Time is wasting away. If you are a big fan of a target company’s management team, pay them the extra EBITDA multiple turn if that is what is required to execute your deal. I did not say “gift” them the incremental purchase consideration. Make the management earn it. Create a Management Incentive Plan (“MIP”), for the target company and link incentive compensation to Revenue and EBITDA targets over several years (use our variable compensation article for idea generation). M&A transactions aren’t won or lost entirely on purchase consideration. More important to long-term transaction success is cultural fit and post-deal integration. Acquiring firms don’t pay sufficient attention to post-close operational activities such as cross training the Sales & Marketing organizations, integrating the Product team and other such operational items. It is these seemingly mundane operational activities that drive long-term Return on Invested Capital (“ROIC”), our preferred metric for measuring long-term acquisition “success”. If your deal is going to fail, let it fail because of a less than best effort on these post-close activities. Don’t allow pride to scuttle your deal before it has a chance to cross the finish line.
