Each party must at all times understand the complex process of a business acquisition. Without understanding no trust, no progress, no prospect of an agreement. A special task for corporate finance is therefore not only to keep a tight rein on the process, but also to translate it into the client's familiar habitat and way of working. ‘Interpreting'at top level and in various dimensions is essential.
First, it is necessary to bridge the very different worlds of a medium-sized (family) business and that of a multinational. To accomplish this, it is necessary to understand both universes.
Drivers of business operations in a multinational environment are often management decisions made by multidisciplinary teams, which also use their own jargon and operate within a specific conceptual framework. In doing so, managers have to adhere to strict processes and procedures - which are often time-consuming and complicated. And even if a manager does identify with his company and obviously makes an essential contribution to its development, the fact remains that he sees his career as part of his personal growth. There is no natural bond between the company and the management. This is actually a requirement for building sustainable, person-independent businesses of any size.
Medium-sized companies have a completely different decision pyramid. At the top of the company is a business leader-owner who can take quick and bold decisions and have them implemented. Almost invariably there is a strong emotional bond with the company as well as a professional one. The personal connection is particularly great: sometimes the manager is the founder of the company, sometimes the company has been the pride of the family for one or more generations. Finally, there is often a long-term focus on the manager’s own world with short lines to customers, products and services, and somewhat less affinity with management structures, literature and vocabulary.
Knowledge and understanding of these very different business models are necessary for corporate finance advisers to translate all aspects of the acquisition process and all the specialisms involved into the lingo of each party. Because what is said is not always the same as what is meant - let alone what the receiver of the message thinks he hears.
Expectations
In addition to a difference in jargon, conceptual framework and emotional connection, the goals and expectations of the parties may also be far apart. To achieve a successful negotiation, it must be perfectly clear what is essential for each party. There, too, rational and emotional aspects can get in each other's way. The seller of the medium-sized company may well put forward certain conditions that are perfectly understandable from a human point of view, but which the 'objective' manager sees mainly as a cost or a risk. Without empathy from both sides, this may compromise the possibility of a deal.
Experience has shown that bringing expectations into line is not only conductive to reaching an agreement, but also helps to determine the success of the acquisition in the medium or long term. Unfortunately, there are plenty of examples of medium-sized companies that end up in a large group and, despite the bright prospects and plans, fail to create any added value - or worse. It even happens that the original owners buy back their company and make it successful again after a failed acquisition or integration. Each and every one of these cases painfully demonstrates what happens when the bridging function is not clearly fulfilled.
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