In the intricate world of M&A (Mergers and Acquisitions), timing and decision-making are critical. One concept that stands out is the "Last Responsible Moment" (LRM), which emphasizes the strategy of delaying decisions until the cost of not making them outweighs the cost of proceeding. This principle encompasses not only financial costs but also time and opportunity, and it can save potential deals from falling apart due to premature actions.
I recently attended an M&A seminar hosted by Japan Consultant Management to qualify as an M&A advisor. The seminar featured insightful presentations from experienced consultants who shared real-world M&A processes. After passing the examination, participants, including myself, were qualified as M&A advisors.
During an M&A deal, it is easy to focus on due diligence (DD) as a means to uncover the financial health of a company. While financial aspects are critical, DD also encompasses business operations, HR, and other areas. Undoubtedly, DD is essential for mitigating risks and ensuring sound investments.
However, I learned a crucial lesson: the importance of timing in the due diligence process. After identifying a potential match and conducting a preliminary screening, the top management interview should precede extensive due diligence. Previously, I would often request three years of annual reports and begin DD simultaneously with the initial interview. This approach, however, might not be optimal. M&A consultants emphasize the importance of building personal relationships before diving into the numbers.
In my experience, prematurely pushing for detailed financial information can backfire. I recall a particular case where my eagerness to discuss annual performance metrics and negotiate terms too early in the process led to the seller withdrawing from the deal.
Currently, I am engaged in a new M&A deal, applying the lessons learned from the seminar. I have expressed interest in the seller's financial condition and profit records while focusing on maintaining a good relationship. Despite only having two weeks of conversations, this approach has yielded valuable insights and strengthened trust between the seller and me.
The key takeaway is to remember the "Last Responsible Moment." Whether you are on the buyer or seller side, adopting a calm and patient approach during initial interactions can lead to more fruitful outcomes. Diving too early into numerical values and tangible assets may cause you to miss out on understanding the less visible but equally important aspects of a deal.
In conclusion, while due diligence is indispensable, recognizing the right moment to delve deeply is equally important. By understanding and applying the LRM strategy, we can maximize the potential and lead M&A deals effectively, ensuring that every decision made is timely and contributes to a successful outcome. Balancing the need for thoroughness with the necessity of building trust can make all the difference in the success of an M&A transaction. And remember, don't deep dive too easily—time discount attitudes can sink deals faster than you think!
