The Human Factor in M&A Transactions

PABLO GÓMEZ
Director
IMAP Albia Capital – IMAP Spain
pablo.gomez@imap.com

There are People Behind Every Transaction

There has been a gradual move in recent years towards professionalising and standardising each of the phases in the M&A process: documentation, promotion, negotiation, and closing. As a result, it is increasingly common to see deals completed in a much more efficient and timely manner. Checklists are utilized throughout the process that determine what steps need to be taken in order to ensure nothing that could ultimately affect the process is overlooked. But there is no such checklist for managing what is, by far, the most important factor in any M&A transaction: the human factor.

The fact is that behind every M&A transaction there are real people. Those who decide to put their companies up for sale or go to the market to find a strategic or financial partner, those who analyse investment opportunities, advisory teams from different areas - the list goes on. And as we know, no two people are alike; each creating their own sense of the world based on their unique and unrepeatable life story; each with their unique personality, physique, expressions, culture and customs, and not least because everyone thinks differently.

Add to this the fact that the M&A process generally lasts anywhere from 6 -12 months and it’s not surprising that during this time there are moments of euphoria, tension, frustration, and anger, etc. The following are just some examples of where in the process these different emotions can occur, there are of course many more:

• Euphoria: When the buyers’ interest in the company materialises in an offer that approaches, meets or exceeds expectations.
• Tension: In key face-to-face negotiations.
• Frustration: During the due diligence process at the requests for extensive information and documentation.
• Anger: When the terms of the initial offer are modified based on information discovered in the due diligence, etc.

Trust & Empathy are Key During an M&A Process

Consequently, the most essential task of a good M&A advisor is to effectively manage all these scenarios by building a working environment based on trust and empathy.

Only on this basis is it possible to build a working environment in which the client allows the M&A advisor to take on the key tasks and functions of the process that can lead to its successful conclusion, safe in the knowledge that the M&A advisor wants to do the job well and will be looking out for the client’s best interests at all times in any scenario, be it the sale of a company, entry of a strategic or financial partner or the acquisition of a company.

However, trust is generally not a given, the M&A advisor must both earn it and be worthy of it. To that end, concepts such as transparency, honesty, availability, excellence, problem-solving skills, respect, and cordiality, etc. must form part of the M&A advisor’s professional values. Furthermore, they must be respected not only throughout the working relationship but even after the assignment has ended.

This is a key intangible in social interactions that is also extremely important in work relationships.

Empathy is the ability to interact with people, to build relationships, to make the client feel heard, respected, and understood. To this end, it is essential an M&A advisor to be able to put themselves in the client’s shoes. Understanding their motivations as well as their fears and concerns allows them to anticipate and manage the difficulties that can arise during the process, which are always the result of human behaviour.

It is also important to keep in mind that in many cases clients, who are not accustomed to these types of transactions, are also immersed in the demanding day-to-day operations of the company. Therefore, the M&A advisor must take into account these factors to ensure they don’t end up derailing the process.

In short, we are in a segment in which soft skills or interpersonal skills play a critical role, not only in job performance but in everything related to the client’s ultimate satisfaction with and lasting opinion of the M&A advisor once the deal is completed. In the vast majority of cases, clients are faced with vital decisions that have major implications, both professional and personal and it is essential that they feel comfortable and completely satisfied with the decision to bring in and work with an M&A advisor before, during and after the work is complete.

M&A is More Than Just Closing a Deal

At IMAP Albia Capital – IMAP Spain, we began to request testimonials from our clients at the end of each engagement a couple of years back. We are always filled with a sense of pride and satisfaction when we receive a message that highlights not only our technical expertise, which is normally taken as a given, but rather the way in which we partnered with our clients and our management of the process on an emotional level, based on trust and empathy. This tells us that our work is about more than just successfully closing the deal, it is about the way our clients remember us.