First off, I’m using the term “post-covid” gingerly, since, as I am writing this article, we are going through a surge of the Omicron variant. This article is intended to shed light on deal structures that we saw in 2021 and compare them to pre-covid years, as well as surmise future structures.READ MORE >>
Deal fatigue is a condition that can arise during negotiations where involved parties begin to feel exhausted, discouraged, and frustrated in their attempt to reach an agreement. The negotiation process can sometimes be lengthy and demanding and requires players to spend valuable resources such as time, money, and energy. The inability to compromise in such negotiations not only depletes these resources but also can ultimately lead to a potential deal falling apart. Deal fatigue is a common obstacle in the world of mergers and acquisitions, one that both buyers and sellers alike have faced. From this, however, dealmakers around the globe have observed a few preventive measures that can be taken to ensure a successful transaction.READ MORE >>
Many business owners know that employees are a company’s greatest asset. Yet, they are also a potential liability. According to CNBC, more than 3.5 million Americans quit their jobs every month. The current unemployment rate sits at 6.7%. It rose to 14.8% in April, but prior to the pandemic, it was 3.5%, which was a strong job market. So, if employees are so critical to a company’s operations, how can organizations mitigate the risk of them leaving, especially immediately before or after an M&A transaction? During such a transaction, a business may find itself at a disadvantage when trying to keep valuable workers in a strong job market and during the uneasiness of a transaction. Workers may feel under appreciated, underpaid, or that they lack opportunities for advancement during this period. Looking from the outside in, a culture like this can cripple the attraction of buyers or a successful integration.
In most cases, this can be averted. But how? Paying employees more? Giving out monthly awards or irrelevant promotions? In short, giving employees true meaning day-in and day-out can be a complex task but it’s a key differentiator in a company being a place where employees want to grow their careers, versus being a resume builder. Having a personal sense of who your employees are and what motivates them can often mean more to them than any compensation, and set the company up for a successful integration. The tricky part is identifying those things in which your employees find happiness, purpose and true meaning. Tackling the following key questions will improve your M&A transaction experience, increase employee retention, and help employees find greater happiness within the workplace.
What are your employees good at completing?
Performance reviews were implemented back in the 1800s and haven’t changed much since. Albert Einstein once said, “Insanity is doing the same thing over and over again and expecting different results.” Employers have been evaluating workers on a yearly basis and adjusting the company’s workforce according to their findings for many years. When evaluating employees, it’s important to include a detailed skills assessment. Investing the time to understand each employee’s specific skills and value to the organization gives the company an advantage for future success by optimizing its workforce. In terms of M&A preparation, skills gaps can be proactively addressed so buyers don’t perceive risk and discount their offers; and, unique skill differentiators can be leveraged to improve competitive position and business valuations.
In addition to finding an employee’s niche set of skills, it’s imperative to also challenge employees on an array of different topics. Challenging employees helps to develop their skillset further, leverage their untapped potential, and optimize their performance. Small adjustments like these can help a company not only retain valuable workers for years to come, but also convey the impression of a strong group of employees for prospective buyers within an M&A transaction.
When do your employees feel most accomplished?
A sense of accomplishment is a cornerstone of any successful job. As a manager or business owner, it’s critical to recognize the drivers of employees’ satisfaction in their jobs, or “delighters,” and promote them. Is it when they’ve closed a new deal, completed service for a difficult client, or finished a task that they’ve been working on for weeks? Understanding the accomplishments that truly make employees happy isn’t that hard. Promoting and acknowledging these things makes employees feel that their work is valued.
One way to identify these “delighters” is for managers to adjust their interactions with employees. For example, having purposeful daily conversations, building relationships, and showing genuine interest in each employee’s current projects. This can also help the workforce better understand their role in the organization’s operations and success.
A Harvard Grant Study found that happiness and even financial success are tied to the warmth of one’s relationships, especially in the workplace. The study’s chief architect famously concluded, “Happiness is love. Full stop.” Working on partnerships with employees can improve purpose within their careers and the organization. Enhancing relationships with employees can help the organization get through tough times and cruise through outstanding times. In addition, having a great working relationship with employees can help ward off negative energy during the demanding process of an M&A transaction. It is important to make time for employees, engage with them, listen to them, and build relationships needed to enhance workplace happiness, improve employee longevity, and sail through the grind of an M&A transaction.
What have your employees learned lately?
Intellectual curiosity is something we all have within ourselves that can help an employee excel in any job. Being able to ask questions, learn from others, and make tasks more efficient can help employees find constant meaning at work. As a business owner, one of the challenges is getting the right curiosity out of employees. Implementing “end of the week discussions” as a group is one way to tap into intellectual curiosity. In addition, putting in place nontraditional learning environments can give employees the opportunity to learn hands-on versus behind a desk. Experiences like these can help improve the longevity of an employee’s career, along with advancing their understanding and ability to retain information. Having a workforce that is intellectually curious can be a considerable selling point during a transaction that buyers are delighted to buy into.
To summarize, multi-billion-dollar corporations and smaller boutique firms alike must mitigate the risk of losing valuable workers. Figuring out ways to make employees excited when they walk through the company’s doors is key to an organization’s success. Implementing small changes as described here can help an organization retain its top tier talent and ensure a smooth transaction. Modest adjustments such as regularly interacting with employees, investing time to understand each employee’s individual skillset, and creating an open environment that engages curiosity, will help make them happier, optimize performance, and ensure that they will continue to support the success of the organization. Acquirers treasure the ability of having a stable team on board during a transition and, as a seller, this can make all the difference in having a successful sale.READ MORE >>
Hearing the phrase "the new normal" has become our new normal. During COVID, we have all had to adjust to new situations. We are not standing in big crowds watching a parade go by in our community, and we are not crammed together in a convention center listening to a recap of the past quarter’s economic trends. In some places, we cannot sit too close to one another at a local restaurant and watch our favorite sports teams. Even with all these changes, there is one thing that will rebound: face to face meetings.
When I was cutting my teeth in life insurance years ago, we were trained on the importance of non-verbal forms of communication. Before 2020, we've had many forms of digital communication. Now it seems like we have endless options, but a short well-planned meeting can save an incredible amount of time. Fancy tech isn't the end-all-be-all. Just because somebody is using the latest tech, it doesn’t mean it’s better tech.
Here are 12 reasons why I believe face to face meetings are still essential:
- I can’t read non-verbal communications through my email and video calls I only see part of the picture. Non-verbal communication is endlessly more important than the words that are spoken. 7% of a conversation is actual words. 38% is inflection. 55% are facial expressions. These cannot be replicated remotely. This cannot be emphasized enough, so it is my number one entry on this list.
- Face to face meetings leave a lot more room for improvisation. Conversations tend to flow more naturally, lead in many directions, and lead to new opportunities.
- Engaging with people is just easier. We have time before and after for chit chat. While this might not seem important, how it relates to building human capital should be recognized. We never know what small items can lead to a spark igniting an excellent working relationship. It can be something as simple as taking a wrong turn, then one of the attendees tells you that they did the same thing their first time in the office. The two of you shake hands, introduce yourselves, and now you've started building a connection that can lead to opportunities in the future.
- “Sorry everyone. Larry can’t make the meeting today. His internet is down. Can we reschedule for later today or sometime next week?”. Now, here is a historical proverb to bring interest to this article:
For want of a nail the shoe was lost
For want of a shoe the horse was lost
For want of a horse the rider was lost
For want of a message the battle was lost
For want of a battle the kingdom was lost
And all for the want of a horseshoe nail.
Will that meeting get rescheduled? Will somebody else have to back out next time? By not having the meeting at the original time, we have opened the door for more potential problems to arise. All we have is now. We can't predict the future, and having to reschedule meetings at the last moment can lead to frustration and ultimately tank a deal.
- Maybe this one is just me, but I often feel that video calls can feel a bit foggy. Face to face meetings are crystal clear. Key points are clear and more easily understood.
- Meeting in person allows someone to go further than just a meeting. After a video conference, what happens? You turn off your computer, and everyone goes back to whatever it is they were doing. If you are the person traveling somewhere, what is likely to happen? Assuming that you are staying the night, more likely than not, someone you were meeting with will take you out and show you around town. Building human capital is what makes an organization's culture. Without these interactions, you have people in various offices doing their own things. When they can meet, interact, and get to know each other, things work out better.
- In my experience, agreeing on an offer is much easier if the buyer and seller meet in person. If the two parties have never met, people tend to get more animated in their responses if things don't go the way they'd like. But when the two groups have met, I see a much different reaction. Parties are less likely to get upset and more likely to listen to each other. Instead of blowing up and walking away from a deal, they take the time to remain calm and discuss items in a more relaxed manner. They've started building a bond. They aren't just trying to get better terms from Really Big Company Inc.; they're speaking with Larry. "Larry is someone that I went to dinner with, and everyone joined from the office and had a great time. I'm going to get on the phone with Larry and see if we can hash this out and find a middle ground." From a broker's perspective, it’s a night and day difference seeing groups that have met in person vs. those that have not.
- A bunch of people in a room and a clean whiteboard can lead to extraordinary breakthroughs and ideas. Ask Mark Zuckerberg.
- In-person meetings show mutual acknowledgment, respect, and action. 93% of people found negotiating with people of different languages and cultures easier. 82% believe negotiating important contracts in person is easier. Overall, 95% of people still say face to face meetings are essential. Also, this one shockingly doesn't have a generation gap.
- Millennials prefer face to face meetings in higher percentages than Gen X.
- Eventbrite ran a study and found that millennials are fueling the experience economy. This means instead of having materialistic items, people age 18-34 (who make up the largest percentage of the US population and the workforce) prefer going to things. Whether that's a vacation, concert, sporting event, younger people like doing things in person instead of remotely. Now, how does that transfer into the workplace? 80% of millennials prefer face to face communication with colleagues instead of 78% of Gen Xers. With this backlog of people choosing to be in person, the future looks bright for sitting across the table and speaking with folks.
- “Now, what about cost? I’m saving a fortune by not paying for my people to travel. Even if my people prefer in-person, the dollars don’t justify their preference.” To quote ESPN's Lee Corso: "Not so fast." Regarding ROI:
- Companies gain $12.50 for every US dollar spent on business travel
- 40% of prospects converted to new customers through face to face meeting
- 28% of current business that would be lost without face to face meetings
- 17% profit an average company would lose if it eliminated all business travel
After reading this, think back to some of your interactions. Could they be better suited for in-person? Gut feeling aside, the data backs the decision to continue face to face meetings. Both for sales, prospecting, company culture, and maintaining client relationships all seem to justify this idea, and this is something that we don't feel will go away in the future despite the tumultuous year we've just experienced.
Sources:READ MORE >>
The first thing that can help a buyer purchase a business is putting their best foot forward in their first conversations with a seller. Buyers are often unsure what exactly a seller is looking to hear or how to impress a seller in the initial discussion. Below are a few of the things Benchmark International tells our clients to look for in a buyer when selling their company.
- How are they funding the acquisition? It may be cash, a loan, a personal lender, or ownership in a new entity, but sellers will need to know a potential buyer’s source of funding. It’s a straightforward question, but many people will not have considered it by the time they are conducting management meetings. Having a knowledgeable and honest answer for a seller will go a long way in cementing a relationship of trust.
- How well will the buyer culturally fit with the company? Were the first questions about the owners, employees, and business operations, or were they about the bottom line? Were they more interested in meeting with the owners and seeing the business they intend to purchase, or rushing into signing into exclusivity and then learning about the business at an unspecified eventual time? A buyer with no interest in the company beyond the free cash flow rarely develops deep relationships with management, employees, and the seller with whom they may partner in the future.
- What is the reason behind the buyer’s interest? Direct competitors, strategic buyers, financial buyers, and individual investors all have different goals in buying a business, and they all fit different sellers' strategies. Being forthcoming in the reasons for your interest in acquiring the business will help conversations run more smoothly down the line, and different buyers can bring a lot to the table in terms of enhancing the seller’s business and offering their employees the security and longevity our clients are often trying to attract.
- What does the buyer plan to have our client do after the sale? Is the buyer likely to stay on for several years, or will they be in a consulting position as the buyer takes over immediately? This can affect whether a seller retains equity, offers a seller note, or works for an investor long term. Each deal looks different for the seller after a sale and having a solid plan for our clients after the transaction can help make long-term decisions for their employees and families.
- How knowledgeable is the buyer in acquisitions? Will they understand the tax implications, assignment of liabilities and assets, and other nuances behind acquiring a business, or will they need assistance from a third party? Regardless of the buyer’s expertise, a little honesty on both sides goes a long way in explaining both parties' thought process and explain that some actions that can appear aggressive or malicious are often just not well understood by one or both parties. Knowing who will work with both parties to figure out the details of the transaction can save weeks or even months of headaches later down the road.
Addressing these questions can provide a lot of comfort and understanding that can create the foundation for a sale, and in many cases, a partnership. The seller wants to know a buyer's business just as much as the buyer wants to learn about the seller's company.
We have also included handouts that go along with this webinar for you to download and view at your convenience. Please see the handouts below:
READ MORE >>