Partnership, Not Conquest: Mergers and Acquisitions

June 27, 2014

A collaborative mindset often leads to the best long-term outcome when you’re looking to buy another company.

Buying a company is not like buying a used car where you walk away and never see the dealer again. It can be more like buying an automobile with the seller thrown in. Imagine yourself at a dealership where you have to take the salesperson home with the car. You would probably negotiate a little differently.

Failing to consider the human aspect is the root cause of many, if not most, mergers and acquisitions failures. Obsessive focus on negotiated wins and financial engineering can deliver you a Pyrrhic victory. You get what you ask for, but not what you need. Conversely, your ability to take a multi-dimensional, collaborative approach can position you way ahead of buyers with more cash in their hands.

Rather than considering acquisition in terms of winning and losing, think about it as a partnership. You and the owner are forming a long-term, strategic and mutually beneficial relationship. Remember, the close of a deal is really just a new beginning.

In many of the best strategic acquisitions the owner or management team stays on at the newly formed company. If you negotiate too harshly you may miss out on significant value the owner or leadership team can bring to the merged company after the deal closes.

Recognizing the human element during negotiations can also help smooth over integration issues. The seller will remember the way you treated them and integration will be much smoother if you were amiable and respectful.

Here are a couple tips for thinking and communicating collaboratively when pursuing a merger or acquisition.

1) Listen. While this seems obvious, it is critical.  Pay attention to what the owners says and respond accordingly. Is he or she concerned about how the acquisition could affect their employees? Directly address these issues to show you listened and that you care about their concerns.

2) Understand their values. Take time to understand the owner and their values. What is important to them? What are their hopes and dreams? Not only will this guide your conversations through the M&A process, it will provide deeper understanding of their company culture and how it fits in with your own.

3) Don’t focus on price. Although it’s an easy target, fixating only on price can lead to counterproductive, hard-nosed negotiation. While price is an important aspect of mergers and acquisitions it’s just one aspect of the deal. You can overpay for the right company and recover, but you can never recover from underpaying for the wrong company.

4) Compromise. You may think compromising is a sign of weakness, but it is essential to negotiations in acquisitions. Don’t be a pushover by any means, but understand which issues you are willing to compromise on, your “tradeables,” and those you are not, your “must haves.”

5) Look at the big picture. Don’t get too entrenched in the present; remain focused on your long-term strategy. Both you and your acquisition prospect should share the same strategic vision. Consider how the acquisition will add to your overall business strategy and what the business will look like in five, ten, or even fifteen years.

As you pursue acquisition, remember that behind every company is a person. Your goal is not to “win” but to get the owner to trust you with their company.  Once you earn their trust, you increase your chances of executing a strategic acquisition that will be successful for both parties for years to come.

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About The Author

David Braun is the founder and CEO of Capstone, which he established in 1995. He created the company to meet the unique demands of mid-market companies and their corporate growth initiatives. Braun is the author of Successful Acquisitions: A Proven Plan for Strategic Growth (AMACOM, 2013). He has more than 20 years’ experience formulating growth strategies in a wide range of manufacturing and service industries. Contact him on Twitter at @CapstoneStrat.

One Comment »

  1. avatar

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