As usual in this section of Eneas Magazine, we would like to discuss the less known aspects of mergers and acquisitions. For instance, issues not normally addressed in university textbooks, and business schools when talking about macroeconomic figures or when reading an article about these kind of transactions.
Because, dear readers, numbers are obviously necessary, they are at the heart of every business transaction, they are the true cornerstone of any purchase-sell agreement, and they are, above all, the result of these operations.
“Figures are apparently everything, they are the beginning and the end, and they represent the origin and ultimate objective pursued.”
We are referring to sales, EBITDA, debt, assets, market share, valuation multiples, interest rates, profitability, employees, offices, the “times-money”, the waiting period, costs, purchase price. We are talking about adding or subtracting, about multiplying or dividing the result. Numbers are a single whole, an omnipresent reality in any transaction.
If we stop to analyze the quantitative importance of numbers in an M&A operation, we will conclude that they are crucial in the accomplishment of the deal. Quantitatively, figures are undoubtedly the most striking. Nonetheless, as in every important aspect of life, a qualitative valuation should also take place. It is at this point where; despite their “numerical advantage” over any other aspect, figures are faced with competitors’ who´s importance is inversely proportional to their number.
“The qualitative aspects of a negotiation are not as eye-catching, but they include circumstances and details that could more important in shaping the success or failure of an M&A operation.”
In these pages, we have recently been discussing the corporate culture, the angle of approach, the human factor, the strategy, and the cultural differences between countries, emotions, and empathy in negotiations, all of which play a major role in M&A transactions. For instance, even if figures show potential benefits regarding an international merger, if shareholders do not get along together from the beginning, due to something as small as a joke in poor taste, the operation will never take place. If managers leading an MBO are unable to align their strategy with the investor´s, the MBO will never happen. If during a sale negotiation, the process duration is excessively delayed or the T&Cs proposed by the purchaser are excessively demanding, the seller may back down.
The previously mentioned are just some examples regarding how the qualitative aspects can have a significant effect on an M&A transaction, even outweighing the quantitative part. Figures may be very “good” or very “big”, but they are not everything. For this reason, and because of qualitative aspects are much harder to manage than figures, which at the end of the day are fixed within a given time. It is essential to have an expert advisor, such as Eneas Advisory, with experience and battle-hardened professionals who not only master the numerical aspect, but also excels the qualitative ones. In this regard, it is important to be aware that, in M&A operations, a great part of influential factors (meaning the success or failure of the operation) are beyond the figures.
