The people who work on it are the heart of your deal. Of course, the legal, tax and financial aspects matter, but they are interpreted and applied by ordinary human beings. Why does this matter to you as a company shareholder considering your future? It matters because so many think that a deal is about mathematics or economics. It is in fact, far more about ‘soft issues’ than we all would like!
The people who work on your deal are the ‘heart’ of your deal.
It is often argued that all aspects of M&A be emotion-free, entirely based on financial modelling and return on investment. This argument would be great if it worked. I have seen many excellent offers rejected because the vendor dislikes, not the acquiring company, but merely the acquirer’s representative/s. Even if the purchaser manages to think entirely objectively, the vendor is rarely able to do the same.
It is argued that all aspects of M&A be emotion-free, entirely based on financial modelling and ROI. This argument would be great if it worked.
For many company shareholders, the firm and their own identity have become deeply intertwined. They ‘are’ the business, and the business ‘is’ them. A vendor may often also be the company’s founder. The business is closely linked in their mind with their own self-worth. Criticism of the business can therefore be regarded as a personal insult. Such owners are also vulnerable in the opposite direction. Flattery works well on them. In such cases, undue praise is heaped by canny buyers on either the firm or its key leaders. I have seen vendors blinded by this into presuming that every action by a prospective acquirer is out of appreciation for their marvellous selves. I have also seen buyers so determined never to speak well of the business – in case that is regarded as the basis for a higher price – that they terminally offend the deeply invested owners.
Both the lawyers you work with and the M&A advisors who pull the deal together need to come to you with proven credentials.
However, the human aspect is not just significant between the main two parties. Do you trust your advisors? What is the basis for that trust? Are they great people, but with little experience of what is needed? Both the lawyers you work with and the M&A advisors who pull the deal together need to come to you with proven credentials. Company owners will have rarely before walked the way they are now walking. Ordinary solicitors are of no use. The firm’s reporting accountants can do a little bit to assist, but no more. They themselves usually acknowledge this by passing you to either a specialist Corporate Finance advisor like Entrepreneurs Hub, or to a team within their own business.
You are almost certainly going to be working with people who are new to you
You are therefore almost certainly going to be working mainly with people who are new to you – on something that is likely to determine the direction of the rest of your life! You will be firmly outside your comfort zone. The only way to manage this is by working with good people who understand this and have a track record in taking big steps to help. You must factor these matters in when choosing your main M&A advisor. Do you respect their researchers, or are they just interns and gap-year students? Do you trust their project manager to represent you faithfully? Are you impressed by their negotiators?
The people who keep your business on an even keel, and more particularly those who make things grow, are crucial to the outcomes
You must also factor this human aspect in when considering who to draw in from within your own business. Do those you involve have YOUR best interests at heart (as well as their own, of course!). Do you have rapport with your sales team? There is nothing worse than trying to haggle the deal price up while the sales results are sliding down! The people who keep your business on an even keel, and more particularly those who make things grow, are crucial to the outcomes.
Next time we will look at the factors that give a deal its ‘legs’. We will investigate questions such as ‘What speeds a deal up?’, and ‘How can deal fatigue be avoided?’ Meanwhile, if you would like to discuss any of the matters raised above do contact us directly. All such contact is, of course, entirely confidential.