When mergers and acquisitions (M&A) are discussed, the conversation typically revolves around valuation, intangible assets, due diligence, warranties, indemnities, strategies, synergies, and integration, among other aspects. However, on rare occasions we discuss the human experience of the key players in these complex processes. As someone who has been deeply involved in the M&A landscape for years, I'd like to share some reflections on this matter.
My M&A journey began almost two decades ago when I dove into the fascinating world of deal-making. Since then, I've participated in numerous transactions, from small local operations to large international acquisitions. Beyond the numbers and strategy, what has caught my attention the most are the human stories that unfold with each transaction.
From my first major M&A deal, amid all the negotiations and paperwork, I realized how M&A processes impact many people's lives, including my own.
They influence the personal lives of the main players: executives, leaders, or managers who make the decisions. These individuals may experience increased stress due to the pressure to meet tight deadlines, achieve expected synergies, and manage the expectations of their stakeholders.
They impact the personal lives of the consultants or advisors for each party, who take on the responsibility of defining the best possible strategy for their client and paying close attention to every technical area for which they are responsible due to their specialization.
They touch the personal lives of employees who may fear for their job security.
They affect the personal lives of shareholders or founders who decide to make significant investments hoping for a return, or to sell and leave behind the company they've built.
They also affect the personal lives of other stakeholders, including suppliers, customers, and the community at large.
It's an emotional and human complexity that isn't reflected in any transaction document, calculation, or Excel sheet. Below, I share some aspects that, from my perspective, add "human" complexity to these processes:
Financial repercussions: M&As typically involve the exchange of significant amounts of capital, which carries a high level of responsibility. A slip in financial evaluations, valuations, or a decision based on insufficient or incomplete information can lead to serious economic consequences. Overvaluation or undervaluation can also result in poor decisions that affect the success of the merger or acquisition.
Performance expectations: There is also the pressure to meet or exceed expected performance outcomes. Failure to achieve these objectives can have negative consequences for both shareholders and various stakeholders.
Professional responsibility: Equally, there is the unwavering commitment of leaders and advisors to act with technical competence, proactivity, diligence, integrity, and ethics at all stages of the process. Success can enhance their professional career, while failure could affect their reputation and the trust placed in them.
Legal and tax responsibility: The legal and fiscal implications of M&As are complex and carry a high degree of responsibility. Mismanagement of these aspects can result in breaches and legal or fiscal sanctions, representing considerable economic losses.
Risk management: Directors, managers, and advisors must identify and manage a wide range of financial, operational, and strategic risks. The responsibility to properly identify, manage, and mitigate these risks adds additional pressure.
Time pressure: There is often time pressure to close M&A transactions. This time pressure can be dangerous, and decisions made with incomplete information or without due depth in analysis due to time constraints should be avoided at all costs.
Burnout: In the context of M&A, burnout can be a real threat due to the intensity and duration of the negotiation and transition processes. Burnout not only affects the personal well-being of the leaders and other actors in charge in their capacity for attention to detail and decision-making but also their ability to lead constructively.
Employees and other Stakeholders: We are also faced with the awareness that the decisions taken will affect employees, customers, and other stakeholders, adding a layer of ethical and social responsibility. The importance of retaining key employees and reassigning roles is another aspect that adds concern.
Cultural and operational integration: The merger of different organizational cultures and ways of operating can be one of the biggest challenges in M&A. Differences in labor practices, values, and norms can cause friction and must be addressed proactively and timely so that the transaction achieves its objective.
Negotiations and interpersonal relationships: Interpersonal skills play a crucial role in M&A negotiations. Decision-makers must manage complex relationships, often under conditions of stress and distrust.
Human errors: The susceptibility to error is a human reality that can affect any aspect of the process, from the initial valuation, due diligence, to the final integration of the entities.
I want to highlight that my approach to addressing these topics is not merely academic nor is it about viewing this practice area or the usual suspects involved from a critical perspective. It is born out of personal commitment as a professional passionate about M&A practice and the firm belief in its importance for economic progress. It is born out of a genuine interest in proposing a constructive approach, motivating those involved to understand and manage these factors with diligence, thereby reducing their negative impact.
Recognizing the human aspect and the possibility of errors is essential in any M&A process, as, after all, they are carried out by individuals with their strengths and weaknesses. Admitting this not only humanizes the process but also encourages the creation of more robust review systems and quality controls, the implementation of continuous training and integration of technology, and a culture that promotes open communication and cross-checking to mitigate these risks. Recognizing that error is possible allows us to be better prepared to identify it, manage it, and ultimately learn from it to improve future transactions.
It is also crucial to highlight the importance of empathetic leadership during M&A in all actors. Leaders not only need to manage the technical and strategic aspects of the transaction, but they also need to be prepared to provide support to their teams and have access to adequate support. Successful companies increasingly invest in training to develop resilience in their talents and techniques such as stress management, mindfulness, and strategic planning, which definitely give a valuable perspective on how to face these challenges.
Throughout my professional experience, I have observed with great admiration business leaders and organizations who consciously integrate the human factor into their risk analysis and decision-making, adopting the company's social responsibility as part of their ethos. I am sure that much of the success of these businesses is anchored in the human, moral, and ethical consideration that they prioritize in their business strategies.
I have also observed how clear and honest communication is essential in M&A. Difficult conversations, although uncomfortable, are necessary to build solid relationships and maintain trust throughout the process. Being transparent about the challenges and uncertainties helps to ease tensions and build a solid foundation for successful collaboration.
Another valuable lesson I have learned is the importance of celebrating successes, no matter how small, along the way. Each milestone reached in the M&A process is a cause for celebration and reminds us of the hard work and dedication it has taken to get there. Furthermore, celebrating successes helps us maintain a positive perspective and propels us forward in difficult times.
My experience in the world of M&A has been an emotional roller coaster of emotions and challenges. However, through it all, I have learned the importance of keeping empathy and communication at the center of everything we do. By always remembering the humanity behind each transaction, we can build stronger, trust-based relationships and achieve more successful outcomes in M&A.
If you have a personal story that you would like to share about your experience in M&A, please feel free to leave a comment below. Until the next entry.
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