Acquisition Is a Partnership — 5 Tips To Make It So09 September, 2014
Buying a company is not like buying a house where you move in and never see the previous owner again. It’s more like moving into the house with the previous owner.
Thinking of an acquisition this way will likely shift the focus of negotiations to the importance of cultural integration. When buying a company, a collaborative mindset and an emphasis on merging the intellectual capital of both organizations often leads to the best long-term outcome.
Failure to effectively apprise and navigate people issues is the cause of many, if not most, M&A failures. Obsessive focus on a financial win can deliver a Cadmean victory. You may get what you asked for, but you will have failed to achieve what you actually need for long-term success.
Thinking of an acquisition in terms of winning and losing, instead of as a mutually beneficial partnership, can damage relationships that are key to new synergies and ongoing growth. Remember, the close of a deal is really just a new beginning.
Here are five tips for nurturing a collaborative mindset during negotiations:
This may seem obvious, but you’d be surprised how often buyers come into negotiations and simply state what they want. A much better practice is to pay attention to what the owner says and respond accordingly. Are the owners concerned about how their product will mesh with your existing pipeline? Are they worried about how the acquisition could affect their employees? Are they concerned about losing identity or control? Show you care about their issues by listening and directly addressing their concerns.
#2: Really Listen
Sure, you hear them talking, but have you taken the time to really understand the owners and their values? What’s important to them? How do they see their company melding with yours? What are their hopes and dreams for the new entity? Really understanding the seller’s values and what’s important to them will not only guide your conversations through the M&A process, but it will provide a valuable understanding of their company culture and how it can most effectively fuse with your own.
#3: Don’t Fixate on Price
Price is obviously an important aspect of a negotiation. However, at the end of the day it’s just one aspect of the deal. Remember, long-term deal success depends on aligning the people, organizational and cultural assets of the new entity. You can overpay for the right company and recover, but you can never recover from underpaying for the wrong company.
#4: Don’t Be Afraid To Compromise
Compromise is not a sign of weakness, but an essential ingredient for successful negotiations. By all means, ask for what you want, but also understand what’s realistic for both parties. Before negotiations begin, clearly identify not only your goal for the deal, but also your needs and wants. Needs are those things you must have in order to go forward with the deal. Wants are those things that you would like to have, but are willing to be flexible on if necessary.
#5: Look at the Big Picture
Sometimes negotiations can get tense; they can be controversial. At these times it’s important to take a step back and remind yourself of your long-term strategy. What is the goal of the acquisition? How will it add to your overall strategic vision? What will the business look like in five, ten, or even fifteen years? Ideally, both you and your acquisition should share this strategic vision. A focus on the big picture and long-term goals can often clarify the minutiae of negotiations.
Behind every company façade is a group of living, breathing people. When pursuing an acquisition your primary goal should not be to “win,” but to generate trust and a healthy working relationship with the selling company. Today’s M&A deals are just as much about achieving operating synergies as they are about achieving financial success. Smart dealmakers focus significantly on the human side of the deal, knowing that it’s critical to value creation, strategic growth and sustainable business success.