You’re the Star—But You Need a Stand-In
As the owner of a printing or a packaging business, you probably think of yourself as a pretty effective negotiator—and you are probably correct. Skill in negotiating is, after all, a hallmark of the leader of any successful business. Years of coming to satisfactory agreements with customers, suppliers and others have taught you the ground rules and the nuances of doing it the right way.
But once you’ve made a decision to sell your company or to acquire another firm, your best negotiating tactic will be to let someone else handle some of it for you. That “someone” is an investment banker: a knowledgeable intermediary who can get past obstacles in dealmaking that the principals might not be able to overcome on their own.
Buying or selling a business begins with ideas: a set of expectations about what you want to accomplish and a plan for communicating those expectations to the other party. While your ideas may seem perfectly clear and reasonable to you, the owner you present them to may misinterpret your proposal or even reject it out of hand. The risk is especially high in a “cold” approach where the principals either don’t know each other or have been acquainted only as competitors.
An investment banker minimizes the risk by acting as a sounding board for your ideas and as your emissary to the other party. Having been an advisor to many other transactions like yours, the investment banker knows what will and will not work in the opening phase. By making the initial presentation on your behalf, the investment banker can present your ideas in the best possible light—a good beginning that will lead to desirable outcomes as the negotiation proceeds.
Veteran negotiators know that the key to bringing a deal home is to take emotion out of the process. But, that is often more easily said than done, and some owners are better than others at tamping down their emotions when negotiations grow tense.
In the due diligence phase, for example, the buyer may uncover flaws or shortcomings in the seller’s business that will have to be addressed. The solution for the seller who isn’t good at handling criticism is to let the investment banker provide the emotional distance by confronting the issue in the seller’s place. Again, the banker’s years of experience as a buffer in situations like this will point the way to a fair and stress-free resolution.
At some point, naturally, you and the other owner will want to meet face to face, and your investment banker will encourage the contact. A meeting almost certainly will take place during due diligence, when the parties typically meet to review financials and business records at the seller’s plant.
But, the introduction doesn’t have to wait that long. At New Direction Partners, we recommend that our clients meet socially with their opposite numbers early on in the process, well before the signing of a letter of intent (LOI). In some cases, the interaction is so positive that the buyer and the seller can negotiate almost all the way to the LOI stage by themselves, with intervention as needed by us.
Your investment banker paves the way to cooperation by smoothing the rough edges of your proposal and by making sure that both parties understand the advantages of saying “yes.” Sometimes you need to be directly and personally involved in the process; at other times, you don’t. Letting the investment banker help you choose your moment protects the buyer-seller chemistry that clinches a successful 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.