TRP 318: Avoiding M&A Pitfalls for Deal Makers Alejandra Ramirez

[00:00:10] You're listening to The Rainmaking Podcast, hosted by high stakes headhunter, author, and professional speaker, Scott Love. Scott Love Hey, this is Scott Love with The Rainmaking Podcast. Our topic title today is Avoiding M&A Pitfalls for Deal Makers. If you're a deal maker that brings organizations together in any capacity, this is a show you definitely want to listen to.

[00:00:37] Our special guest today is repeat guest Alejandra Ramirez. Alejandra is an internal communications strategist and the founder of Ready Cultures. With nearly 20 years of experience in communications, including 15 years in big law and professional services, she helps leadership teams close the gap between what they say and what their people actually hear, especially in high stakes communications, where clarity directly impacts client experience

[00:01:03] and results, and especially in the M&A context, as you'll hear today. Make sure you check the show notes. She's got all of her contact information there, as well as some special resources that you can access that she'll talk about during our conversation today. Also, here's an update. I'll be at the Rain Dance Conference by the Legal Sales and Service Organization, June 3rd and 4th in Chicago. All the information's on the show notes as well. If you're involved in business development in a law firm, whether you're a chief marketing

[00:01:31] officer, practice group leader, or you're a partner that wants to grow your book of business, check out Rain Dance by the Legal Sales and Service Organization. As always, this podcast is sponsored by SharePoint Legal Insights, formerly known as Leopard Solutions, turning legal intelligence into opportunity. And also by The Rainmaking Magazine. Don't lose business to the competition. Read this publication and keep business development top of mind.

[00:01:57] Visit therainmakingmagazine.com today to chart your course to greater rainmaking success. And now here's my conversation with Alejandra. Thanks for listening. Hey, this is Scott Love with The Rainmaking Podcast. Our special guest and a repeat guest today is Alejandra Ramirez. And today we're talking about avoiding M&A pitfalls for dealmakers. Alejandra, thanks for joining me on the show again. Great to be here. Great to see you again. This is great.

[00:02:26] And I'd like to see you active in the deal space, in the law firm world also. I think we've got common interest because we talk to people that are doing those things and we know that it's not easy. So let me ask you this. Let's just get right to it. What do you think are some of the common pitfalls that happen when organizations are brought together in a merger or an acquisition? Well, look, there's a lot of change happening generally in the world and in businesses. And I would say that M&A is among the biggest changes that a company or companies can experience.

[00:02:55] And so the nature of this transaction lends itself to a lot of confusion and a lot of uncertainty. And I think one of the biggest pitfalls that can happen is people at the companies not knowing how they play a role in the success of this new merged required company. And so I would say communication is huge for that. So when should people be mindful of this communication?

[00:03:24] Do they look at the merger between these two entities, which has been going on for a while? We came to terms and we inked the deal and everything is over. Is that how we should look at it? Like, okay, we're done. Let's move on. What do you think? So I would say that if you think day one is the end of the communication, you are sorely mistaken. It really is somewhere in the middle. Realistically, before a merger or acquisition even happens, there should be already ongoing,

[00:03:53] clear, consistent communication that's building trust at each company. Obviously, there's privacy issues and regulated issues that prevent companies from maybe speaking to each other too much in advance of the actual merger or acquisition. But if, you know, each company should have a communications person or a leadership team that is really thinking about what they should be communicating, when they should be communicating it. And then come day one, that's when a lot of these things maybe start to happen. You have a town hall.

[00:04:22] You do, you know, send a few emails. But that's when the rubber really hits the road. That's when you need to start building trust even more. And I would argue maintaining trust. Ideally, you have trust already. And really communicating clearly and consistently over the course of a number of years. If your goal is to eventually turn this into something that you exit from private equity, or if it's just, you know, you want to make it a successful company that turns around into something that you want it to be. That's interesting.

[00:04:51] I've seen this in the law firm world. There was even a law firm leader. He wasn't the leader of the firm, but he was a significant partner in a firm that went through a pretty big merger. Another, two entities came together. And he told me about two years after that, that when that happened, all of a sudden, everybody just stopped trusting each other. Apparently, there wasn't communication between these two entities, the leaders, the people that were doing the work. So let me kind of tee that up. We've got two organizations. Maybe it's a large company acquiring a smaller one, but that smaller one is still going to

[00:05:21] be a vibrant part of that larger company story. The leaders of the smaller company are going to be significant leaders in this newly formed entity. What are some of the areas of communication that those doing the deals should be mindful of, such as is it the roles or responsibilities? What are different kind of like call it a checklist of communication items that need to be discussed? And when should those be discussed in the deal?

[00:05:48] So I would say there's big C communication and little c communication, and you need both. Okay, great. What I mean by that is you first need to have a clear direction, and that comes from the top. And that's where that big C communication comes in, which is for at the top, how is leadership aligned or not aligned? Are they clear? Can they say what the direction is at the small company and at the acquiring company, if you're talking about two separate sizes here?

[00:06:16] But then there's also clarity of message. So once you've got leadership aligned and clear on the direction, is the message to people clear? And by message, it can be as straightforward as what are the new benefits? Or you mentioned law firms, for example. You know, how are the two marketing teams coming together? What tool are they using to put together a proposal, right? It sounds minor, but those things add up to a lot of uncertainty if those aren't clear.

[00:06:44] And so clear message of direction, but also whatever those projects are that are bringing and merging the two systems together. And then I would say reinforcement. Taking these different pieces of communication and reinforcing them through relevant channels, whether it's a town hall and an email. And, you know, if, say, the companies have frontline employees because they're in manufacturing, some of these people don't have emails. How are you going to reach them?

[00:07:13] Is there digital signage? Is there signage in the break room? Text messages? You obviously don't want to bombard people with too much, but the more information you can provide, and not even just more information, the more consistently you can communicate, even when you don't know the answers to everything, that's going to be really important. So who is doing this? Is this just the top leadership team? Do they have a communications team or a consulting firm they're working with? Who's actually doing this communicating with their colleagues?

[00:07:42] I would say leadership. And by leadership, there's the executive team, right? The ones who set the direction. But then there's that manager level that manages teams. And they play a role as well. And I think a lot of companies overlook that layer and, you know, make these decisions in a silo, but then forget to mention to the managers what and how they can help disseminate this information. I would say everyone plays a role. It starts at the top and it works its way down.

[00:08:08] So for example, in a merger, you might be developing a new ERP, you know, trying to figure out a new ERP system. Or you might need to, you might be rolling out a new HR onboarding tool. Every role, I mean, HR plays a big role because there's sort of the onboarding and the logistics and operational piece and operations is going to play a role. But realistically, the senior most executive team needs to be there and have a face and

[00:08:35] be the ones who are building that trust and really helping make sure that that vacuum of unknown isn't filled with the gossip and the uncertainty that comes with a lack of communication. Right. Let's say these entities don't have good communication. They are not mindful of the messaging and the big C and the little C. I like how you put that HR isn't involved. All the other mid-level managers, they're not talking to their workers, their colleagues at that level. There's just not a lot of communication.

[00:09:04] What have you seen are the pitfalls of organizations that go through a big merger or an acquisition without this real nuanced communication plan in place? There's a few. The ones, I mean, more immediately, you're going to end up, your bottom line is going to be affected. And what I mean by that is if you're not communicating clearly, people are going to do what they think they need to do and might end up doing completely different things that contradict each other. That creates drag. That diminishes performance.

[00:09:33] That increases risk. And that's going to result in people being less engaged. That's going to result in people not being happy and likely walking out the door. That's a big deal because usually the first people to leave are the high performers because they're the first to see the cracks and feel like, okay, I'm out. I don't feel valued, right? Replacing those costs money. It costs something. I think the latest number I saw is 34% of a person's salary is what it costs to replace them.

[00:10:03] That's money that you are now having to pay to replace talent. So if you're communicating more clearly, you're going to have more alignment, more clarity, and more likely to have an engaged workforce. You're not going to be paying that money. So performance is a big one. Engagement, talent, retention. And then so that's all cost, right? And then when people are aligned and moving in the right direction, they're doing the work more efficiently. That is going to indirectly impact revenue and growth.

[00:10:33] And I can see that you're absolutely right. The high performers are the first to leave because they can and they've got options. And they can take a lot of that intellectual knowledge with them. That domain expertise goes out the door also. You lose part of your story. You lose part of your brand when those people leave. And you lose trust because those leaders that earn the trust of their colleagues are gone. And they're probably not coming back. So let me ask you this question.

[00:10:58] Let's say there's a dealmaker, whether he or she is an investment banker or an M&A attorney in a law firm. Let's say they do traditional strategic M&A or maybe they're doing private equity M&A. Where do you think or actually when do you think they should get involved? And if we looked at the process, everybody signed the NDAs. They're having conversations. They've came to terms. And now we know it's going to close. We might get a vote here in about another three weeks.

[00:11:24] When do you think they should really start making sure that both parties are communicating in the ways that you suggested? The earlier, the better. Now, again, I know there's a lot of, you know, regulations around when certain companies can speak to each other like in a public company situation. But realistically, the sooner the better. If you're discussing a press release to make an announcement, you should already at least be creating a plan that identifies how you're going to communicate with people once this announcement is out and live.

[00:11:54] Because too often I see that companies are so focused on the external, which is very important. Don't get me wrong, right? You want to make sure that all the relevant external parties are clear on what's happening. But they forget that the people doing the work also need to understand what that means for them if they want this to succeed. And so the earlier, the better. And what I mean by that also isn't necessarily that they need to start communicating immediately, but they need to start preparing what the message is.

[00:12:22] They need to start thinking about how that's going to look. They need to even consider, okay, we need to put together some core talking points that we're going to give to managers so that they know if they get questions, they know who to send people to. I mean, it sounds so logistically and tactically kind of boring, but it's essential because ultimately businesses run on people. And if you want to get from A to Z successfully, you've got to bring those people along with you.

[00:12:50] And so the more you can communicate, the more and the earlier, the better. What have you seen happen when organizations just aren't as transparent about what's going on? But they could be. There's no ethical reason why they have to be more guarded about sharing information. They just aren't doing it. What do you think could happen to the team? How would the team feel about that? And what are some of the potential risks with that? Well, so last time we talked, I know we weren't talking just about M&A, but there was a set

[00:13:19] I mentioned that I want to bring up again here, which is that anywhere from 75 to 90% of M&A deals fail. And the reason is because they forget to talk to their people and focus on their people. So that stat is, to me, eye-opening because it speaks to the one area that, to me, seems pretty straightforward, which is the communication.

[00:13:43] And the risk that comes with not communicating is that you get this vacuum of silence and uncertainty that gets filled with the rumor mill. And at that point, you have lost the plot and people will make things up because that's just what people do. And the risk, it goes back to you're going to not perform as well.

[00:14:09] You're going to miss opportunities to really bring together people and move them in a direction that needs moving for whatever your ultimate end goal is. And so the biggest issue, in my opinion, is trust. And if you're not building trust, they're not going to believe anything you say. They're not going to believe anything they hear. And what I find often is that the merger is not the problem.

[00:14:37] It just exposes the lack of communication that already existed. That's interesting. And so you risk having a very disjointed culture, especially in cases where you have multiple companies being acquired, right? The more new people, the more new companies you bring in, the more ways of doing things are brought in. And so how do you try to bring some alignment to this? You have to have some trust from the start.

[00:15:05] And that then builds into clarity and then consistency. Yeah, you're right. That's interesting how it magnifies problems that might already be in that organization based on trust. And I think that's because this is a stressful event. It could be a positive stressful event, especially for the founder and the executive team. But it's a change. And when people don't know what the bad news is, that's more stressful than if they do know there is bad news. But at least they know that.

[00:15:34] That's a little bit more certainty. What do you think about that concept? You absolutely nailed it. I'm a big believer that people don't resist change. They resist the unknown. We live in a constant state of change, especially these days. I mean, you've got AI. You've got geopolitical uncertainty. You've got all sorts of things that are affecting how CEOs and senior execs are making decisions. Change is the only constant.

[00:16:00] What people resist is not knowing how that affects them and why it matters and why decisions were made. If you can solve for that, you're more likely to get people doing what you need them to do. But again, it can't start and end on day one. This is a consistent thing that needs to happen on a regular basis that builds that trust and that community so that when you do need it, it's already there.

[00:16:28] So help me work through a game plan or an SOP, standard operating procedures. Let's say you're consulting me. I own a manufacturing or construction company, 75 million a year, commercial building contractor. I've got probably about 50 key employees. We've got relationships with subcontractors, clients. Business is good and it's time for me to phase out because I've been taking too many six-week vacations and I want to sell. And the investment banker brought me a deal and it looks good and we signed our NDAs. Now we're in conversations. Let's say you're my coach or my consultant.

[00:16:57] What would be the things I should do next in terms of my communication with my team? So first and foremost, you need to be clear on your message and aligned on where you want to go. So what I mean by that is writing down what the actual goals for the company are moving forward and making sure that whoever the, whether it's the operating team that gets brought in or whatever new leadership team is, or whether maybe you're still staying at the helm as CEO,

[00:17:26] that you are clear and aligned on what it is it means for the company. I can't decide that for you. No comms person can. You need to be able to say, this is what this means and why, and this is why I did this. So that's first and foremost. So I've got that with my executive team. Yeah. And then what, do we disseminate that to everybody or what do you think? Then you want to build a plan around that, which means identify who the people are that

[00:17:54] you're speaking to, how they receive information. So what I call persona building, you know, how someone on the front line receives the information is different than someone at a desk. And so build out plans that identify how best to reach these people and how, you know, how they're maybe going to respond to this. I would also then identify what are the things that are changing from a logistics perspective? Are people, I don't know, checking in and logging their time differently?

[00:18:23] Are they, are their benefits changing? Are they reporting to a new person? Those are things that should be written out, even if you don't have answers to all of them, because those are things that are going to come up. So I always like to do an exercise where I say, what are the questions that are likely to come up? Let's write those down and then work from there. Because you want to put yourself in the shoes of the people receiving the information. So again, alignment and then messaging, clarity, listing out what those things are.

[00:18:53] And then thinking about the systems that are going to help reinforce that and get you any feedback that allows for adjusting. Listen, no plan is ever perfect. You need to be willing to iterate. You need to be willing to adjust. But to do that, you need to be able to understand how messages are landing or not landing when it is time to start distributing those. And so building a system that allows for that through poll surveys and feedback forums,

[00:19:20] and then also channels that go beyond just an all hands or an email are really important. So you mentioned poll surveys. What does that mean exactly? How have you seen that being done? Pulse surveys are... Oh, pulse surveys. Okay. Well, so when I work with clients, I do a survey called a Ready Index Alignment Survey. And that helps assess how aligned people are around a common goal, how aligned and clear

[00:19:46] they are around a message, how aligned and clear they are around leadership and whether they trust leadership. So it looks at trust and clarity around people, process, performance, and gets an overall alignment score. Now, poll surveys are done usually throughout the year by a company to, you know, it'll be a one or two question survey that's put into a newsletter or just a standalone email that asks some core questions that help understand if things are trending in the right direction.

[00:20:16] So it could be as simple as, I am clear about where I need to find information when I'm unsure about something. So finding the questions that help answer whether people are clear and trust. And so you do those throughout the year. Some companies will do engagement surveys. I do not believe in engagement surveys. And you're seeing more and more companies pull away from that because to me, alignment is what matters. Engagement is a byproduct of alignment.

[00:20:43] If people are clear and aligned and trust, they're more likely to be engaged. And so if you wait for this annual engagement survey, you're already kind of behind the times because you've got this whole year in between. So the poll surveys help with, you know, bridging that timeline. Well, I like the clarity and the structure you give to what is, I would perceive as an amorphous concept of communication. And it's very important. And I like the fact that you talk about having real structure to it, having it written down.

[00:21:10] And I appreciate you sharing this, these insights with us today, Alejandra. If we could summarize three action steps that you would give to a dealmaker, maybe it's an investment banker, maybe an M&A attorney, somebody that's bringing people together, or even those that are in a private equity company that are involved in those acquisitions and those mergers. What would be three action steps you'd give them related to what you talked about today?

[00:21:31] I would say that the three actions that they can take are, first and foremost, aligning on a message and understanding whether or not people trust leadership to begin with. That's core. Second, I would say, make sure that the message is clear and consistently disseminated. So have a plan for how you're going to communicate all this.

[00:21:58] And then make sure that you reinforce it. And it's not just this one and done, day one, hey guys, welcome, congrats, we're so excited. It's, you know, regular reinforcement of the message and feedback loops and systems. You asked for three, those are the core three. I'd love to add a little bonus to this, which we haven't really talked about, which is be human. People just want to feel heard.

[00:22:24] People want to see that the person they're working with is not some robot that's just like a talking head. Be human. I think a lot of the world's problems could be solved if people were just human. I think a lot of times leaders think they have to be this, like, perfect answers, perfect everything. And that's a big part of how you lose trust. So if you can be human, you're going to build it more effectively. Well, I appreciate that approach, Alondra. I appreciate it very much. Thank you for being on the show. And before we leave, tell us about your offerings, your services. What do you have?

[00:22:54] What do you do that you'd like our listeners to know about? Yeah. So, you know, I like to say that the work I do is I am that bridge between what leadership says and what employees hear and act on. Usually there's a bit of a disconnect. And so I do that through, you know, leadership alignment, developing messaging and assessing communication systems to help create a system and culture that advances whatever goals and priorities companies have.

[00:23:22] I have a free message builder people can use to help with drafting messaging on my website. So readycultures.com. If you go on the resources tab, there is that resource. And then I mentioned an alignment survey that I also do as part of my assessments to help understand how aligned or not people at companies are. That's great, Alejandra. We're going to put, for everybody listening, all of Alejandra's contact information, including those other resources on the show notes. So go there.

[00:23:50] You'll be able to connect with her directly and take advantage of those offerings that she offered up today. Alejandra, thank you for being on the show again. And I'm sure I'll have you back on in the future. Great job today. It was so great to see you. Thank you. Thank you for listening to the Rainmaking Podcast. For more information about our recruiting services for international law firms, visit our website at attorneysearchgroup.com.

[00:24:17] To inquire about having Scott speak at your next convention, conference, sales meeting, or executive retreat, visit therainmakingpodcast.com. Thank you.