​Basil Reilly - The Integration Game

Basil Reilly - CEO, Logicalis Australia

First pops the cork, then comes the customary cheer, followed by the flow of champagne. For the months of hard work have paid off and the deal is closed.

But dry ink on an acquisition deal is no indicator of closure, rather a precursor to the integration game that awaits.

Fresh from buying Thomas Duryea Consulting in December 2015, Logicalis Australia CEO, Basil Reilly, sat down with ARN Editor, James Henderson, to discuss the human side of an acquisition.

Sitting at ARN offices against a backdrop of the Sydney Harbour Bridge, amidst the hustle and bustle of the daily grind, Logicalis CEO, Basil Reilly, finally caught his breath.

“You know what,” he opened, following a whirlwind two years of M&A activity. “Early in the process my boss said, and no truer word has been said, that you will find more reasons not to acquire a company, than you will to acquire one.”

Twenty-four months and 18 potential acquisition targets since first eyeing up Melbourne-based Cloud and datacentre services specialist, Thomas Duryea Consulting, the affable Irishman is now executing phase two of his plans to edge Logicalis towards becoming a fully-fledged service provider, while maintaining its traditional networking infrastructure roots.

But while both companies plan to operate independently until July 2017, Reilly’s understanding of the human side of the acquisition has helped tame naturally high emotions, as staff seek to reestablish order and personal security.

Combating uneasiness within the workplace is tough however, prompting a policy shift for Reilly, who ensured plans were in place to manager the human dimensions of the deal.

“I hired a project manager and over a 12 month period built a plan,” he said. “Whether it was customer, employee or partner communication, the list went on, covering buildings, car parking slots, solutions etc.

“So, who owns each piece? We spent a year planning rather than going in cold, placing a lot of thought into our day one communication.”

During M&A activity, Reilly said special emphasis is usually placed on the strategic and financial goals of the deal, meaning the psychological, cultural, and human resource implications fall by the wayside, deemed redundant amidst a frenzy of due diligence and market aspiration.

Yet as the channel veteran attests, the human element to an acquisition is key, as illustrated when notifying impacted staff of two redundancies, following the merging of both finance departments.

“Our message was clear. We’ve just bought Thomas Duryea and everyone who has lost their job has already been spoken to,” Reilly recalled. “It relaxed both teams and allowed for an all hands on deck approach.

“We were straightforward and upfront from the start, telling staff that they would have the same boss, the same pay, the same office and this made the acquisition easy.

“Because we are a Cisco company focusing on network and security, and we bought a Microsoft company focusing on the datacentre, we needed everyone to carry out the different levels of work required.”

While paling in comparison to recent announcements of 14,000 IBM job losses, 12,000 Intel cuts and 1850 Microsoft layoffs, managing personalities helps build a foundation capable of withstanding further business growth, given the heightened sense of internal insecurity in the air.

For Reilly is a realist, acknowledging that his Logicalis workforce of 200, coupled with 125 Thomas Duryea staff, require clarification that is only afforded to the merger-designers at the heart of the acquisition.

“The whole business becomes hyper sensitive under an acquisition,” Reilly said. “Everyone is questioning everything and from my perspective, the pressure increases tenfold. Messing up an acquisition is the easiest way to get fired as a CEO.”

Drawing on a desire to understand what motivates his staff, Reilly regularly taps into Maslow's hierarchy of needs, a theory in psychology which suggests people are motivated to achieve certain needs based on a five-stage fulfilment model.

“At the top is self-actualisation, which covers personal potential and self-fulfilment,” he explained. “But at the bottom is basic biological and physiological needs, such as food, water, shelter etc.

“It’s the evolution of the human being and upon announcing our acquisition, we drove our 300-odd staff back to the bottom, around basic human needs.

“Our job is to bring our team back to the top through communicating our vision and reassuring them of their place within our future.”

Educating The Workforce

As a keen student of psychology, Reilly’s appreciation of the behaviour and mind of his staff prompted another new initiative, built around educating his workforce and up-skilling his staff.

“I’ve started a three-year training program for my top 20 employees,” he explained. “I’m investing in their skills development from a strategic management perspective which includes leading change, crossing the chasm and motivation.”

Commencing his career within the Test and Measurement Division of Hewlett-Packard in 1992, Reilly classifies himself as the “last generation” of leaders who started their careers at the tech titans of industry.

“When I walked through the door, my boss said ‘see you in three months’,” he recalled. “I asked why and he told me I was going to get educated. They taught me how to write a business plan, how to manage people, how to lead from the front as well as coping with organisational change.”

Looking back 25 years later, Reilly maintains a recognition of the knowledge he acquired during his early days within the industry, knowledge which has ultimately shaped his outlook on people management today.

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“I started with a blank piece of paper and started drawing,” he said. “I looked at companies and courses and gradually pieced together a three-year program to help develop my staff.”

Citing The Business Model Canvas, a strategic management and lean start-up template for developing new or documenting existing business models, Reilly remains true to his Hewlett-Packard upbringing, drip feeding his team new pieces of information and advice at regular intervals of their career.

“Every reseller should use this to get out of the Valley of Death,” he advised. “It’s crystal clear advice.”

In essence, The Business Model Canvas is an entrepreneurial tool which allows companies to describe, design, challenge, invent and pivot according to changing market conditions, a philosophy Reilly is applying to Logicalis as it enters its next phase of growth in Australia.

Future goals

But if Reilly is to hit his numbers , and effectively negotiate the Valley of Death, it’ll take a shift in market perception.

Alone, Logicalis can leverage its list of customers to drive traditional networking business revenue, drawing on recent deals with Brisbane Airport, Crown Entertainment and Toyota.

But to expand into new markets together with Thomas Duryea, and hit those elusive larger accounts, change is required.

“I have to stretch the brand into new business models and fight hard to even be allowed the same level playing field,” Reilly said. “When we walk in and say ‘we’re here because you have a tender for outsourcing’, it’s because we can deliver.”

Although both companies have enjoyed success in chosen fields, together, Reilly recognises the transition will take time. But with the acquisition over the line and employees refining skills by the day, the direction of travel remains clear.

“There’s a little light flickering at the end of the tunnel,” added Reilly, speaking two years after lighting the blue touch paper.

Sizing up Thomas Duryea

Laughing at the thought in hindsight, Reilly initially hoped his first acquisition would take three months, rather than the eventual two year process that ensued.

In drawing on previous acquisition experience during his time at UXC Connect, the former Hewlett-Packard consultant understands the cycle is long, at times arduous, and always complex.

“But there’s an attitude that goes with buying a company,” he added. “You’ll never make a purchase if you have an exhaustive list of criteria. You might like two things but could do without another seven parts of the business.

“If that’s the case, you must make a call and assess whether it’s worth pursuing to get what you need.”

With an overriding ambition to grow exponentially, reaching $300 million in revenue, Reilly assessed the market from a services perspective, driven by the need to shift market approach.

“The big guys in the market were losing money and to see those big 600 pound Gorillas under pressure was a big shock to me,” he said. “But I know why they did, because I was in the same boat. Everyone is in the same boat and we’re all trying to move away from products to services.”

Alluding to the Valley of Death, Reilly said channel partners in Australia remain plagued by the need to realign big product numbers to services.

“We’re all in this valley because our services revenue haven’t yet caught up with our product revenue,” he added. “Resellers are switching entire businesses but it’s ridiculous to think they all can, so many have hit the wall.

“A lot are realising that this is too hard, and they are happy to bow out while they can. In the past, we all woke up and made money, it was just about getting out of bed, but that’s no longer the case.”

Filling a gap

“Previously, I’d walk up to a CIO and say, ‘Hi, I’m from Logicalis and we do network and security,” recalled Reilly, acknowledging the limited scope of his company’s abilities.

“Now I walk in and say, ‘Hi, I’m from Logicalis and I can provide you everything from consulting and advisory, service desk to the datacentre to the Cloud.”

Through utilising the expanded IT infrastructure and managed services capabilities of Thomas Duryea, Reilly said Logicalis can grow large accounts, chasing the entire IT budget rather than previous networking allocations.

“Our goal is to grow ten $5 million accounts, becoming strategically relevant and a trusted partner,” he said. “It’s a better approach than having thousands of $100,000 a year accounts because you can’t make money that way.

“But you must understand fully what gap you’re trying to fill. Are you doing it because you’re trying to take your competitor out? Are you doing it for market share? Are you doing it for capability?”

This article was originally published in the June issue of ARN Magazine.