About the Host
Ryan is an entrepreneur, podcast host of the show Life After Business and the co-owner of Solidity Financial. Having personally experienced the hazards of selling a business, he joined up with his friend Brandon Wood to educate others on the process. Through their business (Solidity Financial), they provide a platform for entrepreneurs called Growth and Exit Planning that helps in exit planning, value building and financial management.
About the Guest
From working with a wide variety of Fortune 500 companies, start-ups, and small businesses, Jennifer has seen countless growth strategies fall short because a workforce cannot pivot to adapt to change as effectively as leadership anticipated. In hindsight, it’s easy to see why people strategies broke down, but by then it’s too late to intervene.
Jennifer Fondrevay is the organizational transformation guru companies need to keep their growth strategies on track. While data is increasingly used to guide business decisions, Jennifer helps ensure the human component of a company’s plan, such as culture, productivity, and retention remains a cornerstone of success during times of change rather than an inhibitor. Serving as an advisor to senior leadership and a liaison to middle managers, she is a much-needed resource who guides companies safely through unfamiliar waters.
If you listen, you will learn:
- Jennifer’s background in advertising and marketing.
- How she got into M&A.
- Who her book is for and why she launched Day One Ready.
- Why M&A is important to a business.
- Why incorrect valuation is the main reason businesses fail the first year after a merger.
- The culture clashes that happen after a sale.
- Painting a clear picture of a company’s future is critical.
- How Jennifer provides transparency to the M&A process.
- The types of leaders you need to include in this process.
- Emphasizing how the employee fits into the new system.
- The stats of failure for an M&A business during the first year.
- The steps to considering people first.
- The importance of respect.
- Jennifer’s parting advice.
Full Transcript
Announcer: Welcome to Life After Business, the podcast where your host, Ryan Tansom, brings you all the information you need to exit your company and explore what life can be like on the other side.
Ryan Tansom: Welcome back to the Life After Business podcast. This is episode 110. Today's guest's name is Jennifer Fondrevay and I absolutely was super pumped to get her on the show today because she has a completely different take on mergers and acquisitions. She approaches it from the human side. Why do 80 percent of M&A deals fail and how do the buyer's not get the reward and the return that they want or the sellers have something completely different after the fact from a culture perspective is because M&A is based in humans. Business relies on humans and culture. Peter Drucker has the famous saying that culture eats strategy for breakfast, so therefore when we talk about bringing two companies, two cultures with their own genetic DNA, smashing them together, where people are fighting for survival, their fear of the unknown of whether they have their job or all these different things started percolating to the top. The ability to address people's concerns, create a future state of the business where it's gonna go and how all these people fit inside of that becomes unbelievably important so that way everybody can be happy, but also so that the seller can get the return that they wanted from selling the business and that the buyer can actually take that investment that they made and reap the rewards of it and everybody enjoys the whole process. I think the biggest challenge that sellers have to have or you the listener as you're looking at your exit, is what do you want from your culture and how do you fit into that future buyer. So Jennifer has a consulting company called Day One where she talks about all the things that you need to do to go in with eyes wide open. So her and I go back and forth about the things that are really important from the human side of M&As. So without further ado, I hope you enjoy this interview with Jennifer.
Announcer: This episode of Life After Business is sponsored by GEXP Collaborative. Their proven process gives you clarity on all of your exit options and how those options impact your financial success, timing and future happiness. Sell your company on your time frame to the buyer of your choice at the price you want.
Ryan Tansom: Jennifer, how are you doing?
J Fondrevay: Just great.
Ryan Tansom: Looking forward to having you on the show. I came across your podcast and I don't even remember what email it was– the email newsletter I was on. There was the ACG or something to do with…
J Fondrevay: It was probably ACG — Association for Corporate Growth.
Ryan Tansom: Yes. Yes. So something to do with M&A and it's usually the same old boring stuff and I actually read the email because I saw your little blurb which was a lot about the human touch and what's going on in M&A and you've got a different perspective than everybody which made me reach out and then we have been a couple of dialogues about it, but so for the listeners that are not familiar with you, your background, why don't you just kind of give us a little bit of an overview of where you came from and how you landed where you are today.
J Fondrevay: So the quick background is marketing and advertising executive. Uh, thankfully I had aspirations to be ambassador to France, but um, I'll, I'll, we'll just say I'm taking the circuitous path to that; that's for a separate but…
Ryan Tansom: I don't even know necessarily for that,
J Fondrevay: but in my course of marketing and advertising and really I don't, I won't bore you with the details of that. Let's just quick kick quickly to why am I doing what I'm doing now. For the first 15 years I was in advertising and you know, it, I didn't know it at the time but it prompted my interest and fascination with mergers and acquisitions because I witnessed a lot of the clients that I worked with. So I had the privilege of working with a number of blue chip consumer package goods-type clients, right. Nestle, Kraft, Khors, Cadbury and Unilever and every single one of the companies I just named off in that list have either merge, been acquired or acquired another or are takeover target, right? And so during the course of my relationship with them, I saw a lot of the churn and the, the back and forth, and, and unfortunately the downside of what can happen during mergers and acquisitions and as an agency when you're working with companies on campaigns, everything comes to a whole, you can have spent years putting something together with your client and it suddenly just dies. And sometimes, you know, I'll say maybe I totally get it new vision. But oftentimes campaigns were just killed or products weren't launched simply because they were having to deal with the chaos that came through the merger or acquisition. And at that point, really I wasn't thinking about, Gosh, I should do something in M&A. I just witnessed the unfortunately that the, I'll call it the carnage.
Ryan Tansom: Good word.
J Fondrevay: And I, uh, I went client side and the last 10 years of my marketing career I went through three multi-billion dollar acquisitions. And so in that regard I experienced what happens. And in each one of those, and the first one had the greatest impact because I didn't know what to expect. I had witnessed it before. But when you go through it, it's a whole different, it's a whole different ballgame. And I remember thinking to myself, there's got to be a better way. There's gotta be a way to do this for people can still have faith in their skills, still see the possibility, still understand the opportunities presented to them, but because so much of what happens, people just don't know what to expect. And so it was in… I would say by the third, the acquisition experience, I thought, okay, I gotta stop saying there's a better, there's got to be a better way. And I just decided I've got to show what a better way through M&A looks like because I could see that it wasn't going to just happen naturally, that people would start to think, oh, there's a better way of doing this. And so that set me on a, on the path that I'm on now. Um, my initial step was purely I just wanted to write a survivor's playbook. I wanted to write a book that give particularly frontline leaders, middle managers, a better idea of what to expect. And so in writing that book I interviewed probably at this point, I've interviewed 65 executives and they kept saying to me, well, what are you going to do besides a book? And I said, well, do you know how hard it is to write a book?
Ryan Tansom: What do you mean what else?
J Fondrevay: And I was like, well, that's a big, hairy audacious call. I'd never planned to write a book and here I am writing one, but I had a point, right? These are CEOs and CFOs and private equity, um, guys and gals who I was interviewing and it was at that point that I, I realized, you know, they're right. A book's only going to scratch the surface. If I really want to help people get through M&A and see the opportunity, how do I get these books in the hands of middle managers? Because that was the other issue, right? It me handing this out or putting it on Amazon and hoping "build it, they will come" that wasn't going to be a distribution plan. That wasn't gonna work. So, um, I launched a consultancy, uh, focused on helping forward thinking business leaders and owners who want to be smart about how to approach mergers and acquisition, recognize that beyond just the valuation and the profit, how do they think about their people and how do they make this process. As I said at the beginning, it's always going to be tough, but how do you, how do you give it the best chance for success? And that's what my consultancies focused on and never did I think I was going to be in this place. But I'm thrilled that I am.
Ryan Tansom: This is why I'm super excited because, you know, as you and I just started chatting bit before the show is, you know, your, your perspective is so different because there's so many people have bought the numbers and the financial engineers and all this stuff. So maybe Jennifer, what we should do is let's give some context to the listeners on, okay, what do we mean by carnage and what was your — cuz it's the reality of it, right? And so is it financial carnage? Is it the lack of the profits or the all that stuff that I think a lot of people gravitate towards in our space, you know, what do you, what are some of the stuff that, when you say there's got to be a better way, what were you specifically seeing that wasn't working and what was the carnage that you were experiencing or that you've seen happen in the market place?
J Fondrevay: And, and you know, it's, I think sometimes I feel a little bit as you were saying, right? I have a different perspective about M&A, so I don't want to sound like chicken little, hey, the sky is falling and no one's listening. Uh, I was an executive. I'm, I'm privileged to say that in, in the three mergers and acquisitions I experienced, I was in a leadership position and so I get that M&A is a part of business. It is a growth strategy lever that more and more companies have to pull in order to stay alive, frankly. 2018 is expected to be a record year with 4.8 trillion in deals done. I mean if you look at the past five years, it's been over 3.5 trillion in deals and mergers and acquisitions and we keep talking about constant change and how technology is disrupting business segments and what's happening is more and more companies are realizing they can't survive on their own.
J Fondrevay: So they've either got a competitor. [Ryan interjects: And the Boomer wave that's coming.] Yes, I mean the, the, the amount of money that's expected to change hands over the next 10, 20 years. It's astonishing, right? So there's a lot of money out there and a lot of potential for the, you know, mergers and acquisitions to continue to happen. That's the prediction. And so when I say I don't want to be chicken little, it's just, it's not that I say, well that's bad and that's flawed and we got to stop doing that. In my view is we've got to make people smarter about what to expect from the people side, the human side of business, because so much of the failure rate is attributed to people problems and, and they, you know, they qualify them as unexpected people problems. And I, and I say, and I can prove it thanks to the research that I've done, they're not unexpected, there are patterns, there are things you can't anticipate, but if nobody focuses on them and if they don't focus on them early in the process, absolutely those are… people problems will occur.
Ryan Tansom: Well, it's so interesting Jennifer. So here's my take on it too, because been through it myself, watching customers go through it and the reality is so the people that are monitoring successes and all that stuff, and I know you've got a bunch of stats that you, that you should rattle off in a little bit here, but they're all looking at the numbers, right? Because I mean the whole point is to do, is to grow into can you have continually having profits continue to diversify your customer base. All the logical reasons that you want to do that. And they are good reasons usually, but when you think about the people, how much money is being spent right now and people development when like what is one third of employees that are actually engaged two-thirds or like wanting to quit anyways, so you need when you start to look at how much money is being pumped into the personal employee development and then and then you take the reality that you have two companies which are two cultures or like two groups of friends and you smash them together. Like what is naturally going to happen. It's going to be 10 times more complicated than just the normal company that was spending a bunch of money on personal development.
J Fondrevay: I think there's a couple of things that have struck me. One is, and, and again this is my intent is never to point fingers at any one player within the massive ecosystem that is mergers and acquisitions. Everyone has a role to play. But I feel that one of the key issues that has been highlighted for the failure is incorrect valuation. And that, you know, personally, I feel that's a, a number one issue because what can happen is if you've, if you've valued the company incorrectly, you can have set a strategy that is impossible to achieve within the first year and so that can be related to the, the people problems because you just use not scoped the business correctly and then you're just playing catch up. And the tricky part for for me is helping people recognize that having, talking about the human side, talking about the people sooner in the process actually helps you be smarter on the valuation, helps you set the deal up for success in a way that is much more difficult to do if you, if you consider the people the people's side as an afterthought. And I've had those conversations, right? I've, I've, I've talked with people who are in the middle of the deal who say we love what you're about. Think you have a smart, fresh approach to to what is can always has been a consistent issue. But I don't want to bring you into our because that could mess up my deal. And so you know, you're kind of constantly combating that. Actually if you bring me in early enough, then we can talk about here are the challenges that you are going to face with your leadership, with your workforce. How do you overcome that? I don't think there are massive things that you have to do. In my view, it's kind of it's course corrections. It's thinking about the people strategy at the same time you're talking to your lawyer and an accountant about the deal and how to make it happen.
Ryan Tansom: I love it. So you're going to screw up my deal. I mean that, that, that's literally the, the mantra of almost everybody. But Let, let. Let's maybe get some context, Jennifer, on what is the, what are the people problems? So maybe before we go into how you kind of reset and recalibrate this stuff, like, what are the. Some of the things that are the biggest challenges of the people and the of those two cultures and the staffs and all that stuff. And from which side – the buy side, the sell side – kind of give us some, some context to it.
J Fondrevay: So I'll, I'll cover what are typically always highlighted are the people challenges a lot of of discussion is around culture and rightly so when you are bringing two companies together, you quickly see even if you think so what I what I've seen one, one standard scenario in particular when companies merge again for growth strategy, so you've got a company that has been focused, let's say they were focused on the high end and they acquire a company that's focused on products, same kind of within the portfolio, but they focus on the low-end, a salesforce that's used to selling high-end products now struggles with, well I used to actually dis this, this low-end product, right? We've always stood for quality and now you want me to sell it? Makes complete sense from a strategic standpoint, right? We've got to have a broader portfolio of products and this is going to help our salesforce when they go out. Your salesforce can look at that and go, how do I now sell something that I've actually spent years saying is a poor product? So there, there, there, there are, there are challenges that come just inherently from what makes sense on paper, doesn't always make sense in execution because of culture and how your workforce has always been thinking about the product or the service or solution that they offer. So if you don't think about that before you, you move ahead with a deal and think about what are the implications of this? What does our organizational structure need to be and how do we actually help our, not just our salesforce, but our customer service and our customer experience. Everybody has to now recalibrate, if you will, their thinking and that takes time. But what often can happen and just um, I'm playing out this particular scenario because I see it happen so often is suddenly it's like the announcement is this is a great vision and now you'll have that many more things to offer and people are like, are you kidding? I don't, I don't, I don't know how to sell this. And so that obviously immediately then impacts revenue and profit and, and you spend a lot more time…
Ryan Tansom: The drama and the backstabbing and like the who's who in the hierarchy isn't, I mean our old industry is gone through over the last 10, 15 years, a ton of consolidation because it was copiers then everything got digitized and connected to the Internet. So then therefore you were competing with software providers, managed IT providers and like even so people like it was either buy it, build it or partner, the whole mantra of the old, the old industry. And okay, so I have a bunch of copier reps who.. they're box salespeople, they don't know solutions or to sell it. The comp plans are different, different. And there were so many people that would buy them and it would just be a horrendous. Because these, this IT company who is very full of engineers and intellectual individuals and solutions architects were then all of a sudden working for a bunch of soldiers that were just slinging boxes and stuff like you just watched the, the, it makes sense on the outside, but then they comped differently how you recognize profits and how you bill. I mean, everything is so…
J Fondrevay: And you, you, you raise a really good point and that's one of the things I highlight when talking about process in my consultancy is at the same time you're talking to the lawyer and the accountant, envision what, what's the desired future state? Why are you bringing these companies together and what's the organizational structure that's going to help you be successful? You got to have that conversation before you even announce the deal because you have to think that through.
Ryan Tansom: Yeah. In what context are you thinking of from the. Are you mainly from the buy side, this side or like we're like, who were you thinking of when you were talking? Is it both sides?
J Fondrevay: It's honestly both sides, but you know, uh, the, the other thing, because I do, it's the, what are the challenges and issues. I think the knee-jerk reaction is always to go to, to culture and right. I've described the one, I see consistently. Culture is tough and yet I think the tough part about it is executives… It's almost like culture's touchy-feely and it's an HR issue and, and people really don't appreciate culture when you accompany culture merging that with another or integrating it with another, that's a complex comprehensive process. And if you don't think that through, you're going to have two groups of people at odds, right? My, my HBR article, um, which again, I'm, I'm so thrilled that HBR published it because it is a very different take, as you said, on M&A. and the thing that I highlighted was the us and them dynamic. The us and them dynamic, you have it between two companies, but you can also have an us and them dynamic between the executives and the front line leaders. So let's say, you know, obviously let's assume within the company you all got along, everything was great, super, you know the company's doing well. Suddenly though in a merger and acquisition scenario, the frontline leaders, you know, the trust dissolves quickly because the perception is that the executives are making off, but that the frontline leaders are left holding the bag and having to execute. And whether that actually happens or not, that is the perception. What? You knew that this was happening and now it's going to impact my life, do I even have a job? What's going to happen to me? So almost overnight there's an us and them dynamic that occurs between executives and frontline leaders and then the third dynamic is who stays versus who goes. So you'll have people who get laid off and and people who are assuming they're going to be laid off next. All of that hinders productivity. So it's just, it's, it's why I say M&A by nature is messy. You've got a lot of us and them dynamics that happens on multiple fronts and that's why in my article I go into, but you can. There's ways to minimize this through thoughtful preplanning focused on people.
Ryan Tansom: Well, it's interesting. I heard the, I can't remember who said it and forget it… So it was– the quote was around something of people have fear of inconsistency in the unknown. Right. And so if you don't communicate it because a lot of these people want to shut the box this up and have it just be done so it doesn't impact the deal like we've said. And what happens is the reality is when there's unknowns, people fill the space and they usually in the space with a thousand times worse scenarios.
J Fondrevay: Yeah.
Ryan Tansom: The, as you're telling that story or that example, I think I just think about like even in our deal where we all have company logoed shirts, right? So then literally a half the people are more don't go over to the new acquisition and then you've got different logo shirts, you know, you have the whole hierarchy structure is different and it's just so like how, when I think is interesting, Jennifer, is that a lot of everybody was about the deal and the money and the return. Right. But the reality is it's all of these companies are people businesses and that's the highest value of return and when you really think about the groups of people who interacts with who like, I mean like I just think about like so like we had managed it service where like my, I had a rock star team and they all got put onto different teams. It's like taking a football team and throwing players onto a bunch of different teams. It makes no sense. So you have all of these complexities that are way different than just the contracts that actually make the money.
J Fondrevay: Yeah, I think that's the tough part. And it's why I fixate on the, the, the first 90 days, right? And when I say 90 days, I'm talking about day one. That's why my consultancy is called Day One Ready. Day one is when, as a leader or business owner, you first think about a merger or an acquisition as your growth strategy. Because from that moment forward you are as a leader making decisions through that lens, you're now evaluating things through the lens of should we do this? What if we merge or acquire your just… and that, by nature, you start to make decisions that way your workforce will pick up on it, your executive leadership will. So my focus is helping business owners, the moment they think about that, define what is that desired future state, why are you considering a merger or an acquisition? Let's, let's flesh out what does that desired future state look like. Then allowing… then encouraging with the business owner to get alignment with their executives so that they're crystal clear on why they're pursuing a merger or an acquisition and then defining what the organizational structure looks like that will help them achieve success. And that I would say that thought process and that planning is what I see is missing, uh, in too many cases. And that's the people piece. But the first driver though, as I just laid it out, right, you're still thinking strategy. You're still thinking execution. How, uh, what's the organizational structure required to do it? But the, the more clarity you have around that. And then how do you help people be part of that? It allows you to be smarter on how you communicate it. It gets people excited about the vision because they can see, because you paint that picture, you paint, here's what this is going to be, this is why we are doing it. Here's the potential for you because you've gone through this, you know, it's, people have to be energized and motivated. You've got to paint a picture of what this new vision is and why it's good to help them understand what role they can play in making it happen.
Ryan Tansom: So let's got a company that's running on all cylinders with that kind of mentality. You know, what, what do you see from the people that are selling, right? Because I think what I, what I've interviewed a lot of people, Jennifer and I don't know, are you familiar Bo Burlingham at all? [Jennifer interjects: No.] He wrote a book called Finish Big, Small Giants, The Great Game of Business. Some of these other, some of these ones that um, it has to do with people being blindsided after the fact, right? Where like again, these. So for example, if I'm selling whatsoever, let's say I run into like a company that you've been working with like that. And I'm selling and I'm sitting there going, okay, I'm trying to find a way out of my business whether you know, I really care for all employees. I don't know if they're all going to keep their jobs. We've never been through this. We haven't had that mentality and we come across this whole company that they do this for a living and they have that mentality. How do you prepare a seller to ask the right questions to have clarity of what's going to happen afterwards to their culture, to their employees? Because I think there's the employees that are, I mean their numbers, right? And you kind of alluded to that in some of your other podcasts, but when you're selling their costs, their direct costs to the value and how does that… So that's one facet of it and curious on your thoughts on that. But the second part of that is knowing like, so like when you grow a business like that and you hire the people, it's a direct reflection of you. It's like literally like integrated into your personality or identity and what that's gonna look like after the fact. How do you, like, how do you go through and process that stuff if you're the seller?
J Fondrevay: It's hard. Uh, I mean that's, I, I say straight upfront and repeat constantly. M&A is messy. I don't think you can ever be 100 percent prepared. What my goal is in what I'm doing is to provide transparency into what to expect. I think you, the most important thing is what you just pointed out. I think oftentimes sellers may make assumptions that, Oh yes, the people will be taken care of and when I say taken care of, that doesn't mean everybody gets a free ride and we're just going to continue. You have to be smart and strategic. Not everyone necessarily will have a role in that future vision, but you need to talk that through and think through. Again, I'm probably sounding obsessive about what is the future organizational structure look like and how, who do we have that can fill those roles and, and make, make this successful.
J Fondrevay: So the other aspect that I highlight a lot is your executives absolutely play a crucial role, but would often gets overlooked is the troops, your frontline leaders. The sooner that they can be engaged and listen, they can't be engaged at the beginning obviously because you're still working on the deals, but the sooner you can engage and have your frontline leaders be part of crafting the strategy and the then following execution, we all know, right? The more that you can cocreate and feel part of it and ownership it gives the potential for success a lot, you know, a greater, a greater potential if you will, and that's for me, it's asking those questions sooner in the process. Being very clear there are, there are going to be roles that will change. There's a reason why you're selling. There's a reason why they're acquiring you, you know, business is business so I'm not diminishing that, but the more you can think about what does that require? Who are the right leaders, not just executives but frontline leaders.
J Fondrevay: And the other aspect to that is interesting that came through a lot in the interviews that surprised me was quiet leaders, right? We all know we've been in companies where there are people who are not your loud rock stars. They aren't the people who are always out in front, but the role that they do is critical to a company and yet they can get lost during a merger and acquisition. People you know, in operating out of fear you're jacking, you're trying to make sure you keep your role and and people who are the quiet leaders who have just always consistently done a great job can get lost in the shuffle and they could lose faith in your abilities and those are the people… That's why my book is to focus on middle managers and frontline leaders, right? The people who who can get blindsided and lose faith in themselves. And so that's the other aspect that I'm always coaching business owners on, which is don't just think about your executives. Think about your front line leaders and the people who you know, make this company hum that, that can get lost in this process.
Ryan Tansom: That's a super good point because all the people I've worked with and you had these… because the genetic DNA of the culture of every company is different and it's a lot of the there's the loud voice ones, then there's all the quiet ones and the tribal knowledge that they all have and how they work together is one thing and then it's so interesting because you layer in the systems and the processes and the products and tools and stuff because like you have all the dynamics of the personalities and then what they know, but then the, everybody's got their preferred way of doing things and so, like you literally, I watched people operate out of fear, like you had said were there, they want to hold onto their job, but they also want to hold onto their specific systems or the way they do things and then they're thrown and smashed together with a new team and it's just messy, like you said.
J Fondrevay: Yeah and you actually bring up a really good point because I am always cautious. Again, I was an executive so this is not… Um, sometimes…
Ryan Tansom: It's reality. Let's call it what it is, it's totally fine.
J Fondrevay: Well, you know, and then in the movie where they say you a movie, You've Got Mail with Tom Hanks and I'm, oh my gosh, I'm blanking on it. It'll come to me. But the point that I was making is that in that he says, Hey, it's not, it's not personal, it's business. And she responds and says, yeah, but it's personal to me, right? For, for people who have invested so much energy into their work, it is personal. It is, it is part of, of their persona. But also you have to accept change, right? So this is not a call to arms that hey you know everybody who's unwilling to change stay that way. The one of the things that I, I, I highlight again in the book is in order to accept change, people have to understand where are they going, what does that future vision look like, how can I contribute to it? And people are gonna always have a very hard time giving up their old way of doing things if they can't see the role that they play in the new way. And so that's why I emphasize the part about the communication and clarity of that and painting a vision of where the company is going and why you're going in that direction and how it will help not only the company but how they can contribute to it. I think it's those extra steps that help give your, your, your deal the best chance for success.
Ryan Tansom: Well and like you know if people aren't, if you can them out of that fear operating mode where like, Hey, like I think it is, it's clear. It's clear. Transparent communication. Right? So Ray Dalio wrote this book called Principles and it's about authentic, open, honest communication and conversations where like if, if, if the companies know what means what success means and how to measure that and you let everybody know and yeah, things are gonna change. But I think people, they ended up, and I don't know if you've seen this, but people end up getting fired or deselected or whatever you want to call it because even though they should have had a spot there, they end up doing things in the wrong way where they should be working themselves out of a job or making things better it towards that ultimate outcome and they're more likely to be wanted instead of actually, you know, the fear that they have is that they're going to no longer be needed. But I think they're going to be wanted.
J Fondrevay: That is the motivation that I had in writing the book. Right? And in painting the picture of, Hey, you are going to experience stages of grief. It's natural. Millions of people who have gone through a merger and acquisition and have gone through these same stages. So I paint a picture of what that looks like and how it feels. And here though, wacky personality types that are going to emerge. Because when people are operating from a position of fear, all bets are off, right? So I try and paint the stages. You'll go through what's going to happen to the people around you, but you can make this work for you. There is opportunity, but you need to know your value. Know what you can contribute. Really spend time thinking about what is the new direction, what are we trying to achieve with this? How can I play a role? Because I emphasized the longer you stay in denial and stick to your old ways or sabotage you're the only… The only thing that's being heard is you and your career. And so for me, helping middle managers, I see the opportunity and the possibilities by being very transparent about what's going to happen and how they're going to experience it, my hope is that it gives them a greater chance of being successful in, in the whole experience.
Ryan Tansom: It's interesting because you know, you speak to the middle manager approach and I see a lot of similarities and parallels stories where the owner who has been the big shot, who's been making all the decisions were the hiring decisions, a client, the products and services as they sell to a private equity firm or a strategic competitor or whoever the next person is, they end up being a middle manager as they're doing their earn out or whatever it is, and they themselves at some of the biggest challenges because they're in grief and denial and they end up sticking there and that alone becomes unbelievably toxic.
J Fondrevay: Yeah. And that's, that's consistent. And, and, and I say that's consistent even before I started down this path, William Bridges, uh, wrote a book called Surviving Corporate Transition, uh, and then a follow on book Managing Transitions, which thankfully I found those books when I was going through my first one and he talks about the fact that, what I just highlighted, people will be reluctant to adopt a new way of doing things from how they used to do it unless you give them a vision for why that new way is better. And you also have to expect that they need time in what he called the neutral zone, right? A period of time to just adjust and understand what's happened. And I think that's why you see the failure rate that you do because so much is expected within year one. But if you've got people defining the strategy, who, who may or may not know really what it's gonna take to pull that strategy off and suddenly you've got troops who, who find out, okay, they find out day one that this has the new strategy and they've got to hit these metrics and achieve this, and they're still reeling from the news. There's a reason why the failure rate is as high as it is. So.
Ryan Tansom: Can you dive into the failure rates, because we've gone into them because I mean they're pretty staggering.
J Fondrevay: Yeah, I mean the, the. What's been, what's astonishing to me is the 70 to 90 percent and this is Harvard business review, KPMG, Mckinsey Studies all fairly consistently highlighting that by the end of year one, the value that was declared would be achieved was not whatever that valuation would be. And so I look at that and say, well, how do we, how do we give that a greater chance for success? And so I'm focused on the people helping people who go through it to better understand what's going to happen and what to expect. And then helping the executives be smarter about, here are the challenges you're gonna face. I, I jokingly say I'm kind of the M&A whisper for business owners to just say, okay, describe to me your company and, and the company you're looking to merge with or acquire and I can, I can usually anticipate here are the, here are the challenges that you will likely face. Let's play those out. Now let's think about how we would solve for those. So you actually have those solutions before being confronted with them. That's, that's really, that's why I'm probably sound obsessive. I think it will give the, the failure rate. I guess I can't claim 100 percent success, but I can certainly feel I can contribute to diminishing the failure rate.
Ryan Tansom: When you say failure, how are people measuring this? Because is it like, is it cash flows, is it EBITDA, client growth…
J Fondrevay: All of those. It is, really again, it depends on, on the, on how it's been valued. All of those are, are negatively impacted. What's interesting to me is, uh, yeah, it tends to focus on the financials and the and the money. It doesn't, a lot of the stats don't say, well, were jobs really created or were were majority of jobs eliminated. The research doesn't, doesn't focus on that piece. And so you know, again, for me the, my obsession is how do I, how do I make people smarter about what to expect and how to do better through the experience and find the opportunity.
Ryan Tansom: What are some of the tactical ways that people can be like looking at this from both the buyer's side and the seller side, like what are the tactical things that they could actually be doing to become more aware or to help educate both of their teams?
J Fondrevay: I think first and foremost, the advice that I give is just if you are thinking of a merger and acquisition, whether on the buying side or the selling side, consider the people, the people aspect from the beginning. Know that it's as it's as crucial as anything to the success. And again, when I say people and I feel the need to always reinforce this, it doesn't mean your goal is just saving everybody's job and you won't sell unless that happens. You need to think about what is the desired future state that you're trying to achieve and what would the ideal organization look like to deliver on that desired future state that will continue to serve your customers as you have. Because if you work back from that right, you're not obsessed about the people and making sure you keep a certain someone. You're obsessed about how have we served our clients in the past? How is this merger acquisition going to continue to serve that customer? And then how do I organize and structure my new company in a way that not only delivers on their needs but goes above and beyond them. And so I, I'm, I make it an unemotional thought process. But there's an opportunity in that thought process to then think about, okay, what are the teams I need to make this work? And then who are the right people to lead those teams and beyond those teams. And, and that's where I help executives really think through the structure that they need to be successful.
Ryan Tansom: It's interesting too because like that same exact process should be applied to the seller when I think about the questions that they should be asking the potential acquire, right? Because there's so many times where there's a bunch of bullshit that was spewed to the, to the seller about what is going to be this desired future state and it's not really thought about because it's all just financial engineering. [Jennifer interjects: Very good point.] And I think it's to eliminate the grief and the like the regret that these owners have is, let's say I had a company and I was going up against a company that you would be a potential acquire and you had this all. Again, going back to that analogy of you have all these people that are super aware. If I was asking you, okay, what is your desired future state? We would actually have more of a tactical way of saying, okay, here are my people, here are the roles, responsibilities, skill sets, personality types. How would they literally integrate with your current structure and where we want to go versus, hey, you know, here's a bunch of people. Hopefully all goes well. I mean, I think that the seller could increase the value that they get from it too, you know what I mean? Like, and, and have a very clear expectation of, hey, here's the people that are going to be potentially at risk and here's why, and are you okay with that or not? You know what I mean? Like and actually having some conscious decision making instead of just having a bunch of stuff that's blindsided after the fact.
J Fondrevay: Yeah, and I'd emphasized, too, M&A is an emotional experience. If a, one of the fascinating things for me while I was interviewing executives and executives who you could say, right? CFOs in particular are the ones where they said to me typically when they approached a deal and thought about it, it was just a spreadsheet. It was boxing templates. That's really how they looked at it, right? It was an acquisition. It was going to help the company. But in two instances they were acquired by a smaller competitor. And, and one CFO in particular said he had no idea how emotional an experience that is. And so I highlight that because as you're, as you're talking about the, you know, thinking through the people piece and whatnot, one, recognize that people are going to react emotionally, but that doesn't mean to make decisions emotionally. Don't just say you've got to, all of my team needs to be preserved. Everybody needs to keep their same job. Change is going to happen. It has to. That's the reason why you're pursuing a merger and acquisition. So you do need to make your decisions on emotionally based on what is best for the business, but that then forces the discussion who's right to be in these roles for, for the purposes of helping make this successful. And so I, I, I try and make sure that, uh, people confuse my message is not about everybody gets to keep their job and let's all just get along. That's not it. It's just thinking through thoughtful preplanning about the people piece to make sure that your strategy is not written in a vacuum and that you're really thinking through the execution and what's the best way to execute?
Ryan Tansom: There's a guy named Chris Voss that I interviewed on the show. He wrote a book called Never Split the Difference, you've heard of that? Like I would never ever want to go face-to-face with the negotiations with Chris because he, he'd take everything I own, I think. Um, but he has this one thing in his book, he calls it labeling and it has something to do with the human psychology of just calling things what they are and then you can actually process them. So like, you know, in these people's jobs with that CFO story, I mean like if you label and say this is the reality and here's where we're at, where we're at, we can process the best ways to go through this. But we're not, we're not eliminating the motions, we're not ignoring them or calling it what it is. And I think there's a huge sense of relief that everybody calls a spade a spade and hey, this is what's going on and this is why. Here are the goals that we have to have. And yes it is emotional. We agree.
J Fondrevay: And I think you, you touched on it, it's part of the importance of that is respect, respect people's intelligence, respect the role that you want them to play and think about what we're going to be going through when they first hear this piece of news.
New Speaker: Respect the like the feelings, right? I mean like, like there's like, I mean honestly like I just go back to like even my, like because their feelings are reality, right? I mean it's, their perception is reality even though it may or may not fit into the new reality. Like what was was and like. So like one of my, my CEO was like one of my best friends. I mean I really like loved waking up and working with that guy and to this day, four years later, I'm like, God, I just miss solving problems with Paul, you know what I mean? And that's a reality. My reality is no longer there, but it's like, you know, just knowing like, hey, this is, things are gonna change and. But you don't have to ignore it, but respect what… I think, I think you hit the nail on the head. It's, it is respecting and being aware and not ignoring it.
J Fondrevay: Listen, we're out there fighting the good fight. You and I have gone through this from different vantage points and have recognized, okay, we can contribute to helping the success rate increase, right? I won't even talk about diminishing the failure rate. We're just going to talk about making these more successful from the standpoint that the people recognize the opportunity and a way forward and I think that's as much as as we can be transparent about what to expect and how to get through it and how to see where the opportunity is for you. I think there there is a greater chance for success.
Ryan Tansom: I think the thing that actually – I agree with you – and I think the thing that actually needs to be consciously aware to everybody out there is that the happiness of your employees and your culture directly relates to the return on investment and how much money you make. Because if you had a… If you have a company full of a bunch of pissed off people, no one's going to make any money. Your customer servicing is going to suck, salespeople are not going to be happy. I mean everybody's gonna be fighting, there's going to be drama. I mean, that doesn't, that company doesn't make any money, so I think it is directly related to profit. So it's not just this fluffy, you know, intangible stuff. I think there is a direct correlation, it is just a lot harder to measure.
J Fondrevay: It is. And, and you're reminded me that the culture issue, culture integration gets a lot of attention as it relates to mergers and acquisition. But the other huge pain point is talent, not just acquisition, but retention. Keeping a, as I said before, not just the executives, but being smart on who your frontline leaders are, who are the quiet leaders that are contributors that are critical and important to take note of. But what, what can be enormously disruptive is when you're going through a merger and acquisition, morale tends to drop significantly for the most part. It's much harder to attract new talent to an environment where people are still trying to figure out what's going on. So that's the other aspect that I think, um, I focus on a lot is this isn't just about who you, who you keep and what role they play. It's about painting a vision so that not only the talent that you have remains, but you're able to attract the talent you need.
Ryan Tansom: Yup. Yup. Totally agree. Very good point. As we're wrapping up, Jennifer, is there anything that would, cause we've talked about a bunch of different things. Is there something that you want to highlight or maybe there's something that we haven't touched on that you want to leave with the listeners and maybe approach it from someone that's thinking about selling and then also someone that's thinking about acquiring?
J Fondrevay: I'll actually start with the, with the seller and we have covered a lot of things. So I'm, I'm confident I'm going to be repeating myself. I think for, for sellers in my view, I won't talk about the valuation. I think more often than not, what I've seen though is sellers don't always appreciate how much they are worth so you can need to be smart about what your value is because the other side is not going to point that out. [Ryan interjects: Touche]. If anything, if that's the one fascinating thing to come out in my book–
Ryan Tansom: I should pay you more.
J Fondrevay: Yeah, they're not. So be very clear about your value and make sure it's a third party objective valuation, right? Because they can go the other way. There are other aspects where I see the people think their company's worth more than it actually is, so just be very clear on what your true value is. And then as as I said earlier and you pointed out, right, it's not just asking the questions, but it is. It's almost forcing the discussion with the other side that you want to have alignment about the desired future state and the organizational structure that needs to happen as part of that. Because if you force that as a seller and right now sellers are in a very good position. There's so much money out there you can have greater influence on this is I want us to be smart about what the structure's gonna look like so that after I'm gone, we've set this up for success that this company has will move forward and grow as I have envisioned. So forcing that discussion and getting alignment with the other side, that doesn't happen, uh, in, in a majority of cases and I think it tends to be brushed off as well. HR, will deal with that or we'll get to that after the deal's announced. My focus is, is have the conversation sooner rather than later. And for, for requires. Right. I again, I think that similar benefit have that discussion a, it's often quoted as cultural due diligence. I think it goes a step beyond cultural due diligence. It includes not only defining the strategy but really being crystal clear on the, on the execution and what's gonna be required from the people in order to achieve that.
Ryan Tansom: Yeah, totally. Very well said. If there's a, if the listeners want to get more of your information, you have other podcasts, you have resources. What's the best way to get in touch with you?
J Fondrevay: So my website would be, and you will, I know, put it in the show notes, so I'll, I'll say it out loud. Having it in the show notes, make sure that people know how to spell my last name means to sound complicated, but it's Jennifer J. Fondrevay dot com and there you'll get a chance to see the consulting work I do, the process that I pursue with Day One Ready, the speaking that I do, the podcasts that I've done in the past and you can sign up to a preorder the book and the book actually, while my Muse has been and remains middle managers, the book is equally relevant and important for executives.
Ryan Tansom: It's for everybody that wants to open their eyes on what this is all about. I mean, it really could be for anybody.
J Fondrevay: Yeah. And and, and the book. So a one, a one plug that I will say about the book. It's a satirical business book. It's called Now What? A Survivor's Playbook for Thriving Through Mergers and Acquisitions and I, it's the typical because I thought there's a lot of dark humor in m and a and I thought if people can't, can't see with the humor, why would they read the book, right? They gotta they gotta recognize that they'll get through this and there's some. There is some, you know, funny things that will happen and astonish you along the way, so it's illustrated and uh, I have ideally some light moments within the book that people will go, oh my God, that happened to me. Right. It's just providing transparency.
Ryan Tansom: Well, thank you so much for coming on the show, Jennifer. I had a blast.
J Fondrevay: Oh, thanks so much for having me, Ryan. I really enjoyed it, too. Clearly were like-minded and just trying to make it better.
Ryan Tansom: Alright. Thanks very much.
J Fondrevay: Thank you.
Ryan Tansom: I hope you enjoyed that interview with Jennifer and if you had a couple of big takeaways is understanding that your people and your baby, the company culture, the community, the people, the relationships, all of that stuff will change when you sell your company. It might not, whether if it's internal, but they're still going to be a new power dynamic, so just knowing that these are questions that you should ask, how are these teams going to fit into the newest structure? Asking these questions of that potential buyer, where do you see this going? How do you see these people, these dynamics, these teams, these personalities fitting into your vision? How are they going to be measured? How success can be measured, and then how are we going to make sure that they're happy?
Because I think there's all this mess that happens when you have all the financials, different KPIs, different return on investments that you have to hit, and then you layer in that people had their whole world flipped upside down. Their cubes are different. They're sitting next to different people. They have different people that are interacting with. All of that stuff is so different, so just to call the situation what it is, respect everybody's feelings, their disruption, their change and then talking through how they're going to work through this and you, the owner, need to be so aware of what you're going to be walking into and how different this is going to be because you can start grieving ahead of time and so when this happens, you're not totally shocked how different it all is because it's just different and knowing that your baby's going to be completely reorganized is something that is a reality and understanding how that dynamic is going to change in forcing that discussion will bring that reality that you want to create to the forefront and you will be able to help co create that with that potential buyer. So lots to think about. I hope you enjoyed it. If you actually had different, any thoughts or questions on how all the different exit options could potentially impact your culture, your employees. We have a bunch of new ultimate guides that are on the GEXP website. Go check them out and it'll give you a lot of food for thought. Go onto itunes, give me writing. Otherwise I will see you next week.