You don’t need to be a psychologist to be a great dealmaker, but the skill to understand how the human mind functions does come in handy sometimes, says Gregory J. Skoda.
“A huge part of dealmaking is reading and understanding people,” says Skoda, chairman at Skoda Minotti. “It’s trying to get inside their heads and in many cases, figure out what they want.”
Skoda helped launch two great businesses — CBIZ Inc.and Skoda Minotti — that continue as successful enterprises to this day. He has also researched thousands of companies, made hundreds of acquisitions and become one of the region’s most acclaimed dealmakers. In February, he was our first Master Dealmaker.
This week, we share a few clips from the video interview we did with Greg. We spoke about the philosophy of dealmaking, lessons Greg learned creating CBIZ and why it’s so important to listen. What follows is a transcript of the above video, edited for readability.
Energy and excitement
What I really love about dealmaking is there is an energy and an excitement about bringing a couple parties together or multiple parties together to meet their combined needs to help them get to where they both want to go or where they all want to go. When we’re involved in the dealmaking space, it’s everything from finding the transaction or finding the opportunity to exploring the opportunity and getting into the mix with the people who are involved. It’s trying to really figure out what it is that they are looking for. Buy side, sell side, merger side? What is it that they really want to get out of this transaction short term, midterm and long term and then trying to architect solutions that everyone can walk away from the table excited about.
Many different reasons to make a deal
A huge part of dealmaking is reading and understanding people. It’s trying to get inside their heads and in many cases, figure out what they want. They may approach a situation that they want to sell it for X reason or they want to buy it for Y reason or they want to get involved in this merger transaction because of something that they think. When you explore it and pull it apart and put it back together again, the reasons may be very different. Their needs may be very different, particularly with how people want to be involved before, during and after a transaction. How their teams want to be involved before, during and after a transaction. What people see, the combined vision for what this looks like and how it functions on the other side of the transaction are all critically important to the success of what it is we’re trying to do. It really is all about the people.
Lessons learned at CBIZ
We had the opportunity to create a company, to create a public company that we had a vision about named CBIZ. When we started that company, there was a lot of ferreting out and trying to figure out what was our business plan? What did we want to accomplish? We were able to marry that with some capital sources, some wealthy individuals who had done thousands of transactions in their lives with the expertise we brought to the table and the particular industries we were focused on at the time, which were primarily accounting and insurance related. The things we learned along the way were exponential. At the time, we had been successful businessmen. We had built successful businesses and now we were walking into this public company arena. We’d never done at the time another public company acquisition.
We got on this treadmill that took us down a path where over a 24-month period of time, we did 135 acquisitions. So in doing 135 acquisitions in 24 months, to build the team to find them, to build the team to negotiate those transactions, to build the team that walked away from more transactions than we did, it took us down a path where we looked at a couple thousand companies to get the 135 that we completed. The things we learned about companies, the things we learned about people were frankly, things we couldn’t have imagined on the front end. The things we learned about negotiating and the entire nature of the transaction were things we couldn’t have imagined on the front end. The opportunity to explore at that level of volume — indepth, rapid fire — created an education that it seemed like every transaction we did, we got better at.
A costly misunderstanding
We had a situation where a smaller company merged into a larger company. They had been receiving pressure from some of their larger customers. They had to get bigger, they had to get more resources, they had to do this. That was one of the motivating factors for the seller to come to the acquirer. The acquisition happens. The small company principal goes out to that customer and says, ‘I just want you to know, you don’t have to talk to anybody else. You don’t have to interact with anybody else. It’s going to be the same team, the same people and we’re going to deliver the same great service.’
They got fired the next month.
They want back to them and said, ‘Why did we get fired? I thought you were supportive of us doing the transaction.’ And they said, ‘We are supportive of you doing the transaction. You told us we couldn’t talk to anybody else.’ You have to get inside the heads of the customers about what they’re really looking for. You have to get inside the heads of the vendors about what they are really looking for. And you have to get inside the heads of the people you are going to put together. All of those things will drive success or cause failure if you don’t do enough of those things the right way.
