Thread by @JayMarkel

Thread - What I learned throughout my 25-year M&A career:

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My career in M&A was birthed through a series of serendipitous events that occurred in my mid-20s. At 24 years old, I met a charming girl while vacationing in South America. We were both celebrating our recent University graduations.

I had planned to visit for only a week but ended up spending 3 months with her exploring the continent. Fast forward 13 months, I was newlywed and packing my bags for Canada to move in with my wife and her family.

I had originally studied accounting in my home country of Ireland but had to complete further designations in order to comply with Canadian regulations. The entire process took me ~12 months.

I was 27 and living with my wife’s parents… to say I was feeling the pressure would be an understatement… and to make matters even more stressful, my wife was expecting our first child.

3 months after completing my CA, I was hired full-time as an accountant at an Oil & Gas company. The job was awesome. It was a family-run business that was growing very quickly and allowed for driven employees to rise through the ranks.

Roughly 2 years later, the family made a decision to sell the business to a much larger but unrelated O&G conglomerate.

Just as I was settling in, the new management team announced that our entire back-office would be fired in order to achieve “synergies” and remove “duplicate costs”.

Times were tough. I couldn’t find a job for 5-6 months, so my wife and I made the decision to sell our home and move back to Winnipeg with her parents.

Luckily, I was approached by a distant cousin of my wife’s who needed help integrating the operations of a competing auto parts supplier he had recently purchased.

To be honest, I don’t believe I knew what I was doing at the time. I just needed a job and enough money to get my own place to live.

So, while trying to understand how I could help integrate the operations of the auto parts supplier, I rang some of my ex-colleagues to discuss how on earth our O&G company ended up going bankrupt less than 12 months post-merger.

I quickly realized several things.

The acquiring company had made so many management changes and hiring/firing of talent that they had broken the harmony of the business. The family had spent 40 years building the business had established a culture of winning with no politics – a pure meritocracy.

It also made me understand that at the end of the day, unless you are Coca-Cola or Procter&Gamble, businesses are simply social organisms compromised of people (cells) that are guided by a mission (culture).

If the same cells or culture that gave the organism life are altered, then it ceases to exist/fails.

So back to the auto supplier acquisition… I figured that the best way to integrate the asset was actually to just not integrate it at all. Moving around the people or changing the culture would only be detrimental to the business.

Fast forward 5 years, we completed 12 more deals and grew the business 4-fold before I left. Lewis (my wife’s cousin) still runs that business.

I spent the remainder of my career running an M&A program at a waste collection/disposal business before exiting to a much larger competitor.

So, what are the most important lessons?

THE MOST important lesson is that a decentralized M&A program is THE MOST effective M&A program.

Why do I say this? Well, it's not just from experience… the vast majority of successful “roll-ups” are decentralized. Berkshire Hathway $BRK, Constellation Software $CSU.TO, Watsco $WSO, to name a few.

Some may wonder what a decentralized organization is? In layman’s terms, decentralization is simply providing the decision-making responsibilities to the leaders of the business units rather than a central management team that oversees all business units.

i.e once you complete a deal, you let the leaders of the acquired company run the business.

Throughout my career, I developed a “secret M&A sauce” – a guiding framework that helped my decision making as an operator. I always asked myself the following questions:

1. Does this business have happy customers?
2. Would this new business improve my customer experience and or value proposition? i.e adding new services, growing service area coverage
3. Is there a culture fit with my organization?
4. Can the business be run decentralized?

An M&A deal is not just a financial/legal agreement. Customer satisfaction and culture-fit are often low priority considerations in deals, yet have the power to utterly derail business outcomes.

If a business I was looking at did not fit ALL the criteria above, I simply passed on it.