7 Critical Factors For A Successful Transaction
By Tom Schramski, PhD
Volume 1 Issue 3, March 4, 2014
Criticism is often easier to execute than implementation. And so it is in the world of transactions. Whether it is a retail encounter, the purchase of a home, or an acquisition of a healthcare business, we are too ready to do the post-mortem instead of carefully planning for success.
Based on over 30 years in the marketplace, it is clear to me that there are several critical factors in a successful transaction that sellers and buyers should consider early in the process:
- The sense of trust, based on observed behavior, that the other party is operating with good intentions while understanding that all communication includes some element of negotiation.
- Clarity of all parties about their transaction goals and the understanding that there may be more than one tactical avenue to reach their bottom line.
- An appreciation for the valuation model that either or both parties employ despite some difference of opinion about the final pricing.
- Understanding of the critical numbers identified in the financial results to date, as well as any projection based on the numbers.
- Awareness that some issues will only be resolved post-closing (e.g. receivable collection) and that these are explicitly addressed in the sales agreement.
- Anticipation and specific planning for the implementation of the acquisition or merger prior to the transaction.
- Early identification and relative transparency for the basic steps in the transaction process.
From what is presented in the financial media, it would be easy to assume that there are more failed than successful transactions. Quite the contrary. While there are some spectacular failures, there are many sensible acquisitions and mergers every day that provide substantial economic benefit to the parties involved, their customers, and our larger economy. If you consider the factors above, you will have a good start on your own.