Character as Destiny; The Importance of Character Assessment in the Deal Process

The deal business is unlike others, where investors, advisors and entrepreneurs converge out of anonymity into relationships of intense intimacy. The faces & names are constantly changing as the next crop of deals close, and the players in the ecosystem decamp to their next project.

The deal doing environment depends on the frictionless movement of forces from one deal to the next, the ability for all involved to rapidly form new relationships to power up new deal making.

This energy is directed on acquisition of companies where the quality of the management and employees form the foundational value for a business. In today’s world, equity value is most often a function of the quality of a management team’s character.

Yet, paradoxically, this truism is not always applied to the character of the players on the deal team. Often, lenders gain false comfort with a buyer’s character, and vice versa.

Sellers and Borrowers sometimes don’t vet strongly enough the character of their advisors, and vice versa. The transient nature of the industry allows people to get by through presenting a smidgen of competent character, which people overly rely on to their detriment.

Giving people that don’t deserve it the benefit of the doubt is a sure fire way to deal frustration. Character is the single most defining aspect of a person’s reliability yet it is the hardest thing to discern at the beginning of a deal process.

Deals depend on well-intentioned people pushing forward in a relationship of trust. This only works, when all team members have reliable character, which sustains them through the tough moments of the deal process.

It doesn’t matter how smart or financially savvy you are, if you cannot properly assess the character of other deal team members, you will not be successful in the deal business. Here are 4 ways to help you sharpen your character assessment skills.

1. Gain Personal History – nothing informs more than understanding personal context and the events that have shaped them. Find common areas such as family, school to engage on.
2. In Person Connection – don’t rely solely on calls and emails to get to know someone. Take the time to visit with them in the real world and share a meal. You can learn all you need to know about a person in a short lunch or breakfast. Gut reactions are often reliable.
3. Observe 3rd Party Interactions – observing how they treat others, particularly those junior to them, is a window into how they may relate to others in a deal team. Seeing others react to them is a great way to gauge their level of respect and authenticity.
4. Engage in Active Listening – Pay close attention to what they say and how they say it. Pay even closer attention to the things that go unsaid.
5. Informal Background Check – while much can be gained from a cursory google search, find people you have in common and pick up the phone and query them.