In January 2018, Vantiv Inc., a US-based provider of payments-processing services, acquired Worldpay Group PLC, the United Kingdom’s largest payments-processing company, in a deal valued at over $10 billion. The integration of these two businesses has created a global omnichannel payments leader that processes more than 40 billion transactions annually.
Stay current on your favorite topics
As the deal’s closing hit the year mark, McKinsey’s Rebecca Kaetzler and Robert Byrne spoke with Mark Heimbouch, president and chief operating officer of the combined Worldpay Inc., about how the deal came together and how he has managed the integration process, both for himself and his team. This transcript has been lightly edited for clarity.
McKinsey: What was the context of the Vantiv-and-Worldpay deal?
Mark Heimbouch: If we rewind to the global economic downturn in 2009 and 2010, both Vantiv and Worldpay were divisions of banks in their respective markets—Vantiv as part of Fifth Third Bank in the United States and Worldpay as part of Royal Bank of Scotland [RBS] in the UK.
These were two high-performing divisions. But with the downturn, both were carved out of large banks. That was the beginning of two fledgling companies with similar goals. I can speak more closely about Vantiv, where we carved out the systems, we carved out the people, we changed the name, and we went public in 2012. The heritage Worldpay journey was similar—going public in 2015—with the difference, of course, that it was focused on the UK and already had a significant presence in global e-commerce.
Prior to the transaction, the leadership of both companies had spent time together and had really gotten to know each other. You could say we knew our competitor well. There were a number of compelling reasons to combine the companies, but it really took thinking through the financial thesis. It was a matter of “can we get to the right economics for both sides, so both Worldpay and Vantiv shareholders do well?”
Payments is a very dynamic, fast-growing industry. Worldpay and Vantiv had, for the most part, complementary businesses. As we all know, growth in online and digital payments continues to outpace total payments-market growth. The two companies together now represent the largest global payments provider, with a very diverse set of clients. The merger made sense as a revenue-growth opportunity, but just as important was achieving greater scale. Growth in global e-commerce and scale were key to the thesis behind the deal.
McKinsey: How did you set yourselves up to plan the integration?
Mark Heimbouch: The deal was announced on July 4th, 2017, and that October we brought our leadership teams together to start planning. To deliver equity value to our shareholders, we had to execute on cost savings. We went through a series of workshops, so that by the time the deal closed, in January 2018, people knew who was on the leadership team and who they were going to report to. Having that framework established made a significant impact in terms of how people thought about the business.
We also communicated to shareholders and the market that we’re going to achieve $200 million in cost synergies. We worked very quickly to set targets and frame them up prior to the closing of the deal. Establishing those goals from the outset, instead of waiting for them to develop, was a very important part of our strategy and our success thus far.
While there was alignment on the thesis, there can be lots of disagreement on how to move forward. One of the most critical things we did early in the transaction—in fact, prior to closing—was to establish an integration-management office [IMO]. This made it clear that we were going to get organized around synergies and that we were going to involve people across both organizations to deliver.
Setting targets was crucial, but it was also an instrumental way to get management from both companies organized around objectives. The IMO was the vehicle we used to manage people and process, which ultimately helps to create alignment. While senior leadership was responsible for overseeing the transaction and the outcomes, it was the IMO and people across both organizations that were critical to delivering on the expectations.
As part of the process, we pulled people from their day-to-day responsibilities so they could lead the integration. The IMO kept us organized. The goal with integration is to move as quickly as you can because you need to get on with business as usual as fast as you can. And you need to minimize disruption. January marks a year since we combined the two companies, so now we’re looking forward. How do we finish as much as possible in the second year?
McKinsey: Can you tell us about your background and how you came to lead this integration?
Mark Heimbouch: I was on the Vantiv side of the transaction with Worldpay and have been at the company for just over nine years. I started at Vantiv as chief financial officer and then led the company through going public and other acquisitions. I’ve been in the role of COO for almost four years. The COO team at Vantiv was responsible for technology and operations functions, so it made sense for the group to take a significant role in integrating the two companies. We’ve built the playbook in terms of integrating the technology estate to drive a better customer experience and to drive scale. The experience of being the CFO and moving to the COO role has helped me navigate the changing landscape.
McKinsey: What do you see as the deal’s key successes so far?
Mark Heimbouch: There are several areas. First, everyone is clear about our objectives. Again, the investment thesis was twofold: growth in global e-commerce and cost synergies. You have to keep bringing people back to those two principles. Don’t forget why you did the deal.
Second, governance. The way I would think about integration leadership is twofold—the management team of senior leaders and the IMO. You want to see a nice handoff from the leadership team to the IMO team, so you can drive the transaction down to the organization. To me, that is what worked and is continuing to work.
Third, catalysts for change. We were decisive about the new operating model. Before the transaction closed, there was a leadership meeting in which we were continuing to debate the differences between the two companies. Charles Drucker, our CEO, made it clear that we were moving to the Vantiv functional model. That was a pretty crystalizing moment at the very beginning of the integration.
The other catalyst for change was being clear on how capital and resources get allocated. We could have kept throwing resources at the process, but we thought carefully about investment returns and capital allocation. That starts to drive behavior and bring the two organizations closer over time.
An integration is like being a little kid in the candy shop: you can’t keep track of everything, and you’re trying to absorb a lot. You’re getting to know new people and you’re trying to influence outcomes. There’s so much going on that you just can’t handle it all. But then, six months go by and you’re able to take a step back and see the world as it really is again, and you start to make more meaningful decisions because there’s less noise. In any transaction, or any significant change, for that matter, you have a limited window to identify the opportunities for change, take advantage of them, and then continue to go back to the thesis.
McKinsey: How did you use some of those core processes, like capital allocation, to drive change?
Mark Heimbouch: In most organizations, people try to plan incrementally. They think, “Well, I had ten resources last year, so I need 11 this year.” When you’re thinking about a bigger company, are you allocating that incremental growth to the right things or is everybody expected just to add? The process should get people to align around the strategy and start to focus on priorities and driving returns.
McKinsey: How did you manage change, both as a manager and personally?
Mark Heimbouch: It’s a process, and it’s continuing as we head into our second year. We’ve cranked it up a little bit in terms of executing our strategy by shifting assets to certain areas and away from others. It’s going to require the organization to change—not just business leaders but also how we support the businesses. We are migrating thousands of clients from legacy platforms to new platforms almost every week. We want to focus on improving the customer experience and doing a better job for the business. That’s an ongoing process.
It’s also important to understand the personal impact this change will have on people. Even within the leadership team, including me personally, people wonder if the new reality is going to work for them. I remember going back to Charles [Drucker] before the transaction was closing and saying, “Is this the role I want to be in?” You have a lot of heart-to-heart conversations to figure out your place in the integration.
I also became aware of the challenge of fatigue. How do you keep people energized? In the early days, you have people doing hard work—systems stuff is tough, converting clients is tough—and you have to have the plans laid out to accomplish that. The hours are long and the stress level goes up. You’ve got to make sure you’re motivating your team members and keeping them motivated. You’ve got to keep energy in the tank or you could lose some people you really count on—including yourself!
When you go through a transaction of this size, it’s very exciting. But it’s also natural for people to wonder, “What’s this going to mean for me? What’s this going to mean for my team?” You’re asking people to run harder for the next several years, so you have to pay attention to how they’re doing. If the people you’re counting on to lead the transition embrace change, and they have the opportunity to drive change in the organization, they’re going to be excited and invigorated. You find the right group of people, and you just keep pushing change down the organization. You also need to provide the team with a cushion or a break if needed. These things are hard, so you have to be good to the team.
The other big factor is the impact the team has more broadly. A transaction like this is a catalyst to create excitement and success. Good people recognize that and create positive energy. It’s essential to have camaraderie in situations like this.
McKinsey: What have you done differently in this integration versus some of the others you’ve been part of?
Mark Heimbouch: First of all, with two public companies, the amount of time spent on due diligence was challenging, particularly with two different listings on stock markets in two different countries. What was new for us was that we got to spend a lot of time planning for integration before the transaction closed.
The more you can accomplish early on makes a big difference because priorities change over time. I’ll give you an example. In the United States, we’re converting a legacy Worldpay business to the heritage Vantiv business. That means we have to convert all of their clients onto the heritage Vantiv platform and shut the heritage Worldpay platform down. That’s not so easy to do, because in payments the platform has a direct impact on customer experience. In my view, moving faster to get that done lets you put it behind you and moves the business forward.
McKinsey: Let’s talk about the cultures in the two companies. How were they different?
Mark Heimbouch: What happens at the outset is you go through things like culture surveys and engagement surveys, and everybody takes a step back and says, “Wow, look how similar they are.” That’s great from a values perspective but, frankly, I’ve never seen two companies that have the same culture. Companies work differently, people engage differently. Don’t underestimate the size of that challenge.
In our case, the communication styles were pretty different. When we were going through the transaction, I was working with another individual on the team to plan the integration. These were early days, and I thought, “Boy, I try to be a pretty direct and clear communicator, but this was not working.” We would have conversations and I thought we were aligned, but then the second time around I’d be scratching my head that it wasn’t getting done.
Someone showed me a magazine article about the differences in American and British communication styles. It was about an American student going to university in the UK and how the student interpreted feedback. A professor told him, “Yes, I understand what you’re saying,” but what he really meant was that he disagreed. That subtle difference in how direct people should be with each other created a misunderstanding. For us, knowledge of these cultural differences led to a robust conversation about how we move forward. Clearly, there were two styles of communication—neither was bad, they were just different.
Over the last several months, the question has been, “How do we start to align around ways of working? How do we make sure capital is allocated and prioritized, and how do we deliver?” The really tough part is in the ways of working. You come through that courting period in terms of, “Yes, we like the same things and we think about things similarly” and then move to “How do we actually work and deliver on them?” These can be quite a bit different, and that probably doesn’t end after a year. For example, we had meaningful differences in the way we made decisions, the way we interacted in meetings, and even our financial-management approaches. We needed to align and commit as leaders to be role models and support people through the change.
It’s a journey in terms of people getting to know each other, working together, and having some success together, because that success builds credibility. Then, I think, you get a good team.
McKinsey: What advice do you have for other leaders embarking on an integration?
Mark Heimbouch: It takes grit. You have to push ahead in a thoughtful and intelligent way. But you also need grit to make some tough decisions, so you don’t stall and lose control.
Getting to decisions quickly is critical. It’s important to have leadership in place and have the organization in place as quickly as possible, so people don’t come to work the first day and try to figure out what they do or who they report to. We started top down and said, “These are the areas of opportunity,” and then we drove the teams to move forward and execute on them. If you don’t do that, the risk is you’re going to be here talking about it a year later, and people will still be looking for how to achieve the objective.