It’s More Than Show Me the Money
I have to admit that deals fascinate me. They are like a jigsaw puzzle. The challenge is finding the right pieces and putting them together to form the tapestry of a deal. What is intriguing is that, while money always counts, people are the critical element of successful deals. That’s why I say deal making is both a science and an art.
The Chemistry of the Deal
The vast majority of deals are based on connections made between the senior management of the partner banks. This is true for both the acquirer and the seller. Being comfortable with each other often sparks the process and can be determinative of who wants to marry whom. Buyers want management folks they trust and respect. Likewise, sellers want to have confidence in the people to whom they are entrusting their bank.
Deals Are Like a Courtship
Often bankers meet at trade association or vendor meetings and get to know each other. Those meetings often blossom into stronger relationships and friendships. When the time comes that one of them is looking to expand or “cash in the chips,” informal conversations and meetings occur and the dance begins. Clearly, economics play a key role, but usually to get to that point, the parties have to have some connection.
Deals Are People
I have often mentioned in presentations to boards and trade groups that it has always amazed me over the course of my career how important the relationship and behavior of people is to executing a successful deal. From selecting a partner to due diligence and from contract negotiation to securing shareholder and regulatory approval, chemistry matters.
The Secret Sauce
We all have pride and egos. Recognizing that, respecting it, and treating people fairly are critical to successful deal making. The art of the deal is to seamlessly blend the economics with the human side. As a buyer, making the seller feel valued and important is the “secret sauce.” Selling your bank can be a difficult and emotional experience. After all, you are giving up status and control of your own destiny.
I think it is a productive exercise to have the parties role reverse before negotiations begin—to think about what’s important to the other side and how you can meet their expectations. Even sellers should try to understand the challenges and pressures buyers face in making deals. Taking the other parties’ perspective into consideration can make a real difference.
Enjoy the Ride
Deals can be stressful to both parties, but they can also be a special and positive experience with the right attitude. Acquisitions can be exhilarating and energizing for buyers and satisfying for sellers. Toward that end, retaining the right advisors to help guide the process can often be crucial to both a successful deal and positive experience. Enjoying the process, which could be a once in a lifetime experience for some parties, is an important goal.