Mergers & Acquisitions (M&A) in Singapore
The factors that typically influence Mergers & Acquisitions (M&A) include the business’ price, synergies, commercial advantages, and financial performance.
However, a crucial factor that is often overlooked is the importance of ‘investing in people.’ The seller’s attitude can significantly impact the success of an M&A transaction. Although this may seem to contradict the rational perspective of financial experts, it is based on practical experience. Strong relationships and professional etiquette between buyers and sellers often result in better M&A deals.
M&A consultants typically aim to attract multiple potential buyers to increase competition. As a result, sellers must attend numerous exploratory meetings with various companies, turning the entire transaction into a high-stakes poker game filled with bluffs and double bluffs. Thorough preparation is necessary for successful negotiations and a smooth transaction. Therefore, achieving a successful M&A deal requires a significant amount of hard work.
A Successful M&A Negotiation Has The Following Necessary Ingredients:
Set The Meeting Agenda And Stick To It
During the initial meetings of a merger and acquisition (M&A) transaction, the seller and buyers typically present their corporate information memorandums (CIMs) and scrutinize each other’s sales materials and messaging. Subsequent meetings focus more on M&A technicalities, such as business valuation and essential points of the transaction, and involve more significant people from the buyer’s end, including the CEO and executives from various departments.
Throughout the negotiation process, it is crucial for the seller and M&A consultant to set an agenda for each meeting and keep all parties updated. A good consultant would have already set discussion topics based on the agreed messaging and key points of the transaction, providing a blueprint for the agenda.
Additionally, both parties would receive rigorous training to effectively handle challenging questions, which could involve role-playing exercises where the consultant acts as a devil’s advocate and asks difficult questions related to the M&A’s reasons, business valuation and price, prospects, future opportunities, and synergy.
There Are No Good Surprises
A novice seller often hesitates to mention any perceived weaknesses of their business or the business valuation, believing that the buyer does not need to know. However, during M&A meetings, everything that has happened in the past and present will come to light.
It is, therefore, advisable to be upfront, transparent, and honest about these perceived weaknesses and handle any objections professionally. This approach provides reassuring context and commentary that can ease the concerns of risk-averse buyers in a seemingly risky situation. It is even better to provide substantial reasons and suggest potential solutions. Transparency can lead to trust, which is an excellent selling point. Being honest is still a strong and effective negotiation tactic.
Different Tactics For Different Buyers
M&A negotiation tactics should depend on the wants and needs of different buyer types, hence they shouldn’t be a one size fits all approach.
The following general observations can be used for reference:
- The M&A management team of large strategic acquirers tend to involve a longer process – they may need to gather buy-in from the shareholders or get conformity with corporate governance, or seek clearance with more decision-makers. Hence patience is needed when dealing with such buyers.
- Private financial buyers or equity groups tend to be more detail-oriented, and more aggressive in negotiations but swift in decision making, borrowing on a ‘gut feeling’ when the finances stack up.
- An owner or manager buyer, likely an entrepreneur, tends to be more emotionally driven during the decision-making process. Every decision would seem to carry immense weight as personal relationships or their kids’ inheritance may be at stake. They may even toil with the idea of making the buyer a millionaire.
