Why Buyers Should Never Bully M&A Intermediaries

A Personal Encounter

A few days ago, I encountered a group of investors interested in buying and partnering with one of my larger medical groups. Despite being upfront about our process, one of the partners in this group became unhappy due to the arrival of other competitive bids. This partner began bullying me over the pressure he felt after submitting a very loosely defined Indication of Interest (IOI), compared to the detailed Letters of Intent (LOIs) and presentations we received from other parties.

This behavior was a red flag, especially when considering a future partnership. Bullying is the last thing any buyer should do, particularly when they aim to partner with the business owner they are considering buying. This experience inspired me to write an article discussing the adverse effects of unprofessionalism. Fortunately, this behavior is rare, as most people in the world of finance are very professional. However, every once in a while, investors think that because they have the money, they can bully their way into a deal. Enjoy the reading, and let me know if you have had similar experiences.

1. Professionalism and Relationship Building

M&A intermediaries, such as investment bankers, brokers, and advisors, play a crucial role in the transaction process. Bullying these professionals can damage the relationship, leading to a lack of cooperation and reduced willingness to go above and beyond to ensure a successful deal. Maintaining professionalism fosters a positive working relationship, which is essential for the intricate and often lengthy M&A process.

2. Access to Information and Expertise

Intermediaries possess valuable information and expertise about the market, potential targets, and deal structuring. By treating them respectfully, buyers can gain better insights, receive tailored advice, and ensure they are well informed throughout the transaction. Conversely, bullying can result in intermediaries withholding critical information or not providing their best effort.

3. Reputation and Future Deals

The M&A community is relatively small and well-connected. A buyer known for bullying intermediaries can quickly earn a negative reputation, making it difficult to engage with other professionals in future transactions. A good reputation, built on respect and ethical behavior, enhances a buyer's standing in the market and facilitates smoother future deals.

4. Negotiation Dynamics

Effective negotiation requires collaboration and mutual respect. Bullying intermediaries can create a hostile environment, leading to adversarial negotiations rather than constructive discussions. This can result in less favorable terms for the buyer, as intermediaries may not be as motivated to find creative solutions or concessions.

5. Transaction Efficiency

M&A transactions involve numerous steps, including due diligence, valuation, and integration planning. Intermediaries help coordinate these activities and ensure the process runs smoothly. Bullying can disrupt this coordination, causing delays, miscommunications, and increased transaction costs. A cooperative approach ensures greater efficiency and a higher likelihood of closing the deal successfully.

6. Ethical Considerations

Respecting intermediaries aligns with ethical business practices. Bullying and aggressive behavior are not only unprofessional but can also cross ethical boundaries, leading to potential legal and reputational risks. Upholding high ethical standards reflects positively on the buyer's organization and fosters a culture of integrity.

7. Value Maximization

Intermediaries are skilled at maximizing the value of a deal for both parties. By working collaboratively with them, buyers can ensure they are achieving the best possible outcomes. Bullying tactics can backfire, resulting in a suboptimal deal structure or missed opportunities for value creation.

Conclusion

In the complex world of M&A, intermediaries play an indispensable role in guiding transactions to successful completion. Treating these professionals with respect, professionalism, and collaboration enhances the buyer's chances of achieving favorable outcomes, builds a positive reputation, and fosters long-term relationships within the M&A community. Conversely, bullying can have detrimental effects on the transaction process, the buyer's reputation, and future business opportunities.

Dr. Allen Nazeri, also known as "Dr. Allen," boasts over 30 years of global experience as a healthcare entrepreneur. He is the Managing Director at American Healthcare Capital and Managing Partner at PRIME exits. Dr. Allen provides strategic growth consulting to leadership teams of both privately held and publicly listed companies, ensuring their preparedness for successful exits.

He holds a Dental Degree from Creighton University and an MBA in M&A and Investment Banking from the University of Bedfordshire. Dr. Allen is the author of "Value Engineering: Strategies to 10X the Value of Your Clinic and Dominate the Market! " and the brand new book "Selling Your Healthcare Company at a Premium" . Dr. Allen offers a free valuation to business owners ready for a partial or complete exit strategy. Dr. Allen collaborates with strategic buyers, private equity firms, and institutional investors, taking direct accountability for the annual successful sell-side representation of nearly $750M in enterprise value.

To have a confidential discussion about your company and receive a free valuation, please email [email protected] or [email protected]