The importance of Culture when Acquiring Companies with Claude Zdanow at StadiumRed
Every company acquisition has many moving parts. Many people don’t look at the culture when acquiring companies. However, given that the “people” part of any merger is often the most challenging part, the culture when acquiring companies is essential. Today’s guest is Claude Zdanow, Founder and CEO at Stadium Red Group. Inc Magazine ranked his company #84 on the 2020 and #718 on the 2019 Inc 5000 list. Stadium Red Group is a collective of specialist marketing agencies. They believe in the power of combining the radical creativity of independents with the seamless integration of a one-stop shop. Claude shares his methods of looking at a culture when acquiring companies.
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Claude Zdanow: The Transcript
About: Claude Zdanow the Founder & Group CEO, Stadiumred Group. Claude is one of the youngest advertising and marketing authorities in the world. He is also an entrepreneur and public speaker and active investor and advisor to an array of businesses. The Stadiumred Group is a global marketing agency holding company. Agency subsidiaries include Gyrosity Projects, MagicBullet Media, SevenBlue, as well as venture division Stadiumred Ventures.
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Disclaimer: This transcript was created using YouTube’s translator tool and that may mean that some of the words, grammar, and typos come from a misinterpretation of the video.
Claude Zdanow: [00:00:00] Think of any problems in the difference in styles of doing things, right? Especially in our business delivery, timeline, KPIs, all those things are so important, right? Those things become, you know, Very very, you know, evidence. And that’s what I think is really been one of the best things we have done because things will go wrong with clients. I mean, you have to figure out how do you solve them as a team, right. Things will go, right. Things will have people have different ways of working. And so that, you know, for us has been kind of the saving grace when we’ve done transactions is making sure we work together with that leadership team on a project for a client, despite the risks, right. We could piss off one of ours. Great clients that we have because we brought in a partner that doesn’t work, but it’s a risk worth it worth for us because it saves potentially years of pain down the line.
[00:00:44] Intro: [00:00:44] Welcome to grow, think tank. This is the one and only place where you will get insights from the founders and the CEOs, the fastest-growing privately held companies. I am the host. My name is Gene Hammett. I hope leaders and their teams navigate the defining moments of their growth. Are you ready to grow?
[00:01:01] Gene Hammett: [00:01:01] You know, culture is important as your company scales. But when you acquire a new company, do you think about culture first or is it an afterthought? Well, there’s a lot to think about when you’re acquiring companies. Is there a value increased by acquiring this company? Do they have technology? What kind of integrations have to be done? All of the things necessary for you to look at an acquisition must be thought of intentionally. But one of the things that often gets forgotten is the importance of culture in acquiring companies. When you are combining together executive teams, when you’re combining together talent and cultures, you want to make sure you’ve got a great fit and it takes some special thinking to do that today. Our special guest has done this multiple times. He said five acquisitions. He is the CEO of stadium red. We’re talking with Claude Zdanow. Claude really shares with us how he looks at culture and why it’s such an important piece to the acquisition process. And when you think about, you know, creating the right culture fit and integrating that into the company, it’s so important to really realize the value of the acquisition.
[00:02:08] So today we dive into that before we get there, I want to make sure you know, that we have the special thing going it’s called. Fast-growth boardroom. If you are a founder, CEO, or president of a fast-growth company, then we want to invite you to look at the fast-growth boardroom, where you can hang out with your peers. We’re building a community of people with training, but also real insight around how to become the best leader possible. How to create the best culture for your company and how to increase the value of your company. If that interests you go to the fast-growth boardroom, you can check out how we play together. Through racing Porsches and some of the other things we do, but also how we actually engage with each other about why that’s important and why you should be hanging out with your peers of the fast-growth companies like Inc 5,000. This is the place where you could actually evolve as a leader. Just check out the fast-growth boardroom. See if it’s right for you. Now, here is Claude.
[00:03:03] How are you?
[00:03:04] Claude Zdanow: [00:03:04] Hey, I’m doing very well. Thanks for having me.
[00:03:07] Gene Hammett: [00:03:07] Thanks for being here on the growth think tank, where we talk about founders and leaders, really driving companies and scaling them beyond what their peers are doing. You have had a fast run with StadiumRed. Tell us about stadium red.
[00:03:20] Claude Zdanow: [00:03:20] Yeah. So stadium red is a marketing agency collective. We’ve grown through both organic and inorganic growth. Most specifically in the past three years, we’ve made five acquisitions and our business. Is a premiere, primarily a collective of complimentary non-competitive, highly specialized marketing agencies. So we have currently five different marketing agencies kind of on one platform and they all provide different types of services. And for our clients, the benefit is that it can work with one agency. Three agencies, five agencies. It doesn’t matter. It’s completely seamless and easy for them because we’re really a true hub and spoke model.
[00:03:54] So our model is the answer to maybe the traditional holding company when he’s of the world. And you know, our plan is to continue kind of on this trajectory growing and, and delivering great services for our clients by way of bringing together some of the best boutique, highly specialized agencies in the world.
[00:04:10] Gene Hammett: [00:04:10] So Claude, since you talked about the five acquisitions, that’s one reason why I wanted to have you on the show today, because you’ve done enough of these where you, you know, what to look for, what some of the gotcha points are with acquisitions, but mainly around the leadership and culture integration point. Cause I think a lot of acquisitions fail because they’re not able to integrate the culture and the leadership. Of the acquired companies. What are your thoughts on that?
[00:04:34] Claude Zdanow: [00:04:34] I think spot on, I mean, I think the one thing I’ve learned, the, probably the truest thing I’ve learned through this whole process is typically when you’re making an acquisition, you’re always keeping the leadership team of the company you’re acquiring and in place, right. You don’t want to buy a company and then have it go by the wayside because the loyalty or the leadership, or it goes, it goes away. But I think. One of the things, most buyers, or even the sellers when they’re selling their company to somebody else having an exit and what you, what you miss. And people always look at last, which honestly needs to be one of the first things is the cultural connection, right?
[00:05:06] It’s, it’s, you’re going to be going through the trenches. You know, whether it’s integration, whether it’s when things go wrong you know, nothing ever happens exactly the way you want to. And I think there’s an inclination when people are doing deals, especially when you’re exiting yourself. You just want to get the deal done. Everyone wants to get a deal done because they’re excited about it, but they miss the cultural piece so often and it makes it incredible. That is really one of the biggest reasons why an organization makes or breaks it. Right? If, if, if you’re, if you’re selling to somebody else and their vision for where the company needs to go, or their way of operating is so different and something you don’t aspire to, or want to be a part of, or you’re not open to, because you’ve been doing it your way for so long, it’s going to be very difficult to make that work.
[00:05:47] Right. And yeah, so I think that’s one of them, I mean, I can give some examples of where it’s gone well and where it’s gone wrong. But I think, you know, most other challenges are surmountable, right? Personnel overlap, any of that other sort of things that, you know, you might have. Right. The first thing people think about when they’re, when they’re doing a deal is, oh, where are the synergies? Where can we cross-sell clients? Where can we be more effective, efficient around costs? But again, You can’t under you, can’t deem undervalue the importance of the cultural and people connection, especially in the marketing and advertising world, which is where we are, where our business is. So predicated on people, right?
[00:06:21] There’s IP in technology and little other things, but we’re not making products. We don’t have big factories. So it’s all about how people come together and that collective genius, if you will, that then translates to great work for great clients.
[00:06:32] Gene Hammett: [00:06:32] Claude, you have a framework that you use when you look at the culture of a company, your mind.
[00:06:38] Claude Zdanow: [00:06:38] Yeah, absolutely. I mean, in the beginning, we didn’t, I have to be transparent, you know, you’ll learn a lot from, well, you know, you learn a lot from doing things and I’m not going the way you want them to be. Or you’re you thought that they would. Right. And so I think part of it is objective and part of it is subjective. So the objective part we typically use culture surveys that we’ve built up, right. To not only survey the leadership team and kind of their approach with making but. All the way down to individual employees within an organization which can be challenging, especially if you’re going through a deal flow, because sometimes leadership doesn’t want to let the employees know, you know, that there might be an exit or an opportunity.
[00:07:12] So timing that, and how that’s done is, is, is important. We’ve had some creative ways around that, but yeah, a big thing is a culture survey. We also have done some stuff using some kind of our own testing of basically like. How do we think these personality traits, you know, fit within, you know, our way of working our, our approach. Right? And then the other part of it is really a little bit subjective of kind of breaking bread and sharing your, your ethos, your thought process and, and spending a lot of time and right. And so that’s why even. From a deal perspective, every single transaction we’ve ever done, I have spent almost all my time really getting to know those individual sellers. Right.
[00:07:50] Personally, it’s not just like the pro some of the problems with, with, with when you’re exiting is you get bankers in the middle. Right. And so bankers while they’re great, because they give you a kind of that arm’s length protection, and they negotiate for you, et cetera. Right. You need a lot of, you know, seller to buyer time, you know, leadership to leadership, time, bonding, time, breaking bread. I mean, it’s hard now in the pandemic because you can’t get in front of people have dinner, but you really gotta think about, is this somebody you want to get into a relationship with a marriage with, right. Cause no matter how you slice it, whether it’s a small piece of your bigger puzzle, if you’re in a choir or whether it’s your only transaction you ever want to do as a seller that’s really important. So I think, you know, That’s the other part that we spend, it’s just a time thing. Right. So we can do all the objective survey and we can look at all the data we can see, oh, look, you know, they have a similar way of working and, you know, we can kind of get over that. Right. But there is the subjective of literally just investing the time and having the true, like heart-to-heart conversations that are a little bit. You know, if they’re a little bit difficult to have sometimes where people are always posturing when they’re selling, they’re trying to only show the good sides of their businesses, not the bad sides. Right. And we all have both sides. And so I think that’s, yeah, that’s something I personally focus a lot on in, in terms of getting a deal done.
[00:09:02] Gene Hammett: [00:09:02] I want to go zero in on this whole leadership thing because a part of acquiring another company is acquiring the talent and the ability to lead others. Is there one thing that you’re looking through? I know you’re looking for a lot of different things, but is there one thing that stands out that you’re like, oh, I can size up the way this person leads because of this one?
[00:09:20] Claude Zdanow: [00:09:20] Yeah. Yeah. I think, yeah, I think so. I mean, I think, you know, when I, when we. You know, take a step back. Right. I think part of this is driven my, why you’re doing an acquisition, right? If an acquisition is purely for, and there are people who do deals this way, right? Or so in their business, like someone just wants a patent IP or technology or whatever it is. Right. That’s, it’s much more transactional. Right. In our case, when we’re doing a deal, we’re typically looking to either bolster an existing service or add a new line of service. To our business. And so the number one thing we do is we try to, before we ever do a transaction work together, and what I mean by that is cross-sell a piece of business, right?
[00:10:03] So say, Hey, we have a trusted client. So we’re taking risks on our own site where it’s like, Hey, we have a client that’s important to us. And we know they can benefit from this service. Let’s now get that team involved. Let’s get the leadership team directly involved, not have them just pass it off to somebody else. Right. But have them, part of that process sell in that business and then work together without even having been in a transaction. This is one of our most important due diligence things. But what will happen is you all of a sudden, very quickly, any problems in that way of working any problems in the difference in styles of doing things right. Especially in our business. Delivery timeline, KPIs, all those things are so important, right? Those things become, you know, very, very, you know evident. And that’s what I think has really been one of the best things we have done because things will go wrong with clients. I mean, you have to figure out how do you solve them as a team. Right. Things will go, right? Things will have people have different ways of working. And so that, you know, for us has been kind of the saving grace when we’ve done transactions is making sure we work together with that leadership team on a project for a client, despite the risks, right. We could piss off one of our great clients that we have because we brought in a partner that doesn’t work, but it’s a risk worth it worth for us because it saves potentially years of pain down the line.
[00:11:14] Commercial: [00:11:14] Hold on, Claude just talked about working together, finding a best way to do this initially. This is a lot like dating, and I know there’s a lot of dating inside of the business context, but you want to make sure that you date before you get married. And so working together as a great way for you to find the, how you’re going to work together, how are you going to collaborate? How are you going to work through challenges? Claude really talks about some of the details there, but I really want you to think about next time you look to acquire someone is you date first, that would be really important in your journey to creating something that’s really valuable for both companies. Back to Claude.
[00:11:48] Gene Hammett: [00:11:48] I want to kind of focus our conversation on what happens after the merger and acquisitions that comes in, because you’ve got to now align executive teams together. The current team you have with stadium red, but also these, these acquired company. Executives sometimes they’re probably not going to be a fit going forward. Maybe they don’t want to stay. What are your thoughts on creating that alignment across?
[00:12:10] Claude Zdanow: [00:12:10] Yeah, I think, again, it varies on a case bycase basis, but I’ll say typically for us, you know, we have, because of our style, right. We typically try to avoid. Companies that are selling in a process, right? What that means is bankers are involved when they’re kind of shopping at around a whole bunch of different people. There’s a lot of strategic reasons why we do that. You know, why we don’t want to be in bidding wars or things like that, that by the way is not necessarily the best thing for the seller all the time. Sometimes you might get the best economical deal. If you have bankers shopping, you do a whole bunch of different buyers. Right. But for us, No, that’s not how we typically approach. And I think the other thing we don’t typically do is we typically look for companies where we can extract value, right? So we’re a strategic buyer. We’re not a private equity roll up, or we have some big pool of capital that we just need to deploy and get right. Done. And so for us, we’re looking for those intangibles, which I think applies into when you start looking at companies and leadership, and we look for transparently, even things that have problems, right. Things that, you know, typically, oh, they’re so concentrated in a few clients or, Hey, the leadership team is really great in marketing and their vision and their execution, but the finance. Person. Isn’t awesome. Right. And so a lot of what we have done is when we look at these businesses, we’re trying to one fill out our overall leadership team right. Across all our agencies. And see, is there a leader or two within this organization that could be elevated out to compliment what we already have going on. Right. And then beyond that is. Are there ways that we might be able to transition leaders a K a and B someone who’s leading finance, right. Who isn’t so strong, you know, with, you know, into our existing finance team and create cost savings for that. Right. And that doesn’t happen overnight. Right. And there’s obviously a human element to this. You know, we, we do not approach things of like, Hey, we’re on a chopping block and, you know, day acquisition happens or just. Getting rid of everybody here is your package and go, right. I think that kills culture. But I think, you know, at the end of the day, we’re looking at these businesses because we believe they’re great businesses and because the leaders have something special, we do trying to repurpose and, and, and do that. So it’s a very. Hands-on evaluation from a people perspective. You know, at the end of the day, you can’t have too many leaders ended up, you can have too many leaders in an organization to be clear, right? You don’t want too many cooks in the kitchen, as you say. So I think you need to be careful. But that goes into our upfront, initial thinking, right?
[00:14:23] Unless, you know, you’re in the position where you’re just buying something and you’re transitioning the leaders out and they have golden parachutes and some people do that. Right. There are plenty of acquisitions where like we have a leadership team. We like, we think you guys will fit in. You’re going to help us transition and integrate and in you’re out. Right. And that’s fine. Right. That’s just not our style. Right. So from our perspective, because we’re really looking to, we’re typically we’re going to get a company and help them go from where they are to where they are times five. Right. We want to try to keep as much of that leadership team intact and help them get there. As much as we possibly can.
[00:14:54] Gene Hammett: [00:14:54] When you think about Your evolution as a leader of combining all of these people and the talented and the visionaries together, what have evolved inside you as well?
[00:15:05] Claude Zdanow: [00:15:05] Yeah, that’s a really good question. And I think that’s one of the great things of the pandemic. One of the few great things that have come out of a pandemic, which, you know, I think many, many people are seeing is. You know, with, with business kind of pausing there for a minute and then kind of rebuilding, especially in the marketing and advertising industry, like the whole industry was down 35% last year, not even including, you know, people who were more effected, like equal in the events and experiential marketing business. But we really spent a lot of time looking internally and it was, I had to make this kind of decision where I was at. Okay. We could keep cutting costs and putting along, or we can try to grow out of this and be ready for when the world comes back online. And it allowed me to really sit back and think about, okay, where should I be spending my time as a leader? Right. And in so many ways throughout the years, I think naturally as an entrepreneur, you try to spread your time across everything. Right. If you’re a CEO of company, many CEOs are trying to touch everything, be part of everything. And I don’t even say delegation, but I mean, like literally have their hands on the pulse of every hand for us.
[00:16:06] What I realized my best strength was, is not having my hands on the pulse of everything, but solving bigger and bigger problems. Right. My job is to solve for impediments in the organization, more than anything else, something that is slowing us down. And as a result I decided, well, then I need to step out. Of the things that I probably shouldn’t be spending my time on and bring the right people in to do that. Right. And I think you know, a Testament to that is how we’ve kind of reset up our organization through the pandemic. So we hired a new president of the organization, a gentlemen named Jeff Stalmack. He came from, you know, the traditional marketing and advertising, holding companies. Right. And he had, he has done integration. Post acquisition. It’s like, that’s what his role has been at many other organizations. And prior to this, I was doing all the integration myself. Right. And being able to say, look, there’s somebody else who knows the pitfalls of the big one and companies as well as how we can be doing a different, and that’s what they’re here to do and create that accountability, that integration and kind of those best practice, let me put him in place. And then additionally to that, you know, I promoted. Our chief strategy officer into our COO Debbie Kaplan, also coming from the big agency world. And I basically had them two together as a team with support of the rest of our leadership team take over the day-to-day execution of the business. Right. And Andy integration.
[00:17:23] So basically my role shifted where, and all of a sudden I had a whole bunch of time on my hands in the beginning. I thought, because I wasn’t in all the leadership meetings, I wasn’t, you know and I, wasn’t kind of managing these agencies day to day, but then very quickly, all of a sudden, my day has got very busy again with things that I really should be spending my time. Right. And you know, for me as a CEO, I think most CEOs, you know, we spend, you know, we need to spend more time on some of those things. Right? So things like vision, things like, you know, thinking holistically about the business, the model where we’re going, how are we going to address that? How do we adjust that? Right. People, you know, I always say CEOs are going to be. You know, the number one talent recruiter for an organization, or at least they should be right. You’re out, you’re networking, you’re meeting people. You are going to be the one to sell the vision and get great a players over the finish line. And then the last piece of the puzzle, of course, besides, you know, finding new companies to acquire or any of the things we’re dealing with on that side it’s solving problems, right? And there are constantly problems in an organization, no matter how well run you are. Right. And that’s your job as a CEO is. To be able to find those issues and get them out of the way. So the organization can keep moving.
[00:18:26] Gene Hammett: [00:18:26] Well, I just said something that I want to put a spotlight on. Where do I spend my time?
[00:18:31] A lot of CEOs ask them this very question. I talked to them all the time as executive coach, and you’ve probably thought of too, where do you spend your time? Now? The company must continue to evolve. You must evolve. And the way you spend your time must evolve. You’ve got to learn to let go of some of that day-to-day work so that you can focus on the most important aspects. The projects, the visionary work of the company. You’ve got to see around the corners. I promise you that you will find a way to use your time wisely if you’re very intentional about it, but you must learn to let go of the day-to-day. You can no longer be the bottleneck of the company. You can no longer attend every meeting that you want to attend.
[00:19:09] You have to strategically let go so that you can move to the next level. And a lot of people struggle with this. They’re not sure where to let go or how this will work. Are there standards at such a place that they’re not sure how the company will continue to grow because. You’ve been so involved and that’s, what’s gotten you here, but here’s the thing that you need to really understand that because you’re the bottleneck of the company. You have to keep letting go so that others are empowered to take care of the company so that you can focus on the highest value work. I hope people do this all the time. If you have any questions about this, just reach out to me, send me an email, find me on social media. I’d love to help you evolve as a leader.
[00:19:49] No, where let go. Nope. You really empower people the right way. Just reach out to me. I’d love to help you anytime and back to Claude.
[00:19:56] Well, you, you really have something there for me. Cause I I’ve talked to a lot of leaders that struggle letting go of that day to day and maybe promoting people, bringing people from the outside, bringing people in from certain positions that you talked about with the president and COO, like you, you went through this period where you weren’t sure what you would do with your time, which is normal.
[00:20:14] But it is built in nicely with the highest value things for the organization to keep you on a trajectory for growth. Is that fair to say?
[00:20:22] Claude Zdanow: [00:20:22] I think that’s absolutely fair to say. I think that’s absolutely fair to say. I mean, look it’s with a fast growing company. No matter whether it’s inorganic organic combination. You know, one of the things people don’t realize is it’s very, every time it’s kind of like the multiples of 12, right? It’s like when you go from 12 employees to 60 employees, like it’s very different when you go from 60 to 144, right. It’s very, very different. Your challenges become different. And I think the one.
[00:20:49] The one thing I’ve been very fortunate about is I, and I’ve learned, I should say over my career, I used to be very micromanaging. And I really, really realized is I would much rather let go be macro, let something break or someone fail or let the organization in some way, have a misstep. And. Fix it quickly, then try to handhold it for the next six to 12 months and never get to where you want to be. And I think, you know, as you grow as an organization, you need to not be afraid of having those missteps, those failures, maybe you’re going to lose a client, whatever it is, right. Like it’s, it’s tough in the moment will be hard. But that sort of transparent, honest approach to doing things and allowing things to happen in some way or another is the best way that you’ll be able to grow and continue to scale an organization because, you know, there’s only so much time in the day.
[00:21:42] You only have so much bandwidth. Right. You know, at one point in time, I had, I had this thought process of, you know, if I wasn’t working. You know, 20 hours a day and sleeping for and burning the candles. I wasn’t, I wasn’t delivering value. It wasn’t her, it wasn’t the hardest working person in the room. Then I was never going to be that successful. Right. And I think there’s there’s, there is, there is something about being the hardest working, but there’s also needs to be the smartest working. Right. And I think, again, we are. We’re all humans. There’s only so much bandwidth, any one of us have. And so I think we need to be able to let go sometimes let things happen and then adjust and pivot and grow from there.
[00:22:17] Gene Hammett: [00:22:17] The academy, listening on your phone, then make sure you check out what we have available on YouTube. We are getting a lot of traction over there on YouTube. You can just go to Jean hammond.com for slash YouTube, the contents, a little bit more visual there, and it’s really will help you become the extraordinary leader you want to be.
[00:22:32] Just go to Jean heaven.com for slash YouTube. See you there.
[00:22:36] Well, you’ve shared so much much with us today. I really appreciate you being vulnerable enough to say that you’re covering micromanager. I think we all are in some ways, but I I’d love to see what you’ve done in your journey here on with stadium red and what you’re going to continue to do because you focus on people so much.
[00:22:54] So thank you for being here.
[00:22:55] Claude Zdanow: [00:22:55] Oh, I appreciate it. Thank you so much for the time. And hope to be back someday soon.
[00:23:00] Gene Hammett: [00:23:00] Let me wrap up here a little bit offline. You know, if you are planning an acquisition, you want to make sure that you get a lot of things, right? Of course you want to add value to the organization, but what Claude talked about was.
[00:23:09] Is this a culture fit? How do we ensure that this culture will be integrated together? And how will we do that? And who’s going to be responsible for that in the future and all the things that we talked about as far as aligning your executive team and letting go and truly being a visionary for your company are very important.
[00:23:26] As you evolve into the leader that your team needs to be. If you want to check out how you can hang out with peers, fast growth companies and make sure you check out fast growth, boardroom.com, where you can really connect with other leaders that are growing fast, becoming extraordinary leaders. If you think you’re a good fit for that, I encourage you to, to apply, just go to fastgrowthboardroom.com. We hang out and we do some cool stuff with Porsche’s and things like that. But it’s really about you evolving as a leader. So appreciate you being here on growth. Think tank as always lead with courage. We’ll see you next time.
Disclaimer: This transcript was created using YouTube’s translator tool and that may mean that some of the words, grammar, and typos come from a misinterpretation of the video.
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