Emotional roller coasters at the beginning of an M&A process – An interview with experts who have often accompanied this.
Possibly the most difficult question when considering an exit is: Can I let go of my life’s work? And how? This is usually more about the emotional level than about logic.
Are you personally ready to sell your own company? Perhaps the hardest decision in preparing for an exit. I discussed this topic in our series on lived M&A experiences with my colleagues Christoph Löslein and Felix Brokatzky, particularly focusing on
- the multiple emotions that can hinder us, as well as
- strategies for moving forward
Emotional Dimensions of an M&A Transaction
Martin: In our last conversation, we gave an overview of when a company is ready for a sale. A less-discussed aspect is the emotional dimension of the seller.
Christoph: Indeed, and the reason why it’s rarely talked about is certainly because it has little to do with logic; and both entrepreneurs and economists and lawyers find this challenging. The question is, can the entrepreneur separate from their company, their “baby.”
The question gains more weight the longer one has been in a leadership position, especially if the company has been family-owned over several generations.
Felix: Besides letting go of one’s life’s work, there are further reasons why emotions play a role in M&A. Let’s name three major dimensions:
- First, there’s the uncertainty and fear regarding the company’s future, job security, and the location. Another decisive factor is the question of one’s own role after the transaction is completed. Naturally, something changes when there is a change of ownership; one should be aware of that. Aside from the question of changes in position and responsibility: for many business owners, their company is a central part of their identity. A sale can lead to feelings of identity loss and questions about future direction and role.
- Furthermore, one should anticipate pressure and stress in the transaction, though perhaps that’s not the right word. The complexity and scope of the M&A process, combined with the pressure to make the right decisions, can lead to increased stress levels, although the task of being a CEO was hardly a cushy job before.
- Conflicts and tensions among shareholders can arise due to differing ideas and goals among the involved parties, which can be both personally and professionally burdensome. We often see this in companies where multiple families have developed within the shareholder base over generations, where professional and familial aspects quickly intermingle.
Martin: All of this can lead to unusual strain. A common reaction is then to “cling” or “suppress” the issue. Or there are excuses, such as no successor being available, the team not being ready, or the time not being right…
Christoph: Exactly, and the sad thing is that this endangers the life’s work, thus achieving the opposite of what one actually wants to achieve. Not making a decision is often still a decision – and not necessarily the best one.
Felix: As they say, you should leave when it’s at its best.
Strategies for Moving Forward
Martin: Yes, but that might make things a bit too easy. Emotionally, I can understand the problem. How can one deal with it?
Christoph: One approach is to set personal goals: one of my goals was always to make myself redundant. This hardly ever happens, as the environment constantly changes, making development necessary.
Martin: Building on that, it helps to look at company development holistically, i.e.
- What is the next development stage?
- What skills are needed for this?
- Buy or Build or Exit, i.e., can these skills be built internally, or is it easier to acquire them (possibly through a financing round with a financial investor), or might a potential strategic buyer be able to handle it much more easily?
If one manages to identify these crossroads and sees oneself as the overall orchestrator, one remains in control and can see the company sale as a passing of the baton and thus the greatest success.
Felix: And it doesn’t have to get boring afterwards. The experience gained is often valuable as an advisor or even operational partner, be it with strategists, financial investors, or companies like ours.
Martin: Indeed, we are known for having former entrepreneurs among our partners who have already been through it and don’t want to sit bored at home. So, in case of doubt, there’s a “new home” with us. But all jokes aside, Christoph, what personal advice do you often give entrepreneurs?
Christoph: I often recommend exchanging ideas with other entrepreneurs who have already gone through it or are perhaps in the middle of the process. Everyone asks themselves this question; it’s somewhat normal. But if you hide away with these questions, lock yourself in your chamber, then the risk of “stewing in your own juice” is high. We have brought together many entrepreneurs who later told us how liberating it was.
Conclusion
Felix: So, you’re not alone; there is life after, even in a work environment, and if you understand passing on the company as a baton handover, it becomes a strategic question that entrepreneurs can generally answer well.
Martin: That sounds like a good summary. Let’s look at possible strategies next time. Thank you both for the conversation today