Conversations: Christian Barnard, Who Was the COO at T3 When It Was Acquired by LRW/Material+ in 2019

Conversations Christian Barnard’s done his tour of big design, with stops at Scient, frog, and Sapient (twice, first as Sapient in the early 2000s, and then more recently as Publicis Sapient). He also co-founded and sold two small design firms: Buzzbait in 1997, and Deft in 2012. After his role as Group Vice President at Razorfish, he took over operations at T3, and saw the company through its growth, and eventual sale in 2019.

Tell me a little about your experience at T3.

I joined T3 in 2015 as the Chief Operating Officer. T3 was a family owned, digitally focused design and innovation firm offering end-to-end services in brand design, product design, and loyalty and CRM. When I started, the company was doing about 20 million revenue. In the years I was there, we grew to about 40 million in revenue. We had physical offices in Atlanta, New York, Austin, and we had about 250 people at the end of 2019.

The company was 25 years old, and had a very strong creative culture, a very founder-led culture. At that time, the two co-founders—Gay and Lee Gaddis—were taking a step back. Their son, Ben–who had been with the company for a few years and was the Chief Innovation Officer–came in to be the President. And the culture there was very familial. I hate saying that, and it bothered me when leadership would say, “Hey, we’re a family,” because we’re not; it’s ultimately a company and a team and a business. But some people were there for a very long time. The Chief Creative Officer was there for 25 years. In the creative industry we are in, that’s very rare.

And the company did have a very “we’ll take care of each other” vibe to the culture. We created these t-shirts that said fiercely independent. And that was part of our jam; it allowed us to do great creative work without robot overlords of holding companies and things like that.

Overall, T3 was the best job I’ve ever had! The people were great, the founders were very generous, the culture was fantastic, and the work we were doing was truly innovative. That experience will be hard to replicate. If any of the founders from T3 are reading this right now, I would like to thank you for the opportunity!

It sounds like everything was working great; but then, T3 sold to LRW Group in 2019. How did that deal happen?

I was out with Ben one day and he asked me, “What do you think if we were to take the company to the market and sell it?” Although this was a surprise to me, I can’t imagine how long the family had thought about the decision, and how tough it was for them to move forward with any kind of sale.

So, we started meeting with bankers who facilitated the entire matchup.

Ben and I decided that because the culture was so strong and because of that fiercely independent piece of it, we were just going to do this with the two of us. Not many other people on the leadership team knew what we were doing. The family knew, but no one else on the executive team or company knew. We started going through the paces, meeting with bankers. We did our pitch deck, we did our CIM. And then we brought our CFO in, because as you know, it’s all about the financials. Then it was the three of us. And then Ben and I started going out and meeting with potential buyers, big companies, holding companies, private equity companies. We did probably over a dozen of these meetings. And they asked for all the things: What’s your pipeline look like? What’s your recurring revenue? What’s your profit? What are your growth plans? And things like that.

It was probably three to four months doing this somewhat covertly. And of the 16 that we met with, there were 12 companies of interest that were like, here’s an offer on the table. As things moved along, and became more real, we brought more of the leadership team into the conversations, which helped out a lot.

One of the buyers—LRW Group—was positioning themselves to be a platform. Their leadership team had already made about 9 acquisitions before T3. Some really small, some bigger, and at the time, T3 was the largest targeted acquisition at the time. But their intent was end-to-end digital services, research, creative agency, marketing, product design, brand design, loyalty and CRM.

It seemed like a good complement,and the LRW leadership team was very impressive; we liked them a lot. We met with them several times during diligence. And the T3 owners made the decision to go with them.

What happened right after the deal closed?

The deal completed on October 31st, 2019. We communicated it to the team, and we had to figure out how to go from “fiercely independent” to “fiercely part of a larger organization.” And that’s where one of the learnings comes in. It was a bit of shock, which I think led to a bit of lack of trust with the team. Those deals don’t just happen; they take a long time. And now the majority of teams, especially the leadership team, knew that we were in those conversations for a long time and not many people knew about it.

So I think there was a bit of a trust deficit as an outcome of the way the communication was handled, and I would handle that differently next time. It was better received than I thought, and we didn’t have a lot of turnover immediately after the transaction went through. And from my perspective, we were still operating T3 as an independent company within a larger holding company. The LRW leadership team and the PE firm were great to work with through the entire process.

When did you start to integrate the teams?

COVID accelerated a lot of integration. We went through an integration process, and T3 took the lead as the company to integrate with four of the smaller companies that focused on making things. We went through role alignment and operational alignment. We asked the different companies, “What are your operations? How do you go to market? What’s your sales process?” And then, as a combined entity, we operated as about an $80 million division.

But there were serious challenges with this. Some of them were cultural, some of them were procedural and a lot of them were communications.

For example, things like title and level: Executive Creative Director (ECD) here and Executive Creative Director there are two very different things. ECD in this one company was just a few years out of school. ECD in this other company meant 25 years of experience. And we had to do compensation alignment to rationalize some of that stuff.

Culturally, the companies were very, very different. There was a company in Seattle, one in San Francisco, one in Philadelphia. And the culture was very different not just because of geography, but because they were all founder-led organizations and those founders instilled different cultures in each one of them.

As an example, things like vacation time became a real challenge. We told the different companies, “Keep your own vacation policies and holidays.” But T3 had more vacation time. We would try to set up a meeting and some people said, “Well, we have that day off,” and someone else would respond, “Well, we have the next two days off.” And everyone asked, “How’s that supposed to work? That’s not cool.”

Little things like that seem little, but are actually very, very important big things when it’s a people-based business, and especially a creative business. So we had to create an integration plan and we had to create equitable treatment for everybody.

T3 had 250 people, the majority of whom were focused on their craft. Those people said, “As long as I get to continue doing cool work and great work and you’re not going to impact my ability to do that good work, it’s okay.” But as those teams started coming together and working on projects together, that’s when we started to see culture clash.

For instance, the acquiring company LRW was a research company. It was very, very performance-driven, a culture of “results, go, go, go, go, go results.” And although we grew at a healthy clip at T3, it wasn’t the same go-get-’em culture. It was more like, “Hey, we’re going to do more great work.”

One example was that we got rid of our time tracking. And I think LRW looked at us saying, “You guys are a bunch of children running around. You don’t have a lot of operational rigor or client rigor in your business.” I think they looked down on us; in response, we started to get the opinion of, “Well, these guys are stuffy, and they’re not creative.”

Here’s another example. LRW had a sales system whereby they asked all their leadership team to send out a number of outbound emails to targets and prospects. In their leadership meetings, they would pull up the scoreboard and say, “Jen sent out 20 emails last week and got one meeting.”

For what they were selling, it works really well. Just more widgets. You could send a blast email and say, “Need research done on some topic?” And sell that. They explained to us that, “We’ve had a proven sales system; you guys need to start doing it, too.”

And we responded, “That’s never going to work.” If I go to our Chief Creative Officer and say, “Look, I need you to send out 20 emails to people via LinkedIn,” he’s going to say, “No way.” And then the question is, “Well, Christian, why can’t you make them do it?”

Well, because we don’t do work that way. And that’s not how we sell business. That’s not how we win business, how we deliver business. That’s not how we start a relationship with a client. Mandate culture to use a selling system that doesn’t feel right? That was a massive cultural divide.

The delivery culture was another example of a big difference in how work gets done. A lot of their projects had a very, very tight project plan. You followed that project plan linearly. They looked at our work and said, “That’s a mess.” It’s not a mess; it’s iterative and it’s creative and sometimes we don’t even know what we’re going to do before we do it.

Do you think these things are possible to resolve without some sort of autocratic, top-down force?

I want to say yes, but my heart and my gut say no. That’s really hard to do unless the cultures are so closely aligned. We saw that with frog and Aricent, right? You try bringing engineers and creatives together, which makes sense to people in the boardroom at a private equity company. They think, “Oh, you design stuff, and they build stuff; just smash them together.”

In the case of frog and Aricent, there were legit language, time zone, and cultural barriers. But even after you work through that—and I do think that part is workable—it’s really about why people join a company, what they think is meaningful and important, and that’s your culture. Join frog for a reason, join Aricent for a reason, join T3 for a reason. The reason that we spend our time doing work and making things is different. And those things are difficult to align.

The opportunity for success, and the reason why we brought those different companies together with T3, was that we’re all doing creative work in some flavor and form, but we’re just doing it differently. I was hopeful that integration of these companies would be easier. But it’s still really hard because you’re changing the foundation of why people are there in the first place.

The companies LRW had acquired, including T3, were small, founder-led organizations. It starts there. You might have better success if you make the acquisition, chop off the founder level, and say, “Okay, we’re going to take these clients and these people and those clients and those people, and we’re going to start something fresh, net new.” As opposed to having these founder-led cultures coming together and trying to work, which is really, really, really difficult.

The other thing we did is a massive communication plan to our clients. We said to them, “Look: that company that you’ve been working with for 15 years is about to be acquired by another company. You’re still getting the same people, the same level of service. Don’t worry about that.” But clients feel that too. They would worry, “Oh shit, you’re going to change.” And in fact, it did change the way that we work with them.

About 2 years into the integration, LRW leadership decided to rebrand the company, transitioning all of the legacy companies it had acquired to a new brand called Material. I was part of that rebranding effort, it was really fascinating and exciting. And I think the rebrand helped everyone from the acquired companies turn the corner to become one company, with one integrated offering, and one culture.

But even with that rebrand, I still sense that you don’t feel great about the integration.

Before I left, I was leading the systems integration project for all of LRW/Material. The CEO told me, “Hey, you’re the only person with systems integration experience. Can you do this project to integrate—to select a new best in breed set of platforms and then migrate all of these companies to this new platform?” So we hired a big management consulting firm. They did a whole systems strategy and selected Workday and Salesforce. And it changed the way that everyone across the entire workflow worked, from sales to delivery, to finance, everything. And if that’s not done well, you change the way people work. You make their jobs harder and worse, and all of a sudden the morale is just tanking. When we integrated the systems, it changed little things, like how we invoice those legacy clients. The client’s like, “Well, I like the way that we were doing it before.”

I don’t know how to get around that. Because if that company is going to try and maximize their value, maybe go to market and have another private equity event, they can’t sell that company with 12 different financial systems, 12 CRM systems. So it’s a necessary evil. You can’t overlook the impact that it’s going to have on everybody, and process, and the culture.

Let’s talk about the work and clients. Were the teams able to do better and more impactful work, or work with different clients?

Synergies played a big part of the deal conversation. I truly believe the thesis behind the acquisitions, and the intention to provide top quality creative services from research through design and build is a good one. And I’m confident that over time, if they haven’t already, Material will realize that value, own a differentiated and valuable place in the market, and deliver a ton of value to clients.

But it’s going to take hard work, dedication and time. As an example, after the acquisition, we looked at their pipeline and their existing accounts, and they looked at ours. We said, “Oh gosh, you guys are in some big clients that T3 would like to work with. We’re going to start selling these.” So after the transaction, we started joint account planning sessions. The problem we ran into is the buyers that LRW was selling to were very different from the buyers that we were selling to. In fact, in most cases, they were in a very different part of the organization.

Right before I left, we sold a large digital transformation deal. It came through one of LRW’s relationships. We said, “Great, T3 can do digital transformation. So pitch them digital transformation.” And we incorporated research into the proposal. But research for us means we’re going to go do a couple ride-alongs and some contextual inquiry, stuff like that. LRW would do hardcore survey-based quant research. They said, “This is how we do it. We need this much time to do it.” We said, “No, no, we’re starting the design process there.” So it became a bit of a challenge.

And that conflict extended into who owns the client, who talks to the client, all the little petty things, as well as how the work gets done.

We had these two teams coming together, and there wasn’t any trust between those two teams yet. So every little thing became an escalation.

It was really, really simple stuff, which should be easy to have a conversation about, but that speaks to the cultural clash and the lack of trust because we hadn’t worked together before. So everything became this fire: blow up, come back, blow up, come back, blow up. They said that we’re not using the insights coming out of the research. Blow up, come back. We said that those insights don’t inform digital transformation. Blow up, come back. It was a big and important learning process for us all.

I can imagine that would drive you crazy.

Completely. All of those extra conversations are taking away from what we want to do, which is do the work… just do great work. So now you’re spending 40% of your time on deescalations and education and collaboration with the internal team, as opposed to spending time with the client or advancing the work.

What are some things that you think you could have done differently to have the deal go smoother?

It’s all about culture and communication. You have to be purposeful about the culture and either make the transaction a cultural addition or make it purposefully separate.

On the communication side, we could have brought the team in earlier to let them know what was happening, to bring them into the process and have more time to digest what was about to happen—to get mentally and emotionally prepared. I recognize there are downsides to that, too; taking the eye off the ball of our current book of business could have been disruptive to the transaction itself. So I realize that that isn’t as easy as it sounds either.

On the culture side, being purposeful about the duration of keeping companies and teams separate, vs integrating immediately. Having a more thought-through integration plan, as opposed to just saying, “Okay, we’re going to bring these companies together. We’re going to start working together.” I should have figured out some of the things that I mentioned earlier around titles and leveling and equity, and made those moves first. It was super disruptive, but unavoidable.

But I don’t think it’s all bad. A lot of what I shared with you sounds like negative learnings, but I don’t think an entrepreneur’s experience selling their design firm has to be negative. I think you need to figure out why you are selling, and that needs to be part of your pitch. If it’s a good design firm, it’s going to be wildly valuable, and so I would say, don’t settle for any reason. And if the founder is like, “I’ve had it and I’m done,” or “I just don’t want to do the finance and the sales stuff,” that should inform which buyer to go with. What’s the right fit for your buyer?

You need to be really honest with yourself about why you’re selling, and then stand firm when you get all these offers to make sure that the offer is one that will live up to what is important to your team and your legacy.