Establishing Trust is Crucial in a Successful Merger or Acquisition. Here’s How to Make It Happen.
All successful relationships are built on trust. Instinctively, we know this. But we often still err in how we establish it: giving it out too readily, too stingily or not at all.
Trust is a critical component to building a business. Business owners need to foster trust in a client or customer who has never purchased a product or service from them before. In the same way, a buyer needs to establish some level of trust in your competence and ability to deliver before they will pull the trigger and buy. But, all too often, I see deals where people lack a sense of trust either in the business they’re buying or in one they’re selling. If you can’t trust the other side, then why are you entering into an agreement together?
Feelings of fear and distrust during mergers and acquisitions can be even more prevalent. Most sellers have never been through the process before, and they often don’t know what to expect. This is the business they worked hard to build, and they’re naturally—and understandably—afraid of what might happen if their legacy falls into the wrong hands. So, how do you work with a seller to help overcome those fears?
Having a good track record as a buyer certainly helps. But when references aren’t enough, doing your homework is the key. By arming yourself with as much information as possible, you can help eliminate room for doubt and speculation. This starts by simply talking with the company’s leaders. Get a sense for how they operate. Get a grasp on the relationships they’ve developed. Understand how the leaders conduct themselves. And, perhaps most importantly, work to understand how the employees feel about the business. Their happiness level can paint a very telling picture of a company’s true culture.
Establishing trust requires a level of transparency on the buyer’s end, too. You can’t be afraid to put yourself out there and answer any questions that might be thrown your way. It’s important that we invite open and honest dialogue from employees and listen to their thoughts. Let them know that it’s OK to ask questions. Believe in your overarching acquisition strategy and tell the same story as the seller. Most importantly, a buyer can’t ever be afraid to tell the truth. Pulling the wool over someone’s eyes almost always ends negatively.
In the end, whether you’re buying or selling, it’s important to consider shared goals. When you do your homework, chances are, you’ll realize everyone is on the same page. And once you gain that level of knowledge, open up the circle of trust to each and every employee. Trust begins at the top. When the seller is completely and totally on board and believes in the company that’s buying the business, that confidence will trickle down throughout the rest of the company and ultimately result in long-term success.
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