Too many cooks spoil the soup. Nowhere in business have I found this old maxim to be more true than when trying to put together an acquisition. Every senior manager, "C" suite executive, and board member in the company will have their own opinions about the transaction -- what to watch out for, what to make sure you get, who to retain, or when the timing is right, and a plethora of other things as well.
The problem is -- if you try to take all this in, you'll most likely end up not doing the deal.
Every acquisition occurs because the range of acceptable outcomes in the negotiation for each party has an area of overlap. Imagine, if you will, a circle with a dot in the middle. The dot represents the ideal outcome for a particular party during negotiations and the outer circle represents the limits of what is acceptable.
Both parties have a circle like this, and deals can happen when parts of both circles overlap. If the circles don't touch at all, no deal is possible. If the circles do touch, it doesn't guarantee agreement will be reached, however, as things like pride, mistrust, and other bidders can still derail a possible agreement.
During successful negotiations, the two parties find themselves in somewhere in the overlap area. In a "fair" negotiation, both are approximately equal distant from their ideal point. The art of negotiation is try to move the point of agreement as close to your ideal outcome as possible.
How do unwanted opinions impact this?
In my experience, opinions about what should or could be acceptable as an outcome for the company usually have the effect of shrinking the area of the circle (I think of them as taking a "bite" out of the available area of overlap. When you hear things like: "We have to have majority ownership," or "Don't buy it during a downcycle," or "That price is too high (or low)," it makes the zone of possible agreement smaller.
It also normally causes the point of agreement to move closer to the objecting side's ideal outcome, which is why you find difficult to work with parties often getting a better "deal" when there is one struck.
It also tends to anger the other side, thus making a "non-agreement" outcome more likely for emotional reasons (distrust, irritation, etc.).
So much for theory...
A number of years ago, I was involved in a joint venture negotiation with a company located in Israel. After a visit and lengthy negotiations, I brokered a deal that would be good for my employer. When I returned home, however, numerous objections were raised by several company executives. The Israeli factories were not included in the joint venture (they were part of a Kibbutz, a communal holding), which was considered unacceptable. The mechanics for bidding jobs was cumbersome. The management team, because many were Kibbutz members, was considered suspect. I ended up with a list of five or six restrictions that I needed to go back and resolve.
The second go round of negotiations was twice as difficult. Even with the restrictions, however, we were still in an overlap region and I came back with every one of the objections resolved.
Unfortunately, that wasn't the end of it. An additional round of internal reviews resulted in more objections, including one I knew would eliminate all possibility of a deal -- we couldn't do a joint venture with a Kibbutz as our partner. That meant that the only possible acceptable outcome would be a total purchase of the business, which I knew from my prior discussions, wasn't acceptable to the other side.
Predictably, the deal fell apart.
In another deal that jumped the tracks, I watched as a peer proposed the acquisition of a company in the "green energy" sector to our Board of Directors. One director expressed doubts about the sustainability of the industry and whether the deal was taking place at the "right time" due to the industry's highly cyclical history. That started the ball rolling. Pretty soon other objections were raised, and the deal went down in flames without a hope of rescue.
I know that predicting the future is difficult, but in this case the board was absolutely wrong. The deal would have been a good one, as was later proved by the target's continued success. And the transaction would have provided a beachhead in what turned out to be a rapidly growing market.
Ten years later, the company finally took their first step by entering the industry with an acquisition. Now, however, they were a latecomer.
Too many opinions mess up deals. The attentive deal maker will try to keep the number of layers of decision-makers to an absolute minimum in order to keep the number of restrictions on the acceptable outcome as small as possible. Ideally, presenting decision makers with a go/no go decision is a pretty effective way to do this, but just make sure that you have thought through all possible objections ahead of time if you do this. Otherwise, you're likely to get a "thumbs down" without any hope of reviving the transaction. 24.4
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If you are intrigued by the ideas presented in my blog posts, check out some of my other writing. Novels: LEVERAGE, INCENTIVIZE, DELIVERABLES and HEIR APPARENT. Coming soon -- PURSUING OTHER OPPORTUNITIES
Non-Fiction: NAVIGATING CORPORATE POLITICS
Below is a montage of my published books. The four to the left are Novels, all in the "Corporate Thriller" genre. The book on the right is a non-fiction work which provides a framework that managers and executives can use to think about nd utilize corporate politics.
The books can be purchased on my website, or by clicking on the image and following the page to the reader's preferred supplier and reading format.
My novels are based on extensions of my 27 years of personal experience as a senior manager in public corporations. Most were inspired by real events.