Remember, thinkers and modelers, there is plenty of time to get to the bottom of whatever pressing issue we are facing.
I’m an analytical person by nature. I am in a committed relationship with Microsoft Excel and can find a way to model most decisions if given enough time. “Enough time,” however, means enough time to help a client or colleague make an important decision with limited information on a deadline of yesterday. It is hard for us over-thinkers to make snap decisions, but it’s also a job requirement for any leader, and especially for any leader engaged in mergers and acquisitions.
I have learned that time is the enemy in M&A. The longer we spend scrutinizing the details before we talk about value and the future, the more we risk overlooking the big picture and finding some reason not to close a deal. No firm is perfect, and no M&A transaction is without the exposure of some weaknesses in one (or both!) sides of the discussion. In my experience, there is a correlation between how quickly we can agree to a value (or even agree to an approach to valuation), and a theoretical deal structure and the likelihood that we will get to the closing table. That idea is counterintuitive – and downright uncomfortable – to the over-analyzers in the room. I want to have every piece of information at my disposal to make a recommendation.
The dividing line between firms that do well in M&A and firms that do not could possibly be drawn at the informational threshold. Although basic information is needed for a cursory analysis, it is crippling in M&A to wait for more information or to hit pause to update the analysis with every detail. We have to tolerate a high level of uncertainty in so many facets of a target firm’s operations, and that can be unnerving. While it is contrary to my background in law and credit risk to feel comfortable pressing onward with half the story, it is something that has to be done if I want to help my client close a deal.
The good news is that once we have agreement on the basic structure, we have due diligence to confirm that what we believed when we drafted the offer is, in fact, reality. The process gives time for the analysis, but the risk that we oftentimes see is firms that want to finish due diligence before they begin discussions of value. Remember, thinkers and modelers, there is plenty of time to get to the bottom of whatever pressing issue we are facing – let’s just keep our eyes fixed on the target while we get there.
Jamie Claire Kiser is Zweig Group’s director of M&A services. Contact her at jkiser@zweiggroup.com.