Negotiations are a crucial part of corporate strategy, but not (as some may think) merely for high-stake deals, such as mergers and acquisitions. In fact, leadership frequently requires negotiation on nearly a daily basis. And good leaders understand that negotiating is a skill that needs to be developed, just as with any other leadership attribute. Yet, many avoid it unnecessarily … and often, detrimentally. They tend to be more concerned about the objections and perceived conflict they believe negotiations brings about than with the feasible solutions they uncover. Some feel they lack the confidence to ask for what they want or need.
Underlying all of these concerns is age-old fear, and in particular, fear of failure or rejection. This is the fear that likes to stop us in our tracks, causing us to hesitate in the belief that we are safer that way. And, as we all know, the only way to grow and truly get what we want is to push that fear aside and get comfortable with being uncomfortable.
In addition to the uncertainty and fear that can arise in preparing for negotiations, the pandemic has also actually affected how we negotiate. Non-verbal communication and body language are important elements in connecting with others, especially during negotiations. However, with the increase in virtual negotiations, our view of the other person is restricted to computer screens or smartphones. Without the ability to fully see a person’s body and, more specifically, his or her subtle movements, it becomes more challenging to anticipate their acceptance or objections and proactively work toward solutions. But while their individual preferences and comfort levels may be more difficult to ascertain, they are not impossible if we remain mindful of them throughout the process.
Finding Opportunities to Negotiate
If you find yourself shying away from negotiations, it’s time to start thinking about why, and recognizing the numerous opportunities that surround you each day to do so. Like any skill, it takes practice and development. Utilizing average encounters will increase your confidence as you move into negotiations with higher stakes. Even asking for a discount on an item you are purchasing and asking your cell phone service provider for a better rate are, in fact, negotiations.
One could argue it’s not worth the effort or the time to engage in these activities, but that’s the fear talking again. Even if you don’t care about saving a few dollars at a store, the investment in building your negotiation skills and confidence is invaluable. Avoiding negotiations in these “not worth it” circumstances leads to avoiding them in other “very worth it” ones.
Going into any negotiation, you can also hone in on your skills by considering the following questions:
Is the situation fair?
Do I deserve a better outcome than the one I have been offered?
Am I feeling hesitant or confident?
How can I connect with the other person to come to a better resolution?
Tip 1: For in-person negotiations, pay close attention to the other person’s body language and try to anticipate and address objections before they ask them.
Tip 2: For virtual negotiations, take the pulse of the other person often. Repeat what they’ve said to ensure you are understanding correctly. Ask them if they have any questions throughout, and pay attention not only to their words, but to their tone.
How can I cultivate the relationship?
How can I close the deal?
Negotiating is really about making the conscious decision to do so, rather than avoiding it all together. Be mindful about recognizing and evaluating the potential for negotiations and that it may look a bit different today than it has in the past. But underlying it all is always relationships, confidence, and the mindset to put yourself in a position to strategically approach the deal. Ask for you what you want, be fair, work through the objections, and get better outcomes.
As with any skill, the more you practice – even with “low-stake” negotiations, the stronger your skills will become. If you need guidance, Barker Associates has experience working with CEOs on negotiation strategies and skills, particularly with finances, lending, and mergers and acquisitions. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Deal fatigue is a common occurrence in the world of mergers and acquisitions. The parties involved get frustrated with the process and feel helpless that they can do anything to speed it up. Frankly, they’re fed up, and as negotiations or other processes necessary to close the deal seem to have no end in sight, one of both parties loses hope and wants to give up. For example, oftentimes, the timeframe between a Letter of Intent and the close of the deal takes too long and can result in one or more of the parties deciding they want out of the deal.
The High Costs of Deal Fatigue
The costs of deal fatigue are high and the complexities many. Not only has the company lost the proposed deal and any related funding, but there are many other associated costs of the deal falling apart, including:
Attorneys’ Fees. The funds used to pay attorneys and consultants have added up over the months (or even years) and can no longer be paid from the closing proceeds.
Impact on Operations. With the pending deal, the C-Suite has been distracted by answering due diligence questions and negotiations. And, as a result, they have not focused on the core day-to-day responsibilities of the company’s operations. This could impact many success metrics, such as ensuring customer satisfaction, building the proper pipeline of sales, managing personnel, and regularly reviewing financial data.
Personnel Problems. There is also the potential loss of personnel if they had learned of the pending transaction and decided to pursue another career opportunity. The costs of recruiting and onboarding are always high, but this has never been truer than in today’s environment, where the costs of losing personnel have skyrocketed.
Lack of Preparedness and Its Effect on Deal Fatigue
The root cause of deal fatigue is a lack of preparedness. This can begin years prior to the idea of entering any transaction whatsoever. Decisions that are made, and processes put in place, that are not healthy for the day-to-day organization can impact the company’s ability to complete a transaction. The following are a few far too common examples:
Lack of organization of legal documents and contracts. Unfortunately, this is a huge issue that has gotten worse in the digital age. Years ago, businesses would have filing cabinets full of documents, along with administrative personnel who managed those documents. There was a clear-to-follow process to make sure all contracts were executed and fully completed prior to being added to the filing cabinets.
In contrast, contracts now reside in emails and other cloud-based storage systems. They may have signatures, or they may not. In fact, most of the due diligence processes I have gone through over the past eight years are held up because the “completed and executed” contracts are not readily available or the parties involved thought the documents were executed and find that they never were.
Financial statements are not up to date and do not reconcile to the billing and sales data. The ease of use of some modern cloud-based accounting systems combined with the fact that most personnel are not taking the necessary time to reconcile as often as they should lead up to outdated, unbalanced financial statements. Imagine going into a deal only to find that their representations are based on unfounded financial principles? This could not only cost you the deal, but your reputation, credibility, and integrity. There is simply no negotiating around outdated financials.
The best way to avoid deal fatigue is to be prepared in every aspect of your business and the deal itself. This will help each step move along faster and more efficiently, reducing the overall time of the transaction. If deal fatigue starts to creep in, remind everyone involved about the mutual advantages and the reasons the deal was struck in the first place. Keeping a clear vision of the big picture helps to avoid getting stuck on the smaller details.
Are you about to go into negotiations or already experiencing deal fatigue? Barker Associates can help keep the parties and the deal on track. If you need assistance, or have any other questions, please click here to schedule a 30-minute consultation at a rate of $100.
Last week, we talked about the initial considerations of a non-profit merger. Once you’ve reflected on the relevant issues and made the decision that a merger aligns with your goals, donors, board members, and mission, it is time for the next phase of the process – engaging in due diligence.
In the scenario of a non-profit merger, due diligence has three primary functions:
1. Minimizing the risks associated with joining two separate organizations to further a common mission;
2. Providing clear insights into each organization’s interests; and
3. Improving the timeframe of the merger by reviewing the relevant documentation and processes, and identifying any challenges sooner rather than later.
Due diligence is conducted by thoroughly inspecting all aspects of the organization with which you plan to merge your own non-profit. The entire due diligence process consists of numerous categorical reviews, including legal, contractual, employment, operational, financial, tax, real property, physical property, intellectual property, and human resources, among others. However, for our purposes, we will focus only on financial due diligence.
Financial due diligence provides an opportunity to analyze potential savings with regard to the overhead of the combined organizations. With this full and complete knowledge, the approving Board Members will have the ability to examine the overall benefits of the merger.
The Financial Audit Checklist
Before you can merge with another non-profit, you must possess a clear understanding not only of its current financial status, but also of its financial history. You must have the ability to answer questions such as: What resources will be available moving forward? And what obligations will remain?
Financial due diligence will include a review of the following:
Audited Financial Statements for at least three years
Annual Budgets, Projections, and Strategic Plans for at least three years
Debt and any Contingent Liabilities
Grant level financial results
Accounts Receivable
Accounts Payable
Fixed and Variable Expenses for at least three years
Depreciation/Amortization Schedules and Methods for at least three years
Outstanding Liens
Accounting Methods and Strategies
Any Investment Policies
Account Standings
Employee listing with position and annual salary
Organization Chart
Detail list of larger donors
While non-disclosure agreements must be executed prior to any due diligence occurring, many organizations have valid confidentiality concerns as they relate to financial reviews of internal documents. As one possible solution, some organizations choose to move forward in a phased approach. In doing so, they leave the disclosure of the most sensitive data and documents to the end of the process.
While each situation will be different, and financial due diligence may vary slightly, it is essential to build a foundation for success. Not only are you protecting the non-profit itself, but also the individual board members and donors involved. Each non-profit should conduct its own independent due diligence, as well as joint due diligence to maximize information and minimize risks. By taking both a historical approach and a forward-looking approach, you will gain an incredible amount of knowledge. And with more knowledge, comes the empowerment to make the best decision for your non-profit.
Barker Associates has extensive experience working with non-profit organizations as they prepare for, and go through, a merger. If you are considering this strategy, use this link to my calendar to choose the best time for a free 30-minute consultation.
The profound effects of the COVID-19 pandemic will be felt for years to come in all aspects of our lives and businesses. However, non-profit organizations have faced, and will continue to face, their own set of unique challenges. Overall closures, increasing unemployment, a lack of feasible projects, and the cancellation of fundraising events have combined to result in sizeable shortfalls with regard to funding.
To navigate through these trying times and ensure success moving forward, non-profits need effective solutions. One possible solution they may consider in 2021 is a merger with another non-profit. And the time to consider this course of action is now – prior to it being needed. Too often, there is an inclination to only consider mergers reactively because, for example, the organization needs financial help. However, the best time to consider it is proactively, as an effective growth strategy. When considered proactively, the advantages and disadvantages can be examined on a more rational, analytical basis instead of an emotional, biased one.
As with any transition, challenges will be present. Questions to explore may include:
Do you have enough knowledge about mergers and the due diligence required to effectuate one?
Is there enough funding for the process?
Do you know a facilitator to help explore merger options?
Does either non-profit have government contracts in their name for a specified amount of time?
Do you have too much of a personal connection to the non-profit mission and vision to examine the option clearly?
Do you perceive a merger being a failure?
Are you concerned about losing employees? Or the organization’s culture?
There is no doubt that these are valid questions and considerations that must be examined. Yet, they should not undermine the significant advantages of mergers for both organizations involved, including:
Increased resources – Instead of purchasing new equipment, leasing new space, or hiring new employees, a non-profit can gain all the resources needed through a merger.
Decreased expenses – Each organization has its own expenses, many of which will be duplicative. Once merged, those expenses will decrease.
The ability of each to meet the needs of the other – Each organization has its own strengths that will often compensate for the other’s weaknesses.
Effective growth strategy – Combined resources coupled with decreased expenses will result in an increased probability of growth.
Furthering mission – Oftentimes, with a merger, the reach of the non-profit will expand due to the increased resources, enabling its mission to have a more significant effect.
Better positioned to achieve goals – With more resources and further reach, the organization will have the ability to focus on, and work toward, reaching its goals.
Greater probability of long-term sustainability – With a more effective growth strategy, there will be a higher chance of long-term sustainability and success.
After thoroughly examining the challenges and the advantages of a merger, the following questions should be considered:
1. Can you look at a similar organization as a resource, and not as competition?
2. Can you determine the ways in which you are similar and the ways in which you are different?
3. Can you envision what working together would look like?
4. Could combining resources, leadership, and operations work in both your favors?
5. Which name should survive (considering government contracts, if applicable)?
6. Are you prepared for extensive due diligence?
Mergers are viable solutions for non-profits, whether due to funding needs or the desire for an effective growth strategy. In either case, through a merger, the strengths of each can be leveraged for a common goal. Over the next several weeks, we will explore a variety of topics related to non-profit mergers, including due diligence, closing items, and integration considerations.
Barker Associates has extensive experience working with non-profit organizations as they prepare for, and go through, a merger. If you are considering this strategy, use this link to my calendar to choose the best time for a free 30-minute consultation.
