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Corpo­ra­te transac­tion: The requi­re­ments for mediators

In the first parts of this series of artic­les we looked at the areas of conflict and the possi­ble uses of media­ti­on in corpo­ra­te transac­tions. This artic­le summa­ri­ses the requi­re­ments for media­tors in corpo­ra­te transactions.

Requi­re­ments for corpo­ra­te transactions

In media­ti­on, field compe­tence usual­ly plays only a subor­di­na­te role. This is becau­se media­tors usual­ly work on the basis of process and not on the basis of content. However, there are situa­tions and conflicts that requi­re a high degree of expert knowledge to be dealt with by a media­tor. These include, for examp­le, dealing with mobbing cases or working with children.

At Corpo­ra­te transac­tions and the associa­ted proces­ses often requi­re a media­tor with transac­tion experi­ence. In additi­on to the basic requi­re­ments analy­sed in the previous section, this media­tor should in any case meet further process-speci­fic requi­re­ments. The field exper­ti­se of the media­tor is more important in transac­tions than in inter­nal conflicts with less complex structures.

Read econo­mic data

The entire process of the business transac­tion is accom­pa­nied by econo­mic analy­ses, data and statis­tics of the object to be sold. Above all, the documents mentio­ned in the previous section, the BWA, the list of totals and balan­ces, the annual finan­cial state­ment or the balan­ce sheet, should be mentio­ned here. Reading and under­stan­ding such documents is not only an absolu­te neces­si­ty for buyers and sellers. The media­tor must also be able to read and inter­pret business data. This is rooted in the control over the process through questi­ons. Especi­al­ly in the case of closed questi­ons, the media­tor can only use the instru­ment of asking questi­ons if the answer to this questi­on is compre­hen­si­ble to the mediator.

Techni­cal terms

Corpo­ra­te transac­tions are complex and devia­te great­ly from usual purcha­se agree­ments. The commu­ni­ca­ti­on between the parties is conduc­ted with many techni­cal terms. There­fo­re, it is often diffi­cult for layper­sons to under­stand. In additi­on, there are many peculia­ri­ties in each corpo­ra­te transac­tion. Although there is a rough­ly standar­di­sed process, every transac­tion is diffe­rent. For examp­le, the compo­si­ti­on of the share­hol­ders or the type of compa­ny is always diffe­rent. Each compa­ny sale requi­res special conside­ra­ti­on and proces­sing. Due to these facts, a media­tor with M&A experi­ence has a clear advan­ta­ge and can lead and follow the media­ti­on process.

Special feature: Project

The entire process is set up as a project by the buyer and seller. The project ’sale of a compa­ny’ or ‘purcha­se of a compa­ny’ does not differ from the usual defini­ti­on of a project. They are all charac­te­ri­sed by a time limit. Time limits always bring a high stress factor into the process, especi­al­ly when the final deadline or the last possi­ble date is approa­ching. In this phase, the accumu­la­ti­on of conflicts between the parties usual­ly increa­ses. The media­tor now needs an instru­ment that allows him to deal well with the stress, which he also experi­en­ces as a litig­ant, and to conti­nue to accom­pa­ny the parties through the mediation.

Almost exclu­si­ve­ly entre­pre­neurs and well-trained advisors are invol­ved in a transac­tion. This circle places high demands on the profes­sio­na­lism of a media­tor. This is becau­se buyers and sellers regular­ly lead people and thus exhibit a natural autho­ri­ty. A media­tor in M&A proces­ses must be able to deal with these perso­na­li­ties and bring his own respec­ted autho­ri­ty into the process.

The media­tor as a preven­ti­ve instrument

Parti­ci­pan­ts and litig­ants in corpo­ra­te transac­tions are incre­asing­ly turning to a media­tor as a preven­ti­ve instru­ment. The preven­ti­ve use of a media­tor is an instru­ment that notice­ab­ly relie­ves the parties invol­ved, especi­al­ly with regard to the execu­ti­on of the business transfer.

Deal Media­ti­on

In media­ti­on in M&A proces­ses, the concept of the Deal Media­ti­on estab­lished. Deal media­ti­on is alrea­dy integra­ted into project and process planning. Here, at the begin­ning of the planning, the possi­ble process steps are identi­fied in which experi­ence has shown that there is poten­ti­al for conflict. With the excep­ti­on of the “negotia­ti­on” step, deal media­ti­on is designed as a short-term media­ti­on. This is due to the time pressu­re that often occurs in the overall process.
This is a preven­ti­ve measu­re. There­fo­re, a basic and compre­hen­si­ve clari­fi­ca­ti­on of all parties invol­ved takes place at the begin­ning. Last but not least, no mistrust should be created between the parties. Final­ly, a deal media­tor propo­ses a proce­du­re for conflict resolu­ti­on even though there are no conflicts yet. Especi­al­ly at an early stage of a transac­tion, media­ti­on requi­res a great deal of tact on the part of the media­tor. This is neces­sa­ry, for examp­le, when negotia­ting the parame­ters of the NDA. This is becau­se the serious­ness of the parties is alrea­dy identi­fied here and the basis for further negotia­ti­ons is laid.

Increase chances of graduation

In other words, the chances of conclu­ding a corpo­ra­te transac­tion increase with a planned deal media­ti­on. After all, the parti­ci­pan­ts in the process deal with their interests inten­si­ve­ly and at an early stage. In additi­on, they inform the other partner through the process. The media­ti­on process thus creates trans­pa­ren­cy in an M&A process. It thus provi­des a certain basis of trust for the acqui­si­ti­on of the company.

If one looks at the process exten­ded by media­ti­on, the time frame appears at first glance to be exten­ded and more protra­c­ted. If, on the other hand, one analy­ses the regular behaviour of the parti­ci­pan­ts in the process with regard to the length in negotia­ti­ons of indivi­du­al parame­ters, it becomes clear: preven­ti­ve media­ti­on can shorten the process, in some cases consider­a­b­ly. This is due to the fact that media­ti­on can elimi­na­te many possi­ble points of dispu­te in advan­ce. This can elimi­na­te repea­ted and protra­c­ted rounds of negotiations.

Reduce conflicts

Media­ti­on can also minimi­se or even elimi­na­te the area of conflict descri­bed at the begin­ning regar­ding seller loyal­ty. Becau­se a Compa­ny succes­si­on media­ti­on general­ly promo­tes the sustaina­bi­li­ty of negotia­ti­ons. However, this can also be a disad­van­ta­ge for the seller’s line of argument if he wants to leave the compa­ny as quick­ly as possi­ble after closing. This is becau­se trans­pa­ren­cy is encou­ra­ged and deman­ded in this process.

For the M&A advisor or M&A boutique, the imple­men­ta­ti­on of deal media­ti­on has many advan­ta­ges. The advisors only earn their success commis­si­on if the transac­tion is concluded through a notari­sed purcha­se agree­ment. In additi­on, there is the image gain on the market, with many successful transac­tions having a functio­ning post-merger phase. Deal media­ti­on can be a decisi­ve instru­ment here.

For a successful business transac­tion, a correct business valua­ti­on is indis­pensable. Learn more in the free webinar The 7 most expen­si­ve business valua­ti­on mista­kes for buyers or sellers with KERN founder Nils Koerber

Tips for further reading:

KERN study on business succes­si­on in Germa­ny 2020: Acute lack of succes­sors threa­tens family businesses

The media­tor in the sale of a company

Comment: Unresol­ved compa­ny succes­si­ons endan­ger our prosperity

Advice traps in the process of business succession

Selling a business: Why a pure success fee makes it diffi­cult to provi­de serious advice

The costs of a business succes­si­on or an M&A project

The 5 most important contents of an entre­pre­neu­ri­al emergen­cy kit


FAQ

What requi­re­ments does the corpo­ra­te transac­tion place on a media­tor?

Field compe­tence usual­ly plays only a subor­di­na­te role in media­ti­on. After all, the mediator’s work is usual­ly process-related and not content-related. But some moments and conflicts requi­re a high degree of exper­ti­se. There­fo­re, a media­tor with transac­tion­al experi­ence is often needed. In additi­on to the basic requi­re­ments alrea­dy mentio­ned, this media­tor should defini­te­ly meet further process-speci­fic requi­re­ments. First­ly, the media­tor should under­stand the econo­mic aspects and techni­cal terms. Only then can he media­te effec­tively with the help of closed questi­ons. Second­ly, he or she should be a stable perso­na­li­ty. After all, diffe­rent managers meet in a corpo­ra­te transaction. 

What is deal media­ti­on in the context of a corpo­ra­te transac­tion?

The term deal media­ti­on has become estab­lished in media­ti­on in M&A proces­ses. As part of the process and project planning, the steps in which experi­ence shows that there is poten­ti­al for conflict are identi­fied right at the begin­ning. Due to the time pressu­re, deal media­ti­on is designed as a short-term media­ti­on, with the excep­ti­on of the “negotia­ti­on” step. Deal media­ti­on needs a lot of clari­fi­ca­ti­on and tact at the begin­ning. Final­ly, deal media­ti­on is brought into play as a conflict resolu­ti­on process even before conflicts arise. Overall, deal media­ti­on prima­ri­ly increa­ses trans­pa­ren­cy and thus creates mutual trust for the corpo­ra­te transac­tion. Final­ly, the parti­ci­pan­ts in the process deal with their interests early and inten­si­ve­ly and inform each other about them. In this way, deal media­ti­on not only makes the sale of a compa­ny more successful. It also shortens the process, in some cases considerably.