The M&A Success Factor Nobody Teaches You at University: Relationship Building
There is one crucial success factor in mergers and acquisitions that you cannot find in textbooks or university courses, but it makes a big difference: Relationship building between the acquirer and seller. In M&A literature and articles, the focus is on analyzing the motivations, business cases, negotiations, and integrations, but it stops there. You will also not find relationship building on any mergers and acquisition process map. However, building a relationship between the parties makes everything easier during the early M&A process and after the closing, especially during the integration and performance improvement projects. Here are some relationship-building examples to help you with your next M&A project.
Tips for Better Relationship Building in M&A
Start early building a relationship - Don't wait until you have acquired a company. Already in your first meetings, begin building a relationship. Include longer coffee breaks in the agenda, set up dinners, or start with a breakfast together. This is not only for creating a better relationship but also to learn more about the key people of the target company, how they communicate with each other, and to see whether you can imagine working with them in the future. Besides the examples above, there are many other relationship-building activities. In one of my transactions, I went with the CEO of the target company during breaks to Starbucks for a coffee. Besides building a better relationship with him, it was also an excellent time to approach difficult negotiation topics in a more relaxed atmosphere.
Include people who speak the language of the other company - This is a big topic in international M&A transactions. Having people on the M&A team who speak the language of the other company opens doors. I saw it personally when I stepped into meetings and started speaking Spanish with companies in South America. It changes the discussion. If you don't have multi-lingual people in your company, consider it when choosing your external advisors and experts. In addition to language, an interest in the other culture is another essential element. Hire someone who can give you cultural and historical input about the other country. You don't have to be an expert, but every little bit of knowledge will show your openness and interest. It will also help you better understand the differences.
Listen and ask how they would do it - As an acquirer, you develop early in the M&A process ideas and approaches on how to integrate the target and how you can improve their operational and financial performance. It is part of an M&A business case and value capture analysis. One simple but powerful approach is to ask the people at the target company what they think about those ideas or how they would approach a specific topic. It not only helps you to develop a better relationship and team spirit, but it is also a helpful sanity check of your assumptions. Remember, during the due diligence period, you still have limited information and only access to a few people from the target. Every bit of additional information and assessment helps. Don't expect they will applaud all of your ideas, but be open to feedback. How you deal with it early in the M&A process determines how you can manage it after closing during the integration and change process.
Celebrate Together - There are many milestones in an M&A process, and you should celebrate achievements. It shows everyone that there is progress, and it motivates your teams. Whenever it fits, celebrate it together with the other company. The closing is undoubtedly one of the times, but there are other milestones during the integration that you can use. It will bring your teams closer and helps to develop the relationship.
Relationship Building is an Essential Management Skill
Relationship building doesn't require specific talents but is a crucial management skill. It can make a big difference during the whole M&A process and later when you work together and improve the business. Communicate openly and show interest in the other party. You can make it work!
Feel free to contact me to discuss specific mergers and acquisitions examples.
