Communication Strategies: Bad news doesn't get better with age

In this episode, we dive into the critical role of clear communication during business transactions. Whether you're buying or selling a company, effectively communicating your intentions can make or break the deal. Our hosts discuss how to navigate these conversations, the importance of involving advisors, and how to keep the lines open even after the transaction is complete. Tune in to learn strategies that can help you succeed in your next business transaction.

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TRANSCRIPT:

Welcome to Integrated Insights with ICCG. For more than 30 years, our team has partnered with small business owners to prepare for and navigate the business transaction process.

Pull up a chair as we share stories and insights from our experience on all sides of the M &A table. And welcome back to another episode of Integrated Insights.

My name is Michael Hefner. I'll be your host today. I'm joined by Andrew McCulkin and Dave Parker. Hey, guys. Hey, Michael. Hello. Hello. Today we're going to be talking about clear communication.

So we try to quarterback the communication during the business transaction process. And first, we're going to get started on the beginning of communication in the deal.

So how can business owners effectively communicate their intentions to potential buyers without compromising their business position? What role do advisors play in the communication process during a business transaction?

That's a great question. It's probably one of the reasons that advisors are needed if the advisors can communicate well for everybody. I think we've met a lot of business centers.

And look, as we always say, transaction done.

And a lot of business started, I think I'm going to give it a shot on my own, then we hear from them later going, well, that didn't work out so well. Almost always, because the communication breaks down at some point. It's a game.

It is a total game. I think we're going to be doing a podcast soon on negotiations and negotiating. And that's, it's a little bit of a game. And all that involves communications.

So when a, when an intermediary gets involved, they should be able to communicate clearly to our client. What I feel like our job is to stay in a constant communication to our client,

communicating clearly what the intentions the other party has towards purchasing in this case. And if we're representing the seller, communicating clearly to a buyer what the tensions are of the of the seller and oftentimes that gets muddied when buyers and sellers are talking to each other directly because they're out trying to outmaneuver outthink each other that's our job we get to outmaneuver and outthink each other it

works a lot of the time sometimes it doesn't work so well but most of the times it works when you say andrew don't you think is you because you're you're one of the first ones to communicate with people, right? Like, you're meeting them.

You know, Andrew's the master. We kind of laugh because the guy can get into any door who wants to. It's like, you know, it's like, how did you talk to that guy? Yes. I just kept. He's called the business and asked to talk to him.

Yeah. Well, you know, I think that the, the key thing there, David, that you kind of were insubating. I mean, look, you have two parties,

a buyer and a seller, and they both have different things that are important to them, right? And so one party wants to communicate what's important to them and one wants to communicate what's important to them.

And they don't always match up. And so, and really, it's not, it's not that they don't agree with each other. It's more about they're just, they're just putting more importance on different things.

And so the communication with that, I think, is for us is key to understand those intentions of each party. And so most PE groups,

at least at the beginning, we'll communicate with. And understanding their intentions is always key. And so I'll have several calls a week to understand what that P group is,

is trying to do their, their, their, their, their, their, their, their, their, not just their criteria, but, but, um, what do they do with the business afterwards, you know, and, and, and,

and that's important because that way we can, we can, we can let the seller know what to expect. Yeah, speaking directly. Let me, let me, let me, let me, let me, let me, let me, we've done something, you and I have done something quite often.

come in and we pay five times, you know, your, uh, your ebada or your whatever it is and, um, your earnings. And, uh, you know, we, we have limited due diligence.

We make this super easy transaction. We're like going, no, there's no transaction that's easy. There's no due diligence as quick. So we've been, we've been through it enough to where we can actually,

you know, call BS and what's BS and kind of get to the bottom line. You know, how many times have you retraded a deal? What's your retrad? I mean, is that typically how you operate? Some P .Grups, that's just typically how they operate. They'll go and get as many LOI sign as they can.

And then they'll start, you know, figuring out which one they can close. Or that's not, that's kind of atypical, but that's done out there. And we just want to flush all that out at the beginning. And so Andrew,

Andrew will get in the door with people and talk to them and find, you know, find a list and then we'll start interviewing them and we find it kind of fun because we have to ask all the hard questions you know but really yeah if you want honestly i kind of feel like if you want the right to to go in and buy one of our clients businesses but i feel like we we represent really good business owners and uh you

want the right to go on and buy one of our guys businesses we want to protect them and one way we do that is to make sure that you're qualified buyer and same thing with a, and same thing with the seller. You know, we want to make sure that it's a good match.

Sometimes it's just not a good match, and you don't know until you really find out what they're wanting. And sometimes if you're getting in them to communicate what their intentions are, as Andrew said a minute ago,

and their intentions may be, oh, I want, you know, $100 million from my business that does $2 million in EBITDA. Well, we're probably not you got to go get you $100 million. I don't know of anyone who can.

You're going to go find that buyer on your own, right? Yeah, and I think, and even then, I think we've talked in the past about what is important to a seller.

And I think that it's not always the purchase price. It's not always about the number. What's important to them is the people. It's about their legacy. It's about these different things.

And not all buyers can. important to them to us,

right? We have to have that information. Right. Right. Yeah. So, you know, I think just overall, Michael, you know, just the communication is just, look, that's what the whole transaction is communicating.

And I think honestly, let me say this true also, communicating with integrity and communicating honestly and openly, I mean, it just kind of is what it is sometimes. And, you know,

we kind of operate around an adage that one of the early investors in one of my very first businesses years ago told me, you know, bad news gets no better with age. And so you really think about that.

And Grant and I've operated on that for a long. And neither one of us like bad news. Neither one of us like to address bad news. But we've always found out that if you go ahead and address it, people really appreciate that.

And I think that most business owners really and buyers really like just very front, just this is the way it is. And it gets some negotiations a lot quicker that way too and gets to the bottom line.

So, you know, communicate with integrity, communicate with honesty and openness and communicate regularly so people understand and know what you're doing. You know, when we get a seller,

I think, you know, Michael, one thing, we're doing better than what we've done before at our company is starting to communicate. when things go wrong.

Like you mentioned, you know, we do a lot of the vetting to try to avoid get in front of some of that, but sometimes we still get the bad news. Sometimes people don't tell us things right away. Sometimes, you know,

things are going normal, but somebody still reacts negatively. What do we do? How do we step in there and what can that look like? That's, yeah, that's a little tough.

We've seen many reactions to this, right? I mean, look, deals can fall apart if communication goes awry. I mean, it can. And I know you asked Dave that specifically,

but I know it can, I mean, there are drastic differences in how we, look, we can try to save it. I've seen Dave save a deal, I mean, several deals just by the way that he communicates.

And so I think that that's worth noting that anything, we can explain anything, but as long, I think it's important to go through us,

just as the advisor. I think that is also very, it's, it helps the deal move forward rather than just fall apart.

Yeah. And sometimes, You know, we can't talk super detailed how we keep people at the table because then they wouldn't need us, right? But I do think it's,

I really think it's respecting people with where they are. Look, sometimes people just wake up on a Monday, case in point, sometimes me. And it's just, you just don't,

you've got to really work at having a great day. So the Monday day, as they call it. But, you know, sometimes, sometimes deals go wrong just because someone's other stuff is happening in their life.

And you just have to kind of let it be for a minute and walk with them through that a little bit and show empathy toward that. And the deal will start coming back around. You got to almost sometimes I think we try too hard.

This is something Grant, my business partner's taught. Sometimes we maybe try too hard, although I do think we have to try. We do have to get in and do our best to make sure we're doing, but sometimes it's giving a little bit of breathing room to come back to life and,

and massaging in a bit, you know, giving a little CPR in the process. So case in point, we had a deal a couple years ago, just all of a sudden just stopped. And everyone walked away and went,

this just isn't going to work. And so I got the, we were representing the seller. I got the buyer on the phone. Both people were great people. Both people really liked each other. And I thought,

this just can't end like that. This just can't stop like both. Something's not quite right here. And all it was was just, you know what? In this case,

it was kind of like getting the plaintiff on the stand. You know, you really don't want the plaintiff to get on the stand to be the witness. but in some case, you have to put them on the stand. In this particular case, it just took having a couple of individual conversations with buyer and seller,

and then facilitating a call between them, and within a day it was worked out, and we were able to get back on track. But it's taking the initiative, because oftentimes when things, we all know this,

most people don't like to deal with conflicts. When conflict comes up, they just want to walk away from it or ignore it or put their head in the, you know, put their head in the sand like an ostrich. And really, I think what our you know,

you might step on toes. And if you step on toes, people get hurt. And so they react a little bit poorly. And so we're dealing with people, right?

We're dealing with, with, most of the time, it's a, it's a business owner that's selling their business that they've owned for a long time. It's their baby.

It's emotional. And so we have to respect that and be and be patient with it. It's not always the immediate reaction of that business owner or,

you know, whoever that, whoever it is, that is how they truly feel or how they, you know, want to move forward. And so that Dave's right. Just, hey, let's just zoom out for a moment,

big picture. And let's be patient. Okay, now let's let's come together again and let's talk about what's important. And then, and then maybe we can move forward from there.

We do a lot. We do buy side as well. So we're actually sending out that spreadsheet on behalf of the buyer. People look at that and they go, 284 lines. What are you talking about?

You know, 40 cells long, wide and 200. So we always kind of, we always, but you know, we do. We call them in advance and say, this is coming.

We communicate with them. Rather than just giving an email, we call them. We communicate with them. And, you know, Mason's getting good at this column saying, hey, you know, you're going to get this spreadsheet. Don't freak out.

This is the same spreadsheet that you use. We've tried to, we've tried to kind of zero it into your business, but it's still going to have a lot of things that are just not applicable. Just put NA and move on. Just kind of go for the easy,

you know, go for the low -hanging fruit first, knock out that easy stuff, and then we'll get back to the other stuff. But what happens also, how that can go wrong, though, is that people get a little sloppy during due diligence and they don't either want to answer the questions.

It's too much trouble to supply the documents so they don't. And then that's discovered late in the process. And so again, one of the things we try to do is we try to stay on top of that.

So sometimes it's not verbal communication. It's looking at all the written communication that's coming in and making sure it is what it's supposed to be. You know, nothing gets passed on to a seller or to a buyer,

for instance, from our seller until it's passed over someone in our offices' eyes to make sure that it is what they've asked for. Again, again, that's one reason that,

and honestly, due diligence is what will typically blow a deal apart if someone's trying to do it directly without because it's too, it's just, it's just too overwhelming.

So Dave, Andrew, sometimes, you know, we, we help somebody sell their business, right? And some people that maybe haven't sold a business before can think, oh, yeah, I'm done at that point, right? There's nothing else to do.

I'm never going to hear from those people again. But sometimes that's not the case, right? What can that look like? What are the circumstances that can cause communication to need to continue after the transaction is?

time. And so you don't really know. I know there, I would say with that transition period right after closing, there's going to have to be some handing over of,

of, of, of customers and hey, transition. Hey, just kind of helping them through how they're, they're running the business and getting them acquainted with,

with running the business. And so there is going to be that. A lot we have working capital adjustments we have all of that or the true up that those types of things that are that's that's going to have to be communicated for sure but but as far as the business and the operations of it there might be some i know dave has handled this before being a business owner and so i'll let him give examples but that's that

does happen for for sure. Oh, yeah, 100%. No matter whether you're left, I mean, when we sold, I can't think of a business that we've sold that we've owned, that we haven't had to be involved quite a bit after the transition.

And again, I'm just going to tell you up front, people, we try to prep our sellers for this. It's an integrity thing. I mean, to me, I know a lot of things come back to that.

We keep saying really this is this is a high integrity thing do you do you appreciate what's gone on enough to to want to make sure that that transition's good it's easy to sit back and go oh i hope they you know under your breath and go i hope they fail you know because they can't possibly run as good as me right that's the arrogant seller uh and that's that's when he's not really being he's not selling for the

right intentions i think but most it's really fun fun when you find a seller who's saying, man, I want them to succeed. Now, if they've got rollover equity in the deal, they might be a little more engaged.

But we tell sellers, you've got to be engaged. We do a lot in the medical space, in the medical facilities, small medical facilities.

And we've owned one of these ourselves. And so the transition time afterwards is so important because you are, you're transferring licenses, you're transferring pharmacy licenses. There's a lot of regulatory things that have to be engaged.

And we've had situations where, you know, we basically helped a buyer buy one nearly out of bankruptcy. And there was no help on that. We had to hire somebody who used to work for the company to come in and help with that.

Another one where, you know, the, the seller just wasn't helpful or being helpful in the way they approached things. And then the other ones,

you know, where you're really, maybe they just didn't realize the magnitude of the amount that they would need to help. So, but being available right away for that transition is super important.

And oftentimes they get a big check in the bank and they're like, whoa, this is nice. I'm going to go on vacation. We tell people, can you hold it on your vacation for about six weeks? Because they're really going to need your transition. this or they're not doing this right or also it's not cooperating and all of a sudden it's just like mommy and daddy are going you know who's who talking to mommy and daddy

figuring out who's going to solve their problem for them and on the flip side I will say that we've had several clients that say oh no this business is not they're going to need me around you know they need me to run the business you know and and and honestly most yeah most of the time not the new owner.

And so there's this conflict that might arise. And the thing is, is that we try to balance it to where it's, we're limiting it to a reasonable transition.

We had one client a few years ago where he literally told us, no, this business will go into the ground without me and told us that, not the buyer.

And so, but I think it was, we limited to, I think we got him down to six months transition. And there were some key things that needed to be transitioned.

And the buyer knew that. But 60 days in, he called us and he said, guys, you were right. I don't want to be here anymore. And so that said,

after six months, it was so great to see him. He was so excited to be out. And you know what? Good on them because they deserve. And they've built a good business and they've got a good payday coming.

They deserve to be able to walk away. And that, you know what that tells us? Guys, it tells us we did our job well. Right. When we've matched buyer and seller together and the seller can enjoy what they've worked so hard for,

that's a good day in our books, right? That's right. And that's why we do what we do, right? So any business owner listen to this, we'd love to sit down with you, and we'd love to help with your business transaction,

help with communication through that process. That's all the time we got for today, guys. Thanks for joining us. Thanks, Michael. And that wraps up another episode of Integrated Insights with ICCG.

Be sure to subscribe and stay tuned for more stories from our team. We love hearing from our listeners. If you have any questions or topics you'd like us to cover, please send us an email in the show notes.

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