The process of selling a business can become a psychological and emotional roller-coaster. The bumpiness of the ride is dependent on many independent factors including the preparedness of the business itself, the effectiveness of the intermediary, the shrewdness and/or professionalism of the buyer and the rigors of due diligence. Emotional and psychological factors can also have an impact on how smooth the process might progress for a given owner seller. The emotional loss of selling a business is a real thing. Dealing with such emotion while also managing a potentially stress-filled due diligence process can be exhausting.
For some business sellers, the pros of “getting out” far outweigh the cons of both process and emotion that accompany such a transaction. Senioritis in the sale of a business is a helpful component of proper seller emotional preparation. Sellers who may have avoided emotional detachment prior to a full sell-side M&A process, have a greater likelihood of seller anxiety while the transaction proceeds, including feelings and questions like:
Personal vs. Business Preparedness
Even the most prepared business owners are likely to experience some form of emotional stress during the process. It is a very natural phenomenon. Preparing employees, financials, operations and marketing to be ready for deal marketing and deal due diligence is essential for eliminating a great deal of potential stress through the business sale process.
Adequate preparation at the business level is an essential part of the process and one in which the advisor should provide a great deal of assistance. Unfortunately, most investment bankers are not psychologists or therapists. They frequently fail to adequately assist sellers in the rigors of mental preparation.
One of the best ways for sellers to avoid the risks of emotional headaches that come from running a process is to rely heavily on outside advisors in managing, structuring, marketing and closing the deal. Working with trusted advisors allows for owners to take a step back and avoid much of the minutiae that can trigger emotional headaches in transactions.
The Buffer of an Intermediary
A seller’s investment banker provides more than third-party assistance on the deal. The right intermediary acts as an effective buffer between various buyers and the seller throughout the process. An intermediary, allows the seller to step away from the day-to-day questions, concerns and stresses of a transaction. In nearly every deal, intermediaries may receive multiple calls per day from multiple buyers. While such questions are often preliminary to complete due diligence, they important to get the buyer comfortable with both the business as a sustainable going concern and the particular valuation they may be looking to pay for the business. In the absence of an intermediary, the seller would be left to handle many questions that may question the seller’s true interest in the deal. They may read between the lines and find more reasons to be unnecessarily frustrated with buyers, perhaps even seeing red flags when none yet exist.
In addition, intermediaries may not communicate every detail from every discussion with the seller. Key details like valuations and intended outcomes from various groups should absolutely be shared with selling shareholders. However, in many cases an intermediary may choose to avoid sharing details that may be unsavory, unnecessary or wholly unhelpful to maintaining a cool temperature among the selling group. There is a fine line between the necessary and the irrelevant in sharing or avoiding detailed discussions with sellers and investment bankers must always act with caution. However, if managed appropriate, an investment banker can provide a great deal of structure and proper message filtering when dealing with various potential investors to a deal.
Psychology is Art, Not Science
Every deal includes sellers, buyers and advisors with varied expectations and emotional states. No two deals will ever be the same. Some sellers are quite content allowing for nebulous process management, while others would like to micro-manage. In addition, some business sellers are wholly prepared, burnt-out and ready to exit, while others may be uncomfortably compelled to sell (e.g. in the unfortunate case of the death of a spouse) or otherwise emotionally unprepared to transact. In such cases, a healthy dose of both sensitivity and awareness of the human side of what we do is critical. It is the art of the deal vs. the science of transaction.
Unfortunately for those that act as investment bankers, it can be difficult to read where a seller may land on the varied spectrums of emotion that encumber deal processes. We have seen the gambit, but likely have yet to experience the rainbow. Hence, we too much remain both sensitive and adaptive to the potential baggage (or lack thereof) that can accompany a sell-side mandate. Doing so without a degree psychology degree makes our internal processes challenging, but rewarding at the same time.