The Winning M&A Advisor [Vol. 1, Issue 3]
Welcome to the 3rd issue of the Winning M&A Advisor, the Axial publication that anonymously unpacks data, fees, and terms…
We wrote previously about Role Identity Fusion, in which an entrepreneur’s identity as a business owner impinges on their self-identity in their social (non-business owner) roles.
RIF can be great while running a business: highly fused owners demonstrate demonstrate extreme pro-group behavior and will go to tremendous lengths to achieve organizational goals.
However, this extreme comes with a dark side.  RIF can cause owners to act contrary to both their own and their firm’s best interests. Very highly fused people are unable to separate their self-identity from their role as owner. They may find it difficult or impossible to create meaning apart from their role as owner. The result is a series of personal and organizational blind spots such as: failure to build a strong management team, denial of personal or organizational challenges, and/or avoidance of essential organizational changes.
How should advisors anticipate and solve the challenges that come with working with an owner with RIF?
First, RIF is a measurable behavior.
Most owners experience RIF somewhere along the continuum from very highly fused to no fusion. The challenge for advisors is figuring out the degree of an owner’s RIF — sooner rather than later. In terms of deal flow, identifying an owner’s level of RIF as early as possible can mean the difference between making a wise investment of the advisor’s time and resources or throwing good resources after bad.
We recommend this assessment take place in what Bo Burlingham, author of “Finish Big: How Entrepreneurs Exit Their Companies on Top” refers to as the exploratory phase.
Bo conceptualizes exit as a 4-stage process: exploratory, strategic, execution, and transition.
Most advisors’ work is focused on the strategic or execution phases because that is where their skill set and economic incentive is appropriately focused. But Burlingham’s work, 30-years of entrepreneurial research, and our own research concur: owners that engage in a robust exploratory process are more likely to exit successfully. It is no coincidence that this first phase asks the critical existential questions owners have to answer to overcome RIF.
Advisors should encourage owners to answer questions like:
Developing a sense of self apart from their role as owner provides the opportunity to attenuate negative aspects of RIF and enhance post exit resilience that will make the strategic and execution phases much more likely to succeed. Advisors that invest time early in their deal flow to get an objective assessment of their owners are able to not only design a technical strategy for the transaction, but they are able to design a strategy that considers the psychological challenges owners will face throughout their exit journey.
Three tips for advisors:
For more information, our white paper “The Psychology of Exits” can be downloaded here.