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Former McKinsey's Top M&A Advisor on What CFOs Get Wrong About Deals · The Diary of a CFO

0:00
Welcome back to the Diary of a CFO podcast. I'm
0:02
your host, Wassia Kamon, the sitting CFO, the
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background in accounting and FP &A. And I started
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this show because I believe the way companies
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build and lead their finance function determines
0:11
whether they actually scale or fall apart. Each
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week, I'm sitting down with CFOs, CEOs, and strategic
0:17
business partners to talk about what that actually
0:19
looks like in reality. Are they building the
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right teams, getting the right system and control
0:24
in place, partnering with the business, and doing
0:26
it all, hopefully, without breaking out. Today,
0:29
I am super delighted to have with me David Fubini
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He is a senior lecturer at Harvard Business School
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and former senior partner at McKinsey & Company,
0:38
where he co -founded the firm's global merger
0:40
integration practice. Over a 35 -year career,
0:43
he has advised on dozens of major transactions
0:46
and taught generations of leaders in M &A and
0:50
organizational transformation. David is the author
0:53
of four books, Hidden Truths, Mergers, Leadership
0:56
Performance in Corporate Health, Let me explain
0:59
and his latest book post merger integration,
1:02
which was just released in June, 2026. Welcome
1:05
to the show, David. Well, thank you for having
1:07
me and I'm thrilled to be here. So I'm looking
1:09
forward to this and thank you for reaching out.
1:11
Oh, absolutely. I'm so excited about this interview
1:14
because when I looked at your background, I was
1:17
just so amazed. I really want to start with way,
1:19
way, way back before we get to where you are
1:22
now and your early career. You started at Johnson
1:25
and Johnson. where you were part of launching
1:27
Tylenol. Can you please take us back to that
1:30
time and what that experience was like? Well,
1:33
it was an incredible experience. And I was so
1:35
lucky to have this opportunity. And really, as
1:38
one finds in one's early life, you don't plan
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for these things that just happen. I happened
1:43
to be at the University of Massachusetts Amherst.
1:45
A professor I was working with had me do a special
1:47
project with a gentleman who formerly worked
1:49
at J &J. He knew that this group of people was
1:52
being formed. around the Tylenol product and
1:54
suggested I go talk to them. And this would be
1:58
what we would call internal startup, but we didn't
2:01
have that vocabulary then. It was just a group
2:03
of about nine people. Some came from J &J corporate
2:09
and other inventions, and some came from Parkland
2:10
Gamble. And they were created to basically relaunch,
2:15
in some respects, Tylenol. Because at that time,
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Tylenol was a product that nobody knew. I remember
2:19
before my interview, I had to actually go to
2:21
the store and ask a pharmacist to show it to
2:24
me because they kept it behind the counter rather
2:26
than in front of the counter. And it had been
2:28
a product that had been around for a long time,
2:30
but it had never been marketed. So the whole
2:32
point was to try and market it. And the reason
2:34
for that was because Bristol Myers Squibb, then
2:37
just Bristol Myers, had come out with a product
2:39
called Datril. And believe it or not, John Wayne
2:42
was the person who was endorsing it. And it had
2:45
got a lot of play. And Jane Jay was like, oh
2:47
my heavens, we have to do something. So they
2:49
got this group together to do that. The person
2:52
I worked directly for was the former product
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brand manager for Crest Toothpaste from P &G.
2:57
So a real pillar in terms of marketing talent
3:00
and great person to learn from. And my seatmate
3:03
in my cubby was Jim Lanahan who goes on to become
3:06
the vice chairman of J &J. So it was just a really
3:09
great group of really spectacular people to learn
3:12
from. And so I spent the first two years basically
3:15
helping learn, helping really how to actually
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market an over -the -counter product. and with
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this group of people who really were an internal
3:23
startup. Wow. And so now when you walk into a
3:26
store and you see Tylenol, how do you feel? I'm
3:30
amazed. I'm just amazed by that. I mean, at that
3:32
time, our big event and really big thought was
3:35
to launch extra -strength Tylenol. And then,
3:38
of course, we launched any number of different
3:40
forms, and then we put it into cold medicine
3:42
called cyanate, and then all these various products.
3:46
And now, of course, it's become you know, just
3:48
a routine household name. And it's quite remarkable
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to see something that really people never knew
3:53
about. And it actually came to pass. And funny,
3:56
in my whole career, that happened only one at
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the time. And we won't talk about it, I'm sure.
4:00
But I helped IBM PC business get bought by Lenovo.
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And at the time I was working with Lenovo, nobody
4:08
had ever heard of Lenovo in the United States.
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And of course, now we all carry around Lenovo
4:11
laptops. That's my computer right now. And you
4:14
know it. And so that I had that same thing happen.
4:17
at the midway in my career as well. So that was
4:20
quite fun. Tell me about the Lenovo story now.
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Now I'm intrigued. I want to learn more about
4:26
it. When you get on these kind of teams, how
4:29
do you actually learn more about the project
4:32
and able to add value? How do you connect with
4:35
people and bring those brands to life? Well,
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in this context, here you have IBM, which is
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massive, as you can imagine. had the PC business,
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which was quite famous because it was one of
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the first really business -oriented computers,
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had done it spectacularly well, but over time
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had sort of waned because Dell computer had come
4:57
in with a direct -to -consumer model, and Compaq
5:00
had come in and really were better with printers
5:03
than anybody else, and there were lots of other
5:06
competition. And inevitably, IBM said, you know,
5:08
we probably shouldn't be in this business. And
5:11
so Lenovo, who's sitting over, you know, a Chinese,
5:14
basically largely, partially Chinese owned company
5:17
is saying, they're saying, well, we are only
5:19
known in China and Asia, really China and India,
5:22
we'd like to be known globally. So here's the
5:24
deal to be done. And so they come together and
5:28
we're asked to propose on that project along
5:30
with a number of others. We sat down with the
5:32
management teams and told them how we'd actually
5:35
work together and they asked us to do the work.
5:38
And so if you think about it, it's stunningly
5:41
difficult because not just the cultural difference,
5:44
which you just pause and think about IBM and
5:47
Chinese based driven individuals who have a whole
5:50
different culture and trying to merge those two
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cultures was just stunningly challenging. Yes.
5:55
And that's just that's at the highest order at
5:57
the most micro level. It took us literally several
5:59
several days, if not weeks, to figure out when
6:01
we could meet. Because, you know, because if
6:04
you think about it, you know, there's 12, you
6:07
know. 12 different time zones away or some silly
6:10
number. And so just finding a time to actually
6:12
physically meet. And then of course, how to actually
6:14
deal with the language issues were challenging.
6:18
So at the most macro level, it's a huge challenge.
6:19
At the most micro level, it was a huge challenge.
6:22
But it turned out to be one of the great, great
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experiences for me of working with them and shows
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the power of really executive teams who run and
6:31
come together to do something great. The IBM
6:34
PC business was very proud of their heritage
6:36
and they well, they should be. The Lenovo people
6:38
were very proud of becoming a global company.
6:41
They wanted to use the Beijing Olympics as a
6:43
launching pad for their company. And it just
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drove everybody to work very hard and very successfully
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to bring it all together. That is so amazing.
6:52
And you spent decades on McKinsey and helped
6:55
build the M &A integration. What kept you in
6:58
the M &A space for so long? Well, first of all,
7:02
it's one of those things where CEOs are always
7:08
spectacularly good at running their companies.
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But one of the places that CEOs tend to sort
7:12
of say, you know, I'm not as good at this because
7:14
I don't do it very often is transactions. And
7:18
so they're much more open to and desirous to
7:20
have external counsel because this isn't something
7:23
they do every day. You know, you do a major transaction
7:26
that, you know, adds, you know, some huge overlap
7:30
and adds to your company. This isn't something
7:32
they do on an annual basis. One, they're very
7:37
anxious to have help. Two, they love people who've
7:39
done this work before. And one of the great things
7:42
that when you add a firm, a scale, McKinsey,
7:45
it doesn't take long to get a lot of reps. So
7:49
before you know it, you've done three or four
7:50
or five, and then suddenly now you're really
7:52
down the learning curve. And that's quite valuable
7:54
to clients. And so that every time you do one
7:57
more, your learning increases and you may be
8:00
even more valuable to the next client. So that
8:02
was really another exciting reason to do it.
8:05
And the third is that these are really life -changing
8:08
events in many cases for companies and to be
8:12
You know a part of that process and you know
8:14
and I'm not in any way suggesting I'm at the
8:16
core But I'm trying to be additive and trying
8:18
to be counseling and but you can feel quite prideful
8:22
when things come together and work so well and
8:24
I enjoyed that feeling So many of my colleagues
8:28
at McKinsey have that that that from other quarters
8:31
But I had this you know in that unique environment
8:35
So when you look back at this season of your
8:37
career, what do you think you learned the most?
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Because from textbooks and articles all we hear
8:43
is very few M &A transactions actually succeeded
8:48
in a long time. So curious to hear what you've
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learned in the process of being in those tranches.
8:54
Well, I think one of the things you certainly
8:56
understand is that where M &A used to be something
9:00
like a side effort that you do infrequently.
9:05
Now, one of the things I've learned is every
9:07
management team I've dealt with always has how
9:10
we're going to actually think about either buying,
9:13
selling, or venturing as part of their fundamental
9:16
strategy conversations. It is no longer an exception.
9:19
It is almost every on the boards I'm now on,
9:22
every time we meet as a board, we're talking
9:23
about that topic. So it's become at the very
9:27
core of strategy. where it wasn't before. Now
9:30
it is, you know, it's a core element. And so
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that's one of the first learnings you get about
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being in this space. The second is how challenging
9:38
these things are to do because they're so, they're
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both strategically challenging and then they're
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just operationally, they have so much trying
9:50
to knit together a company and create a new set
9:53
of systems and processes and organizations. is
9:57
very challenging. So, you know, a traditional
9:59
deal of any scale could have up to 300 people,
10:02
maybe more part time, trying to figure out how
10:05
to knit these companies together. So it's a huge
10:07
project organizational change. And that's also
10:10
quite exciting. But when you first think about
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and you read about somebody doing a major transaction,
10:15
you don't think about what's happening behind
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the scenes. And it's stunningly challenging.
10:19
Wow. And so if you had like a playbook about
10:23
like what people should be thinking about, that
10:27
maybe typically gets overlooked, whether they're
10:29
trying to acquire or be the person that's being
10:33
acquired. What would you say are some of the
10:35
things people should keep in mind? Well, the
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first thing is that the underlying strategic
10:39
reason for the deal has to always drive everything
10:42
you're doing. You're not buying a company or
10:46
a portion of a company or assets of another company
10:50
without some clear objective that you're trying
10:54
to achieve. First, you actually have to have
10:57
that objective. I know it sounds silly, but you
11:00
just can't buy something because you're trying
11:02
to do a deal. You have to have a fundamental,
11:03
and you have to be able to articulate it to each
11:05
other so that when somebody says, why are we
11:07
doing this deal? You have an answer and a real
11:10
answer. Now, sometimes that reason isn't sort
11:14
of what's said at the time of the announcement.
11:17
There you go on CNBC or you do an FTE interview.
11:20
You're not sometimes talking about the underlying
11:22
real reasons for the deal. because it's not appropriate.
11:25
It's too divulging of confidential information.
11:27
But you have to keep that centerpiece. It's surprising
11:30
how that sometimes falls away when you get into
11:33
the sheer raft of changes and challenges of doing
11:35
an integration. So one, stay true to why you
11:38
did the deal. The second is you have to start
11:41
planning integration from the moment you're doing
11:43
your due diligence. Your CFO audience knows very
11:47
well. If I say due diligence, they know exactly
11:49
what they're going to do. And my point to all
11:52
the CFOs out there is Great. You're doing financial
11:55
due diligence. Perfect. I'm not going to tell
11:57
you how to do it better. You got it. What you
12:00
don't get is how to do the organizational and
12:03
cultural due diligence. That you need to start
12:06
at the same time. Rare that that happens. Very
12:09
rare. And so what happens is that you think you
12:12
have this wonderful financial model, but you
12:13
have no real belief that you can actually achieve
12:16
it because you haven't done due diligence soon
12:18
enough. So that's the second thing. And the third
12:21
is when you actually start to do the integration
12:23
itself, you have to realize that you have to
12:26
keep running the base business. And everybody,
12:28
you know, doesn't want to do that. They want
12:30
to get involved in the new thing. No, no, you
12:32
have to say, no, no, no, all of you go do your
12:34
jobs. Okay. This small group over here is going
12:36
to work on the integration and you separate the
12:38
two. And when you commingle, it gets really challenging
12:42
and many, many, many management teams say, oh,
12:45
I literally have had a CEO say to me, David,
12:48
we meet every other week as a management team.
12:50
We'll just add this to the agenda. And we'll
12:53
just talk about this at that point. I went, no,
12:55
we cannot do that. Because then we have 25 people
12:58
opining on a topic where virtually only three
13:00
or four really know the knowledge. And two, we
13:03
have to operate with entirely different decision
13:05
criteria. And so you have to separate the two.
13:07
So those are the three I would say most prominently.
13:11
Really, nope. Everything has to be driven by
13:13
the reason you did the deal. You've got to actually
13:16
remember to keep the two separated from each
13:19
other is a key element of all doing this. Wow.
13:24
And what did working in that space maybe tell
13:27
you about pressure? Like where maybe you had
13:31
moments where you thought like, I can't keep
13:33
doing this or doing this. Well, I must admit
13:35
it is it is not the type of work that is people
13:40
love to do because it is very intense. You know,
13:45
one of the things I often, I created a committee,
13:48
a council of former leaders of integration, because
13:51
they love to talk about what they did, but they
13:54
all agree pretty much uniformly, they never want
13:56
to do it again. So I would say to somebody, oh,
13:59
congratulations, you're the new leader of this
14:01
major integration operation. Here are eight people
14:04
who've done this before. They can't wait to give
14:06
you advice, but on the other hand, you're going
14:08
to hear from them. Great thing, best thing they
14:10
ever did, but boy, don't want to do it again.
14:12
So as an advisor, yes, it was challenging. It
14:16
was really challenging. But on the other hand,
14:20
you get rewarded for doing these things. And
14:22
at the end of the day, that reward was worth
14:24
the stress. But there are stresses. There really
14:27
are. So when you think back of those M &A's years,
14:30
what did success mean to you then? And has that
14:34
definition changed since you moved on? Yeah,
14:39
I think... I think I've just added elements as
14:42
to what is considered successful. In fact, in
14:46
the early transactions, I wanted a seamless project.
14:51
I wanted to actually get to, I wanted to maximize
14:54
the time that we have between the announcement
14:55
of a deal and when we have regulatory okays,
14:59
and then we can move to a legal close and have
15:01
a smooth transition towards, okay, here's how
15:04
we're now gonna start to implement the integration.
15:06
Those were things I really... wanted to make
15:08
happen and I wanted those to be seamless. Along
15:11
the way, other things got added. One client said
15:14
to me, David, this doesn't work and it isn't
15:17
successful if you don't teach us how to do this.
15:19
So we frankly don't have to ask you to do it
15:21
again. And I think that was wonderful to say,
15:24
oh my God, we really do need to teach people
15:26
along the way. And we leave behind, frankly,
15:30
an institutional knowledge base so that you could
15:32
replicate this. So we changed our whole approach
15:35
to actually making sure that we actually left
15:37
behind you know, not quite a how -to manual,
15:39
but certainly people that actually understood
15:41
and related to that. So that was one additional
15:43
ad that came along the way. The second, it becomes
15:47
very clear when you do these, this is really
15:50
very challenging for the senior management teams.
15:53
At some level, there isn't that much change,
15:56
you know, in terms of the broad populations,
15:59
but the top of the house really goes through
16:01
a lot of change. And so really just the personal
16:05
challenge of trying to realize that this is something
16:07
that maybe you helped build and now it's being
16:10
taken over by another person and letting go is
16:12
challenging. Making the decision about whether
16:14
or not you want to move to a new corporate headquarters
16:17
location, take on a greater opportunity set,
16:20
but change what you're doing. All those are things
16:22
that you then spend real time with very senior
16:25
people working through at a personal level. And
16:28
it was a real privilege for me to be asked to
16:30
opine on those topics. obviously makes it more
16:34
fun and more engaging because now you're dealing
16:36
with the human element, not just the institutional
16:38
element. Okay, so what would be like the coolest
16:41
story or project you run, like you still remember
16:45
to this day and probably laugh about or cry about
16:48
from these things? Well, it's a couple because
16:52
there's so many and that we could take the whole
16:55
rest of the time we have and much more to talk
16:57
about that. But let's go back to IBM Lenovo for
17:00
example. One of the things that was really challenging
17:02
was the culture of these two organizations, as
17:04
I mentioned, and really trying to find a common
17:06
ground. And so one of our early, early on meetings,
17:10
we were talking as a sidebar about the challenges
17:13
of working with Microsoft and Intel, who are
17:15
the major suppliers to the PC and who are very
17:18
difficult to deal with because they are, you
17:20
know, frankly, not quite monopolies, but feel
17:23
sometimes like they are operative, like in a
17:26
monopoly context. And so the IBM people were
17:29
complaining about one of them. And the Lenovo
17:33
people through translation said, oh, we hate
17:35
them more than you do. And before you know it,
17:38
they're all talking about, this is how we got
17:40
allocated here. Here's how we couldn't get them
17:42
to do this. Here's how they gave this to Apple,
17:44
not to us. And they just bonded in this moment.
17:47
It was like, they realized that they really were
17:49
one team globally separated that had the same
17:52
experience. And it was like this seminal moment
17:56
where they looked at each other and said, oh
17:57
my God, we actually do the same sorts of things.
17:59
Yeah, we're going to learn how to talk to each
18:01
other. But this is a pretty cool thing. That's
18:05
one thing you think about. I guess a second,
18:07
and I'll only stop here, is that I helped put
18:10
the privilege of being asked to work with American
18:12
Airlines and US Airways. US Airways bought American
18:15
Airlines. And they were one of the later people
18:20
who did a major transaction of this type. And
18:24
so they were well aware that usually when you
18:27
stand up a common reservation system and a system
18:30
that's used by consumers for everything from
18:33
booking their flights to their frequent flyer
18:35
miles, deeply challenging to have that happen.
18:39
And many airlines faltered at that moment. I
18:41
mean, you can go back and look and some airlines
18:43
actually stopped flying for six hours. Some actually
18:45
went dark. It was really quite. And so one of
18:49
the things that we kept saying to each other
18:50
is that we are not going to do that. We are not
18:53
going to do that. And I remember calling back
18:56
to the client on the day that they actually did
18:58
the cutover. And they were so proud that everything
19:01
just happened seamlessly. There were no, you
19:03
know, nobody on NBC News was talking about how
19:05
this airline shut down for six hours and people
19:07
were backed up in their days. And it was this
19:11
quiet celebration of what, you know, what was
19:13
achieved. And, you know, in part because nothing
19:17
actually got to be talked about. It was just
19:18
this wonderful achievement that we all collectively
19:22
got to. So that was a wonderful moment. Oh, wow.
19:25
You you worked on so many cool projects, man.
19:29
Well, I you know, this is the the wonderful thing
19:33
about working for a firm like McKinsey. And it's
19:36
true for other other consulting firms as well,
19:37
because all of them have wonderful projects.
19:40
But it was what helped you ask, why did you put
19:42
up with all the stress and travel? Now you're
19:45
getting a sense of it. Oh, yeah, for sure. I'm
19:48
curious to hear now that you moved into academia
19:50
and you have a new book, Post Merger Integration,
19:53
that just came out. What made you decide to write
19:56
it now? Well, obviously I have all this experience
20:00
working with my McKinsey colleagues, which I
20:02
wanted to try and pull together. The second is,
20:06
since I've now moved to Harvard Business School
20:08
and I'm teaching, one of the things I get to
20:11
do is teach as part of our M &A program that
20:13
we run every year. and I'll sit and I'll talk
20:16
around case studies that I've written up about
20:18
some of the situations we're just now describing.
20:21
And there are cases, Harvey cases, by the way,
20:23
on just the, even the two examples I just gave.
20:25
And at the end of the sessions, very often the
20:28
executives will come up to me and say, Dave,
20:29
this is terrific, but don't you have something
20:31
that I can, give me something that I can take
20:33
with me that I can, that, you know, and I didn't
20:36
have anything. And I felt badly, I'd had sort
20:38
of no sort of leave behind to help them. And
20:41
so I was always motivated to try and, and get
20:44
this into a form that would make sense. And then
20:49
I worked very closely with my colleague, Patrick.
20:54
And we looked at all the other books that have
20:57
been written about mergers and valuations. And
21:00
look, there's some very fine books out there.
21:03
But the ones on integration were much more cookbookish.
21:06
And it's like, you know. Listen, you're going
21:08
to bake a cake. It's very simple. You put the
21:09
flour in, and you put this amount of milk in,
21:11
and they put a little of the baking soda here.
21:14
And you just spin it around for a little while
21:17
and put it in the oven for 350. It's going to
21:18
work. Well, no, no, no transaction is that clean.
21:24
Every one of them is bespoke. And we tried to
21:26
really say, no, it's not that. There's no guidebook
21:30
that is that detailed. Here are the key thematics
21:33
you have to keep in mind. And so that was a breakthrough
21:35
idea, and that really led us to then write the
21:39
book as we did. Wow, that analogy really resonated
21:42
with me about Cookbook, because my kids, 12 and
21:46
11, at the time we were recording this, they
21:49
saw these shorts on YouTube, and they wanted
21:51
to make bread. Right. And it's a short, which
21:54
means one minute, somebody showed them how to
21:56
make bread. And I was like, I don't think in
21:59
just one minute, quick, quick, quick, quick,
22:01
here, you're going to get the bread. Anyway.
22:03
I was supportive. They didn't want to crush their
22:05
dreams. So we got the flour, the yeast, everything.
22:11
And as you can imagine, it didn't look like what
22:14
was on the YouTube video. It was something flat
22:16
that looked like a cake and it was supposed to
22:18
be bread. So it really resonated with me, but
22:21
it's so true about so many things in experience,
22:23
right? You think it's going to be simple, you
22:25
go in and it's like, oops, it didn't work that
22:27
way. Right. And I'll just give you one example
22:31
from that which we talked about. And it's a really
22:33
simple one, which is that before you start the
22:36
integration, and because very often somebody
22:39
will say to you, oh, you're in charge of the
22:41
HR group. We want you to put it all together.
22:43
We want you to reorganize it. We'd like you to
22:45
professionalize it in today's world. Figure out,
22:47
tell us how you're going to use AI. And by the
22:49
way, in so doing, we'd like to think about 30
22:51
% less expenditure. Well, 30 % of what? see,
22:56
nobody thinks about the, we need a baseline.
22:59
And so one of the things that integrations have
23:01
to do is start with a baseline so as to measure
23:04
your progress. And it seems so simple, and it's
23:08
one of those things that isn't really well -written,
23:12
documented, you know, and it's just, you have
23:16
to have a baseline for where you start because
23:18
one of the other things, truisms about this is
23:21
that, and CFOs would love this because they understand
23:24
it, is In merger integrations, if you don't measure
23:27
it, it will not change. So you've got to measure
23:30
it. And you can't measure it without a baseline.
23:33
So there's just one of those things that leads
23:36
to a flat cake rather than a lost cake. And bread.
23:40
Actual bread for sure. I'm curious to hear now,
23:44
like when you look at the biggest deals that
23:46
you have advised on, whether it's pre -integration
23:50
or like your book really focused on post -merger
23:53
acquisitions, What is the part, the pattern that
23:57
you've seen that makes most of these deals fail?
24:00
Yeah, starting too late on the integration. As
24:04
I said earlier, you should start really early.
24:07
So the due diligence has to be, as I mentioned,
24:10
not just financial, but operational and cultural
24:12
as well. Not staying aligned to the reason you
24:16
did the deal, something we already spoke about.
24:18
Three, minimizing the cultural challenge of putting
24:21
these together. every integration I've been involved
24:24
in, the cultural challenge is always enormous.
24:29
And in some respects, you know that you're in
24:32
trouble when you'll sit with two CEOs and they'll
24:34
say to me, David, look, it's great because we
24:37
recruit from the same places. We have the same
24:40
general organization. We have the same mission
24:43
and values. And so we think the cultural assimilation
24:46
here will be quite easy. And you know in your
24:48
heart, The moment they say that is that they
24:50
are totally wrong. It's going to be incredibly
24:52
challenging because that is not the culture.
24:56
The culture is how you make decisions. Who gets
24:59
promoted? Who is valued? How do people actually
25:04
go about their day? How do they actually think
25:07
about capital formation questions? These are
25:09
the things that change the culture of the place.
25:11
And if you don't get into that level of detail,
25:15
you won't be able to put the companies together
25:17
in a meaningful way so that's the third thing
25:19
really and the fourth strangely enough is when
25:23
you buy something the focus is all on that what
25:25
you're acquiring and and what you have to do
25:28
is remember you know by the way the acquiring
25:30
company is equally nervous and challenged as
25:33
is the acquired company so you're spending all
25:36
your time worrying about the new person people
25:38
yeah you're not spending enough time with your
25:40
own folks who are like equally worried about
25:42
hey They just bought this huge company. Maybe
25:45
I'm not going to be needed here, rather than
25:47
saying, you know, we're obviously going to be
25:48
the winners here because we bought them. No,
25:50
they are very nervous. So people don't spend
25:52
enough time on their own business. So that's
25:55
the other thing that often is a failure mode.
25:57
Wow. I'm curious to hear about like these last
26:00
two, when you talk about the culture, right?
26:04
And what people tend to overlook. How can you
26:09
surface those? Like what kind of questions do
26:11
you usually ask? or process you may have to understand
26:15
what is the true culture of the two companies?
26:18
Well, one of the benefits of these integration
26:20
teams that you form are that they are little
26:24
cultural indicators, every one of them, because
26:27
you put together a traditional scale integration
26:32
might have as many as 20, possibly 30 separate
26:35
integration teams working. Each of those will
26:38
have representatives from both sides of the companies.
26:41
each one of them is a wonderful lens into what
26:47
is the cultural challenges, in some cases by
26:50
function or by geography. So listen to those
26:53
groups and ask them where are the challenges,
26:56
where are the Venn diagram, where's the overlap
26:59
with the non -overlap. So one of the things is
27:01
just using them as a mechanism for listening.
27:05
Often it's not done. really understanding the
27:10
broader population. And the other way to do that
27:12
is by getting out and spending time with them.
27:15
And so reading about it isn't as helpful as actually
27:19
spending time. I'd have CEOs come back and say,
27:23
I didn't really understand that till I actually
27:25
went out in the field and I really didn't get
27:27
the information from the presentations I was
27:29
given. It was actually the person who drove me
27:32
around. It was the individual I sat next to at
27:35
lunch. It was the person who took me back to
27:38
the airport. I learned more from them about how
27:41
people really think than I did in the major presentations.
27:44
So being an active listener is equally as important.
27:47
And third, there are some measurements that you
27:49
can obviously look at, retention, the overall
27:53
quality of the speed with which decisions are
27:57
being made. So I don't want to diminish those,
28:01
but I'm talking about the more softer, more.
28:05
ways that you can really come together and understand
28:07
culture. Yeah, and what you mentioned about,
28:09
like, these days we talk about working remotely
28:12
and being in person. I always say there's nothing
28:14
like being in person because you pick up on those
28:17
things, right? Yeah, it is. Many people think
28:21
it's an old school comment, which it is because
28:23
look at me, I'm old. You know, it's an old school
28:26
comment, but there's, you know, It's a three
28:31
-dimensional game. You've really got to be in
28:33
the room with people to really feel and know
28:35
them and get to understand them. And so you're
28:39
so good at this because you just project that,
28:43
but many don't do that. And so it's hard in this
28:47
context to actually really feel like you're establishing
28:50
the type of relationship you really need to make
28:52
these things work and to learn. So yes, it's
28:55
a travel heavy. commitment. So do you feel like
28:58
working remotely can make it hard for successful
29:01
M &A integrations these days? I do. Or AI? Okay.
29:04
I am a big believer in, you know, trying to work
29:07
on these things in a collective fashion. It just,
29:10
it's just so hard. Now, obviously we're getting,
29:15
two things are helping that. One is AI is helping
29:17
this immeasurably, right? Because it used to
29:20
be that just getting the sheer baselines that
29:23
I spoke about earlier and information, which
29:26
is large amounts of it getting processed, AI
29:30
is now helping us do that much faster. So now
29:32
we're better informed. So we can be much more
29:35
productive in talking about what the data says
29:39
or what the situation is because the data is
29:42
more readily available. So that helps us. So
29:44
when we do meet, it isn't like we're going over
29:46
definitions and you know, trying to, you know,
29:49
dig for data and come back and have, that's just
29:52
more efficient. By the way, AI doesn't tell you
29:56
the answers to any of that stuff. That's part
29:58
of it. So that helps. The other is we're getting
30:01
better because we all have it working remotely
30:05
and we're finding ways to supplement that. So,
30:08
but still, I think it's still fair to say that
30:11
I hold to the old school view, as I said, that
30:13
this is a, you know, face -to -face game. And
30:16
when you think back about the CFO role in the
30:19
whole M &A process, where does the CFO role really
30:24
start when there is an M &A deal? Yeah, I think
30:28
the moment they're going through the valuation
30:32
processes and even the sense of assessment of
30:36
potential transactions, I want CFOs, and the
30:39
really great ones already do this, is to say
30:42
it's not just the financial fit, it's got to
30:44
be the operations and organizational fit and
30:46
cultural fit. And I don't care if the numbers
30:50
are great, if the cultural fit isn't there and
30:52
the organizational fit isn't there, the CFO has
30:54
to say, look, we have to put a higher risk factor
30:56
on this because it's going to be a deeply challenging,
30:59
you know, because they're so different than we
31:01
are. And that is their job to actually call out.
31:07
not just the financial risk, but the operational
31:10
and cultural risk and organizational risk. And
31:13
the really great CFOs do it. Many can fall victim
31:18
sometimes to the investment bankers whispering
31:20
in their ear and saying, if you don't do this
31:22
deal, we're going to lose it. Let's go, let's
31:24
go, let's go. And not stepping back and saying,
31:27
is this really fit who we are and what we want
31:29
to be? So that's the place where we can make
31:32
a difference. And since you've been in so many
31:34
rooms where, you know, you've seen those major
31:36
transactions, what would you say you've seen
31:38
the best CFO do differently when it comes to
31:41
not just pushing back or maybe asking different
31:44
questions? I'm just curious to see, like, when
31:47
you think about some of the best CFOs you've
31:49
seen doing it well on their side, like, what
31:52
were they doing right? Well, really a couple
31:55
of things. One is, and I talk about this in the
31:57
Hidden Truths book, which is that CEOs are somewhat
32:00
lonely people, even though they're surrounded
32:01
by lots of people every day. They need somebody
32:05
to be their counsel. They're a true go -to person
32:10
that tells them the truth, that tells them the
32:12
hard truths, tells them when they're screwing
32:14
up, and tells them when they're doing things
32:16
right. Increasingly, that should -being is the
32:20
role of the CFO. I see this in my own board work.
32:25
the CEOs that I think are most successful is
32:27
because they have a great team around them, but
32:29
it's really excellent CFO who is a true counselor
32:32
and not just a financial guy or gal. So I think
32:36
it's really important for them to, for really
32:39
great CFOs that I work with is that they, one,
32:42
they see the whole and they speak the truth to
32:44
their senior team and indeed to their CEO. So
32:48
they go to her or him and say, look, you're out
32:51
of bounds. We got to back this one up. and do
32:54
so in a way that without fear to their own personal
32:58
careers. So that's one. They also have to be
33:01
the translator often for what a management team
33:04
is trying to do to lower levels. It's sometimes
33:08
hard to convey to different audiences what is
33:11
the nature of the transaction or what we're trying
33:13
to get achieved in the integration. Here, CFOs
33:16
can be a better translator and a communicator,
33:19
and they can help. the BU management team and
33:22
even the functional leaders understand how to
33:24
best communicate that. The CEO doesn't have time
33:26
to do that. She's too busy or he's too busy to
33:28
do all that. But CFO can do that and through
33:30
their team because they're pervasive. They're
33:33
basically the core systems that are always there.
33:38
So their teams can be quite valuable. And third,
33:41
they really are a counselor to the board because
33:46
the board's really important in setting the guidelines
33:48
and the expectations here. And I know that the
33:52
boards that I've been on and am on, the really
33:55
great CFOs are the ones who actually help illuminate
33:58
the challenges and give greater clarity to them
34:02
for boards. And the boards want to have a, they
34:05
like having not just the CEO's voice, but also
34:08
the CFO's voice. And so I think that's where
34:11
they could also be quite helpful. And also going
34:13
to the... to their and this is another one where
34:15
truth -telling is helpful go back to their CEO
34:17
and say you know to her you know look at that
34:19
wasn't good we didn't do good there you know
34:21
I would often present to a board and be shocked
34:24
in some cases by either the lack of attention
34:27
by the board in which case I go to the CFO and
34:29
say why isn't the board care more about this
34:32
or go to the to the board and they would ask
34:37
really tough really important questions and we
34:40
always thought that was so much better. because
34:42
largely the CFO is there helping make that happen.
34:45
Nice, nice. Now you wrote Hidden Troops about
34:49
CEOs, like what CEOs need to hear but rarely
34:53
told. So if you are writing the same book, so
34:56
Hidden Troops about what CFOs need to hear but
34:59
rarely told, what would be on it? Oh, one, they
35:05
are, as I think I just said, they are an incredibly
35:09
important counselor role in this with the C -suite
35:12
and they have to be the glue that holds it all
35:15
together rather than the disciplinarian. Okay,
35:18
I think too often they're viewed as the disciplinarian
35:21
because they're the one who says, you know, you
35:22
can't have the capital, you can't have the budget,
35:24
your project, you know, and that's, no, they
35:26
have to be the people that go to, you know, become
35:29
more the counselor to help. So that's one, and
35:32
really good CFOs do that as a nature of course.
35:35
Two, they have to realize that they'll get romanced
35:39
and approached by all manner of counselors. I
35:42
mean, CFOs are inundated by investment bankers,
35:47
by analysts, by sell -side, buy -side people,
35:52
so many constituents. And so they have to be
35:55
the one that is the clearinghouse for all of
35:57
that and realize that a lot of those people have
36:00
commercial interests. And you've got to have
36:04
a really good filter that says, I know I need
36:07
to listen to you, but I don't need to act on
36:09
what you're telling me. In some cases, I don't
36:11
even need to spend the time listening to you.
36:13
So really recognizing that they are getting a
36:16
lot of commercially -based information that they
36:18
need to filter out. And the third is to say that
36:22
numbers are often a reflection of the challenge
36:25
that is operational and organizational. And so
36:27
they have to basically say, this number is where
36:31
it is because not because the math says it's
36:35
there it's but because it's the operational organizational
36:38
challenges that lie behind that number so they
36:40
have to be able to give that piece of it to that's
36:43
the third piece is translational of the actual
36:45
numbers themselves wow um thank you so much i
36:48
have two more questions for you before we wrap
36:50
up so i'm curious to hear now that you work um
36:54
mna you now you're teaching you see it on boards
36:59
you are able to see organizations at 360. Really,
37:03
you've seen organization like 360. What are you
37:08
still surprised when you see things maybe in
37:10
the news? Or what would you say are, hey, this
37:14
is how I can tell an organization is successful.
37:18
This is how I can tell something is messed up.
37:20
Because I feel like sometimes we don't learn
37:22
from history. Well, let's start right there.
37:27
I think I'm surprised sometimes by people who
37:30
don't really go back and look at history and
37:32
say, in their own history, and say, where were
37:35
we successful and where were we not? I think
37:37
there's sometimes, and this is sometimes tied
37:40
to turnover of management and new management
37:42
comes in and says, I'm going to ignore the history
37:44
that we had, because that was the old manager's
37:47
fault. That was his fault, but I'm new, I've
37:50
got this handled and so I'm in a different place.
37:53
So I think. ignoring history is not a good thought.
37:56
I think most of the clients I've worked with
37:59
for a longitudinal perspective have a tendency
38:02
to repeat the errors of their past. So that would
38:04
be one thought. I think the second is that the
38:09
speed of activity now is much higher, and it's
38:14
not just because of the expectations and the
38:18
challenges. I mean, look at IBM in the last week.
38:21
It makes one decision and now lose 25 % of its
38:24
market cap. So we have speed and an impact changing
38:28
dramatically. It's also because in the things
38:30
that we're talking about, driving change in a
38:33
social media driven arena is so much harder because
38:36
everything gets amplified. There's no secrets.
38:39
And everybody has a view of what's happening.
38:42
So it's really hard to direct a group of people.
38:47
as much as it once was because there are so many
38:50
outliers that can talk about it and opine on
38:53
it. So part of that working in a social media
38:55
based way is often hard. And third, there's just
38:59
greater risks now. Now, when we sit around, we
39:03
talk about what is right or wrong and aboard,
39:05
we're constantly on the back of our heads is
39:07
what happens if we do this and an activist comes
39:09
in? What if we do this and the sell side analyst
39:12
doesn't like it? What do we do this if somebody
39:14
actually short sells this? And so now the risk
39:18
profile is much higher and much more challenging.
39:21
So that's part of the other thing you have to
39:22
think about. Do I listen to that or do I not?
39:25
So that leads to a more thoughtful problem. Those
39:28
are all things that are new. What's positive
39:32
is that a lot more transactions are possible
39:34
now than they used to be because we have this
39:37
lovely third party market that can take out stuff
39:42
we don't want. If we're buying a company, you
39:44
know, I worked for a very large pharmaceutical
39:47
integration, you know, who had a pet food business.
39:50
We didn't want the pet food business. So you
39:53
didn't have to worry about the deal because we
39:55
knew we actually pre -sold the business. No,
39:58
I didn't do it. I say that we, they and the people
40:01
I had a chance to be counseling, figured out
40:04
how to pre -sell that business for private equity
40:06
plan. Great. So now, so in some cases, the private
40:09
equity in markets to create a way to actually
40:13
enable transactions, which wasn't the case previously.
40:15
Okay, thank you. My last question is so good.
40:21
What is your favorite thing to do outside of
40:23
work? Oh, you're really kind to ask. We had this
40:26
conversation before we went on air. I have four
40:29
children. I know you have two children. You've
40:31
talked about them. Anything they're doing that
40:33
I get invited to do, that's my favorite thing.
40:38
you know the uh we just said July 4th and um
40:42
we all got introduced to pickleball because uh
40:45
our oldest son decided he has been a passion
40:47
of his. So we all uh you know went down and learned
40:50
how to play pickleball and that two weeks ago
40:52
I would have said you know I don't know think
40:54
about pickleball now I'm like oh I'm going to
40:55
do this because right because I can play with
40:57
my children so that that um the only other thing
41:00
is um I do love to ski we we have a home in Vermont
41:03
and so I do like to ski um and I'm a horrible
41:07
golfer who enjoys it. that's for any future playing
41:14
partner that wants to play with me. Thank you
41:16
so much for the opportunity. Please realize it's
41:19
going to be a torturous process for you. Golf
41:22
is so hard though. I watched it on TV that growing
41:28
up you see people on TV and then one day you
41:30
get on the golf course. and you swing and the
41:35
ball is still there. Like that, that is totally
41:37
me. It is, it's so, I'm sure that's true of so
41:41
many sports, but certainly golf, just because
41:43
it's so prevalent that people play it recreationally.
41:46
And then you watch these people, most of them
41:48
from the LPGA and PGA tour, and you're like,
41:50
oh my heavens, these people are so spectacular.
41:53
It's just amazing. You know, my son is a girlfriend
41:57
whose family, one of them plays. golf and she's
42:01
spectacular and i'm like it's just oh my heavens
42:03
i wish i could do that yes i doubt i i didn't
42:07
know how heavy the golf club was it was heavier
42:10
than i thought you know watching on tv again
42:13
everything on tv seems easier i was like you
42:15
just take this one you put it oh i can do this
42:17
well but it's it's it's part of their skill set
42:21
that they can make it look so easy yes yes absolutely
42:25
well thank you so much david for taking your
42:28
time to be here I know post -medium integration
42:32
is now with Wiley. For anyone listening who wants
42:36
to pick a copy or follow your work, where should
42:38
they go? Go to LinkedIn. Please just let me know
42:43
that you'd like to connect. I've been posting
42:45
a number of things in LinkedIn. I've done some
42:49
videos which are slightly uncomfortable for me
42:51
to do. But my wife says to me in this wonderful
42:53
back -ended way, oh, you're getting better at
42:55
least. Secondly, go to LinkedIn and also obviously
43:00
the book is available through Amazon and Goodreads
43:02
and any other mechanisms that you want to use
43:05
to purchase it. Thank you. Thank you so much,
43:09
David. It was such a joy to have you on the show.
43:11
Thank you for having me. I enjoyed it as well.
43:14
Thank you.