“What am I getting myself into?”
This question typically invokes anxiety and doubt, feeling overwhelmed by a new and challenging situation. Perhaps regret, or even shame, for finding yourself in that position in the first place.
But it doesn’t have to.
What if “What am I getting myself into?” was the smartest, most proactive and responsible question you could ask? It can be – it’s all in the timing.
For advisors and firm owners, “What am I getting myself into?” should be the top question when assessing whether a deal, succession plan, minority stake or similar move makes sense – before finding yourself in the thick of it. Reaching an answer requires you to look beyond headline numbers to consider the litany of underlying factors comprising the rationale of a transaction. The fact is, certain deals make strategic sense for some firms, but not for others.
The “if” stage in a deal, or the preliminary discussion/assessment stage, is for exploring all aspects of whether a deal is possible and what it might entail. So, what are the essential components and metrics to evaluate? They run the gamut from tactical to strategic to emotional.
Tactical
From the jump, certain considerations and actions are necessary to determine the “if” of a deal. First and foremost, make sure you have a clear understanding of your near-term objectives. Are you preparing for the succession of your business? Are you exploring ways to grow? Do you need working capital? If not, then perhaps the best deal for you is no deal at all.
If a deal does make sense for your firm, getting your house in order before engaging in even preliminary discussions is key. Just as a proper due diligence process works well to flag potential risks and issues that could impact deal success, conducting a thorough assessment of your financials, data and technology capabilities and needs, and business projections helps you get under the hood of what a deal would mean for your business. Ensure your compliance is compliant, your documents and data are up to date, and your regulatory requirements are fulfilled.
Getting your house in order before engaging in even preliminary discussions is key.
Readying your business for prime time also impacts your credibility and reputation. If negotiations ultimately flame out due to a lack of preparedness, or if the projections that you set for your business are not realized appropriately, other firms will be hesitant to engage with you.
Strategic
Strategic “big-picture” thinking and long-term vision are important even in the early “if” stage of determining whether a deal makes sense for you. Define your chief goals: What is the broader impact of a potential deal on your business? Does it align with your long-term objectives? Why does a deal make sense now?
During this phase, it is crucial to manage expectations, solicit feedback and consider stakeholders to build trust and ensure alignment before moving forward. Mapping out what your business would look like post-deal helps to identify potential issues and risks early on, prevents misunderstandings and builds support and enthusiasm for the possibility by ensuring key parties have a voice. For example, is your team along for the ride? Perhaps consider outlining an equity plan before engaging in discussions to help keep your team intact.
Leaders need to be omnipresent throughout the “if” phase, patient, purposeful and visible, communicating regularly on multiple channels, and constantly coming back to the question: “What am I getting myself into?” By anchoring yourself to the initial objectives of a potential deal (e.g., market expansion, technology acquisition, succession and recruitment), you and your team are more likely to create a clear plan to achieve those goals in the new business structure.
Emotional
Do not underestimate the influence of emotional and psychological factors on decision-making during this stage. Biases and emotional drivers can shape, and even distort, perceptions of value and risk. Acknowledging the role of feelings, empathy and interpersonal dynamics in assessing the viability of a deal is critical. Emotions can influence judgments, build loyalty and trust within teams, and are essential for effective leadership during this stage.
Can you accept potentially not being the boss anymore?
Some find this uncomfortable. For example, depending on the circumstance, can you accept potentially not being the boss anymore? Seller’s remorse is real: How will you prepare to manage those feelings?
It is also important during this stage to evaluate your advisors. Is your best friend or cousin your banker and lawyer? Be honest about your needs, taking into consideration that the future of your business, your employees and your clients rests in part on expert guidance and advice. Now is the time to seek counsel with professionals steeped in the wealth market, potentially making the emotionally difficult decision to part ways with current associates.
Experienced investment bankers, lawyers, tax specialists and accountants can help you answer the question “What am I getting myself into?” and ensure that you achieve the best possible outcome for your business, your clients and your people. The right advisor will educate you about the most valuable opportunities that align with your unique circumstances, as well as help you avoid common pitfalls including ambiguous or ill-defined objectives, lackluster due diligence and a disregard for the psychological impact of a transaction.
Sam Anderson is Chief Capital Officer, Co-Head of Investment Banking at Dynasty Financial Partners.
