Eliassen Group CEO David MacKeen says for both buyers and sellers, creating relationships with other parties in advance of a process is really important.
"Creating the early foundation of trust helps avoid an auction process that ends up being all about price," he says.
The professional service firm backed by Stone Point Capital has done nine transactions in the last three years, and four M&A deals in the past year. Through those transactions, MacKeen says he's learned it's important to identify the best cultural fit and alignment for owners, leaders and their staff. He keeps a running list of companies, CEOs and owners who he tries to touch base with every quarter, or at least twice a year, which has helped keep potential deals closer at hand.
"If I think back of those nine deals, six I had a pre-existing relationship with, three didn't even run a process, two didn't have an investment banker and in none of the situations did we end up being the highest bidder," he says.
Trust is an important factor in a deal process, he says, so he operates during discovery and negotiations by assuming positive intent.
"There are going to be unknown situations, so no elephants in the room," he says. "Let's get it on the board and eventually those things are worked out really well. But right off the bat, making sure we set that expectation I think works well."
A deal in which the CEO of a company MacKeen looked to acquire wasn't on the same page with the brand and the messaging to the employees offered a lesson that up front, it's important to make sure all the players and the pieces that are going to be involved after the deal are actually on the same page with brand and employee communication.
MacKeen says in that situation, they met the primary owner, but there was another owner. The two of them didn't have a great relationship, which is why they wanted to split. But no one ever thought to think of the other individual. He says they also didn't go deeper. So, now, in every case going forward, even if it's a small organization with a couple key sales folks, they learned they want to meet them before close and make sure that there's alignment. Generally, he says it's about having broader conversations.
"Before we close, we want to have multiple touch points so that there's consistency in the communication — everyone's hearing the same thing, we're on the same page," MacKeen says. "That way, we try to eliminate any of the surprises. That's at least worked very well for us over the last 10 years."
When it comes to the change process, he says it’s not one size fits all.
"We have many touch points in the organization for people to reach out to," he says. "Now the challenge is all these companies are smaller and they might wear multiple hats. If we're introducing 10, 15, 20 people to them, reasonably more often than not we have to slow things down. There might be others that will rip the band-aid off, but we really want to gauge the other side and the temperature. We don't want to distract from the business. So, making sure that people feel comfortable with the pace of change."
MacKeen spoke at last year's Boston Smart Business Dealmakers Conference about what he's learned as a buyer and how he's applied that the company's acquisition process moving forward.