In the world of business, mergers and acquisitions (M&A) are often perceived as cold, calculated transactions driven by financial metrics and strategic objectives. Companies merge, acquire, or divest assets with a focus on synergy, market share, and profit margins. But beyond the boardroom meetings and financial planning, the business owner is dealing with a much more personal change in their life: exiting their business.
Owners who have dedicated their lives to building and nurturing their businesses find themselves at a crossroads when contemplating an exit strategy. They face a variety of complex questions that go beyond spreadsheets and projections.
Is this exit strategy what is best for my family’s legacy?
Am I prepared to live my life outside of my business?
Who am I if not a business owner?
This is where advisors in the M&A field play a pivotal role. They must recognize and empathize with the owner's personal feelings while providing exceptional exit planning advice and services.
Joe Strazzeri, Counselor and Attorney for successful families and business owners at Strazzeri Mancini, LLP, and Sean Hutchinson, Partner at Ready for Next Advisory Group, share how they incorporate empathy, trust accelerators, and a personalized approach to exit strategy with their business owner clients to better humanize the M&A transaction.
The Human Side of Business Transactions
It is estimated that 70% of businesses on the market do not transact, and of those that do complete a transaction event, 75% of owners profoundly regretted exiting their business one year after the transaction. By considering the humans behind the business, advisors can prepare the owner for their future and limit the regret they might feel in leaving their business.
Sean Hutchinson shares, “Value Growth and Exit Planning work is fundamentally human. I have often said that it’s ‘transformational’ not ‘transactional.’ Without human connection, exiting a business can be brutally disorienting to the owner and other stakeholders.”
When working with business owners on their transactions, advisors should act with empathy toward the owner’s situation. Joe Strazzeri shares, “We all learned the difference between sympathy and empathy and yet somehow as we progress in our practices our internal thoughts start to turn more judgmental. This judgment causes us to sympathize with our varied clients, and by definition look down on them or with less favor. When we can consistently let the client know that we are attempting to see their situation from their shoes, the partnering nature of empathy comes out and gives the feeling of ‘we are in this together.’”
During the exit planning process, the owner will be anxious and perhaps profoundly emotional. They are experiencing the transaction as both the reward for a lifetime of hard work, but also feeling the loss of a significant part of their personal identity. The trusted advisor must be prepared with a uniquely multi-faceted perspective and tools to set expectations with the owner for what they will go through as the transaction unfolds.
Sean explains, “To put it bluntly, how do you humanize any situation without a strong dose of empathy? Otherwise, you’re faking it, which is fatal to the relationship.”
Building Trust with a Business Owner
Trust is a crucial element in any business transaction. The owner has to trust the person or group buying their business. The buyer has to trust that the seller is being truthful in their statement of value. And the advisor has to have the full confidence of their owner client.
Sean says, “When we are doing the upfront work to build trust, we talk about and focus on the emotional attachment the owner has to their business. It’s simply built into trust-building. We use one of the key metaphors of the Certified Exit Planning Advisor® (CEPA) program – Three Legs of the Stool. The owner must have a holistic plan that includes optimizing the value of the business, creating personal financial readiness, and having a plan for life after business. Three equally balanced legs or the stool collapses.”
M&A transactions require the sharing of sensitive financial, operational, and strategic information. Business owners must be confident that their advisors will handle this information with discretion and integrity. Without trust, owners may withhold crucial data, hindering the advisor's ability to provide sound guidance.
Trust encourages open and honest communication. Owners must feel comfortable discussing their concerns, aspirations, and reservations with their advisors. Effective communication is crucial for addressing any issues that may arise during the complex M&A process.
Joe shares, “Entrepreneurs almost always have a sense for other human beings and their trustworthiness. They have made a living and created success around this instinct. They consistently look for small tells as to whether they should trust you. From how you treat your scorecard at golf to the stories you tell about your family and past clients, they continue to gauge you. And then it’s about the simple things – the little nuances and experiences you create.”
Understanding the Owner’s Point of View
Understanding the owner's point of view in M&A transactions is not just a compassionate approach; it's a strategic imperative to the ultimate success of an advisor and owner partnership.
Effective communication is key to understanding the owner's viewpoint. Advisors should foster open and transparent dialogue, creating a safe space for owners to express their concerns, ask questions, and seek clarification when needed. Sean shares that advisors should follow the rule of thumb, “Talk Less,” when working with their owners.
Sean expands on this by saying, “There are a number of skills that the advisor should strive for. Number one is active listening. I recommend a book by Kate Murphy, You’re Not Listening. You also have to be a really good interviewer, which means you have to put away that dreaded standardized checklist of questions and be a great conversationalist. Be authentically curious.”
A comprehensive understanding of the owner's viewpoint allows advisors to provide more informed advice. When owners feel that their advisors genuinely grasp their goals, they are more likely to trust the advice given and make confident decisions. This, in turn, expedites the decision-making process, which can be critical in fast-moving M&A transactions.
Joe highlights the necessity for owners to lead the majority of the conversation as well. He shares that advisors should, “Always create ‘empty space’ in the conversation for the client to think, process, and ramble until they bump into their underlying drivers. Though it takes more time, the payoff is magical.”
The Emotional Impact of a Business Transaction
It is often a misconception in the M&A world that the owner’s emotions can be a weakness in the transaction. However, this is quite the contrary. In fact, the owner’s emotional response to selling their business is not only understandable but is of benefit to their advisory team. By working with the owner to understand their feelings and anxieties, their advisor gains valuable insights into the owner’s personal goals, wants, and fears that can be utilized during the exit planning process.
Joe Strazzeri explains, “Understanding that curiosity is the most powerful tool that a practitioner can have in the beginning and throughout a relationship drives quantifiable success. As we mature in our practices, we often get jaded and find our role as one who separates the weak from the chafe, gets to the point, and keeps momentum to close the deal. We seem to lose the joy of exploration and uniqueness that we used to find in each client and transaction.”
Joe continues, “Clients are almost always asking for the technical and numerical answers, but that should be in second position behind helping the client challenge their beliefs and find their hopes, dreams, and desires – which will always drive to better outcomes.”
By recognizing the emotional significance of an exit strategy for business owners, advisors can build stronger relationships, foster trust, and ultimately, achieve better outcomes. By addressing these emotional aspects, advisors can help owners make well-informed decisions that align with their personal and professional goals. Clear communication, genuine empathy, and a shared understanding of the owner's goals can lead to smoother negotiations and more efficient deal structures.
Ultimately, the success of an M&A transaction should be measured not only in financial terms but also by the satisfaction and fulfillment of the business owner. When advisors embrace the human side of M&A, they not only enhance their own reputation but contribute to a more compassionate and successful business landscape where owners can confidently pursue their next chapter.
Learn More From Industry Experts
Learn more from both Joe Strazzeri and Sean Hutchinson as they join Exit Planning Institute President, Scott Snider, and Founder of Divestopedia, John Carvalho for a free webinar “Strategic Insights: Engaging Business Owners Earlier for Successful Business Exits” on Wednesday, October 18 at 2 PM EST.
In this webinar, we will dive deep into the importance of early engagement in the selling process and how it can be a game-changer for M&A professionals like you. Our expert speakers will share valuable techniques, practical tips, and proven strategies to help you identify signals, target potential clients, build trust, and establish your expertise as M&A advisors.