Engineering Inc - January/February 2018 - 29

"It is a major emotional
transition, particularly
for the leaders who
were founders or
second generation into
a company."

managing director within D.A. Davidson & Co.'s investment
banking practice, who has been involved with more than 30
mergers and acquisitions in the A/E industry over the past 15
years.
Of course it's most important that leadership is completely
on board with the transaction and must exhibit excitement
after the deal has closed, according to Gomes. "They can't just
embrace it. They have to do it enthusiastically because their
staff are watching them every minute of the day after the transaction," he says.

MICHAEL CARRAGHER
VHB

PROGNOSTICATING FAILURE

Predicting how any company leader will ultimately react over
time, post-closing, is not an exact science but vitally important
to consider in as much depth as possible, Carragher says.
"It is not just a financial deal," he says. "It is a major emotional transition, particularly for the leaders who were founders
or second generation into a company. It is a big change for
them, and you need to work with them individually to help get
them into a position where they feel most comfortable."
That could mean having a company executive focus on
building and developing client relationships, or team management and development, or developing business strategies for
the larger buyer company. "You have to really look hard for
that desire or interest in the beginning," Carragher adds.
But possible deal killers are pretty easy to identify, Strittmatter explains. They include staying away from firms selling
solely for financial reasons, and firms whose leaders are purely
seeking a retirement-oriented transaction. Additionally, steer
clear of any company whose leaders tend to limit conversations
to how the acquisition is going to mostly benefit themselves,
he advises.
"We tend to see that as a major red flag versus when a seller
starts talking about how their employees are going to thrive in
their organization going forward," says Strittmatter.

George Lorenzo is a freelance business writer based in Ann Arbor,
Michigan.

Howard recommends firms
begin with the end in mind
because buyers have become
more aware of the need to
have a solid integration plan
at the earliest stages of the
merger and acquisition process. "Who is going to be the
senior management? What
is the reporting structure?
What are the benefits for the
employees? How are we going
to get this group of people
excited about joining us?"
Howard asks.
It's often important to have

to stay on board for a minimum of two to three years as
part of a legal employment
agreement. Staying beyond
that agreement is a good indication of how well the deal
actually turned out overall.
"On the flip side, buyers
are totally petrified that people will leave because they
have spent all this money, and
they want to build this organization," says Christodoulo.
"It is not even monetary.
They want the benefit of the
expertise, the client list, and

a confidentiality agreement
in place before a deal closes,
Christodoulo says. "You don't
want competitors trying to
poach or headhunters calling. You don't want people to
leave," says Christodoulo.
That same theme remains
during the post-deal phases
of any merger and acquisition. "How many are still
there when they do not have
to be there?" Christodoulo
asks, referring to a common
practice whereby seller executives are typically required

THE BOTTOM LINE

After all is said and done, Mick Morrissey, co-founder and managing principal of Morrissey Goodale, says there really is only
one reason to make any kind of acquisition. "Increased stock
value. A good deal, priced correctly and integrated properly,
should increase stock value over the long term for the buyer," he
says.
Morrissey adds that the factors for catalyzing increased stock
value through any acquisition include higher profits; faster
growth; expanded geographic reach; better client service; and
increased diversification of the business, which decreases risk and
therefore increases value.
Throw all those factors in with the biggest factor of them all,
the human factor, and the model for ensuring post-acquisition
success entails a great deal of hard work, determination and
pointed focus on guaranteeing all parties, leadership and staff on
both sides of the transaction, are happy and ready to move forward together as one unified organization. ■

everything else."
Two factors come into play
here, Christodoulo explains:
How disparate are the two
cultures (differences between
buyer and seller), and how
willing buyers are to adjusting their own policies so that
the seller's concerns, including taking good care of their
entire staff of employees, are
adequately met.
"You need to really understand what the post-deal integration is going to look like,"
Howard says.

JANUARY / FEBRUARY 2018

ENGINEERING INC.

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