Q: Hi Ben, can you tell us a bit more about your role in the Augury-Seebo Integration?
A: We had two companies coming together to create a truly transformational business. They felt they needed independent advice on how to handle the integration because it is the biggest M&A activity they have done. We were engaged to advise on the strategy for integration, the way to manage integration, and the process for integrating the companies. We stayed with them for the first period as they went from signing to close; helping them build PMI plans and to deal with the big challenges of integration. They ran the business, and we were advisors and project managers within the integration process.
Q: What was unique about this integration process?
A: This is a company [Seebo] with a high value transaction price and a very small population of critical and highly talented people, so retention of key people was really critical. In big integrations when you have 20,000 people retention is important but it is applied as a generalization. Here we were talking about a group of 80 to 90 specific people for whom the value was being attributed to buy the company and it was possible to be specific in how to address key groups. Another interesting fact is that this was not just an integration, this was a careful part of the transformation journey of Augury into something else. It was not about picking up Seebo and dropping into Augury as it exists today. It was about propelling the business forward into a new combined business. That was not unique, but it required careful management. The focus on change management was there for the most important element, as the cultures were not completely aligned.
Q: You are used to running PMI on a global scale. Was it easier to integrate two Israeli companies?
A: Yes and No.
Yes, because location wise, they are in the same space, not set apart by time zones, speak the same language, it is easier to get teams together physically, and there are certain cultural dynamics which make it easier.
And also No. People might assume that because they are in the same country there is no cultural misalignment and that is not true. Culture in integrations is partly about the national culture but is much more about the DNA of the company. And the cultural issues are still very significant. Another consideration is that a big part of the Augury business is in the United States and that many of the customers are not in Israel. The main HQ and R&D focus is in Israel but that is not to say that the whole company is pivoted around Israel.
So this is a typical consultant’s answer of Yes and No. :-)
Q: Augury and Seebo are Hi-Tech companies. How different is it to integrate two Hi-Tech companies in comparison to traditional industries?
A: Firstly, Augury and Seebo are both tech companies focused on an industrial customer base, so it is not black and white [Hi-tech vs traditional industry]. Their customers are industrials, there is a hardware element to the solution offered, so they are not pure SaaS, which needs to be considered.
But, integrating two Hi-Tech companies in comparison to traditional industries is different. The core methodology is basically the same, the core steps are basically the same, but the value is different. Meaning - in Hi-tech you’ve often got a very small population who are very important individually to the success of the transaction. Hi-tech is usually not tens of thousands of people spread across twenty geographies, which comes with huge complexity of supply chain, operations, languages, and cultures. Hi-tech is usually much more straightforward in volume, but the value is concentrated into a much smaller population and therefore needs to be focused, which can be easier, but it is difficult to tell.
The other consideration is that SaaS and Hi-Tech companies are typically smaller. In the case of Augury and Seebo these were two pre-IPO companies, so they had less maturity of processes on both sides which presented an opportunity for transformation. Industrial companies are typically more wedded to their processes, so it is more difficult to drive change.
Additionally, the speed of transformation for integrating Hi-tech / SaaS companies vs traditional industry is different. The speed of the technology sector is typically much faster than the industrial sector. You don’t have all the challenges of long manufacturing supply chains and logistics to deal with, and there is a need to move faster to retain people to complete the integration. It can be easier to work with Hi-tech companies because they are more adaptable to change, they are younger, they have less history and less locked in infrastructure. Meaning systems and technologies are easier to transition. Some of the challenges we sometimes face around finance, tax, insurance, supply chain and manufacturing are easier than with a client from traditional industry.
When it comes to building consensus among stakeholders in an integration the general challenge of integrations in Hi-tech is that you have founders. In that case it is not just a CEO of a long-standing industrial business making strategic decisions, but often multiple founders who are deeply and personally tied to the growth and development of their companies. It is their baby, which is a fundamentally different context. In the case of the Augury and Seebo integration, the behavior of the founders was superb. It was very objective and focused on what is of value for the company, which is not always the case.
But, there is a caveat. Every individual acquisition I have worked on is uniquely different, so it remains difficult to typecast as a generalization. It is still all about people and value at the end of the day.
Q: What is the key takeaway from this integration you can share with our audience?
A: The willingness of management to be challenged and to really think about the integration carefully, knowing how important it is, is really a critical success factor. The ability for management to look in the mirror and acknowledge that M&A is not something they are expert in, while bringing their strong views, deep knowledge of the industry landscape and emotional quotient is something that brings a great amount of balance to companies going through the integration process.
The other takeaway is to enforce that most integrations are not 0-100 games. Being ruthlessly focused on the value, and protecting and growing that value is key for success.
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