When a Deal Falls Through, Put Away the Torch and Build a Bridge Instead
Sometimes, despite our noblest intentions, a deal doesn’t come to fruition. There are a million reasons why. Maybe the buyer can’t secure the right financing. Maybe the valuation comes in under or over expectations. Maybe the numbers are just too far apart for the two sides to see eye-to-eye.
In those moments, tempers can flare. Words can be said that can’t be taken back. Feelings can be hurt and bridges can be forever burned.
They don’t have to be—and they shouldn’t be. That’s just bad business.
In M&A, no one hits a homerun every time. Deals get delayed—or worse, derailed. But, “no” may not always mean “no” forever. It may just mean “not right now.”
Deals can, and often do, resurface. When they do, they can quickly derail all over again if the relationship you worked so hard to establish didn’t stay intact. Keeping lines of communication open, even when there are disagreements, helps to ensure that talks can someday resume productively.
Safeguard Business Systems had a recent example of this during the recently completed sale of Phoenixville, Pennsylvania-based Safeguard by Innovative to veteran employees Jordan Hartline and Andrew Galvin. Getting the business into the Safeguard family in the first place was a challenge.
Talks began in 2011, but they broke down, and the deal was ultimately put on hold. Still, we had worked diligently to establish a strong business relationship with the principal players, so the door never really shut all the way. It wasn’t the right time then, but it was two years later, and the deal for Safeguard to buy the company was finally completed in 2013.
Safeguard by Innovative continued its market position as a recognized leader in a wide-variety of vertical markets, including pharmaceuticals, health care and finance, and once again presented an attractive investment opportunity. That’s when Safeguard’s Business Acquisitions and Mergers (BAM) team began to explore another transaction; this time, to sell the business to Hartline and Galvin.
That successful win-win divestiture never would have happened if the door had been closed for good back in 2011.
Everyone wants to acquire one of the strongest, best companies. It’s no mystery why: The best companies are the best for a reason. They’re also typically not for sale. Often, the initial response is: “We're not ready right now." That response isn’t disheartening, because it means that an acquisition could be right for them at some point.
We simply urge them to keep an open mind and consider all of their options.
Opportunity could one day come knocking. But, the knock won’t come if the relationship has been irreparably damaged by shortsighted reactions or poor decisions in talks along the way. Work to keep the bridges between you and your distributors intact, and you’ll quickly find rewards on the other side.
R. Scott Sutton, CFE, is vice president of Safeguard Acquisitions Inc. and vice president of franchise development for Safeguard Franchise Sales Inc. At Safeguard, Sutton is responsible for the company’s Business Acquisitions and Mergers (BAM) program. In 2014, he was named a Dealmaker of the Year Award winner given by Franchise Times® magazine. He is a board of trustee for the IFA Educational Foundation and serves as vice-chair of its strategic planning committee. Follow Sutton on Twitter @rscottsutton