Not all deals are created equal. And just because a deal looks great on paper and will benefit your profitability, that doesn’t mean it’s a good deal. In fact, monetary concerns aren’t even the most important thing to look for when evaluating a deal. Focusing solely on the money is a great way to have a deal sour partway through the process, or worse, blow up in your face completely after the ink is dry.
I recently spoke with Phil Buchanan, Executive Chairman of the Board for Cannon Financial Institute, on the Fueling Deals podcast. Phil has been involved in more than thirty deals of all sizes and values, and he has seen firsthand the growth potential deals can offer. For Phil, the important question to ask and answer is “Why are we wanting to do a deal at all?” In other words, how does the deal benefit and impact both involved organizations? Does the deal benefit the clients of each organization or just the bottom line? Phil believes those cultural considerations are vitally important to discuss and address early on.
In our episode of Fueling Deals, I talk with Phil about the importance of understanding the implications behind a potential deal, as well as charting out the long-term effects on both organizations. As a subject matter expert, Phil shares his insights and wisdom on the most important factors in determining the end results of a deal on both partners.
Finding the RIGHT Deal
As you know, I am a major proponent of inorganic growth through deals. However, it’s important to make sure the deal you’re pursuing is the right deal for your organization.
Culture clashes can occur during a merger or acquisition if the principles don’t do their due diligence and ensure that the deal partners are compatible in the first place.
Accelerated growth, new assets, and expanded revenue are wonderful, but it is at least as important to ensure that the deal you’re considering benefits your clients or customers as well. As Phil said during our conversation, if a deal goes sour it probably isn’t going to be due to the financial aspects of the deal. Careful research and preparation can ensure that everyone involved benefits from the deal and can help you avoid a painful case of buyer’s remorse.
Clients and Culture Before Cash
In all types of deals, from mergers and acquisitions to brand and licensing deals, the impact on your bottom line is seldom the most important consideration. It is important to consider what benefit your clients or customers will derive from the deal, just as it is important to ensure that your company culture is compatible with that of your deal partner. A good deal will benefit everyone involved. A bad deal can easily blow up in your face. Focusing only on the financials can have the opposite of the intended effect and create problems, slow your growth, and cost you money causing a negative return on your investment.
It is important to do your due diligence, research your potential deal partner, and look past the dollar signs to determine the extended and long-term impact the deal can have on other aspects of your business. By taking the time to ask the important questions before you agree to a deal, you can better mitigate risk and help ensure that the transaction goes smoothly and that all parties involved benefit. As Phil said, it is important to ask yourself why you’re doing the deal. Do the positive effects outweigh the negative? Is your deal partner aligned with your vision and culture? If the answer is no, it’s almost always better to walk away and find a better deal.
Learn more about Deals in the Age of Information by listening to my episode on Fueling Deals podcast.