Trust Matters in M&A
Maintaining a trustworthy reputation is critical to building a network of relationships that lead to serious buying opportunities. Many successful entrepreneurs who seek buyers seem to shy away from investment groups that seem too intimidating. Some worry that buyers will take advantage of them by cutting a sweet deal for themselves. Trust matters M&A.
Are you getting in your own way? Making any of these critical errors can restrict the number of strategic deal-flow opportunities you receive.
Mistake 1: Giving Unsolicited Advice.
Entrepreneurial leaders must act quickly and decisively on emerging opportunities. When they need advice and guidance, they seek it from professional and personal advisors they already know and trust.
If you approach the target too aggressively and without tact, you will not be able to get in the game. A strategy of developing relationships of trust and respect will go a long way toward helping leaders achieve their goals. Calling often to check-in or offering advice will distract the owner from focusing on strategy and discipline, making it harder to execute efficiently.
Mistake 2: Stifling Growth.
Achieving the growth you seek might not happen overnight. So when the business owner falters from time to time, don’t immediately put the brakes on their emotional reactions. Great business leaders are pioneers who aren’t afraid to experiment, fail, and keep trying until they get it right. Leaders who think big should be educated, encouraged, and empowered.
Mistake 3: Making False Assumptions About Your Role.
Don’t treat the business owner like a subordinate. Yes, the owner appreciates your financial support. But they want to be respected and appreciated during the sale process. They hope their legacy will live on through the business.
Mistake 4: Eroding Trust.
The best relationship between investment groups and business leaders occurs when there is mutual trust and respect. Investors must have faith in the business leaders they support. And business owners must be able to trust that their buyers won’t act in ways that inadvertently harm the growth of the business. Business owners will only sell to people they trust.
Unlike financially distressed companies, profitable companies that are poised for future growth usually have multiple opportunities for their strategic exits.
The best sellers are knowledgeable about their historic performance and have predicted the future potential of the business. Serious and knowledgeable sellers have many options to sell. Achieving a win-win deal takes time, patience, and mutual trust.