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Welcome back to Count Me In,

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

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This is your host Mitch Roshong,

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

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

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insights company committed to transforming
financial processes to best in class

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levels of efficiency and effectiveness.

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

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

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in episode 161 of our series,

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

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where he sees the trends
going in the future.

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Keep listening as we head
over to the conversation now.

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Omar, thanks so much for joining us today,

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

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

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

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

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

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

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

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the things that have
happened to, you know,

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

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somebody would said back in, the February,

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March timeframe of 2020,
what was about to happen?

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

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it's been astounding.

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

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

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but increasing,

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

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we're still moving
forward, which is great.

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

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many companies have grappled with,
employees working remotely and the

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

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deal with early on in the pandemic.

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

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

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engine continued, and not only continued,

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

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continuing through the first, you know,

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10 months of 2021 is absolutely stunning.

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

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

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

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

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you know, they had the capital.

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

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

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

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

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

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it was like very programmatic.

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

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from home and the remote side,

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that a lot of that programmatic process,

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

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

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those large strategics
had, built in technology,

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

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you know, R&D,

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

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I think they did extremely well
versus their counterparts that maybe

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

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

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

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market continued. It really,

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

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

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companies that were not kind of up to par?

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

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you know,

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

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

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it's all the due diligence, you know,

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

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And there's a whole process around that.

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

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but in terms of the
first hundred days after,

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

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

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

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what was the strategic
asset that they bought?

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And I think that's really important.

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

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workforce?

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

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remote workforce.

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

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

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

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

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

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

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

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

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

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the systems and the process
and technology are not

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really running at optimum level,

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

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

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

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

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

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all along the way.

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

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

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

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been discussing.

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

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you know,

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

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

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So those public companies,
they have, you know,

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legal obligations to have
programmatic controls and processes,

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

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

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

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but to the extent that they
have controls and procedures,

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

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and they have certain
monthly and quarterly

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controls that have to get done.

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And they're very well documented.

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They're very well tested.

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

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

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what to do.

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

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

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Cuz that is a challenge with
people working from home.

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That challenge is alleviated.

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

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

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whether it's to PE companies, et cetera,

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

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

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

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

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

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quicker and sooner than what, you know,

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

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

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

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

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

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people that they need to move. Right?

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The valuations now are so
competitive that if companies do

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

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

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that they can move pretty
quickly. Other words,

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

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

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

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On the private equity
side, I think they can move

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

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

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teams that can go through things quickly.

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They have accountants and attorneys
and consultants on speed dial.

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That can jump in,

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

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

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

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

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

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there's a lot of cash on the sidelines,

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a lot of access to
public and private debt.

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

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

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

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

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Why do you think that is?

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

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

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

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And they were always around,

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

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Just take, for example, you know

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

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

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the SPACs.

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

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

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

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

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year and they continued to be popular.

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But I think in the last two months,

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

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

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they're putting a lot more, you know,

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

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

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And I think over the
last couple of months,

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they they've tailed off a little bit.

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

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

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being, game time ready
to be a public company.

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

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I think that kind of remains to be seen,

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but there are lots of
opportunities on this back side,

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just given the vehicle
and given the, you know,

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the people these are very
sophisticated investors that are in

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SPACs.

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Definitely.

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

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And the SPAC is like the new fan gold,

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

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Right?

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

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

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

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

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

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

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And again,

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

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just thinking about how
that affects, you know,

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

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

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

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

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

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

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

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everybody down because
at the end of the day,

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

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

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

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

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

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

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

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to the new target. And then,

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

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

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

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two finance leaders,
two engineering leaders.

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

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we haven't talked about synergies,

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

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have baked in the synergies,

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

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there needs to be some
synergies that come through.

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

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you know,

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

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company, they would like to see some of

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their folks in leadership
positions, in the combined company.

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

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

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

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

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especially if it's two, like, company,

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you're integrating another
culture into one company and

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

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

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

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Yeah.

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

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retain talent and retain people.

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

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

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Most people think I'm about to get fired.

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

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

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

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

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they don't have any information,

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

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

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So that's the difficult
part of retaining talent.

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Yeah. I

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

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talking about, you know,

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

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

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

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the target sees their
leadership being woven

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directly into the combined
company, in my mind,

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that's probably the most important piece,

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

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their sales people, that the

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acquirer is making a concerted
effort to bring and blend in

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

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

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

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

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

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Yeah, for sure.

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And, you know,

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

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And to the extent that these companies,

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

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I think employees today,

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

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

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

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and eliminate, you know,

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just procedures that are just
very routine and convert them and

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

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more value added projects during the day,

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instead of doing rote
recurring, you know, boring,

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you know, functions every day.

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

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there's so much technology available,

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

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as opposed to living in the past.

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

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

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

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continued M&A growth.

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

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

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So one is just continued
access to capital.

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So continued access to
capital is important.

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The interest right rates associated with

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that capital continues
to be at historic lows,

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

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really,

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really nice to have massive
access to capital at

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historically low interest rates. And

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

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

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

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investors, it's massive, right.

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And those funds have to be put to use,

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I think all the strategics
that are out there,

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if you think about what
happened over the last year,

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

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

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

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

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

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

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a nice recipe for continued like M&A work.

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00:20:26,091 --> 00:20:27,570
And so that'll continue.

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And obviously there's lots
of the valuations are,

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00:20:31,491 --> 00:20:34,360
are very nice for, you know, for
people that are trying to exit.

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

339
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I don't see really anything crazy
happening next 12, maybe 18 months,

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

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

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

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

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00:20:57,961 --> 00:21:02,760
I think there's continued concern
about legislation in terms

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00:21:03,420 --> 00:21:07,590
of tax, you know, tax regulations
and tax changes, et cetera. It's

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00:21:09,111 --> 00:21:11,230
maybe too early to tell,

347
00:21:11,231 --> 00:21:15,990
but that could have a dimming impact
as well in terms of, you know,

348
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tax rates, et cetera.

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

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

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

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

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

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

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

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This has been Count Me In,

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00:21:52,691 --> 00:21:56,530
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00:21:56,531 --> 00:21:59,130
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359
00:21:59,270 --> 00:22:02,890
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360
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