It is only when business owners realize that a succession plan is a specialized matter—one that rarely succeeds without the necessary expertise—that they bring in a consultant. Business owners who manage to find a successor on their own are clearly the exception. Why is that? Online marketplaces like “dub.de” certainly make it possible to find potential successors—or a suitable business. So why is a transaction advisor still needed?
Hardly any business owner considers what is likely the most important factor
The critical phase of a succession project and the first steps on the obstacle course begin with preparing for the initial discussions with prospective successors or buyers. A single sentence in an email or over the phone can either destroy existing opportunities or boost interest that had previously been only lukewarm. Few projects require such strategic care as the sale of a business. Yet most entrepreneurs lack this sensitivity—a regrettable fact, but one that remains true. While they may successfully market their products or services, they are very rarely able to realistically evaluate their own company and structure the sales process in a goal-oriented manner. What every successful salesperson knows, they often cannot or will not do: put themselves in the other person’s shoes, understand their interests, and negotiate accordingly. Why this is so remains a mystery.
If an entrepreneur recognizes these difficulties on their own and brings in a consultant, they have grasped something extremely important. After all, a “business broker” acts as a mediator in two ways! They also serve as a buffer between the seller and the prospective buyer. A consultant will compensate for any lack of psychological negotiation skills on one or both sides of the negotiation. It is downright frustrating to see, time and again, the serious negotiation mistakes made without a consultant—and the correspondingly negative consequences.
M&A Advisors as Personal Coaches
With an experienced advisor serving as a coach, source of ideas, problem-solver, facilitator, conflict-avoider, and more, the chances of a successful transfer increase significantly. What is usually completely overlooked—yet crucial to success—is the transaction advisor’s role in balancing and moderating the process. Because this is rarely discussed or written about, it leads to the misconception that no transaction advisor is needed. In a sale project, transaction advisors can become close, personal companions for several months—on both sides. As intensive as the collaboration may be, they fade from view again after the “closing,” and that is normal. Incidentally, transaction advisors also know how differently negotiations unfold depending on whether an MBI candidate is interested in a succession or a company is interested in an acquisition.
When the seller and prospective buyer finally sit across from each other, the level of tension rises dramatically. Critical questions about the company posed by succession candidates are perceived by the entrepreneur as an affront, or even as personal attacks. After all, he has spent decades building a successful business—what kind of questions is this greenhorn asking? An advisor recognizes this shift in the conversation in advance and can defuse the tension. If business owners forgo the advisor’s assistance, their only chance in such a situation is if the other party proves to be extremely lenient. Of course, the other side—usually an MBI candidate—is not immune to overconfidence and rash behavior either. Some would-be entrepreneurs believe they can easily secure three million in financing with 100,000 euros in equity and help from KfW. Without a consultant, this often leads to endless discussions that result in a friendly agreement on both sides. Only after weeks does the impossibility of the project become clear, and the supposedly experienced entrepreneur reacts indignantly: “Why didn’t you say that right away?” Don’t think for a moment, dear reader, that this doesn’t happen exactly like this in practice. In such cases, both negotiating parties have wasted energy and time. Just as before and during face-to-face meetings, critical situations arise afterward—albeit in different ways. Here’s just one example: It was agreed that certain documents would be sent to the prospective buyer. But these documents are slow in coming. This is because the entrepreneur is handling the project with far lower priority than the potential successor, who is practically waiting for a response every hour. Many a deal has fallen through in such situations. A consultant can prevent this breakdown.
It is easier for both project partners (buyers and sellers) to first contact the “intermediary” consultant, who will either resolve the issue themselves or filter it and forward it to the relevant partner to elicit a response. It’s quick to send an email to the advisor, whereas many MBI candidates would be more hesitant to contact the selling business owner directly. This way, even critical details can be negotiated and clarified without causing a stir. The volume of communication between a potential successor and the advisor is many times greater than what takes place directly between the buyer and the selling business owner.
Transaction advisors serve as intermediaries in terms of establishing contact, but above all as mediators in the psychological sense—balancing the interests of both parties and focused on success. In my view, this goal-oriented mediating role between the prospective buyer and the seller is one of the most important reasons to engage an advisor.
