November 10th – November 16th
PERSPECTIVES by Eric F. Risley
Contrary to popular belief, success in M&A is not Machiavellian negotiations, quite the opposite. Most fundamentally, successful M&A is building a shared vision of the future and establishing mutual trust.
As an acquirer, the motivation for acquisition is to fulfill a strategic need. There are many alternatives available, including building the capabilities themselves or acquiring a well-suited existing product, business, and the excellence of the people who built it. Multiple alternatives for acquisition are available, albeit each unique, with positive and negative attributes.
From an acquirer’s perspective, M&A transactions follow a predictable pattern. Internal determination of strategic need – assessment of alternatives – opening of target acquisition conversation(s) – building an initial understanding of the product, technology, business, and people – building an internal business case to support the acquisition and risks – assessing value based on that business case – making an offer – negotiating – both parties agreeing to the outlines of a transaction – entering into an exclusive due diligence period – deep due diligence to understand all aspects of the business and people being acquired – negotiation of a definitive acquisition agreement – execution of such agreement – closing. This takes months and sometimes quarters.
The seller essentially mirrors these steps with their own objectives in mind. Most fundamentally, what are our alternatives?
Every interaction over those months is a test of transparency, integrity, accuracy, and conviction for both sides. These traits are the essential foundation and the guiding principles of successful M&A.
Both acquirer and seller are well served by keeping their counterpart’s point of view high in mind.
