Balance sheets, market shares, and strategic advantages are often what drive mergers and acquisitions (M&A). However, it's crucial to remember that behind every business deal are people with emotions, dreams, and histories. Humanizing the M&A process makes it smoother and enhances the likelihood of long-term success. Here, we delve into how to look beyond the transaction with Ascend Advisor’s Partner, Martin Belak-Berger.

1: The Why: Clarify Your Objectives

Before jumping into your M&A journey, it’s essential to understand the why behind your decision to sell, acquire, or merge. Yep, we’re looking at you, Simon Sinek. This clarity of purpose is the cornerstone of a successful transaction. Are you looking to exit the business entirely or slow down your involvement? For some, the goal might be achieving economies of scale, expanding into new markets, gaining more leverage, or eliminating competition.

According to Martin, knowing your objective helps shape your strategy and guides your decisions.

“It’s essential to get to the bottom of what the client hopes to achieve,” says Martin. “That’s usually my first question: ‘In a perfect world if this worked out, what would your best hopes and dreams look like?’ Until you tell me what it is that you want to achieve, I can’t help you,” says Martin.”

Martin explains that the best way forward for all involved is to come to the table with a roadmap or, at least, a destination so he can help you get there. He also acknowledges that the M&A process can seem daunting for some.

“In many cases, it’s someone’s life work that they have emotional ties to, not just financial ties. It can be scary,” says Martin.

If there are multiple stakeholders, a clear objective and purpose also apply. It’s problematic to arrive at a fork in the road without indicating that you both plan to head in different directions. Fostering trust and transparency from the outset will set you up for success and an overall more pleasant M&A experience.

2: Shared Values: Bring Magic to the Merger

Merging businesses is like blending families; aligned values and mutual respect are crucial for harmony. Desperation should never drive a merger. Instead, take the time to find a partner whose vision, culture, and integrity marries yours. This alignment can significantly ease the integration process.

“You must do your due diligence to ensure who you’re merging with shares common values, and that goes all the way through,” says Martin. “When it comes to HR, how do they treat their people? Even marketing. It impacts every aspect of your organization. I’ve seen what happens when parties aren’t aligned, which can be very negative.”

Cultural clashes are a common pitfall in M&A, often leading to employee dissatisfaction and high turnover. Ensuring compatibility in values and company cultures sets the stage for a more cohesive and motivated workforce. This synergy enhances operational efficiency and drives collective growth and innovation.

“Each person will likely have some say in business operations, and there must be give and take. If you have common values, it can be a terrific thing,” says Martin.

3. Respect: Honor the Seller’s Attachment

When acquiring a business, remember that it’s not just cha-ching; you could be acquiring someone’s life work. This sale might result from years of dedication, passion, and personal sacrifice. Showing respect for the seller’s legacy can significantly affect the negotiation process and the post-acquisition integration.

“It’s good practice to be complimentary of the business and what they’re doing so the seller knows you care,” says Martin. “This might be something they’ve spent twenty or thirty years building, a big part of their life. Perhaps they have key employees they feel strongly about and want to ensure they have a future in the company. That their customers are taken care of. This could be the biggest financial decision of their life, but an emotional one, too.”

A respectful approach fosters goodwill, making the transition smoother for everyone involved. This respect honors the past and builds a foundation of trust and cooperation for the future.

4. Strategic Pricing: Beyond the Full Price Tag

While it might be tempting to pay full price in cash to secure a quick deal that looks good on paper and that you’re emotionally attached to, think before you hit pay. There are other strategic options to bring into play.

“Say, I think your business is worth 10 million dollars, and we give you 10 million dollars,” says Martin. “Then, for some reason, the market goes down, like Coronavirus. The recourse is to sue, which is incredibly expensive with uncertain outcomes. So, I won’t pay 10 million dollars and take all the risk.”

Martin explains that there are different options you can present here, and that’s where Ascend Advisors can guide you. Perhaps it’s a deal that stretches out over several years, which can be a tax benefit to the seller. Or an earn-out where there’s a vested interest in performance. Or, the most obvious, a discount.

“So, maybe I’ll offer you 5 million dollars, and we’ll do a note over five or seven years. Or, we’ll sweeten the deal, and if your sales grow proportionately, you share a little bit of that. But if you want all cash? I’d insist on a steep discount of around 40%,” says Martin.

5. Your Tax Advisor: Make it Personal

Seeing your tax consultant as more than a transaction handler can profoundly impact your M&A success. These professionals are crucial in navigating a merger or acquisition’s complex financial and tax implications, based on your wants and needs. The deeper they understand your purpose and objectives, the better they can tailor their advice and strategies to achieve favorable results.

“We don’t have a silver bullet,” laughs Martin. “But our strength lies in knowing our clients, what they’re trying to accomplish, their risk profile, and their emotional background. You can only get that understanding by spending time with your client.”

Martin expresses that this trusting relationship is also required in difficult conversations, like letting down a client who believes their business has a higher value than it does or uncovering that they’re perhaps not yet ready to make this mammoth decision. What you’ll also benefit from with Ascend Advisors is access to managers and partners at a high level to walk you through this journey.

“Once we’ve invested time with the client and understand their needs and desires, we have the tools and a great group of people to help you. That’s our niche; we’re very invested. We get to know our clients in a personal way. Where we understand that this is their baby.”

Humanizing M&A

Mergers and acquisitions are more than dollar signs; they can be profound, life-altering events for everyone involved. By adopting a human-centered approach, you navigate M&A complexities with empathy, respect, and strategic insight. Understanding your objectives, aligning values, honoring legacies, leveraging strategic pricing, and collaborating closely with your financial advisors are all critical elements of this approach.

In the end, the success of a merger or acquisition is not only measured by financial gains but also by the satisfaction and well-being of the people behind the business. Keeping the human element at the forefront can create lasting value and build a legacy that transcends mere numbers on a balance sheet.