After an M&A deal has been concluded, it is unusual for the seller to depart a business immediately. Whether it is a short-term work out or a longer-term growth plan, invariably there will be is a period in which the buyer and seller will operate in partnership.
In all partnerships, be they personal or professional, the ability to achieve the outcomes and aspirations sought relies to some degree upon the compatibility of the individuals. Almost all studies on the essential components and attributes of successful partnerships, unsurprisingly, conclude that the dynamics of a partnership are determined by the same criteria as any relationship, namely, the personalities involved.
The reason for failed M&A transactions has been studied extensively by academics and professionals alike, but these studies contain little to no data comparing the success and failure rates of transactions concluded with the aid of a formal competitive M&A process and those without. However, common to almost all studies of failed M&A transactions, and often deep into the reports, are cursory references to cultural integrations, yet these are rarely addressed or understood during negotiations.
To truly understand whether the fundamentals for an effective and successful partnership exist in a new relationship is not simple, but it is an exercise that can be explored in the context of a process that exposes the business owner—the seller—to choice. It is a common misconception that the M&A processes only generate choices through the creation of price competition.However, by engaging with a variety of would-be suitors, business owners can unlock the ability to select the right partner for their business, as opposed to simply accepting the highest available offer and thereby explore value beyond monetary consideration.
Whilst price and terms certainly do play a role in such processes, the Benchmark International experience strongly suggests they are not the only factors. Numerous clients have chosen to conclude transactions with buyers who did not arrive at the highest valuation, but instead, who were seen as the right partner for them and their businesses.
In a formal M&A process, it is often at the courting stage between sellers and buyers that the risks to the buyers’ investments are identified or mitigated. This formal process not only offers innumerable benefits to both parties, but also allows an understanding to develop of the compatibility of the parties, in what are, arguably, emotional circumstances.
During formal negotiations, numerous opportunities to evaluate the attributes of successful business partnerships are present. Both buyer and seller are able to quantify their prospective partner’s approach on issues that are important to them; these may include:
• Compatible communication styles
• Acceptance of differences
• Fairness, selflessness and forgiveness
Other important partnership elements that are commonly explored during negotiations may include:
• Complimentary skills and capabilities
• Shared goals
• Market awareness, sophistication and savvy
For buyers and sellers alike, a formal M&A process provides the opportunity to understand both the business and the individuals, test compatibility and reduce the risk of an incompatible partnership.
WE ARE READY WHEN YOU ARE.
Call Benchmark International today if you are interested in an exit or growth strategy or if you are interested in acquiring.
Americas: Sam Smoot at +1 (813) 898 2350 / Smoot@BenchmarkCorporate.com
Europe: Carl Settle at +44 (0)161 359 4400 / Settle@BenchmarkCorporate.com
Africa: Anthony McCardle at +2721 300 2055 / McCardle@BenchmarkCorporate.com