Merger & Acquisition Insights

The Importance of Fair-mindedness When Acquiring Businesses

Posted on April 01, 2015 by Spencer Tenney

When acquiring transportation businesses or any business for that matter, sometimes what appears to be a great deal on paper does not materialize on the buyer’s bottom line. In many cases, this occurs because the deal is deficient in fair-mindedness.

Fair-mindedness occurs when a deal recognizes both the needs/wants of the buyer and of the seller.

The current economic conditions can embolden some buyers to take a “my way or the highway approach” when acquiring companies—the opposite of fair-mindedness. There is nothing wrong with buyers trying to get the best deal possible. However, too many buyers fail to, or refuse to, acknowledge the basic needs/concerns of sellers. And in doing so, buyers miss opportunities to acquire very good companies or fail to maximize the full potential of the companies they do acquire.

Why does it pay to be fair-minded in your approach to buying companies?

First, the seller will play a key role in the transition stage of the acquisition—stabilizing client relationships and ensuring continued commitment of service, stabilizing/improving employee morale, etc. Also, the seller will likely maintain personal relationships with many customers, vendors, and employees long after the sale is complete.

The seller can have a great influence on both post acquisition success and failure. So if you don’t have to, why go out of your way to demoralize the seller in the negotiating process? Focus your energies and creativity on how to motivate the seller to genuinely promote your continued success in the business.

Second, many buyers have a very limited understanding of what is fair and what is not fair. Further they have a very limited understanding of the many ways they can acquire a company and still make money. Through the help of an intermediary, buyers are often able to accommodate some of the requests of the seller while structuring a deal that is far better than initially expected for both parties.

Remember: In many cases, what is required to concede some deal points to the seller often pales in comparison to the long term value the gesture creates for the buyer.

Keys to maximizing overall value of acquisitions through a fair-minded approach:

  1. Many buyers and sellers do not understand what is fair and what is not fair. Make sure you have an intermediary involved in the process to provide reason, objectivity, and creativity as necessary.
  2. Many buyers miss great acquisition opportunities through their own limited understanding of deal structure. An experienced intermediary can help you find ways to make the deal better for both the buyer and the seller.
  3. Sound business acquisitions consider both the deal points on paper and what is necessary to secure the seller’s sincere cooperation in the long-term success of the deal.

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