When planning an M&A deal, psychology matters.  Psychology is all about mind and behavior. M&A deals tend to be 10% economic, 10% tax, 10% legal, and 70% psychological. The “smell of the money” has an effect on people’s behavior in most deals.

In many cases, the buyer is perceived as the “big fish” and the seller is perceived as the “small fish”. This may impact behavior and tactics during the M&A negotiations.

But the seller may actually have something the buyers needs to avoid falling behind its competitors and shrinking. Many high tech start-ups are acquired for this reason – they developed something new and better that the buyer wants or needs because of competition.

This need may be crucial to the buyer and affect its valuation of the seller. Examples include:

• A buyer paying over the odds to keep a technology out of a rival’s hands
• A buyer basing its valuation on higher demand generated by a stronger marketing team that the seller thinks it can generate. This is an example of a Win-Win because initially the two parties won’t always be aware of the valuation difference until the deal is done.

At the international level, many buyers are American. The American way may be very successful but it may not be the only way. In an M&A deal the seller generally has something the buyer wants. Fortunately, communities are ever more connected thanks to the internet.

Other psychological factors that may affect behavior in an M&A deal include:

• Management team quality and outlook
• Timetable – even if it needs periodic updating
• Maintaining momentum – slow deals are more likely to collapse
• Meeting agenda – if you don’t list something, you may not get to it
• Deal nerves
• Seller raises the price at the last minute
• Buyer throws in more conditions are the last minute
• Use professionals on each side to talk to each other as a buffer
• Language – suppose one side has better English?
• When and how to communicate (“sell”) the deal to customers, shareholders, management, employees, government, press, other stake-holders, etc.
• Asset strip sensitivity – labor, tax and political issues?
• Labor layoff sensitivity

Next Steps Include:

• Start planning the ingredients of your proposed acquisition or sale based on the above.
• Many of the surprises may be predictable with proper preparation.
• Remember that psychology is around 70% of an M&A deal. Subjective factors include motive and personalities of the people on each side.
• Read each side – yours and theirs – before drawing any conclusions.
• Research also the history and achievements (or otherwise) of each company and its personalities.  
• What is the other side really after? Can you read between the lines?
• Consult legal and professional advisors in each country concerned in specific cases.
• Contact us if you are looking for an M&A candidate to buy or sell.
• Contact us if you have your candidate and want to prepare for an M&A deal.

© Leon Harris 19.5.25, all rights reserved.  Email: [email protected],  Cell: +972-54-6449398.