COMPTEL: Chesonis Outlines M&A Lessons Learned for Fellow CLECs

After 11 mergers in 9.5 years, PAETEC knows a little something about what makes M&A successful. First and foremost, it’s about the people. That’s the message PAETEC CEO Arunas Chesonis shared during Monday’s keynote speech at the COMPTEL PLUS Convention & Expo in Nashville, Tenn.

PAETEC just wrapped up its latest major acquisition, that of McLeodUSA Inc., and in 2006 bought US LEC. Both purchases taught PAETEC executives several lessons that Chesonis hopes fellow CLECs can use to their benefit.

“We’re all a part of the same competitive industry,” he said, urging COMPTEL attendees to rely on each other first for resale deals and other resources, instead of automatically looking to the ILECs.

In that light, hoping fellow CLECs considering M&A can learn from PAETEC’s experience, he outlined five important points — first, that planned executive job cuts aren’t always right. PAETEC learned this from the US LEC deal. Instead of asking US LEC executives what they’d like to do in the new PAETEC, assumptions were made. Only one original US LEC executive now remains with PAETEC. So, with the McLeodUSA buyout, PAETEC got to know those execs and gathered feedback on what they wanted to do with their careers. For example, McLeodUSA’s former CFO now runs his own business unit as president of the central region. “Take more time in executive decisions,” Chesonis said.

Second, he said, “Make your A-players decision makers on the integration team.” Yes, that causes more work and stress upfront, he said, but the strategy ultimately saves time and money. That’s because the people who say "yay" or "nay" to everything are involved from the start, which causes fewer do-overs.

Third, be open to accepting the acquired company’s best practices, if such a move makes sense.

Fourth, recognize that growing pains are most challenging within the company doing the purchasing, said Chesonis. Sometimes employees grumble about changes they might not understand and it’s important to hear their concerns.

Finally, and above all, “Open communication is essential,” Chesonis said. That goes for every type of company. “Whatever you can do to share the toughest things that you’re legally allowed to [share], that helps a lot.”

Open communication reduces rumors and alleviates employee anxiety over matters such as layoffs, said Chesonis. PAETEC did what it could to slice as few jobs as possible during the US LEC and McLeodUSA takeovers — the minimal numbers of jobs it did have to cut, it cut quickly. That meant employees didn’t have to stress about their futures.

Overall, Chesonis noted during a Q&A session, “We think M&A can be an ongoing part of PAETEC.”

PAETEC www.paetec.com

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