The Keys to Successful Transactions

What is the basis for selecting a merger partner? How do you time the transaction? How do you maximize value? The key is multifaceted.

  • Value Creation
  • Merging Cultures
  • Creating a best-place-to-work environment and culture by maximizing the intellectual and creative capacity of both seller and buyer.
  • Overcome the apparent risks in consolidation and the merging of cultures.
  • Not making your transaction a statistic in the failed-deal column.
  • The key is not selling as a distressed firm, such as a fire sale, but as a firm that’s growing and profitable, ready to capitalize on a buyer with wider reach in geography, talent, service offerings, and overall depth.

To fully understand the process, whether a buyer or seller, one must understand and appreciate the view of the other side. Sellers have risk: their sweat equity and brand built up over decades of hard work. Buyers have risk: their down payment, cash outlay, and ultimate return on investment.

The goal of any transaction is for the seller to realize the value for their equity – the brand they built from scratch.

There is also the goal of the buyer: acquire firms for the strategic reasons of acquiring talent, specialties, and locations. The other not-so-often-mentioned reason is that many firms just cannot get any larger organically. They are in what I call “growth gridlock.” They want to get bigger and better and conclude that acquisition is the best way to get there.

The buyer is willing to pay the going multiple for today’s value with the hope and goal of building on that value. So when the buyer ultimately sells, the multiple and value on the property will increase, another element of his or her return on investment (ROI).

Let’s not forget that as in any service business, the inventory, or the asset, is the people. In any transaction, the confidence of the buyer in the reputation, character, integrity, and the transparency of the seller/owner(s) is critical. That is a key element of the buyer’s investment.

The buyer is looking to gain a competitive advantage, and the process is time consuming. The integration is never easy. The result, with careful management and collaboration, should be a win-win.

The content of this blog was extracted from the recently published “the Ultimate PR Agency Financial Management Handbook”