3 Tips for Exploring Strategic Transactions Involving Partners

An NAPL client calls with an opportunity to acquire/merge with a leading company in the region. The complicating factor is the ownership structure: one partner with 51% (woman-owned) and 4 others combined 49%.

The shareholder issues involved in the pending opportunity are not unique. The print and graphics communications industry is full of family-owned partnerships. Ownership dynamics are complex and involve elements of succession planning, business valuation, and M&A, all under the backdrop of a rapidly changing industry.

The M&A advisory team at NAPL has handled numerous ownership restructuring/M&A cases over the past few years. A few tips from prior experience:

1. Get to know the other partners as soon as politically correct. The acquirer should attempt to meet all partners, not just the leader, either individually or as a group. The thing to avoid is negotiating a deal through one partner because just when you think you have a deal, then the others jump in for a second bite at the apple. Also, the acquirer needs to assess chemistry with all partners, especially if any are coming on board as employees. Moreover, the partners’ perception of the acquirer should be based on personal interaction, not just what the leader is telling them.

2. Determine the extent to which the partners are on the same page as to objectives. It’s fair to say that the transaction is way more difficult to close if the partners are not on the same page. It’s good practice to ask questions and gain insights as much as possible about personal objectives, age & family, likes and dislikes, strengths & weaknesses, financial situation, where they live, etc. One sensitivity to drill into is the relative contribution of each partner to the organization. Sometimes there are partners not carrying their weight, creating resentment among the stronger partners. This dynamic tends to bubble up a lot to the surface in M&A talks. The sooner it can be understood the better. It’s always important to know if the partners are interested in employment going forward or if they “want out” entirely.

3. Ascertain proper venue so partners are comfortable opening up. I just had a visit to a company down South to have a two-hour meeting to help a client “cut to the chase” about expectations and a proposed offer. Phone and email just didn’t work with this owner. He had to be in his office, with the door closed, with his trusted key manager right there at the same time. In that comfort zone, the meeting was more productive because we reviewed a draft Term Sheet together and I was able to elicit real feedback, not filtered through M&A negotiators. I suggest finding a way to get the partners to a neutral, confidential venue such as the NAPL conference room.

Next blog will offer several transaction concepts for acquiring print and graphics communications companies who have multiple partners.