Leaders and managers would agree that a merger and acquisition (M&A) deal can lead to a lot of success and opportunity — or failure. So, when the pressure is on to negotiate a successful M&A, what should you prioritize?
As you navigate the process, you’ll want to follow these six tips for a successful M&A.
6 Tips for a Successful M&A
1. Know Exactly What You Want to Achieve
Every business owner has their own reason for wanting an M&A. That means every business owner also has their own picture of what a successful M&A should look like. So before you start talking to potential partners, have a clear picture of what the combined business will look like. What will be different? What should stay the same? When you treat an M&A like setting any other goal, you’ll save yourself a lot of time and energy later on.
Having a clear picture of what you want out of the M&A also makes it easier to negotiate. Not only will you be able to confidently state your objectives, but you’ll also be able to quickly cross off potential partners who don’t share those objectives. You’ll also be able to get more out of the due diligence process as you evaluate potential partners’ missions and histories.
2. Bring in the Right People from the Start
Are you the CEO and principal owner of your company who can decide anything on the spot? Or are you part of a family-owned business where big decisions are made by a board of directors? Different companies have different leadership structures, as well as different power dynamics. And if you’re interested in a particular M&A, it’s up to you to figure out who the key decision-makers are in the organization and make sure they’re included from the beginning. You’d be surprised how many M&A deals have gotten as far as the final contract negotiations, only to fall through because a principal decision-maker had been overlooked and excluded from discussions.
It’s also worth it to identify and work with key influencers — people who can’t directly make decisions but who can support you in front of the key decision-makers.
3. Do Your Homework
Nobody wants to be surprised after an M&A deal is signed. An overlooked debt obligation, a pending lawsuit, or even a bad relationship with suppliers can completely change whether an M&A will lead to success or headache and failure. And while everyone at the negotiating table should be open and honest about the positive and negative aspects of their companies, it’s your responsibility to find out as much as you can on your own. In other words, do your due diligence.
If you find out something concerning during the due diligence process, don’t be afraid to make yourself heard, but don’t be accusatory. Keep in mind that what can be a deal breaker for your company may be perfectly normal for another company. Clearly explain why an issue concerns you and give the other company the opportunity to explain the situation from their perspective.
Chances are that you’ll come to an agreement about your due diligence concerns. But if you can’t come to an acceptable compromise, don’t be afraid to walk away.
4. Communication is Key
A successful M&A is all about building strong relationships, and strong relationships are all about communication. And while it’s important to be communicative, open, and honest with everyone in the negotiation room, it shouldn’t stop there.
Keep in mind that an M&A will affect everyone in the company, and you should remember to keep all stakeholders in the loop. Employees are likely to feel the most anxious about an M&A and are also the most likely to feel in the dark. By communicating with everyone, you can improve employee motivation as well as prevent rumors and misinformation from spreading around the workplace.
Even the smoothest M&A deals can take months to finalize, so aim to schedule regular communications with all stakeholders every few weeks. This could be in the form of a company-wide email, an open Q&A session, or even an internal blog.
5. Culture Matters
In the end, a successful M&A is more than just a signed legal contract. It’s a commitment to improving two (or more) companies by combining resources and people. Just like with any major organizational change, success means being an effective leader to your team.
As you nail down the legal and financial details of your M&A in the negotiation room, think about how other factors such as emotions and merging company cultures will play out. And it’s not just the big things that can affect employees. Even seemingly small changes, such as new job titles and email addresses, can lead to anxiety and resentment.
As a good leader and manager, it’s up to you to convince everyone that the M&A will lead to positive change for everyone. At the same time, be frank about the potential challenges so that the entire company can work to get through them together.
6. Know When to Walk Away
One of the most important skills to learn when negotiating an M&A, or any deal, is knowing when to walk away. It’s true that no M&A deal is perfect, and everyone needs to be prepared to give up a few things — that’s the nature of compromise. But you should also come to the negotiating table knowing exactly what your deal breakers are. Don’t be afraid to stick to your deal breaker terms, and don’t be afraid to walk away when the other company can’t accept those terms and share your organization’s values.
While it might seem unprofessional to simply walk away from a deal, think of it this way: it’s much better for the other company to get a quick rejection so that everyone can move on and find the right deal for them. If you spend too much time negotiating on something you don’t want, you could miss out on working with another partner that’s a better fit.
A Successful M&A is About Leadership and Communication
A successful M&A is all about building great leadership and motivation. After all, you’re asking your team and employees to effectively join a new company, work with different people, and adopt a new culture.
At Confie, we pride ourselves in prioritizing great leadership to achieve our mission and promote our company’s culture and values. You can learn more about us by getting in touch with Confie or calling us at (714) 252 2500.
