Today we’re joined by Lisa Marchese, Head of Corporate Development of American Express, where she is responsible for all venture investments, joint ventures and M&A activities. Previous positions at American Express include SVP of International Business Development, VP Corporate Development, and VP Strategic Planning Group within the last 20 years. Lisa holds an MBA degree from Columbia Business School and a bachelor’s degree from Barnard College.
This episode is about all things strategic M&A. Buckle up because we’ll discuss:
- What Corporate Development / M&A means for Amex
- Lisa’s path into M&A
- How Amex identifies great targets
- How Venture Development fits into their overall strategy
- The path from prospecting to closing great deals
- The importance of integration and how Amex deals with that
The episode is filled with a ton of frameworks and practical tips for M&A practitioners and professionals interested in the space alike.
Andi: What do you do as a corporate developer?
Lisa: Corporate development can be defined differently for a lot of organizations, but we basically deploy capital to acquire companies that we see as accelerating our strategic roadmap. Occasionally it also includes a divestiture, but that’s not nearly as fun as the acquisitions.
Andi: So how did you end up in this position? Where did you start your career?
Lisa: I have a consultant background, then I joined Amex. Later on, I became a part of the strategic planning groupAmerican Express.
I have always loved project-based work, so I moved from strategy into corporate development early in my career. Learned a ton about accounting balance sheets, tax implications in addition to what I had already known about corporate finance.
And so it was natural for me because trying to figure out how to bring new and innovative technologies into Amex is super exciting for me.
Andi: I heard from another podcast that you studied psychology in the University, which is quite far from M&A. So do you feel your psychology background was a bit helpful in your new career path?
Lisa: So I think a lot of people think about M&A purely by the numbers, but it’s actually quite intuitive. You need to get the math right as a baseline. But what makes a good acquisition of talent that you’re acquiring is the cultural fit.
There’s a lot of reading the room to figure out if a compromise is possible if you’re gonna be able to get to the right. And so I think the psychology background just helps from like listening and understanding of perspectives and motivations. The consulting really helped me have a holistic understanding of businesses.
So I think a lot of people think about M&A purely by the numbers, but it’s actually quite intuitive. You need to get the math right as a baseline. But what makes a good acquisition of talent that you’re acquiring is the cultural fit.
Andi: With your work experience at Amex and American Express, how many transactions do you do in terms of acquisitions, joint ventures, M&A activities, venture investments?
Lisa: So I think what I would say before we get to any of the numbers is all of our activity starts with strategy, as you said. So if it’s on the venture side, we tend to look at thesis areas; what technologies, what themes do we think will be emerging over the next five to seven years that are gonna be important for American Express’s customers, merchants, business partners, and so.
We may talk to a thousand, 2000 companies a year and we may end up with something like 10 investments, right. But we really. Are in search of what’s going to be additive over a five to seven year timeframe. If you think about then the M&A side of the house, we do a handful of in acquisitions a year.
By definition, we’re not a highly acquisitive company. The companies that we acquire tend to be on the smaller side of capabilities. So we bought REI to help expand our dining program for our card members and to continue to give value to the dining restaurants that are our merchants. You know, we bought another small company like lounge buddy that created better lounge offerings and better lounge services for our customers who value that part of the travel proposition.
Kabbage was a company that we acquired in 2020 that helped us expand beyond our core card offering for our SME base into other working capital loans, and cashflow management types of tools. And so it’s never billions and billions of dollars, right? It’s like the small tuck-in capability acquisitions that we can see as a path to integration and within 12 to 18 months create real benefit for our customers.
Andi: Who does the scouting at Amex? Is it the business, or is it your team?
Lisa: It’s a little bit of both. Some of the business partnership teams will go out and have lots of conversations with different companies . So sourcing is a joint effort, and what you end up with is like a list of five or six companies that are maybe interesting. You try and learn a little bit. Then we decide to approach them for an acquisition conversation versus a partnership conversation.
Andi: Interesting. And how long does this process usually last?
Lisa: Acquisitions can be made in three, four, or five months, but like the prep work that goes into that can sometimes be a year in the making. It takes time to find the right partner to take to the dance.
Acquisitions can be made in three, four, or five months, but like the prep work that goes into that can sometimes be a year in the making. It takes time to find the right partner to take to the dance.
Andi: You mentioned a couple of companies. They’re really like a leader, maybe in the restaurant booking space. Have you been eyeing them for a while before you approached?
Lisa: We don’t stalk them from afar, but I think you start to have some conversations with companies around, “Hey, if we partnered together, what could we do? Or if we were to think about opportunities to like leverage our. Our distribution channel for your technology, what could that create?”
And sometimes, that continues down a partnership path and never becomes an acquisition. Other times that turns into a conversation that a few months in, you’re like, okay, well, now that we know all of this, we think there’s real value creation in an acquisition scenario.
Andi: What drives your decision-making when you say this is a good company?
Lisa: Your question on how we decide what’s a good acquisition comes down to how well this fits our strategic roadmap. How does integration work? Right? Because we are a bank and a bank holding company, we need to ensure that the products and services fit under the bank holding company rules.
We also need to ensure that the cost of uplifting and getting products and services, that when they’re a standalone company, can be run one way into an Amex environment, whether InfoSec or other, you know, compliance-related issues.
We need to make sure that works, but at the end of the day, it’s taking a step back and saying if we own this capability, we believe that it will accelerate our ability to drive revenue from our customers.
A better-improved customer experience, new card acquisition. And so we get, you know, a handful of very tactical KPIs that we say, yes, this is going to make a difference to us if we own it.
We need to make sure that works, but at the end of the day, it’s taking a step back and saying if we own this capability, we believe that it will accelerate our ability to drive revenue from our customers.
Andi: Before approaching a company, how do you know its exact financial strength so you can judge if they are worth it?
Lisa: We approach it and we say, okay, give us some of your essential financial information. We’ll look at some comparable transactions. We’ll look at other public companies or whatever is the right comparable, and we’ll come up with a value that is fair and fits within our return parameters.
To your point, if we’re buying this as a cost avoidance on tech, there’s a number that’s gonna make that work and then there’s one that won’t. And so, but I do think the discipline comes from making sure we’re having a lot of conversations and we feel good about the options that we have in terms of the partnership, build or acquire.
Andi: Out of numerous options, how do you decide on the companies are you gonna acquire?
Lisa: First, we ask a company if they would like to be acquired, and the answer isn’t always yes.
Right? Sometimes they’re interested. Maintaining themselves as a private company and they want to go it alone they have a vision for success and they think it’s too early to sell. Sometimes they don’t want to be part of a bank or bank holding company, and sometimes they say, you know, we didn’t think Amex was a natural buyer of our services, but if you get to a yes, then culture becomes super important because.
We’re hiring for platforms, for products, for capabilities, but we’re also hiring talent, and we expect that talent to come and be part of the Amex machine and help us continue to innovate beyond whatever the capabilities were that we acquired. And so, our leadership principles, how we do work operating with integrity.
You know, we could talk a little bit about our philosophy on diversity and inclusion and making sure that our products and services and our teams represent the diverse customer bases we serve. If a company that we’re acquiring doesn’t have that same set of values, the product might be great, but it makes all aspects of integration super challenging, right?
How they sit on a new leadership team, and how they think about doing work the right way. Like it all gets very complicated fast. And so culture is massively important.
If a company that we’re acquiring doesn’t have that same set of values, the product might be great, but it makes all aspects of integration super challenging, right?
Andi: After companies are acquired, do the founders usually stay on for a long time or do founders in their kind of, okay, I’ve done this. Need to run away, need, need my next thing?
Lisa: It is actually part of the dialogue and a lot of what we expect founders to do is to help manage a very smooth transition. And depending on the business, that can be 12 months. That can be 24 months, that could be 36 months, right? It really depends on the integration plan.
But there is an acknowledgement that if you are a serial entrepreneur, even if you’re selling your company to American Express, you may not. And it’s unlikely cuz most of them haven’t chosen to be here for five to 10 years.
So we expect it, we plan for it. We have a lot of conversations about what is the right timeline that gets.
Andi: What other things make an impact in your decision-making? What happens during due diligence?
Lisa: So there’s a couple buckets that diligence falls into, right? We’ve talked a little bit about the culture piece and the people piece, but we have our HR teams who go and they spend a lot of time understanding, do you do performance reviews? What’s the culture?
Is there 360 degree feedback? Right? So beyond. Some of the more qualitative, like have a conversation with me. There is a structure to it. There’s also a lot of time spent on the technology, right? And not just what’s the technology that exists, what language was it built on? What platform does it sit on?
Because our engineers and our tech teams are both looking at the quality of what exists as well as what we will need to do to uplift it in our infrastructure. Then there’s a lot of, you know, compliance. Regulatory type of diligence that will happen. And then always financial diligence to make sure that we understand what’s in the books and records.
There may be product demos that happen a lot. You know, we’ll have people come and say, here’s how our product works. They’ll show it to more of the business and the product team. That’s also super helpful for people to get excited about the capabilities.
Andi: Do you perhaps have a checklist for M&A transactions?
Lisa: So it’s not as prescriptive as a checklist, but there is a framework and in any transaction. You need to make sure 80% of what’s in your framework is appropriately satisfied and you feel good about, right?
There’s always going to be something that’s not exactly what you wanted, and as long as that like 80-20 balance is there, if it’s 80% good, you can figure out how to fix the 20 or adjust the 20 or manage through the 20.
There’s always going to be something that’s not exactly what you wanted, and as long as that like 80-20 balance is there, if it’s 80% good, you can figure out how to fix the 20 or adjust the 20 or manage through the 20.
Andi: How do you handle if you have to kind of reject a company that some business leader is really into?
Lisa: You can imagine that occasionally, I’m a very popular person inside these four walls when I say no to something like that, right?
But it happens, and I think it comes down to a few things, right? One, you have to be super fact based with why it won’t work, right? And so, I try and do my best to paint the picture of what will feel good in terms of getting a deal signed today is gonna create all these downstream management and operational and financial challenges for you.
So we should really be thoughtful about this. I think the second thing is, again, the benefit of being in the job is I have a track record of trying to get the right thing done for American Express. And so it’s not personal, right? It’s just a business decision. And then the final thing is back to sort of the sourcing.
Then my job is to show up with an alternative and say, let me find you something that you will like as much as this company that you seem so enamored with. I’ll bring you others to do. And I have found over the years, it’s the ability to be super disciplined about what will and won’t work, regardless of who’s asking.
So it doesn’t matter if it’s the CEO or an executive vice president or like a director, right?
Andi: That brings me to the next question, what makes a transactional deal a success in your eyes?
Lisa: So if it’s a capability that we fully integrate, you don’t wanna find. In our ecosystem in three to five years, right? We bought a company that had chat-based technology that now powers ask Amex, but you can’t figure out what was part of the company that we acquired, who was the talent that we acquired.
It’s all like inside Amex and, and it hums and it works and it’s a great capability. The other thing I think is, you know, have we changed our customer’s perspective of the services that we’ve provided? Right? So like Resi is a great example. Restaurants are super happy with the table management software and that part of the business.
Our customers are super happy with their ability to get dining reservations at cool and hip and unique restaurants, and we use it as a customer acquisition tool. So those are things where you can look at and be like, yep, that worked exactly. As we thought it would. Right? And so to me it’s, it’s a story that’s best told over like a three to five year period.
You know, six months in, nine months, in, 12 months in, you need to make sure you’re course correcting so that you get there. But it’s really hard to answer that question until you’ve owned companies for three to five.
Andi: After the acquisition, what goes on under the hood in terms of integration?
Lisa: Integration is the core of what we do in some respects because as I say to my deal team all the time, if things get integrated poorly and no business person wants to buy another company, we’re outta business tomorrow.
So like we don’t get integration, right? We’re not buying anything else. And so it would be very easy for us to be like, whoops, we closed somebody else’s problem. But I do have a small integration team, and they, as I say, have seen the movie over and over and over again.
They partner with our business folks to really. Do thoughtful integration plans predicated on lessons learned from prior integrations, and they will stay involved with a transaction for. At least two years post-close. Not running the day-to-day, but you know, it starts as like, let’s get emails updated, let’s get general ledgers hooked up.
Like that’s the core of what they do. But then it turns into a bit more of the advisory, Hey, we’re thinking about this and we don’t know how to think about it. What you know, what was the original business case? How should we think about it? So there’s a long tail. , we acquired companies 10 years ago and somebody will still come back and ask me about it.
So there, there’s a long tail of stuff that happens, but I would say the core of what we do is for at least two years after acquisition,
Andi: What are you looking for in people? What and how do you try to construct a team?
Lisa: So like the curiosity is super important and the willingness to get into the weeds and the technical pieces of, explain to me how the technology works. Explain to me how you acquire customers. What is your sales lifecycle? Because you know, some of the folks on my team, a lot of them are former investment bankers.
Some of them are, you know, finance people that have come over. Some of them are former VC and consultants, but everybody has the option after they do a deal If, if there is an integration role and they want to go work with the company for a period of time, they can do that. And some folks come back and some folks stay in the business.
But I think it’s important to have a group of folks that have seen all sides of a transaction. Like 10 years ago, we bought a loyalty company, I used to say, oh, well that’s the integrations team’s problem. They’ll figure it out.
And then I was on the integration team. I stayed with the transaction, I integrated it, and all of a sudden all these things that were so easy for me to say as a deal person, I was like, Ooh, now I have to live with that, and it has made me a far better deal person cuz I’m like, don’t push off the hard conversation and shove it to someone else to do post close. Like you gotta figure that out now. So I do think that diversity of perspective is super important.
As you think about a well-rounded team and the person who thinks that the negotiation parts or the real sexy parts of the job, they need to also be willing to spend time with the people who are like trying to figure out how to hook up general ledgers, right?
And then I was on the integration team. I stayed with the transaction, I integrated it, and all of a sudden all these things that were so easy for me to say as a deal person, I was like, Ooh, now I have to live with that, and it has made me a far better deal person cuz I’m like, don’t push off the hard conversation and shove it to someone else to do post close. Like you gotta figure that out now. So I do think that diversity of perspective is super important.
Andi: What other hard skills or soft skills come to your mind when you have a potential hire in front of you?
Lisa: So I would say there’s a fair amount of this. You know, you made a comment about late nights, and you know, there’s some of this, that the job requires a lot of togetherness.
So you want somebody who’s like, got a sense of humor, as it looks at like hard things that don’t have a playbook, haven’t been done before and says, that sounds great, right? Because that’s really what we’re being asked to do. And sometimes it’s 11 p.m. or two in the morning or whatever the hour is.
So you need. It’s super important to have balance, right? Because some of what happens are that we all have personal lives to manage. You need to trust your team, and you need to be able to tell your team tonight, I promised my kids I would be home for dinner, so I can’t do the seven o’clock call.
And I trust that my team, whether it’s the senior to me or junior to me, is gonna be able to manage that call and catch me up after. That’s super important. If you wanna be able to do this for a long time and in. Communication skills are critical, right?
Andi: What do you think young finance professionals should focus on to improve themselves if they want to go into corporate?
Lisa: Go outside of the like technical, like math and finance components. I think to think about how either in your resume, in your cover letter, or or in your interview y, you would describe something that you did that was non-typical or non-standard, or describe a challenge that you took on that everybody else thought was hard or risky.
and if you can describe that and how you approached it and give examples, whether it was a project or a product, or something else. Doesn’t have to be M&A related, like it’s understanding and highlighting your ability to accept risk and take calculated risks,, and have the outcome then be good.
Andi: Awesome, Lisa. It was really interesting for me to get an insight into this sort of function that I haven’t seen in this way. So thank you so much for taking your time. I want to give you the last chance to say any closing remarks, anything you want to let go, anything you want to say before we close this up?
Lisa: M&A is a team sport, right? And I hope that that came through the conversation, but it’s also. Need more business strategy. And so I think success in a corporate development function is figuring out how to be the best partner to your business folks you can be so that you’re helping them accelerate their vision, your shared vision.
It’s hard to be a corp dev group on an island with exciting ideas that don’t fit the strategic vision of your company.
Andi: Awesome. Thank you, Lisa, for your profound knowledge of this entry into corporate development and have a fantastic day.
