Selling your business is like organizing a wedding. Countless people, tasks, and systems must align for the big day to succeed without a hitch. When the bride and groom drive off in a cloud of confetti, or in an acquisition, when you and the seller close the deal – happily.
With so many moving parts, acquisitions (like weddings), need careful planning to avoid deal fatigue, a condition where the buyer is dissatisfied with progress. Slacking off or letting standards slip during any stage of the process can result in stagnation, the buyer losing interest, and your deal collapsing.
How do you keep your deal moving until your big day arrives? How do you ensure you, the buyer, and your teams complete their tasks without alienating each other? And how do you recover when things go wrong? Problems will arise – it’s only a matter of what and when.
Learn answers to these questions and more below. Outside of family events, few things in life are as important as an acquisition – especially if it could change your life and that of your loved ones. Invest your time and energy into pulling it off, and you’ll dodge deal fatigue and walk away happy.
1. Treat the Buyer Like a New Family
Acquisitions are more than just transactions. They unite you with a new family. A wedding includes the bride and groom’s wedding parties. Each side has parents, grandparents, siblings, cousins, aunts, uncles, etcetera. In an acquisition, you and the buyer each have staff, legal counsel, accountants, wealth advisors, and so on – and you all need to work together.
Closing day isn’t when you shake hands with the buyer and walk away never to see or hear from them again. After a wedding, you reunite with your new family at Thanksgivings, Christmases, birthday parties, and more. After acquisition, it’s likely the next day. Forget to treat the people on the other side of the table like people, and you introduce friction later.
Once the transaction is consummated, as it were, you still maintain a relationship with the buyer. And so do your people. If you or your representatives were a pain in the backside during the acquisition, don’t expect them to do you any favors after closing day. Narrowly missed that earnout payment milestone? Tough luck. You might not close your deal at all.
Instead, treat any acquisition like joining a new family. Do your best to impress, even when negotiating, and with the utmost kindness, and you’ll set yourself apart from countless other sellers who treat it exclusively as a transaction.
2. Ensure Everyone Pulls in the Same Direction
An acquisition is an intricate process involving many different people. If those people don’t pull in the same direction, chaos ensues. Like organizing a wedding, you need to keep people accountable. Make sure the flower guy delivers. That the cake is made. The invites were sent. The list goes on, and you have just as many deliverables (maybe more) during your acquisition.
Is an attorney running behind on paperwork? Is financing in place? Have you or the buyer got approval from the State Department? Who’s checking on the legality of the sale? You or the buyer could be the most knowledgeable people on the planet, but if you’re not pulling toward the same goal, mistakes will ensue.
Take the construction of the High Rhine bridge connecting the Swiss-German town of Laufenburg, for example. Swiss engineers calculate sea level using the Mediterranean, but the German engineers used the North Sea, and someone doubled the difference instead of subtracting it, resulting in a height difference of 54 cm between each side. Thankfully they corrected the error in time, but you can see how little things can snowball into disaster.
And it’s not just ensuring everyone does what they’re supposed to but also that they do so on time. What’s the point in your accountant supplying financial docs weeks after the buyer requests them?
Create a list of tasks. Set deadlines for each. Assign them to your staff or advisors. Keep everyone accountable and pulling together, and then your deal will gather enough momentum that very little can get in the way of a successful close.
3. Communicate
“The single biggest problem in communication is the illusion it has taken place.”
George Bernard Shaw
You might think that just because a meeting took place, everyone is now doing what they’re supposed to. Your attorney is preparing your digital minute book. Your accountant is tidying up your profit and loss (P&L) statement. Your CTO is compiling code for inspection. But if no one has communicated since, how can you be sure everyone is still on track?
One meeting to establish goals and assign tasks isn’t enough to carry you through to closing day. People get side-tracked, make assumptions, look for shortcuts. Time amplifies even the littlest deviations from your acquisition plan. You might have got everyone on the same page on day one, but without communicating, how do you expect to keep them there?
Overcommunication doesn’t exist in acquisitions. If you genuinely want your transaction to close, set up regular and efficient communication between everyone involved. It’s not enough to rely on people to communicate when they need to – while you’re most invested in your deal closing, others might be less so, so set expectations early.
A daily meeting is a good start. Ideally, with your key acquisition people on the call. Slack or other communication applications can bring your and the buyer’s teams together to update progress, too.
One of my favorite examples of communication done right is the Transcontinental railroad. Linking Iowa to California and involving three railroad companies and countless engineers, surveyors, and laborers, it was one the most ambitious railroad projects at the time and required an unbelievable amount of communication and coordination to succeed.
Yet succeed it did despite challenging terrain of varying altitudes, hills that had to be blast through, and hiring and managing thousands of laborers. Your acquisition is small in comparison, yet subject to manifold challenges that without proper communication, can threaten to derail your acquisition long before you arrive at closing day.
4. Recognize That Things Will Go Wrong
Few people are lucky enough to have the perfect wedding. Drama seems to be baked into the process, from setting a date to pre-ceremony jitters, and if you’re not careful, it can ruin the experience. It’s the same with acquisitions. You might spend a whole year planning for your exit only for something outside of your control to thwart your plans. What happens then?
Sure, a catering mishap or family argument can spoil a day you hoped would be perfect. But with time and distance, the sting of these problems fades. They become things to laugh about, their sharpness blunted by the relief that it all worked out in the end. Yes, a million things can go wrong during your acquisition, but they needn’t stand between you and your exit.
Buyers expect problems and so should you. Most challenges are surmountable with inventive thinking and collaboration. Be honest when you’re at fault and work with the buyer to resolve the issue. If you forgot a line item in your P&L, can’t locate a personnel file, or didn’t pay quite the right amount of tax one year, get in front of the problem with a solution. Your buyer might overlook these issues if you adopt the right attitude.
That said, ensure you evict the skeletons squatting in your closet long before acquisition talks begin. A genuine oversight is easy to overlook, ill-preparedness or arrogance less so. Only if you’re earnest from the outset can you ever hope to overcome the challenges of your acquisition when they arise.
5. Closing Is Just the Beginning
Marriage unites two families. Acquisitions unite your people with the buyer’s people. When you sign the asset purchase agreement, you’re committing yourself, at least for a year, to the buyer. Even if you’re not providing transition services, you’re still on the hook for representations and warranties. You can’t cut ties with your business the moment the wire lands in your account.
How does this help the momentum of your deal? If you recognize that closing is not the end, but the end of the beginning (to paraphrase Churchill), you’ll build much better relationships with your buyer, making it easy to overcome obstacles to closing. If you treat your acquisition as a transaction only, you make it much harder to repair damage or eliminate those obstacles.
You are not selling a car. You are, in some ways, selling an organic entity that grows and contracts, and has periods of wellness and illness. Yes, it’s just a business, but think of how far its impact is felt, the lives it touches, the futures it enables. You are, in a sense, its parent, and like a wedding, you want to ensure the family you’re marrying it to has its best interests at heart.
Finding such an alignment of purpose isn’t easy. You might want to hire an advisor to help find and vet buyers for you. Or at least consult with someone who’s been through the acquisition process before. But when you find that person and recognize that you’re going to work with them long after your deal has closed, you’re more likely to negotiate a deal that makes both of you happy.
What Is an Acquisition?
An acquisition is when one person or entity acquires or buys either a controlling interest in or the assets of another. In business, an acquisition involves the buyer buying all a company’s assets or stock to become its new owner. Acquisitions fall into two categories, financial and strategic. A financial acquisition is where the buyer of a company expects a financial return. A strategic acquisition is usually where one company acquires another to gain a strategic advantage or achieve its long-term goals, such as entering a new market, launching a new product, or acquiring a competitor.
What Is Deal Fatigue?
Deal fatigue occurs when one party to an acquisition, either the buyer or seller, pulls out of the deal because of a perceived lack of commitment on the other side. Maybe the seller takes too long to respond or the buyer repeatedly makes lowball offers, for example. Deal fatigue can also occur when one party isn’t moving fast enough for the other. This doesn’t always point to a lack of commitment, but also a lack of preparedness or willingness to negotiate.
Why Do Buyers Pull Out of Acquisitions?
Buyers might pull out of your acquisition for many reasons, including:
- You can’t answer their questions.
- You appear to be ill-prepared for the acquisition process.
- Your asking price is too high.
- There are issues with your business such as pending litigation.
- Your financials are untidy.
- You allowed growth of profits or revenues to stagnate.
- Key staff refuse to work with the buyer post-acquisition.
- Macroeconomic factors such as financing or interest rates.
To avoid buyers pulling out of your acquisition, ensure you prepare to sell your business well before you list it on a startup acquisition marketplace. Get a professional valuation, tidy up your financials, resolve any outstanding problems with the business, and ensure revenue is scalable post-acquisition.
The content on this site is not intended to provide legal, financial or M&A advice. It is for information purposes only, and any links provided are for your convenience. Please seek the services of an M&A professional before entering into any M&A transaction. It is not Acquire’s intention to solicit or interfere with any established relationship you may have with any M&A professional.
