The Asshole Money Matrix in Mergers and Acquisitions

In November of 2022, I attended a week-long executive course on Mergers and Acquisitions at Chicago Booth Business School.?

Needless to say, I was the only psychologist in the room. However, I’d noticed the theme of chaos, bad deals, and unrealized returns over the years. Multiple people told me about integrations gone wrong. Some of my clients were selling their businesess.

By the third day, the case studies we reviewed each evening led me to a full-blown hissy fit. I was appalled by the lack of intelligence on the human factors guiding the deals. In one case, three sentences would have saved millions of dollars.?

In group work time, I listened to the conversations around me. Financial persons assessed deals from a discounted cash flow perspective. Business development persons assessed the strategic value for market domination.

Most people in the room were on the acquisition side of the equation. When I asked about the due diligence habits of companies being acquired, I learned that many of them didn’t have experience and were easily taken advantage of.?

In my desire to begin a conversation about the human factors that impact the financial cost and/or return on investment in Mergers & Acquisitions, I mapped out a matrix on the back of a piece of paper.?

Let me set forth two clarifications now:

1) The matrix and explanations focus on the categorization of a "seller" and a "buyer" for ease of concept. Of course, multiple people are involved in most deals, so best practice is assessing the key decision-makers in each deal and those who may be influencing them.

2) Underlying each quadrant is a continuum. As with most 2x2 matrices, there is variation between data points within any single quadrant.

3) While "Mergers and Acquisitions" is the term often used by larger companies, all concepts apply to small business owners as well.

THE ASSHOLE MONEY MATRIX CATEGORIES

The Dishonest Asshole

I won’t insult your intelligence by defining a dishonest asshole. Here is how their presence in a deal can cost either party.

The Acqirer?– If you are a Dishonest Asshole or have one on your M & A team, you will spend more on the acquisition. At face value, most businesses care about what they have built. If they feel that you don’t care, the price goes up. If they think you are being dishonest, the price goes up. The attorneys and other high-value professionals will spend more time cleaning up your mess, which increases the cost. You won’t think about this because you’ve been rewarded for being a Dishonest Asshole. The cost you may not be aware of is? the fee that no one speaks about, summarized in the? question one attorney asked of me, “Do you charge Asshole tax?”

The Seller – If you spot a Dishonest Asshole on the Acquisition side, you and your team will spend extra time and money assessing all angles of the deal. You can count on the fact that regardless of how tight the contract is, the Asshole will not follow through on the agreed-upon terms.? You see, Dishonest Assholes tend to think they are above the scope of normal human and legal ramifications, so the Asshole will make you work hard to get what you are owed. If the Dishonest Asshole has money, it’s easy to say, “so sue me,” and let you spend the emotion, money, and time to get what you were promised in the first place. Ultimately, there will be some points at which you will have to ask yourself, “Is this fight worth it?” Hence, you will lose money as you try to get the deal to close in the integration phase, and any further payouts.

The Tone Deaf Analyst

I originally called this category the Ignorant Asshole. However, I thought that maybe Jesus wouldn’t be pleased, and even my atheist clients thought it was a bit harsh. From an accuracy perspective, some people in this category may act like assholes, and some don’t. The Tone-Deaf Analysts have blind spots caused by low emotional intelligence. They may come across as assholes, but they don’t have the nefarious intentions of the Dishonest Asshole category.

Acquirer – If you are a Tone Deaf Analyst or have one on your Acquisition team, you will spend money on hurt feelings. Nobody wants to admit that hurt feelings happen in M & A. However,? Tone Deaf Analysts have a way of saying honest but offensive things. Thus, you or your team will spend extra money soothing the ruffled feathers of the seller, who may already feel vulnerable and defensive about their place in the deal.

Seller – If you are a Tone Deaf Analyst, people will take advantage of you. Your high level of honesty combined with your inability to read the room means that you will give away information to the Acquirer that they can use to their advantage. However, since you focus on facts and truth rather than emotional nuance, you will not have the same leverage to understand their intangible desires.

The People Pleaser

The People Pleaser wants everyone to get along. Some people pleasers will trend toward the intentionally dishonest end of the spectrum, but many are unintentionally dishonest through errors of omission. They will not say everything that needs to be said because they want to be liked and to avoid conflict.?

Acquirer – If you are a people pleaser or have a team of pleasers, you will not ask some of the hard questions or call out concerning information. While both Ignorant Assholes and Tone Deaf Analysts COST you money, People Pleasers will LOSE potential money. You will agree more quickly than you should and will likely lose potential ROI on both the front and back end of the deal.?

Seller – You will get less money. Everywhere. You are especially vulnerable if you are tired and a small business owner who has not previously sold a business. In part, you will tend to follow the Acquiring parties’ demands because you fear that saying what your gut tells you will jeopardize the deal.?

The Relational Genius

The Relational Genius attends to the human dynamics as much as the discounted cash flow.? You are honest with yourself about your own company and what it needs. You bring your business acumen and emotional intelligence to the table. You are discerning of what you see in others, compassionate, and truthful, even when uncomfortable. Hence, you address the deal based on who other people are, rather than whom you want them to be.

Acquirer –? You will make the Seller feel safe through your straighforward approach. Even if you need to ask tough questions, your honesty will make the Sellers feel they know who they are dealing with. Mutual trust costs less money. If you are dealing with a Dishonest Asshole, your emotional intelligence will help you know what NOT to say, and you will save money because you will understand their game and be able to use it as leverage.? If you are dealing with a Tone Deaf Analyst, you can explain their actions to your team so that your people don’t lose time and money being offended. If you are dealing with People Pleasers, let’s face it, you’re going to get more money and be able to get the upside of the deal during the integration phase, all the while treating them with respect.

Seller – You’ve already done the work, and you know the best deals may be the ones that you don’t happen. Your combined business acumen, emotional intelligence, and honesty serve you and others. You are unlikely to be taken advantage of, so you can push for the best deal for your company while also holding the line on what you want during the integration phase.

We get magic if both the Acquirer and the Seller are Relational Geniuses. They will seek a win-win-win because they will be able to see the bigger picture. While the initial cost of the deal may not be lower, their combined honesty and emotional intelligence increase the likelihood of a higher, long-term ROI after the deal is completed.

I understand that if you have been burnt and jaded through too many M & A deals gone wrong, it may be impossible to conceive of one Relational Genius, let alone several. Yes, I may be describing unicorns, but they are easier to find once you systematically screen for the Dishonest Assholes, Tone Deaf Analysts, and People Pleasers. Additionally, the quadrants are arranged for conceptual ease, but remember that what underlies them are continuums. Thus, the better placed on the continuum, the better the outcome, regardless of the specific category.

The Nice Person's Vulnerability (NPVs)

*NPV– Nice Person Vulnerability. The NVP zone lies in the lower Relational Genius Quadrant and the Higher Side of the People Pleaser Quadrant. Depending on how well they read others, they may vary on the EQ continuum. These are the people I love to work with, whom I also help protect. They live with integrity and expect others to do the same. They want to be fair, to compromise, and to move forward assuming the positive intentions of all. NVPs not only assume the best of the other party, but they also assume that the experts involved have the right answers. Hence, they may not double-check the work of the attorneys or accountants to ensure that all bases have been covered. NVPs are highly collaborative, and their collaborative nature makes them vulnerable. They are not dishonest or naive; they are simply less likely to push on issues that might make them come across as difficult. The NVPs who struggle with confidence or are in their first deal may be especially vulnerable to taking promises at face value.

NPV Acquirer – You will want to take care of the Seller, and your own team. You want everything to go smoothly. You may buy at a higher price than you want or lose some of the ROI during the integration due to hasty promises or a desire to keep the peace.

NPV Seller – You will want the deal to go well. You may settle for less money than you should. You may also encounter problems in the integration phase because you took verbal promises too seriously and failed to ensure that expectations were spelled out in the letter of intent.?

When BOTH Acquirers and Sellers are NVPs, there is an increased likelihood that the deal will fall apart right before closing or that neither party will be completely satisfied during the integration phase. Their attorneys, advisors, or executive coaches may have warned them, but they probably thought that their advisors were probably being a little overprotective. (If you are an attorney, advisor, or executive coach and this sounds familiar, I’d advise taking off your professional face and throwing a little tantrum. Meet emotion with emotion instead of logic).

NPV Blindspot – This matrix may be a bit distasteful because you don’t want to put people in boxes and call them Assholes. You want to think the best of people. Hence, you will be less likely to put them into the appropriate category and take commensurate actions. Instead, you will think that “Do unto others as you would have them do unto you” is the best path forward. If this is you, please get someone in the room who has your level of integrity but is a little more ruthless in assessing other people.

RECOMMENDED ACTION FOR ASSHOLE MONEY MATRIX

While I normally add a lot of specific techniques, I want first to offer the most important one. Get someone who is great at reading people into the conversations. Preferably, this is someone who isn’t already assigned to a specific role. Their attention needs to be free to track the patterns, nonverbals, subtext, and gaps in the conversation. Apart from assessing the players, the person may also be critical in the integration phase to help all parties maximize the deal's outcome.

Second, while the above matrix focuses on individual personalities, groups form their own personalities. The easiest way to explain this is in marriages. Frequently, individuals in a couple have their own personalities, but the couple combined forms a personality of its own. If that’s way too abstract or trauma-laden, let’s try cake. Flour, eggs, and sugar are separate ingredients; when they are combined, a new entity forms. Similarly, groups of people form dynamics that are greater than any individual player. Hence, it’s important to be aware of not only the individual personalities in the room, but also the separate variables that form when they are brought together.

For more information about Dr. Groff, go to www.drtriciagroff.com. For more information on the foundations of difficult personalities, check out The Difficult People Playbook, in Relational Genius: The High Achiever's Guide to Soft-Skill Confidence in Leadership and Life