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Transformation: Warren Buffett’s special success strategy for deals message


M&A consultant as advocate and opponent

Warren Buffett has a special success strategy for future business. He suggests turning the boardroom into a courtroom and bringing in two M&A advisors to consider a deal. M&A is the abbreviation for Mergers & Acquisitions and includes company acquisitions, mergers and other corporate partnerships. These consultants should act as a kind of advocate for the respective sides, that is, for arguing or against a business transaction. As Marketwatch reports, Warren Buffett found in his latest annual report from his investment company Berkshire Hathaway that there are enough CEOs who yearn for an acquisition and are increasingly engaging consultants who argue against a deal. “It would be an interesting exercise for a company to hire two knowledgeable acquisition advisors, a pro and a contra, to tell the board their views about a proposed deal,” Buffett advised.

Illuminate a store from both sides

If it were up to Buffett, CEOs would invite two M&A advisors to review a deal to illuminate the deal in the boardroom from both sides. He has the high standard of M&A advisors in mind, who are at significant risk with a multi-billion dollar takeover bid, as failure can ruin their reputation and sometimes even end their careers. Many bankers and advisors repeatedly emphasize that they make great efforts to protect their customers and do not advise you to do business that could potentially destroy your value. However, these statements are often not true, as a majority of the consultants receive a commission when the contract is signed, so they are usually very interested and want to convince CEOs to sign multi-billion dollar takeover contracts.

A fixed payment for consultants

Some industry observers’ suggestion is to pay a fixed fee to the independent bank advisors. This option was already mentioned in a Legal & General report published in 2018. In it, the fund manager proposed that independent advisors be appointed to report to the board of directors. These should then, regardless of the transactions, be paid as a lump sum as a way of having more independent bank advisors. Another suggestion is that fees associated with a deal should be set as separate items for shareholder approval. This is to enable investors to express their opinion on the decisions without endangering the entire deal.

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