Psychological Attributes of Mergers — Part 2
| DOI | https://doi.org/10.1108/eb057279 |
| Date | 01 September 1982 |
| Pages | 22-26 |
| Published date | 01 September 1982 |
| Author | Nicholas A.H. Stacey |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Psychological Attributes
of Mergers
—
Part 2
by Nicholas
A.H.
Stacey
Chairman, Chesham Amalgamations & Investments Ltd
Continued from the July/August issue
The merger brokers' task is to use his skills so as not to
allow superficial attitudinising by the negotiating parties to
solidify into rigid postures; because if they do, that is the
end of the affair and both parties will leave the negotiating
table disenchanted with themselves, with each other and
with the merger broker. It is always imperative for both
parties engaged in negotiations to help them overcome
their lapses or mistakes without loss of face or dignity.
This can only be accomplished if there is a trusted in-
termediary positioned in-between, and upon whom all
plausible and implausible errors and mistakes made by the
negotiating parties can be blamed, if necessary.
You all know about the need for scapegoats in society,
to ensure the greater cohesion of that society; well, the
merger broker takes upon himself the task of finding a
plausible alibi for either party for having made a mistake,
a slip. Again, thus, Simon pure and shining white the
negotiating parties can continue their discussions as the in-
termediary will assume the role of the scapegoat and take
the rap to get matters back on the rails. Hence the broker
plays a focal role in helping the cause of—in this in-
stance—intelligently conceived mergers. Apart from his
skill in bringing the two parties together at a particularly
propitious time when the optimisation of the chances of a
successful merger is greatest—which he accomplishes by
knowing the requirements and background of the buyer
and the needs and disposition of the seller— the broker
must enjoy complete credibility on both sides.
When mergers are being negotiated
a trusted intermediary can ensure
that neither party loses face or dignity
If merger brokerage only demanded a penetrating
knowledge of business, most retired captains of industry
with their extensive and excellent connections and suc-
cessful records could easily turn to merger broking. But,
on the record, few emeritus businessmen setting up as
merger brokers have succeeded. Similarly, if merger
brokerage only demanded wide ranging good connections
the most distinguished members of the "born with the
silver spoon" brigade would skim-off the cream of the
merger market. The reason why neither do is that credibili-
ty and knowledge must be merged in a merger broker.
Nonetheless, many try their hand at this game.
There is, I am reluctantly led to believe, something in-
herently glamorous in merger broking. That must be the
view from afar! I have never, actually, noticed this "sun-
shine quality" in my daily tasks, but it must be this which
prompts so many to become recruits. The attendant
publicity which accompanies even insignificant mergers
must too be a spur. Alas, at the end of a long haul, to en-
sure his impartiality and independence, the broker strad-
dles the concept and reality of company marriage—in the
sense that he is neither on the side of the seller nor of the
buyer: he must be on the side of a deal he can live with.
Any deal must be a good deal for both parties. Bargains
are not easily endured by either side!
Both entrepreneurs and business managers
are liable to have psychological attributes
not conducive to making the most of a merger
The psychological difference in negotiating manners is
material between companies guided by founder en-
trepreneurs and those managed professionally. A merger
broker will neglect appreciating the importance of this
dif-
ference in outlook at his peril. The founder entrepreneur, a
dynamic primitive, is sometimes blinded to longer-range
but eventually realisable profitability of a suggested ac-
quisition; he will not buy if he can possibly avoid at what
he considers a premium and will think the asking price too
high.
This type of traditional entrepreneur, usually the
founder of companies may, therefore, miss worthwhile op-
portunities. However, by being highly selective and en-
durably mean, since he is spending his as well as the
shareholders' money, he may in the end buy less but more
successfully. At the same time, there is at least one percep-
tible,
psychological barrier to the "unemancipated" en-
trepreneur's chances of buying a business and this barrier
should serve as a warning; namely, he may always wish to
repeat his first acquisition which may have been a sensa-
tionally successful and "cheap" buy. And since subse-
quent purchasing opportunities rarely match such a once-
in-a-lifetime fluke—the more than usually mean en-
trepreneur may deny himself excellent, if not sensational,
acquisition opportunities.
The entrepreneur with such an unchanging disposition is
unlikely to build a really large firm. At the most he remains
a dedicated bargain hunter and could prevent himself from
becoming an industrialist. Perhaps, in the event, he may
well be better suited to managing a smaller rather than a
larger company—that is, he is successful in a small
organisation which is personally managed, as against to
running a larger company where delegation is inevitable.
Delegation is the sharing of power for which he is un-
22 INDUSTRIAL MANAGEMENT + DATA SYSTEMS
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