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Blitz, Zing, Zap . . . Arrgh!

September 22, 2006 5:16 PM

The sounds of a dying deal . . .

I have been talking about a big deal in the works for some time. Every deal has its lessons. This is one of those deals that is full of them (some old lessons and some new):

We’re easy to make a deal with: When a company says they may be big, but they have the ability to make deals quickly . . . watch out. It will be like turning an aircraft carrier in a swimming pool to get any creative deal making out of them.

Tell me up front if it’s a “deal breaker”: If something is important to you in a deal – say something. Be open about it. Don’t just assume that everyone else is thinking the same thing. They likely are not. And, if it is important to you, it is likely important on both sides of the deal. If you add it in the later stages of a deal, it appears disingenuous (whether it was or not). This negotiation ended because of something the other side never mentioned in any negotiation – or put in any of the term sheet drafts that we negotiated ad nauseum prior to saying “we have a deal.” Then, they added it to the final contract and called it a “deal breaker.” So, the deal “got broke” over something that would have saved both sides an awful lot of time and resources if they had just discussed it in the early phases of negotiation.

Don’t shuffle me down: Make the deal with the people who started the deal making process. We are all busy, but if the principle or the high-level person who starts the deal making process has to duck out before it gets done, your likelihood of making the deal decreases appreciably.

Don’t fall in love with the deal: Poker players are fond of saying “don’t fall in love with your cards.” Because if you do, you often make the wrong decision and lose money. The same principle applies to deal making. Just as your pocket queens are much less appealing with a king and an ace on the board, your deal may be much less appealing once you have negotiated the terms. Once this deal was off the table our team started realizing that based on the final terms negotiated we will almost certainly make more and have more control by bidding various pieces of the deal in the marketplace. That is an interesting lesson that has taught me to reassemble our larger team to ask that cost-benefit question before we come to terms on future deals.

Don’t tolerate delay: Even if it is a big deal, delay just wastes everyone’s time. If the deal is going to happen, everyone should be willing and able to help make it happen quickly. I think it is reasonable to set a specific timeline to make or not make a deal – and then force everyone to keep to that schedule. As I wrote in another post, the longer it takes to make a deal, the louder the anti-deal voices become on both sides. The second time this deal-making process was delayed, we should have left the table.

Negotiations teach you about your business: Some of the opportunities that are already emerging after this deal may not have been on our radar screen but for the deal that we did not make. I think it is important to keep your mind open during the negotiation process to alternative avenues (outside of the deal) of achieving the same or bigger goals.

Enough lessons: Not a bad batch for one deal . . .

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