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November 20, 2023

More than the numbers, relationships can make or break a deal. Regardless of the deal rationale, strong, trusting connections between parties can lead to smoother negotiations, clearer communication, and a greater likelihood of mutual satisfaction in the end result. In this article, Nicole Markowski, Manager and Corporate Development at Wipfli LLP, delves into the importance of cultivating positive relationships to drive M&A success.

“There's a lot of tough issues that come up in M&A, and having hard conversations when we're talking about short-term pain for longer-term gains is made a lot easier when you have that trust initially built with the other side.” – Nicole Markowski

The Importance of Relationships in M&A

In M&A, relationships are everything. Particularly for professional services firms like Wipfli LLP, their deal rationale is to retain the people and the clients of the target company, which is only possible if they have good relationships from the beginning. 

Good relationships also reduce uncertainty in M&A. When the target company is acquired, most of their people are scared of the upcoming changes. Trust will help the incoming team embrace the changes since they know that changes are made with positive intentions. 

Key People to Build Relationships With

Cultivating relationships with various stakeholders is at the heart of every successful integration. Here are the key people to secure alignment and build relationships with, according to Nicole:

  1. Executive Leadership of the Target Company

The executive leadership is one of the most important relationships required for a successful transaction. They are the voice of the acquired company, and positive messaging is vital in retaining key employees.

Setting expectations is also easier with a good relationship with the executive leadership. There will be hard conversations with the target company regarding changes, and conveying this message will be a lot easier if both parties are in good standing. 

  1. Executive Leadership of the Acquiring Company

Corporate development’s relationship with the executive leadership within their firm is equally important. Leaders know more about the company, and Corp Dev must rely on them for changes in the strategic plan.

Also, since the executive leadership is presenting in the announcement, they must be well prepared, with the help of corporate development.  

  1. Integration Leads and Due Diligence Teams

Corporate development works closely with the integration team and due diligence teams. Building relationships with them ensures mutual trust, especially when making challenging decisions. Without a foundation of trust, their understanding and cooperation might be compromised.

  1. Acquired Employees

Building relationships with the acquired employees helps smoothen the integration process. Investing time in getting to know them humanizes the transaction, making them feel valued and supported during change.

  1. Brokers   

A positive relationship with brokers can significantly influence the M&A process. Brokers manage their clients better, and they can set the right expectations regarding the process and timeline of the transaction. Without a sound relationship, the transaction could become cumbersome, delaying timelines.

How to Foster and Develop Relationships

Building trust in a corporate environment goes beyond just professional exchanges. Nicole highlights several key principles and tactics essential for cultivating and sustaining these vital connections:

  1. Have an Outward Mindset

Having an outward mindset simply means understanding the impacts of your own actions on someone else. Having this kind of awareness will make people working together a lot easier.

  1. Practice Meet-to-learn

This is a behavior where people come to conversations with the intention of learning from another person. When people make the effort to learn from one another, it makes developing relationships a lot easier. 

  1. Overcommunication

Sharing crucial information with relevant teams, especially in M&A scenarios, helps keep everyone on the same page and fosters trust.

  1. Genuine Listening

Actively listening to others and using emotional intelligence to gauge the best response or timing for discussions will go a long way when building trust with colleagues. 

  1. Respect and Recognition

Give credit where it's due to encourage innovative thinking and foster trust. Recognize each individual's unique attributes and adjust communication and collaboration styles to accommodate them.

  1. See People as Unique Human Beings

Get to know someone and understand where they are coming from. Adapting to the best way they learn or respond makes communication a lot easier. 

  1. Clarifying Questions

Ask clarifying questions to ensure mutual understanding. Try to see what the other person said in the same way they see it will help build trust a lot faster. 

  1. Honesty and Expectation Setting

Being transparent, where appropriate, and setting clear expectations can prevent misunderstandings and deepen trust. This is especially important for executive leadership, brokers, and bankers.

Advice

For first-time M&A practitioners, Nicole recommends prioritizing face-to-face interactions to build strong relationships. Making that a priority at the beginning of the deal is going to make overcoming rough patches easier. 

Recognize the unique nature of each deal and the importance of learning from every transaction for continuous improvement. Patience is key in dealing with the various challenges that may arise, including dealing with resistant individuals.

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