M&A is a complex field. It involves various stages from origination, assessment, strategy, budgeting, deal structuring, implementation and post-implementation management. It is perhaps the most complicated project to undertake, and deservedly one of the most lucrative and rewarded ones.
Perhaps the most difficult and subsequently rewarded professions is deal origination. This is the process of sourcing for deals, meeting people and helping form a relationship. It involves not just financial knowledge, but strategic know-how, networking and significant travel. People that perform this job are people who can easily form relationships and have high Emotional quotient (EQ).
With a number of players – small, medium and large – advising companies on M&A strategies, the process post-origination is not hard to accomplish. However, in mature economies like the United States, finding a bargain is proving to be extremely difficult, especially when the sell-side and capital availability is very strong today. This is why the role of originator is one of the highest paying jobs.
Recently, we advised a client as part of a mining exploration project Roca Honda at Grants Mineral District, New Mexico. In order to make full use of the project, the client required a software that could assess in detail mineral content in ores. As this type of technology was not part of its core expertise, the client desired to acquire a startup or SME that developed such software applications.
We advised them on things to keep in mind when originating a deal. With the world becoming increasingly digital, the first place to source deals is the internet. Websites such as dealmarket.com and Intralinks are great starting spots to check promising deals. Once the deals are identified, originators have to get in touch with sellers and forge relationships. This is perhaps the most difficult stage.
We trained the employees of our client who were tasked with networking and negotiations, on how to handle them. Before you even get to negotiations, the way to win over your seller if by offering the strategic advantage that they would enjoy once they partner with you. Once you manage to convince them on that, then you get to aspects such as price. Surprisingly, price is not the most important aspect in such sourcing negotiations.
At the end of the day, it is important for originators to remember that the negotiating parties are all humans. As much as they are driven by rationality and economics, humans are emotional beings. It is vital that they feel valued in the M&A process and receive intangible benefits in the process. That alone will ensure success in originations.