After a decade in management consulting in my 20s, I received certain perks: being paid to borrow clients’ watches to tell them what time it is, hotel status galore, airline miles for days, and the right to poke fun at the buzzwords that consulting firms throw around. But before you get your Buzzword Bingo cards out, let me at least ask you to wait until the end of the article before you judge.
In the RKCA Monthly Insights series, we’ve been exploring transactions and what all goes into them (despite a departure in August to brag on the RKCA team). This month’s article we’re focused on the post-merger “synergies” that may get thrown around while sellers have management meetings.
For those unfamiliar, management meetings are scheduled by your investment banker and essentially “speed dating” between you and potential buyers. These meetings often last several hours and may be followed by meals or drinks. During the meeting, buyers and sellers often discuss the history of the company, metrics, financials, operational Q&A, and day-to-day type questions for running the business. Additionally, potential areas of cost savings, synergies, competitive landscape, and other more “buzzwordy” items may be discussed.
It is my opinion that it’s best to first prepare with your investment banker the type of outcome you want from a transaction. When you reach the more buzzwordy topics, be prepared to know what type of outcome you want. Some buyers may find synergies with cost-cutting through headcount reduction, or even relocating the business. Some buyers may find that marketing the business under their name vs. yours is better for the brand-synergy. You may be okay with that or not, and the right investment banker will have you prepared in advance to answer those questions.
RKCA has the unique benefit of both working inside of sell side transactions as M&A advisors, but also owning and operating a portfolio of nine companies. Within our Direct Investment Practice, we look at several guiding principles when acquiring a business. Those same guiding principles help inform our sell side M&A advisory work as clients begin to prepare for management meetings. Here are the RKCA “Four Hs” to consider in advance of a management meeting:
- Human Risks
- If not addressed properly, cultural integration can lead to friction within the team after a transaction, reduce productivity and lead to unexpected attrition.
- Hopes Risks
- What unwritten or unspoken promises have been made that need to be addressed.
- Hierarchy Risk
- Is the person(s) buying this business in a leadership role going to assume the role across both entities (theirs and yours)? Is someone on your staff/team going to lead? Are you? Who are your mission-critical talent players needed post-merger?
- Habits Risk
- It’s important to make an apples-to-apples comparison of your systems and processes vs. what a potential acquirer has. While they ask you questions about your processes, work to understand theirs. If you just went through a massive ERP implementation and finally have habits formed, will they come in and be changing them?
As you prepare with your investment banker for management meetings, ignore any urge to question buzzwords or dismiss them as consultant-speak. Underneath the buzzword will be critical components to the successful outcome and legacy of your business and by extension your life’s work.
As the great basketball coach John Wooden once said, “Failing to prepare is preparing to fail.” (also ignore basketball’s Allen Iverson quote on practice). If you’re not working with a coach / investment banker to prepare your business for sale, we’d love the opportunity to share how we get teams prepared for the big game of management meetings.
If you, or someone in your network wants to learn more about what we do, email me at firstname.lastname@example.org
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