The Softer Side of Mergers and Acquisitions

A common error in the M&A game is to over-delegate the process to the financial team. I had a highly successful client who put an entire acquisition in the hands of his CFO. Like many (but not all) of his kind, this financial executive could only see or understand spreadsheets. He had zero patience for the “soft” side of M&A, which turns out not to be so soft when it sabotages the deal.

In dealing with the seller, our hard nosed CFO had just one focus: beating down the other side to the lowest possible price. There is one situation where this approach is legitimate – when you plan to close your acquisition and sell the assets. But more often than not, you are seeking to buy a going concern that you intend to expand after the purchase. That means you will be working side-by-side with the people that face you around the negotiating table. They will remember how you treated them once integration begins, and you will pay for your miscalculations – very likely in hard dollars. Buying a company is not like buying a car where you walk away and never see the seller again. It is more like buying a car with the driver thrown in.

In the case of my client, the transaction never even reached a conclusion.

The refusal to accommodate the human dimension is the root cause of many, if not most, M&A failures. Obsessive focus on negotiated wins and financial engineering can deliver you a pyrrhic victory. You get what you ask for, but not what you need.

To be clear here, I am all in favor of vigorous negotiation and taking a stand for your goals. But in addition, you need to cultivate a breadth of awareness, and an informed understanding of the many dimensions of M&A.