M&A Directions: What Are We Waiting for—Really?
How long does it take to complete a deal for an acquisition of one printing company by another? At New Direction Partners, we’ve seen some that click like speed dating and others that saunter along at the pace of an old-fashioned courtship. Generally speaking, six to nine months should be sufficient to get a deal done—assuming that nothing unexpected happens to slow or accelerate the process.
Internal and external forces can move the hands of the deal clock in either direction. Internally, the wishes of sellers and stakeholders can have a crucial effect on timing. Banks and other external players may have their say about the speed of the transaction as well. Anticipating these influences is the key to dealing with them so that they don’t take control of the time frame.
Unfortunately, this kind of attitude adjustment doesn’t always accompany the decision to sell. One of our clients, a veteran of many decades in the business, had a strict requirement for the amount of money he wanted at closing. Even when offers came within a few percentage points of the number he had in mind, he would turn them away.
Eventually, we were able to put together a satisfactory deal with the right buyer. But in this case, "eventually" turned out to be two and a half years—a lot longer than would have been needed if there had been just a bit more flexibility on the seller’s part.
Sellers aren’t the only ones whose behavior can put the brakes on negotiations. In representing a pair of buyers, we found that one of the partners was highly motivated, but the other partner, not as much. We ultimately closed this deal too, but not before having to cope with many time-consuming second thoughts and vacillations by the hesitant partner.
If it isn’t laid to rest, uncertainty can be a deal-killer. A slowdown like the one described creates frustration all around—sometimes to the point of causing the seller to walk away. And, even if the deal survives, the parties still face the extra expense of compensating their M&A advisors for services rendered during the overtime (in this case, a period of about six months longer than the transaction should have taken).
How different the story can be when everyone is on the same page with the same objectives in view. Representing an eager buyer, we found a seller who was equally enthusiastic about bringing the two companies together. Both instructed their attorneys to avoid inserting needlessly overprotective language into the deal documents. The outcome: a transaction that closed in just 90 days and an amicable relationship that continues to this day with the seller staying on in a sales role.
As mentioned, outside forces also can come into play, and not always in a negative or an obstructing way. Sometimes they benefit a deal by forcing it to speed up, as in the case where the parties signed on Thanksgiving and closed before December 31 in order to be on the right side of tax changes taking effect in the new year.
Then there was the selling client whose bank agreed to defer liquidating the distressed business for one month more, but no longer than that. Everyone was better off with the deal we managed to put together in that brief space of time: the seller, because he didn’t have to lock his doors and fire his employees; the buyer, who got a nice book of active accounts; and the bank, which recovered more money than it would have if it had pressed the company into liquidation.
It’s said that in business, timing is everything. In an acquisition, it’s many things: some of them controllable, others not necessarily up to the principals. Make the deal clock keep the right time for you by being clear about your objectives and reasonable about your expectations. That way, you’ll maximize your M&A advisor’s chances of locating a transaction partner who shares your commitment to concluding a speedy and mutually beneficial deal.
James A. Russell, partner at New Direction Partners, brings over 20 years of experience as a printing company executive having served as CEO of two family-owned graphic communication companies. During his tenure as owner and CEO of Arbor Press, a commercial printing company in Michigan, the company was an eight-time winner of the National Association for Printing Leadership’s (NAPL) prestigious Management Plus Awards program. Arbor Press was also recognized twice during his leadership as one of the 50 fastest growing printers in the country. Contact him at (610) 230-0635, ext. 703.