Managing emotions for successful transactions 💪

Welcome back to another edition of The Wise Exit!

In today’s newsletter:

• 3 lessons we can learn from University of Amsterdam researchers and their study of 30 years of M&A ✍️

• A brand new episode of the Cashing Out podcast 🎧

• Our round-up of interesting M&A transactions from the past week 💰

Let’s dive in!

In 2022, the International Journal of Management Reviews published a review of over 30 years of M&A research by University of Amsterdam researchers, unpacking the role of emotions in mergers and acquisitions.

The study is a rich resource for founders who want to explore the “human” end of what makes a transaction successful– or not.

Today, we’re covering three takeaways from the study that any founder can apply to their own company when preparing for an exit.

M&A Lesson 1: Make room for multiple points of view

As with any major transition in life, selling your company will evoke mixed emotions— and not just for you as a founder.

Researchers Yoeri Klok, David P. Kroon, and Svetlana N. Khapova found that there are often conflicting emotions among top management teams.

“Although target firm managers can be proud and optimistic at a reasonably priced sale of their firm, they could also feel worried about their employees’ faith, collaboration and reactions,” writes Klok et. al.

To complicate matters, your company is no longer operating in its own ecosystem. Just as your managers are experiencing complex emotions, so too are the managers of the acquiring firm.

To prevent negative emotions from sabotaging transaction progress, it’s important to make room for multiple points of view. Klok et. al. recommend the following practices to reduce stress and inspire pride:

• Prioritize transparent communication with your team.

• Allow the flow of information to be open.

• Be honest.

M&A Lesson 2: Know that top manager’s emotions have influence

While allowing for multiple perspectives and communicating openly is important on a relational level, it’s also pertinent to your acquisition’s success.

After studying 30 years of M&A research and data, Klok and his team found that top managers’ emotions have a direct influence on the transaction’s success, reporting that, “When managers are unhappy due to demotion or jealous of peers having received better positions, they could sabotage the M&A.”

This isn’t meant to scare you. Instead, founders can use this knowledge to better manage team emotions.

The study offers the following recommendations:

“Ideally, this is achieved in workshops or meetings where employees can exchange views. Employees can articulate their hopes and concerns and together, members of both firms can learn to cope with the new reality and the inherent uncertainty of the post-M&A integration process.”

The key is being compassionate and preserving social connection.

M&A Lesson 3: Focus on building trust

Emotions flare— it’s inevitable. But that also means that they come and go. One of the best antidotes to any negative feelings around the M&A is building trust.

While it’s likely that you’ve already built trust with your team, the next task is making sure that trust carries over when you make your exit.

Klok’s study found that there was more company-wide trust when people felt that new leadership was being authentic. As you prepare to make your exit and hand your company over to new leadership, make sure that authenticity is a shared value. The study suggests the following principles:

• “Walk the talk”

• Don’t over-promise

• And be fair

When you integrate these findings, you set yourself up for a successful transaction.

Cashing Out: Mentorship, Bootstrapping, and Finding Product Market Fit

Andy Pai is a former investment banker, and co-founder of Finbox, a financial data platform that covers over 100,000 stocks on 130-plus exchanges around the world.

Andy started Finbox in 2015 and identified the buyer intent that ultimately helped build a successful suite of products that led to the company’s acquisition by Investing.com.

In our discussion with Andy, we cover how:

• To manage the expectations and attraction of multiple M&A “off-ramps”

• Building a company with intense focus is essential to success

• Being transparent with advisors and acquirers upfront saves time and primes your deal for success

M&A News 📰

• Food: Blue Apron, known for its popular meal kits, announced it will be acquired by Wonder Group for approximately $130 million

• Movies: Letterboxd, the New Zealand social media network for film lovers, was acquired by Canadian holding company Tiny.

• Manufacturing: Aerospace-focused acquisition company Exchange Income Corporation acquires Dry Air Manufacturing for $60 million.

• Health: Canadian heart technology maker OpSens Inc. sells to Boston healthcare company Haemonetics in a new deal.

That’s all for now.

Tune in next Wednesday for another set of M&A lessons, and have a great rest of the week 👋