Some Goodness

SG EP 57
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[00:00:00] Richard Ellis: Most acquisitions destroy value, not because of the deal, but because of what happens the six to 18 months after close. Michael Stahl held one of the rarest titles in business, Chief Integration Officer. This episode unpacks what integration actually requires when the goal is to make acquisitions work and not just to survive them.

[00:00:20] Richard Ellis: Welcome to Some Goodness, where we engage seasoned business leaders and experts to share practical guidance and tips to help new and future C-level leaders maximize their impact. My guest today is CEO of Wombat Data and former Chief Integration Officer at Harbor Global. Most companies never create that role.

[00:00:37] Richard Ellis: They treat integration as a project, not a function. Today, Michael pulls back the curtain on what post-acquisition integration actually looks like when it goes right, and what almost always breaks. Well, Michael, welcome back.

[00:00:49] Michael Stahl: Thank you. Glad to be back.

[00:00:51] Richard Ellis: It was great, uh, talking to you last time about data.

[00:00:54] Richard Ellis: Today, we're gonna dive into acquisitions. It's top of mind with many leaders that I'm talking to these [00:01:00] days. Uh, I know you've been part of many, several. I, I've been part of, uh, a handful, and I think we all have some good stories and some not so good stories about acquisitions. So would love to pick your brain a little bit.

[00:01:11] Michael Stahl: Yeah. Happy to be here and excited to talk about it, and have definitely been through... I, I think by last count it was over 30 in some role, uh, one way or another, external or internal. So happy to share some of my experience and maybe some of the scar tissue I've developed or lessons I've learned.

[00:01:28] Richard Ellis: Well, I think if I got your profile and history right, at one time you were called a Chief Integration Officer, and I, I like that a lot.

[00:01:36] Richard Ellis: I mean, I think it, it's on point to what needs to happen whenever you have a merger or an acquisition, but it's a title that you, you rarely see. So tell me a little bit about the t- chief integration officer, why you found it important enough to really make that a recognizable C-level title, and, uh, we'll go from there.

[00:01:54] Michael Stahl: Yeah. Well, I mean, m- much of the credit too goes to the Harbor [00:02:00] executive team, the CEO, and the private equity sponsors, Bay Pine and Renovis, for understanding and investing in, in something that they saw the value in. And I think part of the reason I had that title and the purpose of it was to really help build scalable revenue operations for the business, but really to connect organic revenue creation and inorganic revenue creation- Mm

[00:02:23] Michael Stahl: so through M&A, and to make sure the two are connected. Because oftentimes, you know, companies are buying another company and they're acquiring it because they believe it will help them grow and grow successfully. What happens a lot of times is what happens in the corp dev decks and, you know, with the advisors doesn't always translate post-close.

[00:02:44] Michael Stahl: Mm. And so Harbor has, you know, to date, um, they had acquired 12, 13 companies and understood the value of integrating into the platform to get the most out of those acquisitions, and their private equity sponsors did too. So [00:03:00] part of my job was to make sure that that scalable foundation and revenue infrastructure was built and as seamless as possible.

[00:03:08] Richard Ellis: That's great. And obviously it's a super fit for a company that, that, you know, has a lot of acquisitional growth. 12 acquisitions is nothing to sneeze at. But would you recommend, like for companies that, you know, maybe have a, a, an acquisition every now and then to actually designate someone as the chief integration officer where, you know, this responsibility of rev ops across the organizations rolls up to?

[00:03:31] Michael Stahl: Yes. I mean, obviously depends on the total deal flow that they have, but the importance of that role I don't think can be overstated because really it is about connecting the underlying operating model with the strategy. And really it's incredibly insightful for the core business and the buyer as well.

[00:03:49] Michael Stahl: 'Cause one of the things I've said, there's no, there's no better way to identify areas that need improvement in a business than trying to explain to a company you buy how your [00:04:00] business works. Because they have to actually understand what they're integrating into. You have to be able to clearly articulate how you run your business, how you run your sales motions, to be able to tell somebody else how to fold into it.

[00:04:13] Michael Stahl: So what I found is it was a phenomenal exercise to really create deeper levels of insight of which areas were going very well in our business and which areas needed to be tightened, because when we found it harder to explain or more difficult for a team to fold into, that's usually where we had to pay attention.

[00:04:32] Richard Ellis: I'm curious about how you view the integration of the acquisition. Is it a short-term project? Is it longer than that? Does it have a long tail? Because, you know, you always hear, "Hey, we're, we're getting ready for an acquisition. We've acquired this company," and then the acquisition is complete. Well, is it ever complete, or when is it complete, right?

[00:04:52] Richard Ellis: What's your perspective on just kind of integrating an acquired company?

[00:04:55] Michael Stahl: Yeah, for, for folks who haven't been through it too often, I would [00:05:00] actually, um- I would analogize it to client acquisition because there's a strategy around, you know, an ideal customer profile and who we're going after and why, and they're gonna be a good fit and generate long-term value for the company.

[00:05:14] Michael Stahl: I like to talk about ideal target profiles. We have a strategy. We have a thought of who is the best fit given our market position, who we sell to, and why we believe they'll drive long-term value. And it is a much longer project than just 180 days, 30 days, or whatever people think that it is because to do it well, there needs to be a feedback loop over time about how that target performs against the financial model that was the underwriting thesis.

[00:05:45] Michael Stahl: Right. And then how well that acquisition actually helps the core business, the buyer drive towards its OKRs or its, you know, strategic objectives. And then ideally, that feedback loop actually goes back into the corp [00:06:00] dev team to inform the ideal target profile, how'd we do? You know, was our act- was our, our hypothesis correct and we bought this company and it did end up driving those OKRs, or did it not?

[00:06:13] Michael Stahl: And how do we take that information and continue to update and refine our acquisition strategy based on what's working and what's not? So it's not just getting people into Office 365. It's not just getting them into- Right ... Salesforce. And then in client meetings, it's really that core analysis over time.

[00:06:34] Michael Stahl: And look, like, that sounds great. It's tough. Even, you know, my previous company that was really well experienced in doing this, we were constantly looking at ways to improve 'cause we didn't always get it right, and there were always challenges, but that's, that's how we learn, and it's just continuous im- process improvement.

[00:06:50] Richard Ellis: Love that. I'm an engineer by education, and so I always kind of put my, my Deming hat on with plan, do, check, act and make sure you have that continuous [00:07:00] improvement- Right ... and quality loop in there. So, uh, that certainly- Yeah. Uh-huh ... resonates, resonates. I think you said that you focus primarily on the go-to-market side of things and the revenue operations.

[00:07:09] Richard Ellis: So I'm curious, that's a lot of our audience out here listening to us, and so what does it mean to make an acquisition work from the revenue side of things specifically?

[00:07:18] Michael Stahl: Yeah. So I think, you know, generally my title was overseeing the entire in- uh, um, integration, and there was a primary focus, particularly with the other roles that I had and oversaw within the core company that I was hyper-focused on the revenue operations.

[00:07:33] Michael Stahl: And so what I wanted to make sure first and foremost, and I alluded to it earlier, was we had a very clear platform into which the target could integrate into. And so how are we gonna do that well? Because again, in the courting process and the diligence process, we saw that a target was generating good revenue.

[00:07:52] Michael Stahl: We believed there was strategic alignment. How do we make sure we realize that? And there's usually a process where we have to make [00:08:00] sure that first and foremost we get data integrated. Mm-hmm. We know what they're doing, historicals, we've got their pipelines. Then we get systems integration, and then the people integrated into the workflow and using those systems.

[00:08:13] Michael Stahl: And then usually it's about team integration And how do they fold effectively into the buyer's sales motion, and there's true collaboration. And it's not just change on the, the part of the target. It also requires change on the part of the buyer and the buyer's teams because now we're bringing new people- Right

[00:08:34] Michael Stahl: into the conversation. So they really have to come to the table together to understand how to work more effectively together. But none of it happens if you don't unpack your boxes and get the data into the systems, and then people using the systems that form the, you know, core enterprise applications.

[00:08:50] Michael Stahl: And then usually you can start to fold into the real, you know, sales motion and, and the execution elements of the operating model to [00:09:00] make sure that you're realizing the strategy and the potential that really drove you to buy the company in the first place.

[00:09:06] Richard Ellis: Very good. A- and one of the things I've seen some companies struggle with is just kind of the coverage strategy.

[00:09:11] Richard Ellis: You've got two go-to-market teams coming together, specifically sales teams. And so, you know, the acquired company coming on board, do they remain just sellers on their solution, or do they get equipped and enabled to sell the full solution and, you know, maybe for a short period of time they're solution specialists that are overlays, but that overlay model goes away after some period of time?

[00:09:35] Richard Ellis: I mean, those are some strategic questions that companies need to figure out, and I've seen some struggles. Any insights there?

[00:09:41] Michael Stahl: Yeah. I mean, first, I think it's important to be realistic about the process, and there are two elements of it, and I think you identified both. One, it's typically a phased process because when we buy a company, we wanna make sure we minimize disruption on day one.

[00:09:56] Michael Stahl: Mm-hmm. Yes. People can log into their computer, continue to sell [00:10:00] and deliver, and then, you know, obviously they wanna get paid. So- ... minimize disruption, and then we start to fold them in. But I think oftentimes people rush too quickly to try to get them in and, and they're not ready. Mm-hmm. Or they delay it too long, and then it becomes an afterthought and pushed down to the bottom of the to-do list, and BAU, or business as usual, just kind of takes over, and it's hard to get that inertia.

[00:10:26] Michael Stahl: It's really important to acknowledge that it's a phased plan, that it also will feel a little awkward or clumsy at times as we bring two people together. But it's really important to get the leadership teams, A, committed to the idea that you're gonna create a unified growth engine between the two teams, and then, B, make sure that there's thoughtful alignment with the strategy, and then how everything, territory assignments, comp models, everything else lines up to support that.

[00:10:54] Michael Stahl: Yeah.

[00:10:54] Richard Ellis: I like that. And, and that's where I've seen it work well. It's where there's a phased-in approach. Right. [00:11:00] There's intentionality that, hey, in the short term, there's gonna be some overlays, there's gonna be some double comping, but it's for the best, right? Right. And then here's how it fades out, phases into a new normal, right, where the cost of sale is back where you want it to be.

[00:11:15] Michael Stahl: Exactly. And I think that piece is also critical, and sometimes it's management of different parts of the executive team or different members of the board where if they wanna see results immediately or maybe they're really focused on not double comping. Like, we, I think, always wanted to try to err on the side of we were willing to take some of that, you know, double dipping if it really encouraged the collaboration that was on the long term, and we just put expiration dates on it to make sure that it didn't last forever.

[00:11:45] Michael Stahl: And as you said, the cost of sales was gonna move in the direction that we needed to, but we always wanted to try to err on the side of making decisions that were gonna encourage collaboration rather than sort of be myopic and save in the short term.

[00:11:59] Richard Ellis: [00:12:00] Right. A- any other kind of common pitfalls or mistakes that kind of the go-to-market team could watch out for?

[00:12:07] Richard Ellis: Maybe mistakes that they tend to make in the first quarter or two if they're not careful.

[00:12:11] Michael Stahl: Yes. So one is, and it seems obvious, the data have to get into the CRM, the different applications, because that's what creates the visibility and is table stakes. For the teams to be able to collaborate. I think too often it's delayed or done in an incomplete fashion, and then the collaboration really never has a chance to succeed.

[00:12:32] Michael Stahl: The second piece is, I think it's this shared understanding on both sides of the table. And, and sometimes it's hard because there's a lot that the target team has to acclimate to and integrate into, and they, they don't really have flexibility. Like, this is how our legal process works. This is how our contract operations team works.

[00:12:50] Michael Stahl: So to sell a deal, this is how we need to flow.

[00:12:53] Richard Ellis: Right.

[00:12:53] Michael Stahl: But there is more give and take when you have your sales executives and in the account planning [00:13:00] sessions to understand that the target's reps have deep relationships. They understand context. That can be really valuable and added perspective. So I think it's not all one size fits all in terms of how you integrate into the different levels and systems and teams.

[00:13:16] Michael Stahl: There actually needs to be some flexibility with that. And so to me, it was always coming back to and anchoring in why did we do this? Why is there strategic value? And does the plan we're making actually support that and the decisions we're making support it? Or are we experiencing friction 'cause we're, we're, you know, we've jumped the rails and aren't aligned anymore?

[00:13:37] Richard Ellis: Yeah. Really good. Earlier you talked about data and systems and the people. Let's talk a little bit about the people side of things. I, I just, you know, you've had tons of experience, and we all care about our people. We talk about our people being our biggest assets, right? Give us some insights around what happens to the people inside an acquired company and some things we leaders can kind of think about proactively.

[00:13:59] Michael Stahl: Yeah. [00:14:00] Interviewing for this position, it was one of the questions that I was asked. You know, how do you think about cultural due diligence and that being a really important... And there are McKinsey and all sorts of consulting companies, you're right about M&A, talking about talent and, and culture being one of the most important drivers of successful M&A.

[00:14:16] Michael Stahl: I think there are a number of different ways to look at it. One of the ways that I found most helpful and successful in my experience, and not to say it's the only way, but a lot of the culture that I wanted to look at, particularly in a target, was how did they manage day-to-day? And was the way that we manage as a buyer gonna be a culture shock for them?

[00:14:38] Michael Stahl: So were they used to data-driven decision-making, um, really rigorous data entry and hygiene in a CRM? Did they do regular cadences with pipeline reviews and have to manage against KPIs that had dashboards? Because- Depending on the size of the target, sometimes it wasn't the size, it was just the style of the leadership [00:15:00] team, it could be much more informal.

[00:15:01] Michael Stahl: And so somebody taking, coming into a team with that kind of data-driven approach and real analytical or empirical approach would be a culture shock. And I think that it doesn't take away from competence or their effectiveness as a seller, but it's really important to understand how the target managed in those ways.

[00:15:24] Michael Stahl: And, and even outside of go-to-market, how did they... how did their talent and HR team manage all hands communications or performance reviews? It's really how we interacted with our teams day-to-day that would make a big difference and, and make the integration from a cultural standpoint Either more of a struggle or, you know, smoother if it was closer aligned from day one.

[00:15:45] Michael Stahl: And even when it was far afield, I mean, there are ways to bridge, and we had a phenomenal talent team at Harbor. Mm-hmm. And shout out to Karen Curran, uh, who is an incredible, uh, chief talent officer. She's great at integrations. But it was [00:16:00] just being really thoughtful about some of the, the gaps that you have to bridge on the human side.

[00:16:04] Michael Stahl: And yeah, some of it is as simple as how-- what does their day-to-day look like in, in the target, and how is that gonna be different once they're on the buy side?

[00:16:11] Richard Ellis: Yeah, I think there's a real opportunity to just, uh, again, one of my favorite words that if, if you get to know me, is intentionality, right? Just having some intention about thinking through what does that look like, and where are there differences that you need to plan for, prepare for, a-and, and manage through.

[00:16:27] Richard Ellis: It brings to mind one client that I was involved with doing enablement work when they went through a merger, and this was, like, two equivalent-sized, you know, large tech firms coming together, right? And on one side, they were very structured, process-oriented. The other was very startup, you know, everybody wore multiple hats, you know, do what feels right, but still su- they were scrappy, but still successful, right?

[00:16:50] Richard Ellis: You know, that was two different, very different cultures coming together, and I don't know if that was a consideration for whether the merger was, was going through or whether it [00:17:00] made sense or not on paper, but it, it certainly had implications at the end of the day in terms of the integration of the go-to-market teams.

[00:17:07] Richard Ellis: And speaking of data here, the data became the equalizer or the mediator, right? It was just like, because there were so many emotional conversations happening, we, we just had to keep pointing back to what does the data show? What, what wisdom or insight can we get out of the data, and let's let the data decide, right?

[00:17:23] Richard Ellis: And a lot of times that helped.

[00:17:25] Michael Stahl: Yeah, you're speaking my language 'cause I'm a big believer in that, particularly around, I mean, there are a lot of emotions, and people form relationships with prospects, and they want-- they care about their deal. And sometimes when there's an incremental shift in strategy or a refinement, you know, I like to do the same thing and just say, "Hey, I'm, I'm not gonna take one position or the other.

[00:17:45] Michael Stahl: Let's just go through the data and see what they have to say." Like, is the juice worth the squeeze here? Are we spending the right time on the deals that create the most value and align with the strategy of the company? And if there's a difference, how can we course correct? [00:18:00] And it's hard sometimes because that means that sometimes people aren't focusing as much in the same end market or in their, their core client segment.

[00:18:09] Michael Stahl: But there's still opportunity. And to your point, that actually you have to be very, A, aware that it's going on, and then B, very intentional about how you're gonna manage through that. And so I love the word intention, too. It's huge. Actually, that's how I define commitment with my team is awareness and intention.

[00:18:26] Michael Stahl: You have to be aware of what's going well, what's not, and then make intentional decisions about what to reinforce and where to course-correct. So kindred spirits on that one.

[00:18:35] Richard Ellis: Love it. Yeah. Very good. Well, I knew the first time we talked, uh, we were gonna hit it off. Yeah, it's kind of funny how it just kind of full circle comes back to one of the issues that you mentioned earlier on the integrations is fragmented data, lack of data.

[00:18:51] Richard Ellis: A-and even from the cultural side, you know, data's important to get to the right answers to bring clarity and insight, so that's so important. As you think about just any [00:19:00] other generalized lessons, you know, you've been a lot-- You've been through the fragmented data issues and the culture tension and undefined or siloed go-to-market teams when you're kind of bringing these together.

[00:19:11] Richard Ellis: Any, just for the audience out there listening, kind of one or two takeaways, keep in mind, don't miss this, or, or advice you have?

[00:19:19] Michael Stahl: Yeah. I think, too, and, and maybe it, it ties together some of the commentary we've already made. In my experience in the corp dev process, a lot of times it's heavy on strategy and financial analysis.

[00:19:31] Michael Stahl: The operational teams and what we just talked about, about cultural alignment fit, where there is great synergy and where there's a potential gap is absolutely as important because we just talked about it. The human beings are what make it happen at the end of the day. And, 'cause it's not or, or but, it's and, people have to have access to the information to understand what the plan is and that it's thoughtful and that it's continually [00:20:00] refined.

[00:20:00] Michael Stahl: So, like, they can't skip over the data and systems integration and then the enablement work that you do with clients to make sure that, A, they're aware, B, they're making intentional decisions and executing against a thoughtful plan is... I mean, it's key. And I... There's a phrase that I like, "It sounds simple, it's just not easy."

[00:20:20] Michael Stahl: You put that on a slide or write it on a whiteboard and people say, "Yeah, obviously." But the process of getting that done and doing it well is, is really where the challenge is because you're organizing a lot of, a lot of different people who are also trying to get through their day job, which is selling, which is supporting IT- Right

[00:20:37] Michael Stahl: which is supporting HR, and then they're also trying to integrate into two companies. And so it's a high degree of difficulty.

[00:20:47] Richard Ellis: That could be an understatement right there. But, um, yeah, totally agree. And it, it reminds me of what you said earlier is that you wanna make sure that first do no harm, right?

[00:20:56] Richard Ellis: Yeah. Uh, make sure that we're taking care of [00:21:00] business from both respective companies going forward, and then we've got a phased plan that moves us through that integration in the best way possible. Well, unfortunately we are out of time, and so we're gonna have to wrap up with my goodness question. Last time we talked about sunshine and getting outdoors, and I loved that.

[00:21:18] Richard Ellis: So outside of acquisitions, what's some goodness that has, uh, come your way lately?

[00:21:23] Michael Stahl: Yeah. So in the same pattern of just coming, first thing that hits my mind, it's been really phenomenal. My... I've got two kids and they're both now teenagers and just entering into this new phase. We took our first overseas trip together.

[00:21:36] Michael Stahl: Wow. And just to be able to travel with them in a way where they are older and more mature and able to interact, and I'm hearing everything they learned about history, it was just a phenomenal experience to really get to connect with them in a totally different way. Like, I remember getting them ready for preschool and kindergarten, but-

[00:21:54] Michael Stahl: but this first overseas trip where they're walking through all this historical sites and they're teaching me and [00:22:00] my wife about what they learned in class and what this building meant or what that individual did, it was, it was just a tremendous experience and a big sort of seismic event for us as a family in a very good way.

[00:22:12] Richard Ellis: Absolutely. Yeah. That is goodness, and that's such a fun phase of life. Yeah. Good for you. Well, thanks again for coming back on the show. Always appreciate our chats.

[00:22:21] Michael Stahl: Yeah, thanks for having me. It's, uh, always fun and always insightful, so appreciate it.

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