If there is one thing that master dealmaker Gregory J. Skoda has learned from a lifetime of dealmaking, it’s that empathy is among the most critical components of an effective acquisition strategy.

“It’s a very different thing to be able to talk somebody out of their livelihood, to talk somebody out of the business they’ve built, to have them believe they are getting the maximum financial security out of this transaction for their families,” says Skoda, chairman of Skoda Minotti.

He speaks from the experience of hundreds of acquisitions in his career, including 135 deals he closed in just two years with billionaires Michael DeGroote and Wayne Huizenga when the trio started CBIZ in the mid-1990s.

When you craft an acquisition strategy, there is a whole host of data points that must be considered. But you can’t forget about the human element and its impact on a negotiation.

“A huge part of dealmaking is reading and understanding people,” Skoda says. “It’s trying to get inside their heads and in many cases, figure out what they want.”

In this first installment of Dealmaker Strategies, Skoda examines the risk of not fully exploring the wants and needs of the seller when pursuing an acquisition.

Words aren’t enough

When you’re negotiating an acquisition, you need to dig deep to understand the mindset of both the employees and the owner of the company you want to buy.

“Have you asked enough questions?” Skoda says. “Do they want to be there? Do they want to make you better? Do your employees want to work with their employees? You start to pull the covers back on how do all these people function together. Where do they want to go and how do they want to get there?”

Manage the data

When you’re in an environment where you’re rapidly growing by way of acquisition, the amount of data that one has to deal with and the amount of people that one has to deal with can be daunting at times, Skoda says.

“It really takes the right people assembled on our side of the ledger to input, control and manage the data; input, control and manage the people,” Skoda says. “It takes regular interaction multiple times a day with the teams that are involved so that everyone knows what’s going on. Use technology the way you can use technology to share information. You need to stay in front of the information.”

Assess the opportunity

As you get a sense for the people involved in the transaction and the data, you need to begin looking at the big picture, Skoda says.

“What are the attributes of this particular acquisition that mean something to us?” Skoda says. “Is it going to be transformational for us? If it’s going to be transformational for us, in what ways? Do we really have the team lined up that can take advantage of it?”

As you begin to narrow everything down, you can start to appraise the merits of the deal you’re exploring.

“Try to get inside everybody’s heads on the buy side and on the sell side,” he says. “What’s really the beneficial transaction here? How do we think about the people that we’re meeting? How do we think about the people that we’re interacting with? How do we put them together? How do we make one and one equal three or four or five in some cases?”

The bottom line

People can and often do get themselves into trouble because they don’t know what they don’t know, Skoda says.

“They thought they had it,” he says. “They thought they knew it. Probably in the first few acquisitions we did, we thought we had it. You can never in the dealmaking business think you know all there is to know. You’re going to get taught a lesson the moment you think you know everything there is to know. There always has to be this thought that there is something here that is going on. I don’t know what it is and I have to figure it out. If you can keep that intellectual curiosity in working through transactions, you’re going to be more successful.”