Stephen Frazer is the founder partner of corporate financial consultants Frazer Hall. He has worked in mergers and acquisitions for 20 years, personally completing more than 100 buy or sell transactions. In this guest blog, he shares his expert analysis of the emotional rollercoaster that is selling a business, how different personalities respond to the pressure and how we professionals can best help our clients through the process.
One of the things that I love about our role is the diversity of personalities with whom we deal – entrepreneurs and business owners come in all shapes and sizes and can approach a sale of their business in very different ways.
However, before I give my completely unscientific and unproven psychological analysis of personalities, let’s start with what seems to bind them. Most of my clients have spotted an opportunity, held their breath and (figuratively) jumped off the top diving board. The majority have endured some tough times and come through them. They largely care about their staff and their customers, don’t like spending money unnecessarily, but do have an instinct to make a profit. These are the people that mostly hail from normal, not terribly privileged backgrounds and I suspect that statistically, for every one of them that succeeds financially, there must be dozens if not hundreds, that don’t.
So where do the differences lie? In equal measure, we find that a mix of very extrovert, equally introverted, volatile, calm, analytical, emotional, aggressive and non-aggressive people tend to run owner-managed companies. Twenty years ago, our clients were almost all men; in a relatively short time, I have found the mix to be probably 70:30 of men to women. An improvement in the mix for sure, but regrettably we are not there yet.
Like all of us, the personality types are brought most sharply into relief under stress and given that for most, the sale of their company is the largest economic event of their life, it is hardly surprising that the sale process can be stressful. Lack of familiarity with the process, critical scrutiny by the buyer, price negotiations and the uncertainty of a deal completing can all lead to a sense of lack of control. As much as positioning the business, negotiation with buyers and running the deal process, it is our job as advisers to give that control back to our clients, through a mix of information, re-assurance and protection – largely through frequent and relevant communication.
We regularly present the table below to illustrate the rollercoaster that is the company sale process.
The emotions, reasons and timing will vary between people, but a sale process can lurch from the interesting and amusing to exhausting and stressful. Let me give you a straw poll of various reactions a small price reduction, say around 3% to 5% of the sale price, brought about by the buyer discovering something in the accounts that affects value:
The case and outcomes are based on actual situations that we have encountered (although the names have been changed!). Whilst individual situations and behaviour will differ, the emotions will still be strong across all types of people. Add to this, the increase in workload, pressure on keeping profits and revenue strong (no one wants to see these dip during the sale process) and concealing the process from employees and customers (some of whom are, doubtless, personal friends), it is easy to see why this can be hard on the seller.
In summary, deal-related stress is common, but there is a second part of the sale to evoke high levels of emotion and this centres on giving up the business. Some have found it to be a very defining part of their life, around which everything else revolves. The loss of this ownership (especially watching the change in stewardship) was once described to me by a friend and seller thus:
“Overnight, I went from being Charlie Big-Potato to just another retired guy. Over a month, I went from taking dozens of calls daily, to taking none. Over a month, I went from being someone, to being no-one. It’s the change in status and respect that got to me.”
Per my comments, above, I think that there are the two major emotional triggers in a deal process, the first being that of the stress arising from the process and the second, being the loss of that very important aspect of an owner’s life. Of course, there are others and for some, these two points may not apply, but I have to say that they feature regularly as stress triggers in the behaviour of clients.
What can an owner do about them?
To conclude, the sale process can be stressful from many angles and from the perspective of a seller, it can be very emotional. However, good preparation, a listening friend and competent advisers can significantly mitigate these pressures.
Clarion’s pioneering study ‘Enough Now’ helps successful business owners understand and prepare for the impact of selling a business and allow professional advisors to better support them through the challenging process.
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