Word on the Street: Issue 209

14 Lessons from 250 Transactions

250 transactions. That was the milestone that we here at Morrissey Goodale celebrated last week. Two hundred fifty times we’ve been privileged to help our clients—both sell-side and buy-side—successfully close their deals. Each transaction has been unique—with its own special set of circumstances, its own “story” as it were. You can see a full listing of those deals here.

Over the past few days, we took some time as a team to reflect on what we’ve learned from these 250 transactions. And here are 14 lessons that we’d like to share with you.

 
Nick Belitz, Principal
Morrissey Goodale (Denver)


1. A signed LOI with a private equity buyer is not an invitation to a smack-down: Contrary to popular belief, private equity buyers are not looking to get a seller under Letter of Intent (“LOI”) and then mercilessly beat the price down during due diligence. While it is true that the arcane minutiae of accounting rules and the mundanity of revenue recognition can challenge even the best minds among us, virtually all buyers in this industry—private equity-backed or not—are quietly praying the due diligence process goes well and everything checks out. Good buyers know that they’re bringing partners aboard in the combined business, and they want sellers excited and energized about future prospects, not bitterly licking their wounds over a pricing dispute.

2. Recency bias is real: Buyers or sellers in a prospective deal often fixate on whatever happened most recently as long as it supports their preferred view of the world. Sellers see the best-ever year that ended six months ago as the new normal of the great times to come. Buyers see a hiccup in revenue over the last two months as a sign of the Apocalypse. Because of the inherent myopia, neither position tells the full story. Instead, buyers and sellers should focus on the strategic (meaning “long-term”) business case for the combination and the best-available information on market demand and let that be the guide.

 
Brendon Cussio, Principal
Morrissey Goodale (Denver)


3. Price isn’t everything: The best deal isn’t always the highest offered. It’s the combination of both quantitative and qualitative measures: price, structure, cultural and strategic fit, and opportunities for growth of the business and the staff.

4. Don’t forget the gravy: Successful buyers add gravy, value above the purchase price provided via equity incentives for management and key employees, sharing in seller transaction expenses, or assumption of seller liabilities that give them a competitive advantage over their peers.

 
Jon Escobar, Principal
Morrissey Goodale (Chicago)


5. Flexibility wins the day: Deals rarely go exactly as planned. Being flexible and adaptable—whether in deal terms, timelines, or expectations—can often be the difference between a closed deal and a missed opportunity.

6. Know when to walk away: Not every deal is a good deal. Recognizing red flags early and having the discipline to walk away from a deal that isn’t the right fit can save time, money, and resources. It’s better to pass on a deal than to force a bad one.

7. Due diligence is a two-way street: While buyers are expected to conduct thorough due diligence, sellers must also be prepared to vet their potential partners. Understanding a buyer’s track record, financial stability, and post-acquisition plans is crucial for ensuring long-term success and alignment.

 
David Thornhill, Vice President
Morrissey Goodale (New York)


8. Active listening: Keep in mind that the person sitting across from you is often negotiating not only with you, but internally as well. Truly listen to identify what constraints they might be under and work to properly address and minimize elements of risk. Risk is going to be paid for—be creative in minimizing it and placing it where it belongs.

 
Mark Goodale, Managing Principal and Co-Founder
Morrissey Goodale (Boston)


9. Culture eats strategy for breakfast: Forget spreadsheets—if the team chemistry isn’t right, the deal is a mess waiting to happen. Nail the culture fit, and you’re halfway home.

 
Nate Wentworth, Senior Consultant
Morrissey Goodale (Denver)


10.  Clean up your house: Removing personal assets and costs from the business and ensuring that revenue is recognized properly will help alleviate potential hazards of the sales process and increase the likelihood of a smooth and successful process.

 
Lisa Elster, M&A Consultant
Morrissey Goodale (Natick)


11.  Integration begins before the deal closes: Successful integration requires early planning well before the deal is signed. Early involvement of integration teams can ensure a smoother transition, reduce post-deal turbulence, and maximize the value of your investment.

 
Ben Hamer, Consultant
Morrissey Goodale (Boston)


12.  Avoid making assumptions: When negotiating terms, transparent conversations about the other party’s goals can uncover opportunities for small compromises that can lead to greater overall benefits for both sides.

 
Allie Tepper, Principal Advisor
Morrissey Goodale (San Francisco)


13. M&A is not a substitute for succession planning: Buyers, especially financial buyers, want to see a strong and committed management team in place to take the firm forward. By having a robust succession plan, you maximize your options and, therefore, your payout.

 
Katharine Van Leer, M&A Consultant
Morrissey Goodale (Durham, NC)


14.  Steady as she goes: Things can get stormy as “closing” approaches. There’s a lot going on for both the buyer and seller. And this can be really stressful—especially for the seller. Constant communication, asking questions, and patience are key ingredients to getting a deal across the finish line. 

Best Post Transaction Performance Award Update

Applications continue to roll in for the Best Post-Transaction Performance Award as part of our Excellence in Acquisitive Growth Awards Series. 

If you believe that an acquisition you’ve made deserves recognition by the industry, then we invite you to begin the application process by clicking here. Applications are being accepted through Friday, September 13.

The Awards will be presented at the 10^th annual Texas and the South M&A and Business Symposium in Houston this October.

You can contact Mick Morrissey at [email protected] or 508.380.1868.

The Power of Responsibility

The difference between thriving and merely surviving in the AE industry often hinges on a single, crucial factor: how leaders perceive and respond to challenges. It’s the difference between accepting responsibility for outcomes versus blaming external forces when things go wrong. This contrast in leadership mindset is deeply rooted in the psychological concept of “locus of control”—the extent to which individuals believe they have control over the events affecting them.

To explore this concept, let’s delve into the stories of two fictitious AE firms—Visionary Designs Ltd. and Cornerstone & Linchpin Engineering Associates—each led by a principal with a vastly different approach to leadership and responsibility.

Case #1: Visionary Designs Ltd. and the Power of Ownership and Accountability

• Visionary Design’s background: Visionary Designs Ltd., based in Seattle, is an innovative architectural firm known for its cutting-edge, sustainable designs. The firm has been in business for over two decades, and its president, Amanda Reyes, has been at the helm for the past six years. Amanda’s leadership has transformed the company from a small, struggling practice into a major player in the industry.
• Amanda’s internal locus of control: Amanda is a leader who believes that she—and she alone—is responsible for the firm’s success or failure. This belief in her ability to influence outcomes is the hallmark of an internal locus of control. Amanda doesn’t just accept challenges; she embraces them, viewing obstacles as opportunities to learn, grow, and improve.
• Client relationships: When a major client expressed dissatisfaction with a project’s progress, Amanda didn’t deflect blame or make excuses. Instead, she took immediate action. She personally met with the client to understand their concerns and took full responsibility for the delays. “This is on me,” she told the client. “We’re going to make it right.” Amanda then worked closely with her team to overhaul the project schedule, reallocate resources, and ensure that the client’s needs were met. Her willingness to accept responsibility and her proactive approach not only salvaged the relationship, but also deepened the client’s trust in the firm.
• Process improvement: Amanda is always on the lookout for ways to improve the firm’s processes. She doesn’t wait for problems to arise; she anticipates them. When a series of projects started running over budget, Amanda didn’t point fingers at the project managers or the accounting team. Instead, she initiated a comprehensive review of the firm’s budgeting and project management practices. She involved the entire team in brainstorming solutions and implemented new protocols that streamlined workflows and improved financial oversight. Amanda’s approach is simple: If something isn’t working, it’s her responsibility to fix it.
• Team development: Amanda understands that the firm’s success is tied to the growth and development of her team. She takes an active role in mentoring younger architects and engineers, helping them navigate their careers and develop their skills. When a promising architect was struggling to meet deadlines, Amanda didn’t criticize or punish him. Instead, she took the time to understand the root cause of the issue—time management—and worked with him to develop better strategies. As a result, the architect not only improved his performance but also gained confidence and loyalty to the firm.
• Financial performance: Under Amanda’s leadership, Visionary Designs has experienced consistent growth, even in challenging economic times. Amanda’s internal locus of control drives her to seek out opportunities for improvement, whether it’s by expanding into new markets, adopting innovative technologies, or refining the firm’s business strategies. She knows that the firm’s success isn’t just about external conditions; it’s about how she and her team respond to those conditions. Amanda’s belief in her ability to shape the firm’s destiny has led to a steady increase in both revenue and profitability.

Case #2: Cornerstone & Linchpin Engineering Associates and the Cost of Blame and Avoidance

• The firm’s background: Cornerstone & Linchpin Engineering Associates, located in Boston, is a once-prominent engineering firm that has fallen on hard times. The firm’s CEO, Larry Lawson, took over leadership eight years ago following the retirement of the company’s founder. Unfortunately, under Larry’s watch, the firm has seen a steady decline in both its reputation and financial performance.
• Larry’s external locus of control: Larry is the kind of leader who believes that most of what happens is beyond his control. He has an external locus of control, meaning he attributes the firm’s challenges to outside forces—market conditions, difficult clients, or even bad luck—rather than taking personal responsibility. When things go wrong, Larry is quick to point the finger at others, never considering that his own actions or decisions might be part of the problem.
• Client relationships: When a long-time client decided to take their business elsewhere after a series of project mishaps, Larry didn’t ask himself what he could have done differently. Instead, he blamed the client for being “unreasonable” and the project managers for not keeping things on track. “What can you do?” he shrugged during a staff meeting. “Some clients are just impossible to please.” This attitude not only failed to address the underlying issues but also demoralized his team, who felt unsupported and unappreciated. As a result, more clients began to drift away, further eroding the firm’s reputation.
• Process improvement: Cornerstone & Linchpin Engineering’s processes are outdated and inefficient, but rather than taking steps to improve them, Larry blames external factors. When projects started running over budget and behind schedule, Larry’s response was to complain about the economy and rising material costs. He never considered that the firm’s own project management practices might be part of the problem. Instead of initiating a review or seeking solutions, Larry doubled down on his belief that the firm’s challenges were simply a result of bad luck and external pressures. This refusal to take responsibility for internal issues has led to a culture of complacency, where problems are tolerated rather than solved.
• Team development: Larry’s external locus of control also manifests in how he manages his team. When employees underperform, Larry is quick to blame them for not being up to the task rather than considering whether he has provided the right support, training, or resources. He avoids difficult conversations and rarely offers constructive feedback, preferring to let problems fester until they become crises. His stance on these matters has resulted in high turnover, with talented employees leaving the firm in search of better leadership and more supportive environments.
• Financial performance: The firm’s financial decline is a direct result of Larry’s leadership style. While revenues have stagnated, profitability has plummeted due to rising costs and the loss of key clients. Rather than taking action to turn things around, Larry blames external factors—like the competitive market or “unforeseeable circumstances.” His refusal to accept responsibility or make necessary changes has left the firm struggling to stay afloat.

Responsibility Vs. External Defeatism

Amanda’s belief in her ability to control outcomes has empowered her team to take ownership of their work and strive for excellence. She understands that while she can’t control every external factor, she can control how she and her firm respond to them. This willingness to accept full responsibility has been key to the firm’s growth and success.

On the other hand, Larry’s defeatist attitude has left his team feeling powerless and disengaged. By attributing the firm’s challenges to external forces, he has effectively abdicated his responsibility as a leader. This external defeatism has demoralized his team and driven the firm into a downward spiral.

What mindset do you foster in your firm?

Want to talk? Call Mark Goodale at 508.254.3914 or email [email protected].

Market Snapshot: Bridge Conditions

We pulled bridge infrastructure data from the Bureau of Transportation Statistics and grabbed a few insights:

• Texas, California, Florida, and Louisiana make up 30% of the total bridge area in the United States.
• Georgia, Kansas, and Ohio have the highest percentage of bridge surface in good condition.
• Rhode Island, West Virginia, Illinois, Massachusetts, New York, Maine, and Iowa have the highest percentages of bridge area in poor condition.
• California, Illinois, New York, Louisiana, and Iowa have the largest surface area in poor condition.

To learn more about market intelligence data and research services offered by Morrissey Goodale, schedule an intro call with Rafael Barbosa.

Weekly M&A Round Up

Strong M&A activity in the first half of the year: Through the first six months of 2024, Morrissey Goodale tracked 243 deals in the U.S., marking the second-most active start to a year on record. Last week we reported deals in ID, CA, MS, NY, WA, NC, MD, TX, GA, and IA. Global transactions were announced in the UK, France, and Ireland. You can check all the week’s M&A news here.