Blog: I is for Incentives

“Show me the incentive and I’ll show you the outcome.” – Charlie Munger

Incentives influence negotiations in all areas of life, and this is especially true in business. In any transaction, each party brings its own set of priorities to the table. For sellers, incentives include achieving the highest valuation, a smooth transition, and preserving relationships with customers and employees. For buyers, priorities often center on mitigating risk, securing future growth, and realizing a return on investment.

A successful transaction hinges on more than simply negotiating price. Understanding the broader set of incentives on both sides influences not only deal structure, but also due diligence, transition planning, and success post-closing. Buyers and sellers rarely have perfectly aligned interests, but the best outcomes are achieved when a deal is designed to address the most important motivations of everyone involved. When incentives are misunderstood or ignored, challenges can surface well beyond closing day.

At its core, M&A is not only about valuation models or legal documents, it’s also about people. Understanding incentives, and creating structures that account for them, is fundamental to making deals that benefit both buyers and sellers.