Loren Shifrin is the CEO for Revolution Capital, one of the country’s leading providers of factoring and cash flow financing.
getty
As the CEO of Revolution Capital, I’ve negotiated several mergers and acquisitions (M&A) over the years — including five in the past two years — and along the way, I’ve learned a lot. While each M&A is individually unique and should be managed as such, there are some key things that are consistent across the board. Based on my experience, here are five tips to help ensure a smooth and successful M&A:
1. Ensure fairness for all parties.
There is usually a period of time when you will need to rely on the former principal(s) of the acquired organization, so if they feel short-changed or deceived in any way, this can jeopardize the entire merger. The best deals I’ve negotiated are those where everyone feels satisfied; so be open, fair and honest. Successful partnerships are dependent upon how each party enters into the transaction.
2. Realize that culture is key.
Nearly everyone who has been a part of an acquisition has experienced the “us versus them” mentality. It’s a reoccurring theme for months following the process — and it can be quite detrimental. Culture shock is real on both sides and needs to be addressed immediately before the operations manager jumps in with the usual excitement to plan all the logistics and protocols. This all starts with effective communication. First, I recommend a change in the language that starts from the top down. Encourage employees to use words like “ours” and “we”: Our clients, our staff, we secured, etc. This is of critical importance for a strong corporate culture.
I also recommend immediately advising everyone that their jobs are safe. If employees believe they’re being fired on day one, it can cause a downhill spiral, which is difficult to come back from, damaging any hopes of a healthy working environment. Of all the acquisitions I’ve done to date, I’ve never had to fire or downsize.
3. Learn the value of a reputation.
You’re only as good as your last deal. This is a very true statement — but I recommend you take it one step further with a very effective tactic I use regularly. Invite your potential new acquiree to speak to one of your previous merged groups. It’s one of the best and easiest ways to close a deal. Their opinion of you is 100 times more valuable than your opinion of yourself because reputation is everything. Be careful not to damage relationships by alienating staff or failing to listen to key players as this can negatively impact the next deal you do. Your reputation should never be left to chance. Own it, take control of it and use it to your advantage.
4. Know when to walk away.
Not every opportunity is worth closing. There is a belief held by some executives that acquisitions in and of themselves are worth doing, just for the sake of doing them — like growth for the sake of growth. This isn’t true, nor is it a smart and sustainable approach. I’ve had to walk away from both good and bad opportunities on many occasions. Sometimes it’s because the other organization didn’t fit into my wheelhouse. In other instances, I didn’t see any clear value that I could bring or my valuation of the organization didn’t align with the selling principals’ valuation. In some instances, the ethics, morals and culture of the selling company is so toxic that it wouldn’t be worth adding them to the portfolio.
5. Secure alignment from the right people.
As an outsider, you won’t be able to generate support as quickly as trusted sources within the selling company. This is why it’s key to invest in these individuals early and demonstrate your commitment to them. Typically, these employees aren’t involved in the sale, so it’s important that you communicate effectively with them so they can make informed decisions — no manipulation, just open and honest interactions. The success of any transaction of this magnitude is much more likely when all parties are aligned and working together to achieve a common goal.
As a final note, remember it’s key to have healthy relationships with your partners. For mergers, these are relationships you must maintain and keep close at all times. For acquisitions, be sure to keep them close during the transition, and then, shift your focus to ensure you’re delivering everything you promised to everyone involved. Always be true to your word.
Forbes Business Council is the foremost growth and networking organization for business owners and leaders. Do I qualify?
