Why The Most Valuable M&A Insights Come From Conversations With Employees

After a few decades in business and technology, I’ve seen my fair share of acquisitions—and they’re never trivial. But having been through several, I thought I had the routine pretty much down. Then the pandemic hit, and we all had to figure out how to do our jobs—including evaluating potential acquisitions—in remote, distributed environments. While it posed some challenges for my first acquisition as a CEO, it also provided new opportunities to communicate with people that made the process less contentious for everyone involved.

I was surprised to discover that I could evaluate a company differently in this new world — because I suddenly had the opportunity to get to know the employees of the target company in a much more intimate way than was possible pre-pandemic.

When a company begins evaluating a potential acquisition, it triggers a complex due diligence process. Extensive market research to deeply understand the potential target’s position relative to the competitive landscape. Getting background on the company and the executive team. The strength of the company’s brand and solutions. And in today’s modern working environment, an assessment of company values and culture is a prerequisite to the successful integration of two independent companies.

It’s tough to assess the culture of another company, especially a competitor where management isn’t eager to roll out the red carpet for a rival CEO to stroll the hallways and shake hands with employees, however attractive a potential deal may look on paper.

But viewing an acquisition through the eyes of the “acquired employees” is a huge part of making a deal succeed. Ironically, the pandemic made it impossible to visit the office at all—it would have been empty anyway—but it ended up giving me the opportunity to meet the employees and figure out their concerns about how we might work together.

In early 2021, we started the evaluation process for acquiring DialogTech, one of Invoca’s competitors in the conversation intelligence space. I’d had the benefit of meeting the CEO of DialogTech several years prior at an industry conference. Since we already knew each other, it would have been easy enough for us to sit down and work out the numbers of a deal together. It’s a common practice in all businesses: company leaders iron out the details of an acquisition, the companies’ boards approve the transaction, and then, for all intents and purposes, the deal is done.

But, in this case, we broke with standard practice and decided that to bring our companies together in the best way possible, it made sense for me to meet some DialogTech employees. Since we were all doing business by Zoom anyway, it eliminated the awkward situation of welcoming a competitor’s CEO into the building. I was able to meet more than 20 percent of DialogTech’s employees over Zoom before we announced the deal internally. The DialogTech CEO helped lay the groundwork for how our two companies could build a new future together.

This was a completely different world compared to when I was involved with Salesforce’s acquisition of ExactTarget in 2013. To maintain confidentiality, we met at a secret destination for due diligence meetings, far away from our respective headquarters, and were advised “not” to say we were in town for business. This stealth approach made sense because both companies were public at the time, and any leaks would impact stock prices. But the whole exercise felt more like a CIA mission than a business deal. The way it went down with Invoca and DialogTech wasn’t just less stressful for the executive, it led to a smoother transition for everyone.

A typical example of how this went: late one evening, I had an hour-and-a-half Zoom call with a veteran DialogTech engineer. The unconventional time and circumstances lent themselves to candor—which gave me insight as to how our proposed acquisition might benefit DialogTech employees. Conversations like these were critical to how we communicated the rationale for the deal as well as how we integrated the teams.

The value of these conversations went far deeper than merely honing talking points about the logic of the acquisition. I remember one DialogTech employee’s impassioned plea to use some new, albeit expensive, technology. It was really satisfying to let her know not only that Invoca was already using it, but that many more new things would be possible with the additional financial freedom afforded by combining companies.

Within a few weeks, the deal was done—and it was time to integrate the two teams.

This is where things usually get tense, which many Invoca executives knew from being involved in “M&A deals gone bad.” The last thing we wanted was to get into an “us vs. them” mentality where employees from each company feel at odds with those they might still see as rivals. It’s hard to get that sense of competition out of your head, and we needed to find a way to put everyone at ease with each other. A big part of making it work is how the companies and employees talk about each other after the acquisition.

While the company moving forward would be Invoca, we needed a way to refer to our pre-acquisition worlds. We started referring to pre-acquisition DialogTech and Invoca people, technology and customers with the word “legacy” during some meetings. When we started using the term, we hadn’t put a lot of thought into it—but it felt right, and quickly took off like wildfire. It wasn’t something that we had to write down or tell people to say—once it was said, people just started repeating it.

“I’m from legacy Invoca.” “I’m from legacy DialogTech.” “That’s a legacy DialogTech customer.” It became a way for us to acknowledge our pasts, look forward to our combined future, and quash the animosity that acquisitions can bring. In meetings with customers, I will actually take a moment to explain our use of “legacy,” so they know what we’re talking about when it comes up. We hardly think about it at this point—it’s as natural as saying “hello.” This goes to show that the language that you use following an acquisition is incredibly important. The way you speak about the acquired organization can either cause friction or drive collaboration, so it must be considered as carefully as the legal terms of the acquisition.

While we speak of legacies looking backward, the company and the people are all Invoca now. To me, a big part of the success of the acquisition is reflected in how people feel as Invocans. From the day of the acquisition to today, our Employee Net Promoter Score (eNPS) actually increased by 16% among legacy DialogTech employees and we saw a similar increase for Invoca as a whole. Increasing your eNPS score after an acquisition is something to be proud of, and it validates the work we did leading up to it and in the following months.

When your people are happy, it’s way more likely that your customers will be happy, too. We have seen some great signs of this success with both Invoca and DialogTech legacy customer retention rates increasing. Following an acquisition, many would expect the opposite. In 2021, we saw DialogTech customers who migrated to the Invoca platform expanding their investments by an average of 15%—not through price increases, but by purchasing more products. I can’t think of a better indicator of how they feel about Invoca.

Talking extensively with frontline managers and employees helped me evolve our story from, “Why is this good for Invoca, and why is it good for your shareholders and your executive team?” to “What’s actually in it for you as employees?” I would’ve never been able to do that without video conferencing and the more informal “Covid-era-remote-work-behaviors” that have become the norm. I simply wouldn’t have been able to sit down with so many employees at various layers of the organization.

After five years at Invoca, the value of conversations is in my DNA. There is a ton of data to process when evaluating and executing an acquisition, but the most valuable data comes from the conversations that you can have with the people who will form the new organization. The numbers matter, of course, but the people are more vital to your sustained success.

I would advise any and every business leader who’s actively involved in private acquisitions where these kinds of conversations are accessible to take advantage of new opportunities to get to know and engage as many people as you can. The dividends can be huge.