M&A in the Corporate Development World

M&A in the Corporate and Business Development World


In this episode, Kyson interviews corporate and business development consultant Judah Karkowsky. 

They discuss the following:

1. best ways to approach cultural integration 

2. handling ownership issues

3. the surprises you can find during preliminary due diligence

4. international entities’ approach on diligence, being transparent with employees during an integration

5. confidential data protection.

post-merger integration

Corporate Development, M&A, and Partnerships

“We can speak to the integration pieces on why it's not going to disrupt and go with it. Pick a plan. Stick to it. If things start breaking, do your best to continue to take off the runway. As long as you haven't still burnt out your engines you can still pull of and you fix the problems as you go along. You can shut doors and kill reputations if you fail to deliver to your existing customers."

Judah Karkowsky started his career as an investment banker at Credit Suisse, followed up as a consultant in the education and technology industry focusing on empowering and enabling schools to take to take the greatest advantage of what the technology that was emerging had to offer. 

He currently leads strategic development, which includes corporate development and M&A and partnerships for an educational publisher.

He has had the opportunity to work on many different types of deals, first as a facilitator and analyst on standard M&A, and most recently on the buy side, on diligence integration and success management. 

His approach while handling diligence is to first try to understand what the business rationale is and the complexities of assimilating the new entity. 

He advises to take a holistic deep-dive interview process.

“Imagine how strong you have to be about interviewing your future colleagues when it's several hundred or even several thousand people."

On assessing cultural integration, Karkowsky points out two different types of companies: “Not every company is motivated the same way in how they approach markets. Some are driven by social good, and there are businesses that are driven by money.” 

Although none of those are necessarily better or worse than others, there’s a distinct difference in how both approach their day job. Karkowsky recommends being careful while synthesizing two different relationships. 

He compares the merger process to a marriage. 

It is necessary to share the same values and to be motivated to keep the companies alive.

Nevertheless, what you bring in has to be implementable. 

He also highlights that both companies have to be aligned in vision and mission.

In addition, Karkowsky warns about ownership issues that, according to him, every company gets in time.

In order to avoid this, he starts with a brief checklist with his group before they bring in technology and project managers and dragging big teams along.

“Sometimes what looks beautiful from the outside is a mess on the inside and you have to walk away.” 

There is a lot you can discover during preliminary due diligence. In any kind of international transaction, there's a lot of unexpected hurdles that pop up.

"The conventional wisdom dictates you should integrate fast and furiously. I think that that is true for some parts of the business and some parts of the practice and it's really dependent on the entity that you're acquiring and integrating.” 

If there are different accounting systems, you need to go through the pains, rip the band-aid off and get right into it.

“Push those together, have a singular accounting system. My goal is to combine two entities, not to just have a holding in a different company."

In other cases, it doesn't make sense to force the target or the firm to do technology integration for the first months. 

Sometimes, the goal is not to buy the company based on what is has today, but on their potential future.

In those cases, it does not make sense to integrate soon.

When integrating a company, poor communication is a major disadvantage.

Starting on Day Zero

The solution to this problem lies, according to Karkowsky, in starting day zero by getting ahead of rumors or potential pools of disinterest and disengagement.

His communication protocol varies depending on the organization and the structure of the integration. different emotional responses are going to be expected. 

In general, it is the buying entity's teams or their outsource talent that go in and do the communication before the deal gets announced. His team gives everybody an email address for the organization they are now a part of, even if they are keeping their old one. 

They want to make sure that from day one they feel as a part of the team. 

They also gather all new employees on an auditorium and they talk through the transitioning process. 

At that time, everyone will need to know what will happen next. 

The employees are not only worried about their job, but also of their families on their insurance. Karkowsky advises to answer these uncertainties from day one.

The biggest failures occur when companies are so invested on the transition that forget that they still need to deliver to their clients. 

This can be prevented by over planning and setting reasonable deliverables.

Karkowsky continues to discuss the ways his company stores personal and confidential data safely.

For more insights, listen to the full interview.

00.00 /  05.00  approach on due diligence

05.00 / 10.00 choosing healthy integrations

10.00 / 15.000 handling ownership issues

15.00 / 20.00 international deals

20.00 / 25.00 integration timeline

25.00 / 30.00 integration, human resources and key employees

30.00 / 35.00 communication with employees

35.00 / 40.00 sticking to the timeline

40.00 / 45.00 unprofessional management, data protection

45.00 / 50.00 personal advice on integration

This blog is part of our podcast series, M&A Science. Check out the previous podcast "M&A in a Tech World".

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