February 9, 2023
With insights from David Strempel, Translink International Vice Chairman
In the first part of this series, Translink International Vice Chairman and Chairman at Translink Corporate Finance Italy, David Strempel, unpacked the importance of a clear M&A strategy and how global M&A advisors can identify trends, opportunities and challenges, plan around them and advise accordingly. Here he unpacks how personalities and cultures can potentially hinder a transaction unless managed properly, and the important role played by advisors in finding solutions and smoothing what is often a complicated transaction.
Managing the process
Managing governance and due diligence issues is a vital part of an M&A specialist’s role and includes helping companies with a selection process to ensure that the best specialists are appointed, such as accountants and lawyers. This also includes helping buyers to manage their expectations of costs, since these also differ from country to country. Ensuring a competitive process and a reasonable cost structure is important, especially given the length of time that an M&A transaction can take.
Initial concerns about leaked information in the early stages of a transaction is also often a concern to both the buyer and the seller. An advisor can guide the parties here and facilitate the drafting and signing of an appropriate NDA.
Cultures and sensitivities
When it comes to acquisitions outside of your home country, dealing with different languages, cultures and laws are factors that advisors are well versed in being able to navigate. This can also include sensitivities around the parties involved and sometimes even prejudice which, unfortunately, can come into play. Someone accustomed to that country, culture and language can really open doors.
A deal that is well articulated is a vital step towards a win-win M&A transaction. This includes taking different corporate cultures as well as different sized entities into consideration. On the buy-side, companies can be multi-billion-dollar operations. Companies being brought are more often a lot smaller and might not have the internal processes, measurables and infrastructure of a larger company. Expectations and deliverables on both sides of the transaction need to be managed and communicated.
Personalities and rapport play a critical role in the journey of a transaction. Does the seller get along with the upper management of the purchasing company and vice versa?
Sellers are usually company leaders or owners who may exit with the transaction, unless part of the agreement is for the buyer to retain them. This is one of the most important aspects of the whole process – the balancing of personality dynamics and managing the trust from both sides is imperative in seeing a successful deal go through.
The level of trust required is something that M&A advisors help to build and is key to getting to the finish line. Issues can and do arise, and sometimes certain managers who are not in tune with the process or may be hindering the process may need to step aside in the interests of the transaction. Here, advisors can help to emphasise the involvement of other equally capable and perhaps more amenable individuals to ensure a smoother process.
A team effort
While some companies have a dedicated M&A professional within their organisation, the legwork required to work on a deal can be overwhelming and can lengthen the process considerably if the business doesn’t have a corporate finance partner on board.
Being well placed to find the right solutions
M&A transactions can take anywhere from six months to a year, and when the disruptions of global events such as COVID-19 need to be factored in, this process can be much longer. The more time goes on, the more things can go wrong. Keeping all parties up to speed, managing the hurdles and helping the transaction to go smoothly is the aim of any M&A advisor.
Potential challenges and considerations aside, the number one factor remains the importance of establishing a good rapport between the buyers and sellers. This foundation needs to be established for any potential transaction, no matter the size.