Welcome back to Count Me In,

IMA's podcast about all things affecting
the accounting and finance world.

This is your host Mitch Roshong,

and I'm pleased to introduce
you to Omar Choucair.

Omar is the CFO at Tritech a world
class financial operations and

insights company committed to transforming
financial processes to best in class

levels of efficiency and effectiveness.

Omar is a senior level financial executive
with broad experience in corporate

finance, accounting, corporate governance,
and FP&A management skills. Here,

in episode 161 of our series,

he talks about why and how corporate
M&A operations are falling short and

where he sees the trends
going in the future.

Keep listening as we head
over to the conversation now.

Omar, thanks so much for joining us today,

and we're gonna jump right into things
in Bain's global M&A 2021 report,

they state that M&A is
expected to spur 45% of revenue

growth over the next three years. Up
from 30% over the last three years,

one of the first lines of the report says
as the world locked down and masked up

M&A endured, do you agree
with their sentiment?

Yes. Wholeheartedly. And,
thanks for taking the time it's,

you know, the last 18 months have
been quite overwhelming in terms of,

the things that have
happened to, you know,

public companies and private companies.
And, you know, to the extent that,

somebody would said back in, the February,

March timeframe of 2020,
what was about to happen?

I think a lot of people wouldn't
have believed it, but yes, it's,

it's been astounding.

Definitely. I think everybody's just
their minds have blown what's happening.

but what's great is that business seems
to be booming or not really booming,

but increasing,

which I think is one of the things
that with everything locking down,

we're still moving
forward, which is great.

Yeah. It's if you go back
and think about just how

many companies have grappled with,
employees working remotely and the

technology and the processes and the
procedures that all these companies had to

deal with early on in the pandemic.

And to think that whether it
was, you know, strategics,

large strategic public companies, private
equity, venture capital that this M&A

engine continued, and not only continued,

but accelerated all the way
through the end of 20. And then,

continuing through the first, you know,

10 months of 2021 is absolutely stunning.

So even with this positive outlook
that we've been talking about,

many corporate M&A operations
seem to be falling short still,

can we focus a little bit on why
and how this continues to occur?

Sure. I would say a couple of things.
So first of all the large strategics,

you know, they had the capital.

So I don't think there was an
issue with respect to capital.

I think they had cash on the balance
sheet. They had plentiful access to,

you know, to public debt,
private debt, et cetera.

I think what could have happened
was that these large strategics had

a process and a control
procedure about how to do M&A,

it was like very programmatic.

And I think what could have happened was
when everybody went and started working

from home and the remote side,

that a lot of that programmatic process,

it wasn't hardened for people working
from home. And that's my personal belief.

And I think additionally, to
the extent that those companies,

those large strategics
had, built in technology,

whether it was on the FP&A side on the
financial close side, just in terms of,

you know, R&D,

those companies that were really
hardened and connected on the IT side,

I think they did extremely well
versus their counterparts that maybe

had not invested in technology.
And they saw this like,

gap between what they thought they could
do and what they actually could do.

And just the, the astounding pace
at what's, the M&A, you know,

market continued. It really,

it probably put a lot of pressure and
squeeze on some of those companies.

Do you think that there was a bit of a
change management gap as well for those

companies that were not kind of up to par?

I think the, the change management is
always difficult. And if you kind of,

you know,

zoom out a little bit in terms of change
management and just the integration,

I know the first hundred days are
just, it's almost like it's the,

it's all the due diligence, you know,

up until the time that there's
an M&A deal that gets signed.

And there's a whole process around that.

And I think we can talk
about that in a little bit,

but in terms of the
first hundred days after,

those first hundred days after
are critical in terms of culture,

in terms of what did companies buy,
did they buy technology? Did they buy,

did they make customer
list? Like, what is it,

what was the strategic
asset that they bought?

And I think that's really important.

Do you think that first hundred days
is even harder when you have a remote

workforce?

I think the first hundred days are
significantly harder when you have a

remote workforce.

And the reason is because there's
two cultures that have to get fused.

It's the it's, you have to prep
the buyer's culture, right.

In terms of now we have this additional
responsibility. And a lot of times,

you know, the C level and the board,
they're all super excited about, you know,

doing the M&A, but then it's the
mid-level management. Everybody else go,

wait a minute, I've got all this
additional work I have to do. Right. So,

sometimes there's a gap between the
board and senior management and what,

you know, the people that actually
are doing some of the work.

So I think there's that. And then I
think also to the extent that, you know,

the systems and the process
and technology are not

really running at optimum level,

when you bring on an additional,
you know, set of revenue streams,

and HR and people and technology,
it can be a very stressful period.

And then if all those people are
working at home and they don't have that

culture. Yeah. It's a lot of work.
And I think, you know, for the CEO,

CFO, et cetera, there's a lot of gut
checks that have to be made all along,

all along the way.

All right. So we've been
talking a little bit about the,

how and the why and how it affects the
people, but can we focus now just what's

some steps that we can take to overcome
these challenges and the things we've

been discussing.

Right. I would say it's really in two
pieces. So the large public companies,

you know,

they have obviously the large public
companies versus, you know, private,

you know, PE-backed companies, if you
will, it's a different ballgame, right?

So those public companies,
they have, you know,

legal obligations to have
programmatic controls and processes,

et cetera in place. So, so any
company that's a public company.

And then we can talk about
the SPAC and little bit,

they they've had to jump into
that public company real quickly,

but to the extent that they
have controls and procedures,

it's a little bit easier for them to
solve the gaps because they have a roadmap

and they have certain
monthly and quarterly

controls that have to get done.

And they're very well documented.

They're very well tested.

They have third parties that
are testing them all the time.

So the gap is a little bit easier for
public companies because I think they know

what to do.

I think the real question then is for
the management is how do they get folks

that are working at home to continue
to meet those controls and procedures?

Cuz that is a challenge with
people working from home.

That challenge is alleviated.

If they have good technology and
they have good systems, you know,

and back office tools, cetera.
On the private side, you know,

whether it's to PE companies, et cetera,

those controls and procedures probably
aren't as robust as they would be

at public companies. And I
think, the private companies,

they probably have a different skill
set in terms of their, you know,

their management team. And they
probably pivot a lot quicker.

They probably more nimble, more
flexible. They can do things, you know,

quicker and sooner than what, you know,

public companies can just because
of the nature of their business.

So cause of that, I think they can
move. They can move a lot faster.

So do you think size matters then
when it comes to this process?

It could, I think there
are some large, you know,

multi-billion dollar companies that can
move very quickly because they have the

people that they need to move. Right?

The valuations now are so
competitive that if companies do

not move quickly, they get
eliminated very fast. So,

so I think a lot of larger companies
have, you know, very robust M&A

that they can move pretty
quickly. Other words,

they have a process down to move
quickly. They can get approvals,

they can diligence quickly. They can
get approvals quickly, et cetera.

I just think there are certain ones that
do a lot better job than others, right?

On the private equity
side, I think they can move

extremely quickly, very fast. They have
a lot of resources inside, you know,

the PE companies, a lot of the companies
have very experienced, M&A, you know,

teams that can go through things quickly.

They have accountants and attorneys
and consultants on speed dial.

That can jump in,

even though it's getting harder
and harder to capture those folks,

cuz they're in such high demand,
you can still find people that can,

when you say jump, they say how high.
And they can move in quickly. So,

they can be pretty nimble if they
need to be. And then, you know,

we haven't talked about access
to capital, but you know,

there's a lot of cash on the sidelines,

a lot of access to
public and private debt.

Do you think that's why the SPAC market
has been like going through the roof

too? I was reading the other
day, how many have happened?

And just in 2021 alone, it's like in
the hundreds and you're like, what!

I think that seems to be the way
people are way companies are going.

Why do you think that is?

It is a completely, well,
it's not a new vehicle.

There used to be blank check companies
that were just called blank check

companies years and years ago
done this for a long time.

And they were always around,

but I think what's happened is that
there's just so many new opportunities.

Just take, for example, you know

the EV car companies, you know,
Lucid Motors came out and I mean,

there's so many different opportunities
now that I think they took advantage of

the SPACs.

And I think the SPACs can be very
lucrative for the owners of the

SPACs. And so once there's a investment
vehicle that is, that's interesting.

A lot of people, you
know, the herd mentality,

they jump in and the SPACs were
really popular at the end of last

year and they continued to be popular.

But I think in the last two months,

it slowed a little bit just
because the SEC came in and has,

you know, has taken notice in
terms of the SPACs. And, you know,

they're putting a lot more, you know,

public company disclosure around certain
metrics inside those companies. And,

you know, the values were really,
really strong through the summer.

And I think over the
last couple of months,

they they've tailed off a little bit.

I think maybe some of the views may
be that some of the companies that

went public through a SPAC might have
been a little bit early in terms of really

being, game time ready
to be a public company.

That's just from what
I've read and seen. So,

I think that kind of remains to be seen,

but there are lots of
opportunities on this back side,

just given the vehicle
and given the, you know,

the people these are very
sophisticated investors that are in

SPACs.

Definitely.

And it's almost like it's overcoming
what the normal IPO used to be. Right.

And the SPAC is like the new fan gold,

like low gold that people are like,
Hey, let's jump to that one in a sense.

Right?

Well, I think they did that. Cause
there was so much in terms of,

excitement early and early wins.
And when people saw the early wins,

it just brought more and more people and
you had movie stars and you just had a

lot of different types of people
that came into the SPACs and,

and that created this massive windfall
for accountants and attorneys and people

it's just, you know, just massive
amounts of work that went through there.

And again,

with all of that going back to
earlier in our conversation,

just thinking about how
that affects, you know,

management and then middle management,
and then the other workers,

as they're trying to get all these
things ready and prepare this,

it's creating a lot of work, which
again, affects so many people,

you know, being spread out
through so many different places.

Yeah. The entire M&A ecosystem, you know,

impacts everybody across the
spectrum, you know, impacts, you know,

all your employees, not only just the
C-suite and the board, but you know,

everybody down because
at the end of the day,

a lot of times when you
think about an M&A, you know,

being a CFO from the finance
side, you know, there's culture,

and did you buy assets? Did you buy
technology? Did you buy customer lists?

But you know, most everybody says, well,
let's grab the checkbook early. Right.

So grab the checkbook early, and then
you can avoid a lot of, you know,

concern and confusion down the road,
but there's grab the checkbook early,

but then it's also provide the
autonomy to the new, you know,

to the new target. And then,

you know, in my experience, it's
always been good to have best of breed.

So it's always good, you
know, to line up, you know,

sometimes you could have two of the
same, you have two sales leaders,

two finance leaders,
two engineering leaders.

And a lot of times it's good just to
take the best of breed. And, you know,

we haven't talked about synergies,

but even though the synergies may be
talked about early and the banks may

have baked in the synergies,

almost everybody looks at it
down the road and says, yeah,

there needs to be some
synergies that come through.

And I think that's when the hard part
comes in terms of, you know, separating,

you know,

best of breed and getting the right
people in the right spot because the new

company, they would like to see some of

their folks in leadership
positions, in the combined company.

Yeah, to make them feel like they're
not being completely pushed out.

Correct. And that can be important
for a lot of different reasons.

Not to mention culture is
like one of 'em for sure.

Yeah. Well, cuz you're mixing
two cultures together, you know,

especially if it's two, like, company,

you're integrating another
culture into one company and

then it's helpful for people
who are coming on to say, oh,

I know that person or I recognize
that person to kind of make,

it's almost a comfort in a
sense as you're adapting.

Yeah.

I mean the flip side is we haven't
talked about just how difficult it is to

retain talent and retain people.

But a lot of times what could happen
is if you're the target company and

you're about to get sold
most, it's just human nature.

Most people think I'm about to get fired.

And so that's really difficult on both
companies cuz somehow you need to reach

out and say, you know,
don't leave. There's great
opportunity for you, you know,

in the combined company. And
most of the time there is,

but it's hard to tell
people that when, you know,

they don't have any information,

the communication could be spotty and
they have three job offers in their

email to go, you know, to go
make more money somewhere else.

So that's the difficult
part of retaining talent.

Yeah. I

was just going in that direction as I
was thinking through what we've been

talking about, you know,

how do you retain the top talent
in the midst of a big acquisition?

It's very difficult and
it's multiple factors.

And I think probably to me,
the most important part is if

the target sees their
leadership being woven

directly into the combined
company, in my mind,

that's probably the most important piece,

is that they can see that
their CFO, their CEO,

their sales people, that the

acquirer is making a concerted
effort to bring and blend in

everybody. That's really important.
I think the other part obviously is,

you know, comp and everybody
wants to be, you know,

paid fairly. And, some companies have
the ability to do that, you know,

with stock and in different packages.
So I think that's important.

And I think also, what type of
work are they gonna be doing?

Yeah, for sure.

And, you know,

that kind of gets into a little
different animal is just the technology.

And to the extent that these companies,

as they come together have they're
on the leading edge of technology.

I think employees today,

they wanna work for companies that have
invested in technology and make their

job, you know, easier, you know, just
on the CFO side, in our business.

And we've done a lot to help
companies eliminate manual processes

and eliminate, you know,

just procedures that are just
very routine and convert them and

put 'em in the cloud and just make
people more streamlined and people can do

more value added projects during the day,

instead of doing rote
recurring, you know, boring,

you know, functions every day.

And I think that's important for people
cuz you know, as we move, you know,

there's so much technology available,

people would like to be with a company
that has invested in the future

as opposed to living in the past.

So looking at the future, I know
that you watch M&A very closely,

where do you see the M&A trends going
as we look maybe for 12, 24 months?

Yeah, I think it's hard to see
something that gets in the way of just

continued M&A growth.

And I think there's a couple things that
people are hoping continue to happen.

And there's a few things that, you
know, may happen that could derail it.

So one is just continued
access to capital.

So continued access to
capital is important.

The interest right rates associated with

that capital continues
to be at historic lows,

even though it might have ticked up a
little bit. I mean, it's, it's still

really,

really nice to have massive
access to capital at

historically low interest rates. And

that in and of itself
will drive a lot of, M&A.

And I think if you just looked at the
PE companies and the venture companies

and look at the amount of money that
they've raised with their, you know,

investors, it's massive, right.

And those funds have to be put to use,

I think all the strategics
that are out there,

if you think about what
happened over the last year,

a lot of these larger companies, they
cut back on travel, on sales and market.

They cut back on a lot of
things. So as a result,

guess what all this cash is now
sitting on the balance sheet.

So you have tremendous amount of
cash inside the strategics, right?

There's a lot of money sitting with
the VCs and the private equity.

So the combination of all the
cash and access to low capital is

a nice recipe for continued like M&A work.

And so that'll continue.

And obviously there's lots
of the valuations are,

are very nice for, you know, for
people that are trying to exit.

So then the question would be
what could get in the way of that.

I don't see really anything crazy
happening next 12, maybe 18 months,

but I think the inflation kind of hurts
people a little bit. And, you know,

when, when people are paying so much
more for gas and food, et cetera,

I think that does kind of dim a
little bit in terms of, you know,

do we really feel comfortable making
these big bets with inflation?

I think there's continued concern
about legislation in terms

of tax, you know, tax regulations
and tax changes, et cetera. It's

maybe too early to tell,

but that could have a dimming impact
as well in terms of, you know,

tax rates, et cetera.

The supply chain obviously is tough
and we're in the software business. So,

you know, thankfully we're
a little immune from that,

but to have know 300 tankers that
are sitting outside of Long Beach,

I'm sure that that does bother people in
terms of people that are dependent on,

you know, manufacturing and,
you know, the chip shortage.

There's a lot of macroeconomic
decisions that people go in,

but my personal thought is 12 to 18
months. It should continue to be strong.

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