M&A STORIES - The Good, The Bad and The Ugly

In recent weeks Rob and Toby have veered slightly off the M&A topic to explore the emerging world of AI and how it might shake up M&A as we know it. In doing that we've arrived at the challenges of adopting adequate regulatory and ethical controls for AI and never mind the slow cumbersome legal system and how that might cope with AI.

The key point is that AI needs global standards for regulation, ethics and legal controls and anyone with a degree of experience knows how difficult that might be to achieve. In Australia, it's almost impossible getting individual states to agree on a standard never mind a global scale.

Rob's view is that ethical and regulatory controls can be embedded into any AI programs at source and that if the big players (Microsoft, IBM, Amazon, Cisco, Oracle, SAP can be encouraged to do this, we might at least cover 80% of the challenge.

What are your thoughts?

Robert and Toby have been clamping at the bit to start talking about the need for strong ethics, regulatory and legal instruments to manage and control the global adoption of AI.

There's no doubt about it. AI has the equal potential to cause untold harm, and the scandal playing out with the UK Post Office is a stark reminder of how ethics can be completely railroaded. That is why it must be developed ethically. And that's what we're going to go into the next podcast. But today, we've been talking about the Post Office scandal because it offers a vivid example of when ethics and ethical principles play no part.

And I think the lesson we need to learn from this is that we must protect people themselves from the very real harm. that could be caused by AI. To do this, we need to build the ethical foundations and the framework around the technology for the common good of individuals, societies, and indeed all of humanity. Furthermore, those ethical controls must be universal.

And that raises the question posed by Robert. Should an ethical framework be built into all AI platforms so that the user is offered no choice? This and other questions at large will be the topic of our next podcast.

This week, the Dynamic Duo of Robert and Toby ponder on whether AI will drive a new wave of AI-influenced M&A transactions - or not. Certainly, 2023 has seen a 40% downturn in M&A volume globally so what evidence is there that AI will offer a stimulus and create a new wave of transactions?

It's not a simple question to answer because AI is still in its infancy, but adoption is accelerating at an alarming pace whilst regulation and legal controls are somewhat lagging and undeveloped.

The duo give this topic a good thrashing and generally come out in agreement with each other that AI WILL drive a new M&A wave. That said, Toby is of the opinion that it might be five years away because regulatory and legal reforms have not been developed. On the other hand, Robert believes that scrupulous organisations might force legal and regulatory controls to be adopted much quicker and the expected wave might be only one or two years away.

Time will tell.

Robert and Toby continue to delve into the topic of AI and in this episode, we start to examine how AI is or will impact each of the typical M&A processes. As the duo walk through the process from Deal Sourcing to Due Diligence and then into Legal Contracts and Valuation it becomes clear that AI is already playing a strong role in some aspects of M&A. But equally, there are other areas where AI might play a supporting role, where the need for human intervention is still prominent in what Toby refers to as 'the art of M&A'

There's also our long-standing view that the current 'narrow' AI is simply another tool that can be harnessed to significantly advance the quality and efficiency of M&A transactions BUT like all tools, it is the quality of input that determines the quality of output. GIGO (Garbage In = Garbage Out.

We've still got more to unpack on the topic of AI in Mergers and Acquisitions, and we hope our thoughts and viewpoints stimulate your own thought processes.

What do you think? Are you in agreement with Robert and Toby, or do you have a different viewpoint? We'd love to hear what others have to say.

In the last episode, the dynamic duo (Rob and Toby) started to talk about the emergence of AI, and this week, we continued the conversation to try and put some definition to AI. And we also tried (but failed) to stay grounded and not get dragged into the stratosphere around AI.

Anyway, this week's podcast was more serious than others as we sub-categorised AI into Machine Learning, Deep Learning, Narrow AI, General AI and Super AI; and that's probably just touching the surface.

We also tried to understand our personal position (as intelligent laypersons) on whether we were optimistic about AI's potential or deeply concerned about some of the dangers that AI might pose. And that ranged from the benefit to humanity as a whole (imagine AI bringing education to everyone irrespective of race, or social standing) right through to AI being harnessed for personal gain by the super-wealthy and politically powerful. And there's the easy leap from trying to define AI into a stratosphere discussion in the space of a few minutes.

The good news is we recognized our distraction and solemnly promised that we would return to AI basics and discuss its use and potential use in M&A transactions. That's next week's topic so tune in to find out if we managed to contain ourselves.

Robert and Toby often get together like old men on a park bench, to discuss a variety of topics. Some of them become podcasts, others don't. And sometimes one topic sparks a discussion on something different. That was the case recently when the dynamic duo was trying to get their heads around AI and what impact it is/will have on the world of M&A.

It was from that discussion we asked ourselves what tools are currently used to manage M&A transactions and we concluded that the technology is not much more than a spreadsheet on steroids with a simple data room and a database bolted on. Yes, I know we're being harsh, but what really came out of the conversation was the idea that the gap between current technology tools and AI is massive and we ended up with a view that AI will have such a dramatic impact that it's easy to equate it to that period where parts of China went from Abacus to Advanced robotics.

But that's jumping ahead of ourselves. We will start to discuss AI next week and we'd welcome anyone to join us who is keen to offer their thoughts and experiences. But in the meantime, we thought it was worth drawing the baseline and explore what tools are currently available and whether they are adding value to M&A transactions.

There is one certainty in life and that is if you choose any metaphor, Toby Tester can link it to M&A, and he doesn't even blink.

In today's podcast, Toby manages to draw a distinction between the behavioral characteristics of pirates of old and those of several modern-day corporate heavyweights such as Rupert Murdoch, Elon Musk, and Lord Hansen. Toby's view is that just like pirates of old, modern-day pirates possess a number of valuable behavioral traits i.e

• Dare to think like a pirate
• Dare to do things differently
• Don’t listen to naysayers.
• Surround yourself with people not afraid to step out of their comfort zone.
• Be a mentor to others
• Avoid people who complain a lot.
• Approach life with positivity and optimism
• Don’t be afraid of failure.

Moreover, during their conversation, Robert and Toby conclude with several recommendations that the modern pirate (CEO) should add to their M&A toolkit.

• Look at opportunities to deliver value beyond due diligence estimates.
• Don’t accept the synergies defined pre-deal are the only synergies to be delivered- there’s always more, alot more.
• Get people in involved in a joint treasure hunt by running synergy workshops
• Uses M&A as a catalyst to transform.
• Adopt a transformation (not transaction) mindset
• Turn the M&A exercise into a treasure-hunting game.
• Take an activist approach to managing risks.

And Remember: there’s buried treasure in every M&A deal.

To start with a tongue in cheek disclaimer: If we've offended any Corporate Lawyers or Investment Bankers in the recording of this podcast, we did so with gusto and enjoyed having a dig at your expense :-) But enough of that. When and where did the term M&A originate?

We use the term M&A freely as part of everyday language, but when and where did it all start. Our dastardly duo jump into their time machine and head back to 1602 when the Dutch India Company was formed and became the first truly recognised 'corporate entity'. Fast forward 100 years and the Dutch India Company merged with one of its competitors to stave off a downturn in business.

By the 1800's the world of corporate finance was in full swing and London was the recognised finance centre of the world. And that was the catalyst for companies to trade in shares, raise various forms of finance and start the process of buying and selling businesses. The process we know today as Mergers and Acquisitions.

And since then the world of M&A has literally exploded through what Robert and Toby describe as 7 distinct development stages. And today you won't be surprised to learn that since 2000, more than 790,000 transactions have been announced worldwide with a known value of over 57 trillion USD.

Listen to today's podcast and see if you agree with our 7 phases of M&A.

Just when you thought it was safe. Just when enough time had elapsed that you thought the future was safe and secure - - - THEY'RE BACK!

Yes, after a hiatus of 12 months, the deadly duo of Robert Heaton and Toby Tester have returned to their popular podcast with even more M&A Stories.
Today's episode is just an introduction to give you a flavour of what we will talk about. As always, our intention is to share our experiences, provoke thought and conversation and help other practitioners who are about to embark on an M & A transaction.

It's the first podcast for 2023 from your hosts Rob and Toby and in this episode, Toby focuses on the top 5 post-close questions a CEO needs to ask on any deal. But before we start let's put the CEO's task into perspective. He's just spent the best part of last year focused on the deal, the constant back-and-forth conversations, the massive efforts around due diligence, the stress of negotiating the final deal value, and then the task of ensuring that all the legalities are properly managed and signed of etc etc.

There is, of course, the short-term elation when the deal is finally closed and ink is dry but it's short-lived, because before he can draw breath, that CEO is now faced with achieving the strategic vision, value, and synergies that were part of the deal thesis and a promise to the board and shareholders alike. Here's to another year of stresses that are stopping him from doing his day job.

Well as Toby puts it, there is some relief that can be gained if the CEO approaches the post deal activities by asking 5 simple questions.

From Rob's point of view, these questions might come over as too simple, but in reality, they are the foundational questions that any CEO must be comfortable with if he/she is going to deliver the post-deal promise to the board and shareholders alike.

And the final point in all this is that the CEO must not wait until the deal is closed before he tackles these questions. He should be thinking about these as soon as due diligence is underway. In fact the earlier one can consider these 5 important questions, the better.

Well, this podcast was recorded in late November 2022, but a quick hospital visit so Rob could undergo full knee replacement surgery meant that we didn't publish until early January 2023. Still, knee surgery was successful, so here goes.

And to help you navigate this episode, we refer to past episodes where we unpack some seriously disastrous M&A transactions, so if you want to know more about the detail of each of our 'top 5' then you'll find the links here

In past episodes, Rob and Toby walked through a number of disastrous M&A transactions and a number of common factors started to arise on why these transactions had been so catastrophic. In some cases, it was down to the massive ego of the CEO or Chairman who railroaded transactions through a compliant board. In others, the deal thesis appeared to be nothing more than an excited scribble on a table napkin and very little thereafter. Others came down to massive cultural challenges or the simple reality that the idea might have sounded good, but the market wasn't interested. And in some cases, it was a combination of several of those factors. Do you agree with our 'Top 5' or do you have other examples to offer?

And if you want to delve more deeply into each disaster, you'll find that we dedicated an episode to each of our top 5 so simply look through our episode history to find out more.

Oh, I almost forgot. HAPPY NEW YEAR to our friends, colleagues and listeners around the globe. Here's hoping 2023 is a safe, healthy, and prosperous year for everyone and that your friends and family play a key role in every aspect of 2023.

In this 2nd episode with PTS Consulting, we pick up with Barry Lewington and Hugh Van Wijk where we left off. but take time to delve deeper into some of the critical success factors in managing technology transition or transformation during M&A.

Seasoned M&A professionals won't be surprised the hear that technology itself isn't the most important element. In fact it doesn't appear on Barry and Hugh's top four recommendations

I'm sure we will hear more from Barry and Hugh, in fact there are rumours they may record a podcast episode every month. Watch this space.

About PTS
PTS offers clients a personalised service to transform their operations through technology. We combine visionary thinking and strategic guidance with innovative design and practical implementation to ensure technology transforms, engages, and optimises.

In today's episode, I'm joined by Barry Lewington and Hugh Van Wijk from PTS Australia to talk about their experiences in managing the technology integration (or separation) aspects of M&A. We will be recording more podcasts with PTS in the future but from today's episode, there are several takeaways from our conversation.

About PTS
PTS is a global technology consulting business with 35 years of experience delivering world-class IT solutions to some of the world’s leading organisations. They help clients better align their IT, Business and Real Estate strategies by transforming the workplace through technology and by optimising their Data Centre environment.

In today's episode, Rob and Toby continue the conversation about 'infusion', the art of purposely planning the deal as a value-add exercise and being committed to adjusting your operating model to 'infuse' the best of both sides.

Rob and Toby kick off by proposing that traditional integration is what we refer to as 'scale deals' ie: bolting two entities together so the end result is more efficient, but principally a larger version of the two originating parts.

Scope deals on the other hand are about setting out to 'fuse' the best parts of each business so as to produce a 'new' organisation that is stronger than before and is now able to capture new geographies, enhance design capabilities or perhaps add an entirely new product range or service. These deals are about infusing those things that each organisation is exceptionally good at and maximizing the advantages via a willingness to adjust the operating model appropriately.

You can listen to what we say about this, and we also recommend you read a well-written article from Strategy+Business entitled 'The Capabilities Premium in M&A'.
Highly recommended reading.

Well, Toby's back from his quest to conquer Spain and Malta, and he's fresh with renewed enthusiasm. So much so that he has invoked Alice in Wonderland and Alice's conversation with the Cheshire Cat to demonstrate his thought processes. I'll let you, the listener find that delightful snippet.

In this episode, Rob and Toby revisit a familiar theme that proposes that the outcome of any M&A deal must be greater than the sum of the two individual parts. We start by looking at traditional M&A integration of "bolting things together" and surmise that this results in diluting the outcome. By contrast, a deal with a clear vision that takes both a finance and engineering approach will always deliver more significant, more sustainable value.

Why? Well, R&T argues that the duality of a financial and engineering approach to M&A infuses the best value for the two sides of the deal, and with the snap of a finger, INFUSION-type deals are born.

But it's not as simple as it sounds. Rob and Toby have determined to give it more thought, so if you are wondering what the topic of our next podcast might be? Think no more!

With Toby on vacation in Europe, I've had the opportunity to bring in a guest to the podcast, and I'm delighted that fellow M&A professional Anirvan Sen has joined me to talk about his experiences managing cultural change in M&A environments.

In today's podcast, we unpack our thoughts that culture is a leadership responsibility and that it is the culmination of many different aspects that make up corporate culture. Everything from rewards and recognition, communication style (internal and external) your approach to innovation, and lots more. So much so that Anirvan and his team have developed a diagnostic and operational model with the well-chosen acronym P-R-O-M-I-S-E. Listen to today's episode and you will understand more about PROMISE and the many facets of managing culture during M&A transactions and subsequent integration.

About Anirvan Sen
Anirvan is the Founder and CEO of Fifth Chrome a leading consulting and advisory firm specializing in programs that focus on the 5C’s: Capable leadership, Change Management, Communication, Cultural Transformation, and Collaborative Technology.

Fifth Chrome's transformation programs are based on Mergers & Acquisitions (M&A), Internal Organizational Restructuring, Future Talent Strategy, Outsourcing, and Digital Technology Adoption.

In the last episode, we delved into Rob's background and how he got started in M&A. The tables have been turned, and it's Toby's turn to wallow under the spotlight.

We learn quickly that Toby's first M&A experience was after joining a Financial Services business and leveraging his project management expertise. And he realized this was something he enjoyed doing because it allowed him to utilize his skills and expertise across the whole of the business.

As Toby puts it, he became bilingual and could speak the language of every department at every level. Toby also enjoyed the freedom and flexibility of moving seamlessly up, down and across the organisation as part of the M&A execution process, unfettered by internal barriers and politics.

Fast forward, and Toby has completed 50 M&A projects, half pre-deal, and the other half post-deal. He feels privileged to have had this opportunity across his career, and he doesn't envisage slowing down too much while he is enjoying himself.

The dynamic duo aka Rob and Toby have spent many episodes talking about their respective M&A experiences, but we've never talked about how it all started. Rob is slightly embarrassed about opening the kimono, but as he explains in this episode, it started with his ability to regularly be in the wrong place at the right time. By that, Rob means that he was often asked to pick up 'special' projects and didn't know how to say No.

But if you listen to this episode, you'll quickly understand that Rob's start in M&A was a two -way transaction. His willingness to "have a go' when asked to take on projects parallel to his day job, coupled with the willingness of senior executives to provide support and coaching.

And it's possible that Rob would not have been here today to talk about M&A if it wasn't for his very first experience and the willingness and coaching of a very well-known British industrialist.

So in reflecting back over the years, Rob provides the following advice for anyone looking to start a career in M&A

So in today's episode, Robert and Toby continue their conversation around value creation in M&A, but this time taking a more philosophical approach to the factors that impact the desire to go after value that is beyond what Rob defines as the 'bleeding obvious'

By 'bleeding obvious' Rob is alluding to the usual synergies, cost reductions, and efficiencies that result from typical M&A deals, and whilst achieving these can be stressful on the organization, the pathway is based on proven methodologies that are well trodden.

But then there is the innovative value that can be derived from M&A and in many cases that area has a lesser pursuit. Why is that?

Robert and Toby ponder whether it's because the organization is exhausted after dealing with the post-deal shenanigans or whether CEO's are risk averse and don't want to push value creation too strongly at the risk of their performance bonuses etc.

But maybe it's determined by the 'style' of CEO at the helm. Some are clearly focused on delivering consistent performance, whilst others are more 'entrepreneurial' and willing to take greater risks.

And maybe it's just that two teams are needed. The initial team that goes about achieving the bleeding obvious, with a second team swinging in slightly behind team 1 to pick up on the more creative/innovative themes and drive that additional 'buried treasure' that Toby often refers to?

The answer will always depend on many factors, and in fact could be a combination of all three scenarios that the dynamic duo talks about, but the fact remains that many deals stop at completion of the integration phase, and a lot of additional value creation remains buried.

What do you think? Have you got examples where that elusive innovation value has been uncovered? Do you want to come on a future podcast episode and talk about it? Let us know - you know how to find us.

You might recall in the last podcast, that Robert and Toby got on a roll in talking about value creation during post-M&A integration so you won't be surprised that this is the topic for today's podcast.

The Dastardly Duo hold firm to their belief that insufficient attention is paid to real value opportunities beyond what Rob describes as the 'bleeding obvious' And you'll hear Toby berate Rob for not respecting the huge amount of work that goes into identifying value opportunities.

But I digress because in this episode Rob and Toby start to explore what they call the Three Phases of Value Creation and reaffirm their belief that more can be done to realize post-deal value. Moreover, Toby proposes that there is an additional function needed that he calls the VMO (Value Management Office) and you can read more about that idea here

And finally, what are those Three Phases?

As always, we hope you enjoy our podcasts and we invite you to comment if you have something to offer or indeed disagree with our observations. Lastly. let us know if you have a story to tell and we would be delighted to have you on the podcast as our guest.

Just occasionally, Rob and Toby get into the groove and thoroughly enjoy their chosen 'topic de jour' and today was one of those events. The dynamic duo decided it was time to explore the principle of creative value during M&A. And what do we mean by that?

Well, a lot of post-deal value creation is what Rob calls the 'Bleeding Obvious' and what Toby prefers to call Combinational Synergy Value (he's always had a way with words, that lad) It's the value derived by spreadsheet jockeys mulling over the post-deal financial data.

Then there's the second wave of value creation which is when the combined data points you in a particular direction. In this scenario, Rob offers a previous experience of differing supply chain costs being the catalyst for greater value creation

BUT WAIT - THERE's MORE! - Because what we are really talking about is value creation brought about by strategic vision or by seeing the unseeable opportunity that unfolds when you have insight into both of the businesses that you have just combined.

So for our bottom line Rob and Toby offer the view that yes, there's a place for the Combinational Synergy Value (Bleeding Obvious) value opportunities but the REAL value potential comes from taking an engineering approach and fully understanding how the combined business works and how it delivers value. THAT is where the really exciting value creation journey can be found.

In today's podcast, Rob and Toby start to discuss the impact that positive and negative emotions can have on the success of any M&A integration. And to be clear, we are not talking about the bigger picture of 'culture' although that does have some bearing on the topic.

What we are talking about are those situations where emotions such as fear, envy, anger, frustration (clearly all negative) and elation, enthusiasm, comfort, and certainty (positive) start to appear in both individuals and groups as they react to the news of the merger/acquisition.

Rob expresses a view that in many M&A deals the topic of emotions is relegated to the back burner and only tackled in a reactive sense when the smelly stuff has already hit the fan. Moreover, Rob suggests that emotional reactions need to be considered as a certainty in any post-deal scenario and that there is a need for managers at all levels to be capable of recognizing, identifying, and managing emotional behaviors long before they become a problem.

Do you agree? Should more attention be paid to managing post-deal emotional reactions or do you think this is sufficiently well managed in most cases?

In today's episode, Rob and Toby attempt to make sense of Elon Musk's $44Bn acquisition of Twitter. Attempt is the operative word here because only Elon musk knows why he's doing this so all Rob and Toby can do is offer some thoughts and speculation.

What we do agree on is that this isn't just a pure social crusade by any stretch and there is most likely a business model in Elon's head that he thinks can monetize Twitter. And one of the thoughts that we offer is maybe Musk has a 2 step approach where step 1 is to steer Twitter more towards a Wikipedia type platform (and thus allow true moderation by society rather than powerful individuals) and step 2 is a subscription type model where people will pay for good (self-moderated) content.

One thing Rob and Toby can be certain about is we don't know what Elon Musk has in mind for Twitter but we think our hypothesis has got some merit.

Are we likely to see Wiki Tweets in the not-too-distant future? Does the application of a Wikipedia type model make sense? What do you think? Let us know your thoughts in the comments section.

When Toby first raised this as a podcast topic, I was immediately taken back to a phrase that my mother would use when I'd misbehaved, but it turns out Toby was talking about something completely different.

What Toby was talking about was an alternative investment vehicle for targeted acquisition(s). According to Dr. Google, A SPAC (Special Purpose Acquisition Company) is a company that has no commercial operations and is formed strictly to raise capital through an initial public offering (IPO) or the purpose of acquiring or merging with an existing company.

Disclaimer: Now Toby and I will never claim to be experts in this particular topic, so consider this episode more of an exploration of our knowledge to date....ie: not a lot.

But we do think it's an interesting topic and it is certainly getting more favor in North America and Middle East markets and could soon be appearing on the Australian stock exchange.

So what you will hear in today's podcast is our novice views on SPACS and a call out to anyone who can add to this topic to reach out and perhaps come on a future podcast as our guest.

Any takers out there?

In recent episodes, Rob and Toby have started to look at M&A fraud and certainly, the HP Autonomy deal was on a massive scale, as was Theranos. And here in Australia, we are just starting to unravel the Ponzi scheme of Melissa Craddick. But those are all massive frauds that captured almost global attention.

But what about the risk of uncovering fraud in everyday M&A? And maybe it's not fraud in the strict sense but more likely dodgy practices, knowing turning a blind eye, engrained revenue recognition practices? How can you identify these sorts of behavior? Does regular Due Diligence cut it? we think not, but there are some techniques that everyone should consider, and it does not necessitate diving into forensic levels of DD.

If you listened to the press this past year you must have heard snippets about Elizabeth Holmes, the young, attractive and charismatic CEO of Theranos, and how she fleeced rich and savvy people out of almost a billion dollars. It's a topic that Rob and Toby have been mulling over recently and particularly wondering just where in the journey did Elizabeth turn to fraudulent claims and did she do so knowingly?

From what we know, she started out with a genuine vision/dream to disrupt the blood-testing industry with a machine that could provide blood analysis from a single pinprick and in the early years, there seems to have been a lot of effort into achieving that dream. But somewhere along that journey it would have become obvious that the technology wasn't going to work and that's when Elizabeth's pathological desire to succeed turned to fraud.

The bottom line seems to be that she had a sociopathic disorder that allowed her to believe in her fraudulent claims, but it doesn't explain why such savvy people parted with their money so easily. Was it because they thought they were being invited into a secret and highly exclusive club? Did the fact that well-known people had already invested cloud their judgment? Who knows?

What we do know if that even basic due diligence would have set alarm bells ringing so I guess that leaves us with two take aways from the Theranos story:

You might remember in a previous podcast towards the end of 2021, that Robert and Toby discussed HP's disastrous acquisition of Autonomy and the huge accounting scandal that unfolded. Well, the reality is that repercussions are still being felt more than 10 years later and there are criminal prosecutions that have resulted in a jail term for the CFO. Added to that, a recently approved application should see Autonomy founder Mike Lynch extradited to face charges in the US. He's fighting the extradition as we speak, but if a trial goes ahead he is almost certain to face a prison sentence.

Let's join the podcast and get a recap from rob and Toby and perhaps give some thought to whether more white-collar crime should be prosecuted?

THE DASTARDLY DUO ARE BACK!!!! Welcome to the first podcast of 2022

What do you get when you cross a project manager with a psychologist and a schizophrenic? The answer, is a very effective M&A Integration Manager, at least that's the view of the Dastardly Duo aka Robert Heaton and Toby Tester in the very first podcast of 2022.

Why such a description? Well in today's podcast Robert and Toby explore how an integration manager must be able to deliver the expected value from the deal, operate and communicate at every level from shop floor to boardroom, remain calm and focused in the face of constant upheaval, ensure that the original deal vision is efficiently transformed in operation reality and deal with objections, change, and innovation simultaneously. Easy Huh?

The duo also discusses whether Integration Managers are drawn from internal company resources or whether an outsider is the best option. Either way, they both agree this is not a job for the faint-hearted.

Robert and Toby first decided to record this podcast when COVID forced everyone into lockdown. That was 18 months ago and the dastardly duo has recorded 62 episodes on every facet of M&A.

We both have other pressures to deal with now that COVID is taking a backseat (we hope) so for the time being, this is the very last podcast - or maybe the last podcast of 2021. Who knows what 2022 will deliver.

So in this last episode, we've looked back on the past 18 months and summarised what we talked about and what we've learned. IT'S BEEN A BLAST and we both enjoyed the experience. We are extremely grateful to the audience that has listened to what we had to say and before we go, it's our last action to make sure everyone has a relaxed, safe, and enjoyable festive season with friends and family and to wish everyone a healthy, safe, successful and prosperous 2022.

Robert and Toby have always extolled the quality of leadership as being fundamental to M&A success and most listeners would agree that executing the right deal and developing the vision and strategy for the business are core values that you would expect from any leadership team. But what about when the deal is closed and it's time to integrate the new acquisition and turn that vision into strategic and operations reality? That's where another level of leadership is required and Toby argues that there are four distinct leadership types, and each has attributes that can be beneficial or detrimental depending on the type of deal being executed. They are:

And in this podcast, Robert and Toby unpack each style to discuss where and how they may be relevant and which type of deal favours which leadership style.

The summation from Robert and toby is that there is a role for each style but getting that right is something that needs to be considered at the same time that the deal is being negotiated. getting the wrong leadership style against the wrong M&A deal is not something one wants to contemplate.

Leadership is an endless topic and this time around Robert and Toby examine M&A Leadership at the CEO level. Robert kicks off by giving two examples. #1 is a CEO who is a high-risk taker but has charmed the board, shareholders, and Wall Street with his daring acquisition strategy but is never seen to engage below the C suite level.

#2 is a CEO who has a steady and consistent relationship with the board and shareholders but is also highly visible at operational levels and with customers.

The question that Robert and Toby raise is which of these is the most important? For many of our listeners, the answer is obvious but it does help to pause and question whether both examples have something missing and what can be done to strengthen both CEO's capabilities.

Robert started this podcast recognizing a few leaders that he has worked with who have shown exceptional skills at every level of an organization, but we quickly accept that these people are very few and far between. The hundreds of CEO's/Leadewrs who don't have this charismatic style must look elsewhere to compensate BUT they must not delegate. You'll see what we mean when the conversation gets underway.

Leadership is one of those topics that is really hard to wrap your head around because, in Robert and Toby's opinion, Leadership isn't just the person with the grandest title at the top of the tree, Leadership is invested in many people through every facet of an organization.

That is particularly true in Mergers and Acquisitions where Leadership should be demonstrated by different people at varying stages of the M&A deal cycle.

In this episode we unpick the leadership responsibilities of all the key players starting with the Chairperson, then the CEO, Corporate Development, Internal and External Advisors and finally exploring the leadership needed for post-deal integration.

As you might expect, Robert and Toby offer the view that the post-deal integration role is the most critical in terms of leadership. What? Biased? Me and Toby? NEVER!

And we close today's podcast setting the scene for the next episode where we will explore different post-deal leadership styles and whether some styles are more suited than others.

In this latest podcast, Robert and Toby have pivoted away from M&A disaster stories and moved towards an examination of leadership? Why you might ask.

Well, in all of Robert and Toby's experience, good leadership (or bad leadership for that matter) has been the instrumental factor in whether an acquisition is successful. So that got the dastardly duo thinking about what exactly defines leadership? Are good leaders simply born that way or can people be developed into leadership?

The answer is both. Leaders are born and bred, in a combination of nurture building on nature. There does appear to be some sort of raw material that contributes to leadership, which leads to quite different capabilities and outcomes as education is added.\

Looking at famous artists could help you understand this distinction. Although everyone can learn to draw, not everyone may become a Picasso or Monet, a da Vinci or Caravaggio — and that is probably a good thing. Can you imagine a city full of world-class artists all wielding their brushes and their temperament? It is worth remembering that the great artists nurtured their talent, studied their craft, and honed their ability over many years.

By analogy, leadership is somewhat the same. It is a combination of some sort of raw material, combined with a life of learning. In this sense, leaders are bred, or created, carved out of the stone as they grow through life. Leadership is nurtured, built on nature (which creates a significant responsibility for organizations).

Some people who occupy leadership positions rely on natural talent and then reach a ceiling — much like the bright student who coasts through school, only to come to grief when they find they have not developed the habits necessary for advanced study. They rely on their towering height or authoritative voice to look and sound like a leader, while the actual skills of leadership remain uncultivated.

Another acquisition dissected by the dastardly duo of Toby Tester and Robert Heaton and this week it's Google's $12.5Bn acquisition of Motorola. A deal which they then sold to Lenovo less than 2 years later, for $2.9Bn.

On the first examination, this looks like a disaster, but in reality, Google came out of this break-even. Why? because Motorola had $3.2Bn in cash, the sale to Lenovo offered Google a $2.5Bn tax benefit and they retained 17,000: Yes, you read that correctly - Seventeen Thousand patents valued at $5.5Bn that would help Google see off challenges to its Android platform.

And let's not forget, an acquisition of this size is pocket money for Google and they have the ability to take measured risks on things like this.

So what was Google's rationale? The short answer, they thought they could supersize Motorola and disrupt the smartphone market but if you consider that the smartphone market is dominated by Apple and Samsung, you'd really have to think hard about how successful you might be.

Bottom line, Google realized fairly quickly that this had been a mistake and they offloaded Motorola and went back to doing what they are good at.

And as always, we leave you with three or four lessons that you might consider when finalizing your next acquisition.

You might have thought that Robert and Toby would have run out of M&A disaster stories by now? Oh, Ye of little faith. THis week we explore Sprint's majority shareholding acquisition of Nextel to try and unpack how a $35 Billion investment in 2005, resulted in a $30 Billion write-off just three years later.

The deal vision made sense and there were significant economies and efficiencies to make the combined business a challenging #3 globally to AT&T and Verizon. Better still, there was significant cross-sell opportunities between Sprint's typical consumer customers and Nextel's B2B customers. Well it made sense on paper BUT:

There's a heck of a lot going on in this particular story and we remain 'Gobsmacked' (that's Rob's descriptive superiority coming through) at how and why this deal should have such a litany of challenges.

To Summarise

So there you have it - yet again, the recipe for how to successfully navigate a $35 Billion investment and turn it into a $30 Billion single write-off in just three years.

This week Robert and Toby discuss the failed 'merger. between automotive giants Chrysler and Daimer-Benz. On paper this was supposed to be a win-win. The $36 Billion 'Merger of Equals' was supposed to raise Benz's market share in the U.S. auto market. Chrysler was supposed to improve its vehicles through Daimler-Benz' car expertise and the combined strength of Daim;er-Chrysler would stave off competition from the Japanese and deliver synergies and other benefits worth $8 Billion

Nine years later PE Group Cerberus paid $7.4B for Chrysler. This is a fifth of the price paid. Chrysler was demerged and the tombstone proclaimed it to be The most unsuccessful merger of modern times.

So what went so badly wrong? Well, cultural issues at both companies certainly didn't help. The tyranny of distance between the jont CEO's (one in the Us and one in Germany) A view by Daimler-Benz that anything with the Chrysler name on it was inferior, seriously lost opportunity to leverage Chrysler's industry beating 2 year timeframe for concept -to showroom and massive differences in pay-scales and reward bonuses are just a menu of challenges that stopped any post merger integration efforts.

The Post Mortem

The key lesson is summed up nicely by Toby and will probably go down in history as one of his greatest quotes.

Every day, wrong companies are purchased for the wrong purpose, with wrong measures for valuation. This results in wrong things integrated into wrong operating models.

A Frenchman and an American walk into a bar and over pissaladière and fried chilli chicken wings come up with the idea of working together and operating efficiently from their respective home turf to compete cost effectively with competitors from China and Asia Pacific. What could possibly go wrong

On face value, the merger of Alcatel and Lucent was a necessity to ward off serious global competition from Huawei and other telecom competitors. The combined strength of both organisations made sense and joining their respective technologies even more so.

BUT - dig down under the covers and there are several ingredients that make a recipe for disaster. French cuisine and America's lack of anything 'cuisine' would result in a disastrous recipe and this was no different in the 2006 merger of US based Alcatel and French based Lucent. So what were the unsavoury ingredients?

As always, there are good and not so good lessons to be learned, but you might need to listen to the podcast to find that out.

In today's episode Robert draws on personal experience of Oracles acquisition of Peoplesoft and subsequently J.D.Edwards. Robert was part of J.D.Edwards global leadership at the time so watched this deal evolve from the inside. And whilst his career suffered as a result (Oracle removed the J.D.Edwards leadership team) Robert has to admire the brilliance of Ellison's strategy and execution.

This was Larry Ellison at his finest. He saw Peoplesoft and J.D.Edwards agreeing-to merge and pounced one week later with a hostile takeover bid. Despite protestations and legal challenges from Peoplesoft's Board, the deal went through.

So why does Robert see this deal as particularly brilliant? Well in a nutshell, the deal was a true reflection of Ellison's brilliance. In one very clearly executed vision he:

• Removed Peoplesoft and J.D.Edwards competitive threat. As a merged business they could have seriously challenged Oracles dominant position in the Tier 1 marketplace
• Immediately gained access to more than 8,000 additional customers who Ellison planned to convert over to Oracle applications
• Gained the opportunity to move most of those customers onto Oracle's database
• Avoided any necessity to integrate either business (it simply wasn't necessary)
• Accessed the 18-20% annual maintenance (cash) that Peoplesoft and J.D.Edwardfs customers paid for support on what were essentially very stable products

So bottom line, this was a very clear vision that was swiftly executed by stealth and surprise with immediate benefits flowing straight into Oracles coffers.

Robert & Toby continue to unpack some of the worst M&A deals in corporate history and this week it's the disastrous $350 Billion merger / acquisition between AOL and Time Warner.

On the surface, this 1999 deal was the stuff of dreams and it made a lot of sense in many ways BUT - This was DOT.COM era, the bubble had just burst and high speed broadband internet was rapidly replacing Time Warners dial up modem technology. Worse still, the dream was never transformed into a clear vision. Significant cultural differences were completely ignored and there was a significant absence of any plan on how the dream was going to materialise into reality. Added to that is Toby's view that the two companies failed to consider how their respective capabilities could be combined for the greater good of the combined entities.

In many ways, this was a dream deal concocted over dinner by the respective CEO's. The dream had lots of lofty words and press releases but was never translated into into a meaningful vision, strategy and execution plan.

The end result in just 2 years was a MASSIVE $99 Billion write down and the final unwinding of the business in 2009

And a quote that Robert uses on the bottom of all his emails sums this up nicely
STRATEGY = EXECUTION. All the great ideas and visions in the world are worthless if they can't be implemented rapidly and efficiently" Colin Powell

Last week we asked the question Could it get any worse?

Well, Toby has excelled as usual and the acquisition of Autonomy must go down in history as one of the worst, most value-destroying deals in the history of the Tech Industry and Corporate America.

This story is a bit like “Air Crash Investigations”. It’s not just one factor that conspired in a complete M&A disaster, but a number. Let’s list them:

• A CEO desperate to make a deal and rushed the process
• Two diametrically opposing cultures:
  • A large unwieldy and bureaucratic buyer
  • An aggressive “in-your-face” software firm big on personality, entrepreneurship and suspect sales practices
• A board with several new people with limited time to focus on the deal.
• A CFO who said “don’t do the deal”; roundly ignored.
• A Due Diligence process with limited financial transparency and an over reliance on ‘audited’ accounts.
• A lack of integration planning that would handle different cultures and make the deal work.
• A very optimistic valuation indeed; way above market expectations.
• AND a $8Bn write-down within one year of the deal closing

So apologies for our listeners, this one is over 30 minutes duration, but it's necessary to cover all of the salient points of this tech industry disaster.

In the past weeks, we've been reviewing some thew worst M&A disasters in corporate history and this week I think Toby has found one of, if not THE worst M&A disaster in corporate history.

This was Royal Bank of Scotland's disastrous takeover of Dutch Bank, ABN Amro in 2007 and not only was it a massive disaster for Royal Bank of Scotland, it almost brought the UK economy to its knees. Bottom line, it had ALL the hallmarks of a recipe for guaranteed disaster:

In summary, these dot points make for an explosive outcome but the lesson here is that these traits are universal for any M&A transaction irrespective of industry, size or geography and it is a Chairperson and the Board's responsibility to ensure proper process, strong governance and a balance of Board power to ensure such transactions receive proper and thorough consideration.

But suppose you want to understand more about this disastrous event. In that case, you can watch this video exploring the history of RBS, and how it nearly caused Britain's financial system to collapse. This is a fascinating video that will give you a better understanding of the events that led to the financial crisis in 2008.
https://lnkd.in/gptkzb-s

Robert and Toby continue to unpack some of the most disastrous M&A deals in corporate history. This week it's EBay's costly and disastrous acquisition of Skype. Her's the dot-points.

• Ebay thought it could leverage Skype to provide a voice and video channel for its customers and sellers to communicate. What they didn't do was talk to their customers, because they would have learned that EBay customers want anonymity and were perfectly happy with messaging and email communication - and they still are today!
• For whatever reason, EBay paid $2.3Bn for what was a $7M start-up in 2005 and then had to write down $1.4Bn over the course of its ownership of Skype
• A serious error by their legal team made sure that the deal went through without the underlying software that was the foundation of Skype - that was still in the hands of the developers post deal!
• And to top it off, there were the usual cultural clashes that occur when you try and marry a large conservative corporate with an agile, innovative start-up. And that resulted in Skype's leadership team during over 4 times during EBay's ownership

So there you go. Several ingredients to create a recipe for disaster.

The final outcome is that EBay sold Skype off to Microsoft in 2015 for approx $600M and under Microsoft, maybe Skype can re-live its core expertise and carve out a slice of the VOIP market?

But just consider this. Zoom did not come into existence until 2011, so Imagine what Skype might look like today if EBay had not made this disastrous acquisition. Food for thought?

We continue to unpack some of history's M&A disasters and this week Toby delves into what he calls YAHOO's Murder of Flickr.

This story kicks off in 2003 during the early years of the internet when Flickr was a fledgling start-up desperately needing a larger partner to accelerate the innovation and seize what could have been a massive transformational opportunity.

On paper Yahoo looked like the ideal partner but in reality the partnership was ambushed by Corporate Development who were intent on treating the deal like any other M&A integration. As a result, the need for synergies and efficiencies took priority and you might even conclude that any desire for innovation was suffocated.

The result was a massive loss of opportunity that should have seen Flickr as a dominant player on the emerging social media stage, but instead saw if denigrated into the backwaters of the internet.

The recent announcement that Japan Post have finally unloaded Toll's Global Express to Apollo Equity Partners will bring a sigh of relief in Japan Post's boardroom and a wry smile to the face of Apollo's Leadership. Better still, the appointment of Christine Holgate as Global Express' CEO is a smack in the teeth for Australia Post. Watch this space (if you will excuse the pun)

Robert and Toby are by no means experts on the initial acquisition of Toll Group by Japan Post and the debacle that followed, but in today's episode we do try and pick the deal apart and break it down to the key factors that influenced one of the biggest acquisition mistakes in recent history.

Do you agree with us? Can you add any more flavour to the mix?
Let us know, or wait until next week when we will unpick another M&A disaster

We've set out on a quest to narrow down M&A to a set of key principles that can be expressed in one line statements. It's a work in progress, but Toby sets out an example to get the conversation started

We follow this up with a conversation about that feeling of either certain confidence or get wrenching uneasiness that you might get as you review your progress in an M&A deal. Some call it Emotional Intelligence, but what is it exactly?

And as usual we finish up with three further quotes from the Late Les Hayman. This weeks offering is about how you treat your people.

Toby's prediction from 6 months ago comes true as he shares the news that Westpac will use divestitures to drive a massive 21% annual savings across the business. We discuss how this will be a repeat pattern as other businesses re-focus on their core strengths and aim to build protection from post COVID experiences and also deliver stronger returns to shareholders.

Robert introduces the principles of Murphy's Law and Sixth Sense in M&A using a very recent deal collapse where Murphy's law intervened at the final moment.

And his sixth Sense commentary is around that ability to spot what others can't see. Some of it is learned behaviour from years of experience and some of it is intuitive. You can't build it into a playbook, but it's that skill and intuition that can make the difference between M&A success or having to clean up a pile of smelly stuff that hit the fan.

And as always, we finish with three quotes from the Late, Les Hayman. This weeks quotes are all focused on personal development. Enjoy!

After riding his bike up the side of a mountain, Toby's endorphins kicked in and he has proposed a great idea. You can learn more from listening to this podcast and we would welcome any contributions you might make.

M&A Integration is about keeping it simple but as Einstein says "you've got to make everything as simple as possible, but not simpler" and it's this topic that Robert and Toby explore.

Then just as we thought we had simplicity nailed, Robert introduces SPAC's. What? I hear you say. Well according to Wikipedia, A SPAC (Special Purpose Acquisition Company) is a company created solely to buy another firm and take it public — an alternative to a traditional IPO . Robert aims at providing a brief overview but as always, we welcome further commentary from our listeners.

Lastly we invoke Les Hayman and choose three more 'Pieces of advice for managers' This week's sagely offings are

An extended episode today as Robert and Toby are joined by special guest, Daniel Levy from Melbourne based Kidder Williams, to talk about the multi-faceted topic of compliance and the implications on the deal outcome if overlooked. Kidder Williams Providing Corporate Advisory and Investment Banking services to private and ASX-listed companies,

We start off by letting Toby have a regular rant, and this week he's having a bellyache about culture and how cultural change should be addressed as an engineering challenge that is resolved by pulling a series of levers. I have to say I agree with him, but I'm equally certain we will upset a lot of HR people in the process.

Then it's on to compliance - whether it's regulatory compliance, ethical compliance, statutory compliance, or one of the thousands of industry compliance standards, they are all important to a business' ability to operate, and neglecting these areas can have significant consequences in M&A.

Robert And Toby offer their thoughts before we offer Daniel Levy's thoughts from his pre-recorded session earlier this month. Whichever way you look at it, compliance is one of those everyday M&A topics that should be almost automatic, but it's sometimes missed. Let us know what you think?

And last but not least, we finish with three of the late Les Hayman's 'tips for managers' and this week's offerings of sagely advice are?:

That's it folks! We'll be back next week with more M&A Stories.

As you might expect, Robert and Toby unpack several topics in today's conversation.

We kick off by asking if inspirational leaders are good for business? Not always it seems, especially if that 'inspiration' is driven by ego or is associated with excessive risk taking. And inspirational leaders can also be of little value if they only influence a small audience.

Once we finish this topic, it's time for Toby to have a rant, M&A Integration is the enemy of innovation says Toby and boy, isn't he on target? The core premise of Toby's rant is that there is still too much focus on cost reduction and efficiency, when real value is derived from innovating products and services and driving net new revenue growth.

And last of all, three more quotes from my former boss, Les Hayman:

And that's it folks - but don't forget we are back next week with more M&A Stories.

I am joined today by real life. Bonafide London trained actor, Dale Stevens

Dale has played the role of an assassin in mission possible and as a detective in blue healers, but today she prefers to use that creativity to grow influence in the people that she coaches she uses her extensive experience in theatre, film, and TV to inform her unique approach to coaching where she emphasises the importance of 'being present' to create powerful messaging that inspires new behaviours.

Dale brings this podcast episode to life with her thoughts and experiences and she leaves our listeners with four key takeaways:

In last week's topic we unpacked the myth of M&A failure rates and this week, Toby expands on the discussion to talk about the deal value disconnect whereby what was envisaged when the deal was crafted, is often very different to what post deal activities uncover. We offer some thoughts as to why this might be the case but we'd welcome your thoughts and experiences.

We then move on. Toby's crystal ball has been recharged and we gaze gleefully to offer some insights into the volume and appetite for M&A deals across 2021. And we have to say that based on our own experience, these predications seem fairly accurate. What do you think?

And lastly it's time for another three tips from the late Les Hayman's '100 pieces of advice for managers' This week's tips are very much people focused. Enjoy!

80% of all M&A deals fail is the cry you often hear and Toby takes this apart to show stats from recent surveys demonstrating that in reality, most deals are successful, but they have to be measured in terms of Strategic success, Financial Success and Operational success.

We then move on to talk about Artificial Intelligence (or Intelligent systems as Toby prefers to call it). Does AI have a strong role in M&A transactions? Well maybe, but it's still in its infancy and we will talk about this topic more in weeks to come.

And lastly in remembering Rob's former mentor, the late Les Hayman, we offer up three pieces of advice that should be best practice for anyone in a management position.

We'll make this a regular part of our podcast each week from here on.

It's the second episode with our new format and Robert brings up a recent Financial Review post that suggests there will be significantly less 'strategic' M&A deals because companies are focused on getting back to post COVID normal. As you might expect, Toby is dubious (as is Robert to some degree so we've published the link here so you can form your own opinions

Toby continues to examine trends that suggest 2021 and beyond are going to be bumper years for M&A (although economist predictions can often be wildly wrong)

Then we introduce the topic of 'Capability Deals' which Toby will outline next week

And finally, a plug for Global PMI Partners latest training program running on 24th and 25th March covering the importance intracacies and challenges of managing Culture and communication in M&A. At $295 it's terrific value for any manager or aspiring manager. You can find more details and registration through this link Culture & Communications in M&A Integration — Global PMI Partners (gpmip.com)

After the Christmas hiatus, The Dastardly Duo of Rob and Toby are back and they are trying a new format for the M&A War Stories podcast. In today's episode Rob and Toby reflect on trends in M&A deals, they have a rant about how the impact of culture in deals is often misunderstood and mismanaged and then they change gear and examine the recent acquisition of ME Bank by Bank of Queensland.

We hope you enjoy the new format as much as we enjoy recording it - but we are quite certain our listeners will let us know if we need to improve.

It's our last podcast for 2020 and your hosts on M&A War Stories, Toby Tester and Robert Heaton reflect on the common theme of leadership that has been a constant throughout all of our podcasts.

We also look back on which topics have been out individual favourites and we leave our listeners with six key takeaways for the year.

We'd like to wish all our listeners around the world the very best for the festive season and our hopes that you each spend quality time with friends and family.

We'll be back in 2021 with further M&A War Stories and reflections from our many experiences across the years.

In this week's story Robert and Toby talk about an experience with a senior executive who’s rapid career success elevated him to the ‘big chair’ but confronted him with a woe some lack of preparedness for the people, responsibilities and accountability that he now faced.

We’ll start 12 years back when a young sales guy walked into his new job with an eagerness to succeed. It wasn’t long before he had demonstrated a natural ability for sales and it was no surprise when he was promoted to a sales manager role just 2 years later.

Listen to this weeks podcast to find out what happened when he found himself promoted to Country CEO.

Some 20 years ago Toby Tester had the good fortune to study Existentialism as part of his MBA at Macquarie University. Apart from being what he thought was a pretty cool subject at the time, the existentialist view on responsibility continues to resonate with him to this day.

It's a type of responsibility that's deep, introspective and uncompromising. People need to go forth into the world with a moral and psychological responsibility for literally everything they say and do.

As the French philosopher, Jean-Paul Sartre put it: "Man is fully responsible for his nature and his choices"

Toby found this tough-minded view on responsibility, in an odd way, to be very life-affirming. There is much to say about this deeply introspective understanding of responsibility, particularly when it comes to dealing with modern-day challenges where the very rules of business are in a constant state of flux.

This is what Toby wants us to think about accountability….

In this episode of M&A War Stories, I put Toby Tester under pressure with a theoretical scenario

Imagine this? You're a technology business and in the past three years one of your regions has made 2 acquisitions that are aimed at enhancing the products and services that you can offer to clients. You will also ‘acquire’ some new customers as a result of these acquisitions. To date, you haven’t integrated those acquisitions into your core business but you have had some sales success selling cross business products into your existing customer base.

Your board has just decided that it’s time for this region to integrate all of the acquisitions into the core business, and simultaneously the business has just appointed a new regional CEO; someone who is stepping into their first role as a CEO.

You head up a team that’s been put in place to help integrate the businesses and you’ve got 30 minutes maximum with the CEO to advise on the top three priorities.

What priorities would you recommend? What would you do?

The economic turmoil caused by the coronavirus pandemic is likely to unleash a wave of deals as companies look to offload business units to help generate cash, strengthen the balance sheet and become more resilient to what may be a more turbulent future. It’s during a crisis, like we have now, where organisations need to refocus their business and think about where they are going to invest.

Divestitures can be a highly profitable way of selling assets that, for whatever reason, are no longer core, and use the capital raised where it’s most needed.

This isn’t a story about M&A as such but it’s a story about customer service that left its mark on me and several other people at the time. It also delivers powerful lessons for M&A practitioners about the need to ensure customer service levels are maintained during and after post deal integration.

The occasion was a Board meeting in San Francisco. It was 7:00pm and the only item left on the agenda was where to hold the staff Christmas dinner that year. We didn’t really have any firm ideas so the item was postponed until the next leadership meeting, and we all walked over to a harbourside restaurant for dinner.

This story is something I observed whilst completing a project for a large multinational pharmaceutical and CPG company. My role was to advise on the global consolidation of manufacturing and other business services so the situation I’m about to tell was just something I observed at close hand, because I happened to be there at the time.

This company manufactured feminine hygiene products and because of the personal nature of those products, manufacturing standards and quality assurance criteria had to be extremely high. As a result, reject levels between 40% and 60% were not unusual.

Profit margins were strong so high reject rates could be accommodated. The real problem however was that these rejected products could not be re-worked and disposal was a huge and unwanted headache. That is until a gentleman walked into reception one morning and inquired whether the company was prepared to let him have all the rejects.

Listen to this episode and you'll find out what happened.

Rob and Toby discuss their views that M&A should increasingly be seen as a vehicle to drive real transformation in a business and not just a transactional process to achieve cost reduction and operating synergies.

M&A as a means to transforming a business is a powerful mechanism that delivers real and lasting value, but it requires vision and leadership as catalysts of change.

Throughout this episode, Rob and Toby share their experiences of the key components to driving transformational value through M&A

We're still on the topic of M&A, but in this episode we detour to an hilarious story with a sobering lesson. The story is set in the backdrop of a slap up meal to celebrate a successful acquisition AND three years of significant business growth.

At the height of these celebrations, the CFO somehow managed to lose his trousers and his embarrassment is revealed in the story telling

The lesson of course is that as senior leaders, our behaviour needs to set example and that applies both internally and externally, especially if you consider that in external scenarios you never know who is watching or listening.

In this podcast we are joined by Daniel Levy from Kidder Williams a Corporate Advisory firm providing Investment Banking services to private and ASX-listed companies, including:

• Corporate Finance Strategy
• Mergers & acquisitions
• Divestments and demergers
• Capital structure
• Equity and debt raisings
• IPOs

Daniel outlines his experiences where poor governance and amateur level finance preparation has resulted in significant changes to company valuation, and placed the entire deal in jeopardy.

This again is another story where the key lesson is 'pay attention to details and accuracy. But as Daniel points out this can't be something that's done in the 3-6 months leading to the deal. Buyers need to start taking advice and preparing for sale 3-5 years beforehand. The Governance and finance practices outlined in Daniel's story are discoverable at Due Diligence so need to demonstrate long term consistency .

Attracting a price premium for a divestiture comes down to three things: preparation, preparation and preparation. More preparation; more value.

Background:

A UK listed engineering business brought Toby in to help them acquire a global computer analytics business put up for sale by the parent firm. The buyer saw a unique opportunity to complement cutting-edge computer analytics with their current business offerings.

Unlike previous acquisitions the buyer had made, this deal was special. It represented a one-in-a-lifetime transformational opportunity to reposition themselves in the market as a digital business, to increase their capabilities, and cross-sell digital solutions to their customer base and grow revenue like never before.

BUT - There was significant difference between the preparation that the buyer understood and the detail operational, people and IP separation that was necessary for this to be a successful a going concern

We've got special guest Ben Kenyon from North Cyber Security joining this week, and Ben goes into the technical realm of FOSS (Free Open Source Software) to outline the importance of software IP and checking source code for external or 3rd party licences that might have been used to build the software.

Developers often use other people's code to help build their own software quicker and while that might be efficient, there has to be a system in place to verify that developers have used code with the appropriate licences.

It's not always the first thing developers think about, but if you've used 'free' software for commercial purposes you could find yourself facing some very hefty licence fees.

If you are engaged in acquisitions where software is part of the deal, the devil is in the detail. Getting a thorough technical DD and software code audit completed might sound like overkill but in reality it can save you millions.

Listen as Ben takes us into the technical realm of FOSS

About North Cyber Security

North Cyber Security & our team of cyber security consultants specialise in penetration testing and technical due diligence.

The team members have in-depth technical knowledge grounded in web development and network infrastructure, experience that helps us understand technology for different situations.

In this episode we are joined by our guest, Ted Leverette - The Original Buyer Advocate from "Partner" On Call Network LLC, based in Palm Beach, Florida.

In this story, Ted walks through an example of Acquisition Creative Financing—After Gaining Control. It’s a deal he arranged for a buyer who didn’t have enough down payment cash to buy the company.

Thanks to a cooperative seller, and the buyer being willing to pay a fair price for the company, after completion of the transaction, the buyer used the business to quickly create cash and increase cash flow to pay the seller the remaining portion of the deferred down payment.

You can learn more about Ted's positive approach to creative financing from his website

Ted J. Leverette
The Original Business Buyer Advocate ®
“Partner” On-Call Network, LLC
https://partneroncall.com/

With apologies upfront. COVID-19 gremlins caused some sound quality issues in the last segment of this episode. We hope we will be forgiven.

And we get serious this week so you could consider this episode a free training program.

TRANSITIONAL SERVICE AGREEMENTS (TSA's) are legal / financial instruments typically used during carve-outs where certain services (read IT systems, payroll, asset leases, production capacity etc) are provided by the seller, to the buyer for a defined period after deal close.

The goal of both parties is to get the deal completed quickly, so with that intent, it's not unusual that some elements of the business sale can't immediately be transferred but are a necessity to the proper operation of the business. That's where TSA's come in.

Listen as Toby takes us through the step by step approach to the What Where When and How of TSA's

This is more a story about a restructure rather than a merger of acquisition, but the decisions that were enacted apply just as easily to M&A. The headline of this story is that you should not ignore the impact that your decisions have on people.

This was a large UK manufacturing business with a new CEO who was keen to overhaul the business, reduce costs, increase productivity and boost profits. A series of initiatives had been set in motion and there was change taking place everywhere.

I have strong manufacturing and logistics experience, so I was leading several initiatives across those areas and as I headed to our project office one morning, I could not help observing the CFO with a wide grin on his face. Why was he so happy?

In this episode, our guest is Linley Watson, Founder and CEO Peak Performance International and author of “Avoiding the M&A Failure Club”. Peak Performance is a leading Australasian people and culture consultancy with team members in Australia and New Zealand and a wide network of associates across the globe. https://www.peakperformance.com.au/

Linley offers her view that good communication is a critical component in any change initiative, especially during a merger or acquisition. When bringing people from different teams or organisations together, much of the fear, uncertainty and the resulting resistance to change can be reduced through honest, balanced communication.
Good communication is proactive and keeps things moving forward. It needs to be clear, candid, compelling, consistent and constant.

Addressing the rational and emotional responses to a merger or acquisition is an investment in time, effort and money that has a significant payback. Here are Linley's top10 tips for communicating effectively throughout each phase of the M&A deal.

Just when you thought it impossible to get M&A and Zombies in the same podcast, Toby comes along to prove everyone wrong.

In this podcast he returns to his favourite topic of Deal Fever, presenting the view that some deals go REALLY wrong and that is always because the acquiring company ignores the three core principles of Purpose, Process and Planning. And when they do, they start to act in a Zombie like state where the deal is being done to satisfy huge ego's or just for the sake of it, and when that happens those companies are behaving just like Zombies.

In this episode, our guest is Norman Wolfe, founder and CEO of Quantum Leaders, a 15 year veteran of Hewlett Packard and author of The Living Organization, an application of the core principles of how the world works and how organisations can create extraordinary impact.

Norman's view is that most M&A fail because they are treated transactionally, and while that's a necessary baseline, successful acquisitions must be treated like a good marriage where relationship and context are key factors that bring about a transformation of the core paradigm of business.

A fascinating story and some valuable cause for thought especially as acquisitions resume post COVID-19.

As we look towards to possible end to COVID-19, there is general acceptance that we will see a rise in divestments, both out of necessity because of distressed assets, but also from strategic adjustments.

In this episode, Toby goes back in time to reflect on his first divestiture. This was a large separation impacting almost 1,000 people and a post divestment review idetified 14 key lessons for future divestments.

Toby talks about his experiences and leaves us with three key areas that he concludes must be tackled up front

Get the Governance right
Get the scope right
Make sure people care is properly addressed.

In this week's story, we continue with the Sales Integration theme but explore a Food & Beverage acquisition where despite best practice from the leadership team, a few Brand Managers attempted to throw post deal progress off the rails. And then just as this 'sabotage' arose, another culture war erupted in Marketing.

This story outlines how strong leadership in the business recognised these as seperate challenges, and dealt with one of them swiftly but fairly, whilst turning the other issue into a significant advantage.

In the last episode, Toby outlined how some acquisitions have an inside out approach, and the customer is often overlooked, resulting in lost revenue opportunities.

In this episode, Robert draws on his extensive sales expertise to outline all of the moving parts that need to be considered post deal in order to ensure that the customer, and revenue growth become a central focus of the deal value creation.

And hopefully, you will recognise that it's not a simple process, but if tackled early, it's one that will deliver significant reward.

It can still be surprising that M&A deals continue to focus on an inside out approach such that attention is on financials, processes, systems, people etc. And whilst that's good practice, Toby argues that it's equally important to take an 'outside in' approach that takes the customers needs and expectations into consideration.

In this episode, Toby outlines a large deal where on the surface, everything looked well organised, until he realised that the newly acquired customers had been completely neglected.

And once customer interests and engagement had been considered, the benefit on this particular deal was an improved operating model and increased revenue forecast.

We have the pleasure this week of being joined on our podcast by Global PMI's Stefan Hofmeyer. Stefan is a senior Partner with Global PMI Partners, and a highly experienced M&A practitioner with many successful projects under his belt.

Stefan has chosen to talk about why executives and employees alike should be tuned into and practice their emotional intelligence skills. Particularly, Stefan advises that EI is one of the cornerstones of best practice in M&A that can directly impact the post deal outcomes.

More over, Stefan goes on to suggest that strong EI practice can be beneficial to employees and leaders alike in making sure everyone achieves their personal ambitions.

As Stefan so neatly summarises, it's all about communicating with Joy.

Hopefully, the experience relived in this podcast is one that very few people would have experienced. It's concerned with atrocious behaviour by a very senior leader who in the face of tragedy chose to put business before people.

The lesson in this week's episode is that we must always treat people with respect and dignity and in fact treat others how you hope to be treated yourself.

It's also a lesson that as leaders, we should aim to set the example for others to follow and emulate.

In this episode, Toby recalls a complex divestiture that he managed.
If the complexity had been left to flourish, it would have created disillusionment and misunderstanding that could send the divestiture completely off the rails.

The answer in this case was to bring the complexity down to a series of simple to understand rules, guidelines and expectations that everyone could understand and follow. Let's call them guiding principles.

Better still, Toby involved everyone in creation of those 'guiding principles' so they readily owned and complied thus bringing the divestiture to a successful close.

As Einstein is quoted as saying "Everything should be made as simple as possible, but not simpler" That really is the Beauty of Simplicity.

The ability to quickly say “No” is sometimes the best answer in M&A. This is a story about a deal where quickly arriving at “No” was the best outcome.

In this episode, Toby recalls getting involved with a business making its very first acquisition. There was Board approval for the deal and a committed leadership team eager to reap the benefits of their brand new acquisition.

All seemed well except for the nagging issue that the deal seemed to lack clear purpose. As Toby points out, there was a lot of attention to the 'WHAT' needed to be done but there was scant attention to understanding the 'WHY'.

Without the 'Why' there is no purpose and a deal without clear purpose is like driving without directions and no idea of destination.

Set in the beautiful surrounds of the Loire Valley this French engineering firm was a family business started 30 years previously. The founder on his 70th birthday, announced his retirement and gifted the entire business to his loyal employees.

This perfect scenario however soon presented some challenges which luckily were resolved and happy endings ensued for everyone. The warning in this story is that this could have so easily gone the other way.

Disappointed with the recording quality this week, but that's what you get when you're dealing with COVID-19 restrictions. Better luck next week.

Robert and Toby continue to unpack some of the popular myths and half truths about Mergers and Acquisitions. In many cases these myths have some grounding in fact, but when examined properly, they don't convey the atmosphere of risk and disaster that so many want to portray.

In reality, these myths and half truths are diluted when some fundamental techniques are adopted.

And in this Part II conversation, Robert & Toby concluded that those myths are just that, and that many of the fears or uncertainties are applicable Not just to M&A, but to any corporate project.

In this week's slightly longer episode, Robert and Toby unpack some of the popular myths and half truths about Mergers and Acquisitions. In many cases these myths have some grounding in fact, but when examined properly, they don't convey the atmosphere of risk and disaster that so many want to portray.

In reality, these myths and half truths are diluted when some fundamental techniques are adopted.

And in this conversation, Robert & Toby concluded that those myths are just that, and that many of the fears or uncertainties are applicable Not just to M&A, but to any corporate project.

Still on their Divestment journey, Robert and Toby discuss a business sale where initial bids from buyers were well below expectation. But by looking under the covers and digging for 'buried treasure', several areas of potential growth were identified that would be very attractive for future owners.

That 'buried treasure (read well qualified and quantified opportunity) increased the attractiveness of the business and ended up attracting a 20% premium over expectations.

Bottom line, 3 weeks of effort resulted in $25 Million increased value, so in this case digging for treasure and taking time to polish it certainly paid off.

In this episode, Robert and Toby discuss the importance of IP in every deal, not only in terms of legal and financial ownership, but also in terms of quality, capability and IP protection.

In the highlighted case study pertaining to the software industry, the IP turned out to be vapourware and rendered the deal worthless.

Important reading for anyone making acquisitions where IP forms the foundation of the value and important lessons that it's important to dive under the covers and get right down to the detail.

In this episode, Toby explains how he was engaged by the buyer, but ultimately ended up helping the seller. The messages in this are that sellers must put themselves in the shoes of the buyer and make adequate preparation of their business so it can be bought and operated with minimal fuss.

In this particular case, the deal did not go ahead for multiple reasons but uppermost was the starting fact that the seller thought that financial and legal separation was sufficient to get the busy sale ready.

In this episode, Robert and Toby discuss a Tech Industry acquisition where 'deal fever' resulted in rushed and poor quality due diligence. They discuss the threat this posed to post deal value creation and the steps that were taken to resolve several issues.

Overall, Robert & Toby conclude that this acquisition whilst posing some serious value creation challenges, was ultimately the right acquisition for this company and ultimately a strategic success.

In this 15 minute episode Robert and Toby discuss how the COVID-19 pandemic actually offers a unique opportunity for CEO's and Boards to Reflect, Review, Plan and Prepare the business. This often means recognising that all or part of your business is more valuable in someone else's ownership, and that often results in recognising 'buried treasure' the you didn't realise you had.