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Navigating M&As Amid Murky Markets

Originally published by International Business Times on 6/22/22

 

Amid an apparent cat-and-mouse game between red-hot inflation and leaping interest rates, concerns about maintaining a healthy bottom line are on the minds of many business leaders.

A consequence of facing uncertainty, some key corporate endeavors are sometimes shelved for less turbulent times. But if your business is on the verge of a significant acquisition or buyout that cannot or should not be delayed for circumstance, there are fundamental lessons to reaching a deal that can deliver a win in any economic climate.

At a broad level, mergers and acquisitions are about more than just joining forces or acquiring assets. Although every deal is different and each company unique, it’s incumbent upon the acquiring firm to set the stage for both parties to benefit mutually.

That means expertly understanding your strengths in context with the shifting industry landscape and appealing to your counterparty’s needs, while respecting their legacy and ensuring a path for their business to continue to grow and remain viable into the future. Almost unconditionally, getting to “yes” also requires open-minded, flexible partners and transparent negotiators.

 

Understanding Industry Inflection Points and Selling Your Strengths

Nearly all industries were universally impacted by the pandemic, and the parking and mobility sectors that our business has been operating in for nearly 40 years certainly weren’t left unscathed. While many companies survived the pandemic, many owners were worn down or worn out by the realities of the grind that was 2020 and part of 2021.

But amid unpredictability about inflation lay opportunity: for some companies experiencing uncertainty, a buy-out may be the most favorable option to ensure the longevity of the business.

Additionally, the parking industry is undergoing dramatic changes thanks to the electric vehicle (EV) movement helping more drivers overcome skyrocketing gas prices. According to a report from CarGurus, 53% of active car shoppers are interested in EVs for their next vehicle, and 40% of Americans anticipate buying an EV in the next five years.

Blossoming demand inevitably drives simultaneous needs for cutting-edge EV charging infrastructure, and parking companies that can leverage EV technology experience possess a major asset sought by more antiquated businesses.

 

Respect Your Partner’s Legacy and Earn Their Trust

It’s critical for an acquiring company to thoroughly understand every facet of the company they’re seeking to acquire. Beyond mere assets and financial opportunities, they must come to know their leadership, values, culture, strategic goals and needs. With that foundation, the acquiring firm can soundly highlight the ways in which a buyout would enhance the acquired company and solidify its upward trajectory.

But current owners shouldn’t just take buyers at their word: let prospective partners hear directly from the leadership of previously acquired firms to gain a true understanding of what the acquisition process entailed and why buyers can be trusted to uphold and strengthen sellers’ legacies.

Transparency beyond the transaction is also key to establishing trust in a deal. Especially in dealing with executives who have sometimes dedicated decades of their lives to growing a business, buyers need to be clear about their future objectives to help the company and its team thrive.

Supporting open lines of communication between executives can also build trusting relationships and inspire unity over a debilitating “us versus them” mentality. This approach consciously cools tense and anxiety-ridden moments during the final hours of an acquisition and leads to long-term success down the road.

 

Sharing a Vision and Ensuring a Smooth Transition

Another key to getting to yes is establishing a direct and mutual understanding between the chief executives behind the buyer and seller outfits. Most often these are two leaders who have built their companies from the ground up.

They both know the long hours, the years of dedication, and the unique sacrifices that have gone into creating profitable businesses. Essentially, they’ve been on parallel journeys of growth and are now coming together to ensure an even more successful future.

This common ground can lead to an innate sense of trust between the two companies and help the current owner feel comfortable entrusting their business’ future to someone who truly “gets it.” They can transition ownership fully confident that their vision is understood, and their legacy will be protected.

 

Know When to Walk Away

Of course, harmonious outcomes are not always possible and it’s best to know your limitations. Buyers and sellers should walk away from a deal if they determine a partnership is not mutually beneficial or if there’s no opportunity for scalable growth on both sides. No deal is worth having if the values and business practices of the parties are incongruous on either side.

David Schmid is the Chief Investment Officer of Propark Mobility, a national mobility and parking management company based in Hartford, Conn. Schmid leads mergers & acquisitions, the real estate division, and Propark’s Cloudpark Technology Initiative. For more information, visit www.propark.com.