Having been involved directly on both the buy and sell side of a process, The Selinsky Force President and CEO Lori Scott has gotten to see many aspects a deal.
Looking at the current situation versus the past, she says many of the same challenges continue to exist. For instance, on both the buy and sell side, one issue is trying to find relationship businesses — businesses that fit together well — an aspect that she says can make or break a transaction.
“The culture and the fit for any of those businesses is hugely important for them to flow properly and work,” Scott said at the 2024 Pittsburgh Smart Business Dealmakers Conference. And unfortunately, I think not always is that the priority.”
Because having one side feel stuck in a relationship that isn’t ideal can negatively affect a deal, she says it’s important for both sides to look at the long-term prospect of the relationship and take into consideration what all the people within those businesses can bring to the table — the extra help, she calls it, that one side may not be able to do on its own.
“Prior to that change, we didn't have the resources, we didn't have a consultant,” she says. “So, those are the things that I see is hugely important in helping that growth, making it turn out a lot better than what it is.”
There are some recent market factors that are complicating processes. For instance, higher interest rates and the pandemic are clouding each side’s ability to see a deal’s prospects clearly.
“Do you have a realistic background of what their norm is? How do you vet that out?” Scott says. “Are you at risk that it's being overstated? Or you go the other way, and you're trying to put out that in your business that wasn't the norm, and how do you back that? That's the one thing that's changed in my mind over the last four to five years, obviously COVID being a big impact. How, as a seller, do you get that out there? How, as a buyer, do you try to make sure that you are really getting what you're looking at?”
Culture can have a major impact on a deal. She says it has been the case that companies that have had their culture set through multiple generations, regardless of industry, can struggle if both sides are not culturally on the same page heading into a transaction.
“For the ones I've been involved in, (it) made or broke how they went,” she says.
Avoiding a disastrous transition is often about how the two entities communicate to their teams, how they interpret it, and keeping an eye on the results.
“For myself, being at different levels over all of those transactions had a huge impact,” she says. “In hindsight, obviously it's easy to go back and make it different. But looking at those and thinking that some of them could have gone better, some of them could have also gone worse, but better, for sure, had there been a better fit or better communication between what the new owners are looking for. And I think it gets hard, especially with family-run businesses, things that have been in multiple generations, for some people to step back and do that because you know somebody is going to come in and do it differently than what you've done it. But if you're open to that and taking advantage of the new opportunities some of those transactions have and communicating that, I'm a firm believer that that can make it go much, much differently, and have a much greater effect of achieving the growth that you're looking for as the buyer.”
She says it can be easy to get hung up in the numbers. But if one or the other is taken without considering both the numbers and the culture, it’s unlikely to have the same outcome as when both are considered.
