from top level leadership so if the C. E. O. or your C. level your V. peas if they say one thing but don’t really care about it that’s going to trickle down to the employees and they’re not going to be really invested in the because if on the other hand the really committed to what this changes about in the really fine and they’re communicating that and ran really exhibiting that this is important and critical people will truly take ownership of that and they will buy in and they will go and be above and beyond to make sure that this new change is successful yeah that makes me think about what we talked about earlier this keeping the the cultures and trying to figure out what the cultural going forward if you’re just doing processes and facilitate knowledge G. and nothing about the people people are scared at the end of the day it’s like what’s going to happen to my job and I’m not talking about managers and talk about the rest of the company yeah I agree I I’d say one of the big can CERN’s anytime one company gets acquired as they hear horror stories of other companies I got acquired and then people get laid off right and so I think truly coming in and being transparent and open with your employees  and really trying to articulate and communicate what you envision as the plan for them and the company  as much as you can is is really critical to obtain that by and make sure that while there could be some uncertainty for a period of time  it is alleviated and people move forward really insightful that’s such great insight from insiders that are in the field thank you both so much for being on the show I learned so much I’m sure the audience also as well great thank you good to be with you thank you again Scott Jeff it was fascinating to hear some of the technical aspects that go into building processes and how it can save organizations time and money in the long run if you enjoyed this episode please make sure you subscribe and may be shared with a friend or coworker Rosenstiel insiders is created in partnership between Bridgepoint consulting and founding media to learn more about Bridgepoint please visit the links in our sense