There’s No Way Around The 4Cs

I’m not adverse to someone labeling what we do as “matchmaking.” Although admittedly, the initial meeting between potential merger candidates most likely pales in comparison to the anticipation and excitement of a first date.

And whether you’re in merger mode or date mode, you hope for something to click. Because if it doesn’t, there’s no more uncomfortable feeling that I’m aware of than frequently checking your watch in hopes that it will mercifully end soon.

For something to work out, either romantically or in business, I would say unequivocally that of the 4 Cs (chemistry, culture, continuity and capacity) necessary for a successful union that chemistry is at the front of the line in terms of importance. In our CPE sessions we continually harp on the fact (some would say ad nauseum) that: “If you don’t want to have lunch with someone, don’t do a deal with them.”

The second is culture.

And by coincidence, I have a recent case study to reinforce its order of importance. Recently I arranged a meeting between a buyer and a seller in one of our Midwestern markets. Afterwards both reported back to me explaining in detail that the meeting had gone well. However, the seller firm confided in me later that although they liked the principals of the potential successor firm, the cultures were too different.

Why?

The seller firm’s owner explained they fostered a dress code of business casual during the week and on Fridays allowed blue jeans. Their counterpart by contrast mandated suits and ties. The seller developed a feeling of claustrophobia during the meeting (no doubt envisioning a tie and a starched collar choking his neck). He also felt that the firm exuded an “old fashioned culture” something you might see in a CPA firm during the Carter Administration and predicted that Millennials coming up via the talent pipeline would find an atmosphere like that quite unappealing.

So the seller not only viewed this potential merger in the present tense, he also extrapolated out the problems he envisioned them having when trying to recruit younger talent in the ranks. No younger talent equals glacial growth or, in a worst case scenario, no growth at all.

We can debate the remaining two Cs - continuity and capacity - in another column. Now it’s my job to inform the button down firm that they’re out of the running, and I invariably will be asked why.

I guess the first thing is to let them know that its 2015 and potential merger candidates have a distinct distaste for stepping into a time warp and being transported back to 1980. I can just hear it now “hey your grandfather called and he wants his keypunch back.”