Key strategies for a successful M&A integration

Transcription:

Transcripts are generated using a combination of speech recognition software and human transcribers, and may contain errors. Please check the corresponding audio for the authoritative record.

Patti Harman (00:07):

Hello and welcome to the Dig In podcast. I’m your host Patti Harman, editor-in-chief of Digital Insurance. Mergers and acquisitions play a major role in driving growth and innovation and a well thought out approach with specific goals can increase the odds of success. Finding the right partners or companies to acquire takes a lot of due diligence, investment flexibility, and a little luck. In 2023, there were approximately 40,000 M&A deals completed worldwide, worth almost 2.5 billion. In 2024 in the US, there have been almost 22,383 deals valued at approximately 1.7 billion, which is just about 25% lower than the 2023 numbers. Joining me today to discuss some of the factors to consider when integrating acquisitions into your company priorities as part of the acquisition process and the importance of human capital in these interactions is Jason Turner, founder, president, and CEO of the Venbrook Group. Thank you so much for joining us today, Jason.

Jason Turner (01:21):

Thank you, Patti. Good to be with you.

Patti Harman (01:24):

So let’s start with something easy. What are some of the reasons companies will pursue a merger or acquisition with another company?

Jason Turner (01:34):

Wow. It’s not necessarily easy, but I think the answer is complex. It’s an easy question, but the answer is complex. I think firms looking to do M&A activity are generally speaking, attempting to increase their portfolio, whether or not that’s in the insurance space, whether or not that’s strategically attempting to add products or resources to their existing company or it’s trying to expand geographically in a certain territory or just generally speaking, gaining more critical mass to create leverage within their overall strategic mission.

Patti Harman (02:20):

Yes, you’re right. There are a lot of different reasons to consider that type of activity. What are some of the factors to consider as a company is researching possible businesses or companies for a merger or acquisition?

Jason Turner (02:37):

That’s also another complex question and the answer is different for everyone. I don’t think there’s necessarily a one size fits all, but I think it’s people is a big portion of it. As I always say to my team and others, it’s always the jockey, not the horse. The insurance business is a people first business. Business relationships matter and the longevity of those relationships that equate to recurring revenue is always an important factor.

Patti Harman (03:19):

There are definitely a lot of considerations, and you’re right because or what companies are considering. It will depend on the nature of that type of business and the investment. Are there some more common mistakes maybe that companies make as part of the m and a process? And if you don’t mind, let’s look at this from two different perspectives. What are some common mistakes for a company looking to acquire a company? And then maybe if you could kind of outline, are there mistakes sometimes made by companies that are being acquired? Because I think there are going to be different factors that come into play on both sides there.

Jason Turner (04:03):

Absolutely. When I think about acquisitions or acquiring a company, it’s just like making a decision by two people to get married and just like you in a marriage, you have to do your diligence. And whether or not that’s diligence on the person, the culture of the company, both sides. I mean, I think the buyer and seller should be diligent in each other as far as is there a cultural fit? And then the buyer needs to do their diligence, the financial aspects of a company, the legal and the regulatory parts of it, their markets. Are their markets and their carrier relationship strong?

(04:56):

Where does that business go over the next 2, 3, 4 years with their clients? So you want to make sure your diligence in their top clients, any one of those misses in a diligence process could lead to a unsuccessful transaction. Either that could leak a day after the transaction closes or could leak years later. But forgetting to do due diligence on all those little aspects for the buyer is critical for the seller. I think that you’re diligencing not just the buyer’s capability to perform on the acquisition, but you’re also diligencing, Hey, will I be a fit going forward? Will my people be a natural fit going forward? So that cultural aspect is critical, Patti. And then of course, what are the long-term goals and objectives for the team that’s being acquired? Are there going to be layoffs afterwards or is the company committed to retaining those employees? Me personally, what I’ve always said is we want continuity and consistency the minute after the transaction occurs, that applies to both the employees as well as the customers. We want to make sure that what we’re doing is not going to disrupt that business that we’re acquiring.

Patti Harman (06:22):

Right. That’s so important. And you’re right to mention the customers as well because they are all going to be part of that acquisition in some manner. So keeping them in mind will be important. So as anyone who’s been with a company that has been acquired or been part of a company acquiring a new entity, there are a number of factors to consider as part of this merger. And I realize as I ask this question, it will depend on probably the industry, the companies involved, all of those sorts of things. But I was wondering if you could share with our audience a couple of the top factors to consider when you’re considering acquiring a company. What are the things to look for, watch for, questions to ask, that sort of thing.

Jason Turner (07:10):

Again, I’d go back to my original, it’s the people. You’re stepping into an existing company that has a culture, that has a theme that has, and it’s most likely different. I mean, the people are different no matter if you’re five miles from each other, 500 miles from each other. And so I do believe the number one thing to consider are the people. You’re impacting people’s lives with the transaction and you’ve got to be careful how you navigate that. So how do you do that better? Do you go meet with those people one-on-one, do you take them to dinner? Do you go to Disneyland? Do you do something that’s away from the office or the professional side? Just so that one, you can get to know them better, but most importantly they get to know you better so that you can set yourself up for success going forward. The other things to consider though, and we touched on this, is the clients, the retention of those clients. How long have those clients been with you? If you review or due diligence a company for acquisition, if you see a bunch of business that’s new, the client relationships that are one or two years old, that might have a different profile risk profile than if you’re acquiring a company that has clients for 10, 20 years that has maybe a more conservative or consistent profile. So you’re always want to make sure that you’re seeing, you’re looking at those things. And then of course, it’s just a lot of it, the financial profile.

Patti Harman (08:52):

That’s true. I’ve been privy to some companies that were in the midst of going through an acquisition and heard it from both the side of the company that is acquiring people and how to take care of everyone as much as possible, who is involved in that process as well as the people in the company that are being acquired. And it always made, it encouraged me to know that on both sides, they were trying to think and do what was best for the people that were involved on both sides because that human aspect is really important.

Jason Turner (09:33):

No, the human capital is so important.

Patti Harman (09:36):

Definitely. So we’re going to take a short break now and we’ll be back in just a few minutes…Welcome back to the DIG podcast. We’re chatting with Jason Turner, founder, president, and CEO of the Ven Brook Group about M&A best practices. So Jason, is it ever okay to walk away from a merger if it doesn’t look like it will be beneficial or a good fit for the companies involved? And once you make that decision, how is that handled?

Jason Turner (10:11):

Yeah, it’s a great question. It’s interesting only because we were having the same conversation with my senior leadership team yesterday, and the short answer is it’s imperative that you go through the agony of walking away either on the buyer or seller side. If something is uncovered or discovered or becomes known, even if it’s the 11th hour, I think there’s an obligation that both parties should maintain that no one wants to do a bad deal. It’s in no one’s interest. And so as hard as it may be, it makes for a good movie at a wedding, someone walks away walking down the aisle, but it’s just reality. You have to have the decency to walk away if you find out something’s not right.

Patti Harman (11:10):

And the pain of making that decision is hard. But my guess would be that that would be short-lived compared to going through with that merger and then having to live with all the consequences later on and still possibly having to undo all of that.

Jason Turner (11:26):

Right. Well said. Exactly.

Patti Harman (11:29):

So we’ve talked earlier about how people are such an important part of the acquisition. If a company has been acquired or is in the process of being acquired, when should leadership inform the employees and then what are some of the risks involved with sharing this news?

Jason Turner (11:48):

Yeah, another great question. So if you’re the buyer and you know that people are critical to the future success of the business, you want to get to know those people as soon as possible. That’s logical and it makes sense. If you’re the seller though, you don’t want to introduce your people to the buyer, the potential buyer, until you have a lot of confidence that the deal is going to happen. And so it’s a little bit of a Spanish dance that has to take place for a fairly short period of time, but at some point it is one of the critical diligence steps in doing that. Again, no one size fits all, but it’s nice. I think if you’re the buyer, I’ve always found it to be helpful to get yourself out there. The buyer gets out there and meets the new people, the new potential employees and partners on their own turf so that you’re coming to them.

(13:01):

That’s important. It helps create a much, the initial feelings I think are stronger that way, and I think it’s always good. I have found it to be helpful to take them outside the business walls, so to speak, whether or not that’s socializing for dinner or going out to a park. I mean, there’s going out to a baseball game, there’s a lot of different ways to take them offline so that there’s not the threat of, Hey, we’re coming in here and stepping on people’s hands and knees. But I think there has to be an attempt by both to get to know each other outside the business so that, because at the end of the day, it’s just the people, it’s relationships. And like I said, it’s like dating and marriage. You have to get to know your in-laws,

Patti Harman (13:51):

You definitely do. So I have been an employee in multiple companies that have been acquired or where there have been significant changes. So I can understand the employee position in terms of learning that news and how unsettling it could be. So how can companies reassure their employees if a merger is in the works, whether you are the company that’s doing the acquisition, or probably even more importantly, the company that’s being acquired. I think there might be a little bit more trepidation on that side.

Jason Turner (14:26):

Yeah, I think how is always different from one person to the other, but the genuine attempt by the buyer to really be transparent in what their future plans are once the transaction takes place, I think is critical. And then at the end of the day, the buyer has to follow through with that. Hopefully no one’s involved in a situation where there’s a bait and switch where you’ve told me you’re going to do X and you end up doing Y unless there’s a really good reason you have to be a man of your word.

Patti Harman (15:10):

What are some examples of positive actions that you’ve seen companies take to make the transition smoother for their employees? And that can be on either side, just things that kind of make it a little bit easier for people to understand what’s going on from an education process and there might be other steps or factors to consider.

Jason Turner (15:32):

Yeah, we’ve used one in particular, I would call it almost like a town hall where the buyer go out to the company and you really just sit there in the middle of the office or the middle of the meeting room or whatever, and you tell ’em about yourself. You tell ’em about your business, you tell ’em why you’re doing this, the rationale, business and otherwise. And then most importantly is you sit up there and you take questions and answers. People that hopefully people will ask a lot of good questions. And through those questions and answers other, the staff and the company that’s being acquired, we’ll get to know you better and get to understand what the reason is for this. Because I think if you communicate the rationale, the reason for this and your reasons are strong, then I think most likely people will say, oh, that makes sense. I’m happy to, I understand it, and I’m excited to be part of it.

Patti Harman (16:33):

Yes. Good, clear communication is so important. So before, during and after, I think, for the entire process,

Jason Turner (16:42):

It never stops.

Patti Harman (16:44):

And a lot of times I think companies underestimate the importance of that, or they might be really good on the front end and then after everything happens, they don’t realize that process continues on months after the acquisition has been made.

Jason Turner (17:01):

It sure does, and it’s hard to do, to be perfectly frank. And for me personally, I’m always trying to get better at it. You never can be good enough. You always have to improve and look for, just be honest with yourself. But yeah, communication just doesn’t stop. And we can all, as leaders and managers be better at it, I’m sure.

Patti Harman (17:28):

So we’ve covered a lot over the last couple of minutes about the M&A process. Is there anything that I haven’t asked you or that you think is important for our listeners to know about creating a successful M&A?

Jason Turner (17:42):

Well, no, I mean, your questions have been so spot on. Like I said, it’s almost like you’ve been listening to my senior meetings in the office here. No, your questions have been fantastic. I appreciate that.

Patti Harman (17:55):

Well, thank you so much, Jason, for sharing your insights with our audience. Thank you for listening to the Dig in podcast. I produced this episode with audio production by Adnan Khan and Kelly Malone Yee. Special thanks this week to Jason Turner of the Venbrook Group for joining us. Please rate us, review us, and subscribe to our content at www.digin.com/subscribe From Digital Insurance, I’m Patti Harman, and thank you for listening.