Joseph Mills, Chairman of the Board at Caliber Midstream Company, says people are a company’s most important asset.
“I know a lot of us sometimes get fixated on — and again, I'm an energy guy, so — the oil and gas properties or the land that you own or the geology or what basin you're operating in,” Mills says. But quite frankly, it's all about the people. We can't do what we do without having those people.”
Having done nearly $30 billion in M&A throughout his career, buying and selling lots of businesses, he recognizes that the best deal can be destroyed by not integrating it properly.
Speaking during the inaugural Houston Smart Business Dealmakers Conference’s midday panel, moderated by Insperity’s Emily Hak, Mills says there are four phases of any acquisition, though most people tend to focus on the first three. Those are the evaluation, the due diligence and the closing. But the most important part of any successful M&A transaction is the integration.
“You can put down all the great things you think you're going to accomplish with it, but if you don't actually do it, then the value that you thought you're going to get doesn't materialize,” he says.
In his companies, he says accountability through the integration process is critical. To help that go smoothly in his deals, he says he’s appointed a czar of integration. That person was at a high enough level that they could reach across the organization and hold everyone accountable to getting the integration done because its such a big part of whether or not a deal succeeds.
“We were a serial buyer. As we found, your VP of Business Development, he's moving on to the next deal. He's the wrong guy to integrate. So, you need somebody that's accountable, that is going to hold everybody else accountable on the integration part. It's all about the people at the end of the day. It's the culture and how you're going to get those synergies out of successful acquisition.”
The czar reported directly to Mills and he a lot of authority to hold people accountable. His primary job was the integration — making sure the checklists were done, that people had resources and were being held accountable to getting it done.
“These were all very large acquisitions — billion-dollar-plus-type deals,” he says. “But even the smallest deals, you got to focus on that integration. Truly one of the most important parts of any successful acquisition is how you integrate it into your company successfully.”
Leaders, says John O'Brien, CFO of Cooper Machinery Services, must make difficult decisions when it comes to personnel. So it’s important to be decisive, transparent, and effectively communicate.
“Hard conversations go both directions,” O'Brien says. “You've got to be able to listen to it, actively listen, take that feedback, understand it, synthesize it, and make decisions as a group or sometimes make decisions as a leader. But ultimately, you can't shy away from those hard conversations.”
Looking back at several decisions that he and his team made across the portfolio, some of them aren't easy. And some are timely conversations leaders must have with their colleagues because hiding from it accomplishes nothing.
“It causes instability,” O'Brien says. “When you look at it, change and transition and integration, it's all scary. And people want to be able to go home at night knowing where they stand within an organization. And it's up to us as leaders to make those decisions and to communicate effectively across all channels.”
When it comes to personnel, O'Brien says it’s important to acknowledge when the wrong set is in place — round pegs in the square holes — and to act on it quickly.
“The longer that goes on, the more toxic it can be for the culture of the business,” O'Brien says. “That's one of the greatest lessons I think I've learned over the last 10 years is acknowledging that, understanding it and understanding that just because this person is pedigreed doesn't mean it's going to work in the culture of the business. Being able to call a spade a spade in that instance, and move on it, is important. Some of the mistakes that I've made in my career, when I look back over my tenure at Pelican (Energy Partners), is I left the wrong people in the wrong seat for way too long. And when you look at the detrimental and negative consequences that has, it can really upset the culture of the business and knock it off course. Putting the round peg in a round hole is important. But acknowledging when you've got the round peg in the square hole and doing something about it, more importantly, is the way we need to act as leaders.”
