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Til Something-or-Other Do Us Part: Guidelines for Happier Business Mergers, Acquisitions, and Roll-Ups

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I’ve been told by everyone from my attorney to my friends to a former partner that a business partnership is very, very much like a marriage. Well, I’ve been married to the same man for 40 years, which makes me both very experienced, and very inexperienced–experienced in making the kinds of efforts and compromises that sustain a relationship, but inexperienced in the range of relationship dynamics that can come to bear when two people or two entities merge business interests. I’ve also been in and out of a couple of pretty intense business partnerships, and I can tell you that the comparison to marriage as I know it is limited.

While many of us go into a marriage on a wave of hopes, dreams, emotions, and hormones, most of us at least try to enter into business partnerships a bit more pragmatically. The potential partner has something we need: experience, money, skills, connections, properties that will make our business stronger. These are all measurable. You can, and should, take a careful inventory of the assets and attributes of a potential partner, match them to your own attributes and needs, and come up with an index of suitability. (Of course, you could do this before a marriage, too.)

You can hire professionals to conduct the business equivalent of premarital counseling, to identify and work through differences of philosophy and expectations. And you can (and should) hire excellent legal counsel to craft the business equivalent of a pre-nup.

Such logical, time-consuming, expensive steps should help. Yet even so, it’s been reported that only about 2 percent of business alliances last more than four years, and even in those, half the principals involved say the relationship has failed to meet their expectations.

Why? you might ask. Well, you’re an independent publisher, aren’t you? You like to do things your way. You expect to call the shots. You don’t like to give up control. The same traits that have contributed to your success are the ones that work against successful partnerships. In a marriage, on the other hand, we promise total commitment–better, worse, sickness, health, richer, poorer, and so forth. A majority of us–some 60 percent–stand by that commitment. And if we’re at all traditional, we have built-in expectations about our respective roles. These may be uncomfortable, but they give us a framework to work with that is often lacking in a business partnership.

Even with the dismal longevity record that partnerships have, they keep happening. There’s a tidal wave of mergers, acquisitions, and roll-ups in the publishing industry, and it’s reaching down into the realm of smaller independent companies. These partnerships offer a way for small companies to join forces for growth, or for big companies to increase profitability or market share.

If you’re exploring partnership possibilities, here are some guidelines I’ve crafted, taking full advantage of the benefits of hindsight.

Know for sure what’s in it for you. Gut feelings are important, but do your due diligence. What will your potential partner truly bring to the table? How much are you willing to give up–in ownership or control–to get it? What will your business look like one, three, five years down the road with this partnership in place? And is that what you really want?

Take your time. If you’re married, think about how long you and your spouse courted, sized each other up, tried each other out, before tying the knot. I’m shocked at the speed with which people (including me!) sometimes enter business partnerships. Explore, discuss, role-play with your potential partner. Be relentless in seeking to understand what your work life together will be like. Make no assumptions. And definitely decide whether your egos will fit in the same room.

Face the worst-case scenario. What’s the worst that could happen within or because of the alliance you’re contemplating? There’s an 80 percent chance that it will. Could your business survive it? Do you want to take this risk, knowing the probabilities?

Provide for all the what-ifs. Working with your lawyers, create legal documents that cover contingencies for every bad thing that could happen, even if you think it won’t. Depending on how your business is organized, your partnership contract might include buy-sell agreements and key-man insurance so you can afford to buy a partner out. In any case, it must include a mechanism for termination that will leave you standing.

Consider the ownership share dynamic. If you’re entering a partnership for money, you very well might have to give up majority interest. If so, be sure to build in protections for the things that matter most to you.

One of my partnerships was with an individual who would, I thought, bring skills and attributes to my business that I lacked. Only slightly after the four-year period when 98 percent of business alliances fail, this one sank because of a profound difference in personal values. Another partnership (which lasted three years) was with a large publishing company, where even the most congruent of corporate philosophies couldn’t paper over the disparities of scale. Exiting each of these relationships was hard work and financially grueling.

But I would do either one again. Not in the same way, to be sure. But the educational value was beyond price–what I learned about doing business, what I learned about myself. I just hope the next partnership has a happier conclusion.

Linda Ligon has served as president of PMA and is now on the board of directors of the Small Magazine Advisory Council, a division of Magazine Publishers of America. The founder of Interweave Press, she is its CEO and creative director.


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