A Story About M&A Integration and Scaling Chaos

Here's a story about a Little company that took down Goliath. A certain gigantic global company acquired a small but industry-leading tech company. Since the executive team wanted to let the acquired company continue its innovations uninhibited, they let it be. Then one day, a salesperson spotted an opportunity for the Big company's tech to be integrated into the Little acquired company's tech to create value for a range of customer applications, resulting in more revenue. Big platform met Little platform. Little platform was thrilled, as integrating into the Big platform brought new streams of revenue, which validated its value creation story.

Until one memorable and celebrated day, Big wanted to fully integrate Little. Everyone was thrilled. The strategy and plans were made and stamped with executive approval and praise. Spirits ran high. Then, swift decisions were made and actions taken.

Soon after, these plans with defined actions caused a high percentage of customers' software, dependent upon integrations, to stop working between Big and Little. Customers were in an uproar. There was untold damage to the integration plan and the much-desired value creation. Executive heads started to roll. People found new positions at other companies. A reduction in force (RIF) rumors started spreading like wildfire. Humans retreated into crevices as though the hot flames would burn them at any moment, moving into full self-preservation mode.

What on earth could cause this much post-acquisition tech integration chaos?

It boiled down to a single, small, and cute domain name and a lack of deep technical and operational due diligence tied to integration and scaling requirements for value creation.

Since the integrations from Big to Little were budgeted out of various departments, everyone with hiring authority hired their favorite contractor to perform integrations. This meant that each hiring manager hired and provided a narrow scope of work to fulfill their narrow need. Oh, and never mind the complete loss of economies of scale by not qualifying and engaging with a specialized set of contracting and consulting firms connected to the big picture.

 It appeared as if no central integration team of experts was ever formed.

Each contractor was given an integration task. There were over 1,200 contractors, consultants, and temps performing varying levels of software engineering integrations across both companies and countless departments. Without a centralized integration team, there was a plethora of integration methods, database types, coding languages, QA tools, types of release trains, and documentation standards. Some hiring managers had no technical integration background because they were in the sales organization, chartered with fixing customer issues, but access was granted to their contractors at the code level with no standards. Some were in various SCRUM teams, but the Scrum Masters were not overly technical to understand the impacts of poorly managed integrations.

How could a little, cute domain name cause so many issues?

It boiled down to a very rudimentary, programmatic method of creating a path between two things in software. One method is known in software engineering as creating a relative path, and the other method is known as creating an absolute path. Sadly, there was a disproportionate amount of absolute paths programmed because there were no integration standards developed, no code review against said standards, varying code bases on different database architectures, and a complete lack of documentation of this simple method, making issue detection extremely challenging.

Technology integration was not anchored to the due diligence. Or worse, the tech due diligence was cursory. Oopsy.

It turns out that a senior leader, who was formerly technical, but not in a technical role, decided to gain access to several sets of code bases to review, as this leader was in the Little Company's product development team, but also played a significant role in closing out aged audit exceptions emanating from the tech stacks for the Big Company's CFO. The incorrect method was spotted like it slapped this leader clean off the office chair, leaving this person almost breathless. Immediately, this leader formulated a plan with budget, resources, tools, and an estimated timeline based on past technical and project management experience. It was presented and met with skepticism, as this solution was not associated directly with the leader's job title. Seriously? The focus was on the job title, not the capability to solve a huge, systemic problem?

Quick Tip: Resist The Temptation to Discredit Problem Solvers

The leader persevered, showcasing technical acuity and big-picture M&A knowledge. After a bit of executive lobbying and education, the architects were given the green light to kick the tires on the theory and plan. Miraculously, the plan was reviewed and adopted.

Due to this calamity, the value creation was completely eroded, but the ability to scale was realized, although it was over a protracted period.

The lesson is that although deep due diligence may present itself like an expensive, time-consuming, complex, and painful root canal, the result of quantifiable deep diligence has the power to yield substantially better integration and scaling wins than previously imagined.

Why Does Forza 51 Do Due Diligence Differently?

The Forza 51 mission is to de-risk buy-side acquisitions with complex products. Yes, we have MBAs and PhDs, but most importantly, we have scar tissue. We are not academics, we are road-tested practitioners. We’ve rebuilt operations, salvaged integrations, restructured R&D, and walked post-close chaos back from the brink.

Our unique approach to pre-acquisition, deep due diligence with a proprietary quant-based model enables post-acquisition value-creation retention because our expertise in Technology, Operations, Market, and R&D allows for real integration and scaling.

We’re not guessing. We’re translating complexity into clarity, at deal speed. We’ve helped teams recover from the kind of value erosion that could have been prevented with 40 hours of better questions.

If you want to deep due diligence, we're aligned. How can we help you today?

Contact Us

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