IN OUR 20-PLUS YEARS OF EXPERIENCE in M&A, we’ve found that about 85 percent of deals fail to meet the expectations of everyone involved. The best way to avoid that fate is to make sure every party is working from the same playbook and rowing the boat in the same direction, one stroke at a time.
One of the biggest contributors to a Hollywood-style M&A ending is your attorney. Your attorney can help spur your M&A strategy to success, or he/she can sink it. There’s very little middle ground. He or she must be in your corner, supporting rather than working against you.
Get the Right Advice
Counsel has one goal: to craft all the legal documents required for the M&A deal to ensure it actually happens, instead of crashing and burning. Your services firm needs to be working with the right attorney to avoid unnecessary pain in the transaction.
That’s what your lawyers should be doing, but the reality usually looks much different.
In our experience, attorneys try to give businesses unhealthy recommendations. Most, but not all, lawyers seem more concerned with losing annually billed clients than offering them the right advice.
Lawyers are a tricky bunch. They’re very valuable to the entire process and should be celebrated as such. But they sometimes try to become business advisers, which is not their strength. Some also try to share knowledge on financials and post-M&A activities, neither being core competencies.
One of the biggest reasons M&A projects fail is the lack of a post-sale integration process, an important part of the transaction. The problem comes from having people, including attorneys, involved in a part of the deal outside their skillset. No one should be guiding your team on things they don’t understand.
It Takes a Village
Your attorney is there to help your firm buy or sell, legally. That’s it. He or she needs to be focused on the legalities of the transaction so you can successfully sell your firm, or buy another, while avoiding the surprises that cause unnecessary stress.
Your attorney should also have experience with your industry and be able to walk you through the process with little or no problems. The neighborhood lawyer who doesn't know anything about professional services or the IT channel will not be the best choice. Your lawyer should be knowledgeable about how the industry works and understand the valuations of IP-based companies.
One aspect of M&A you’ll need to understand is how your attorney will help in your specific situation. You’ll want to know what will be expected of your attorney, whether you're buying or selling a business.
To have a truly successful M&A experience though, you need a team, including an M&A adviser and an accountant, not just a lawyer. Much as it takes a village to raise a child, completing a successful deal will require a broad base of support.
REED WARREN, vice president of Revenue Rocket Consulting Group LLC, works with professional services firms and IT companies to identify and understand the barriers to growth while determining strategies required for success. He has a Bachelor of Arts degree from Northwestern College in St. Paul, Minn., and works and lives in the Twin Cities metro area.
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