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December 2006 Archives

The Anatomy of a Deal

December 7, 2006 12:27 PM

There is a rhythm to every deal. And while it is never quite the same from one deal to the next, there are patterns that develop (and I believe are useful to articulate). If you are conscious of each phase of the deal, you may be able to more efficiently manage the rhythms of the process—and thereby get the deal done faster and with less acrimony.

THE FIRST DATE: Every deal seems to have a honeymoon period. And, just as the prospect of future love, sex and relationship rallies the battle-worn lover back to cupid’s lair, the deal-making honeymoon period is the reason that negotiations begin. Without it, we wouldn’t bother.

I think the key here is to take advantage of the honeymoon period. Deals that get done quickly take full advantage of everyone’s initial excitement. If you have been in a room with decision-makers and you agree that a deal ought to be done, the worst thing you can possibly do is walk away and relegate the deal making to the attorneys. Nothing against attorneys (remember I am one), but they start from a different place than a decision maker. If this is really a deal that is worth the time of all parties, you should IMMEDIATELY get in a room and hammer out major deal points.

Few companies are used to this procedure, but the differences can be remarkable. You will know quickly if there is a deal to be done—and you have the advantage of the honeymoon motivation to get over smaller issues that may appear like larger issues later.

The key is to remember that you only get the advantage of the honeymoon period once in a deal-making process. Use it well. If you are so pleased with yourself for the meeting that jump started the deal-making process, you may miss the best opportunity you will have to get the deal wrapped up quickly.

ROLL UP YOUR SLEEVES: The next deal-making phase brings with it most of the heavy lifting. This is when you wake up the next morning and figure out that regardless of how much everyone wanted to make a deal, you now have to design a deal that everyone can make. And remember, a majority of potential deals do NOT get made.

Here is where the patterns begin to develop. In most cases, the heavy lifting portion of a deal contains at least three distinct periods. The most universal are the setup, the fall-out and the intervention. Again, I think that understanding this pattern will help everyone out.

THE SET-UP is just what it sounds like. If you have not gotten sign-off regarding basic deal points in the honeymoon phase, you will have to do that here. My suggestion is that you begin by asking all parties to articulate the deal points that are important to them in writing. No need to take a position or try to draft anything yet, just have everyone document what elements they think ought to be considered in the process. Then, you can drill into specifics.

FALL-OUT POINT: Inevitably, you will reach a fall-out point—when it does not look like the deal is going to or should happen. Not a reason to be concerned—just about every deal gets there. But, if you know it is coming, it won’t freak anyone on your team out. You have two real constructive options: (1) Take the challenging issue up to the decision makers to resolve before you head forward or (2) Reserve judgment on the troubling issue and see if you can find agreement on everything else. In most cases, I suggest the second approach. That way you do not derail the train (or slow it down). There will likely be a few major challenging issues in every deal. If you get everything else done, you will be able to look at those challenging points in context and decide if there is a creative resolution.

INTERVENTION: It will likely take intervention by the decision makers at least once before a deal can happen. I think it is very helpful to limit the number of times an intervention is required. Inevitably, interventions eat up precious time and present additional opportunities to end the deal. Your best strategy is to line those big issues up and address them all at once. Inevitably, big deal issues are always intertwined. If the decision-makers get a chance to look at all the remaining big issues together, there is a chance to manage expectations and balance losses on one issue against gains on another.

DEAL OR NO DEAL: And, finally, there will inevitably come a time when one or both sides are done with the deal making process. This is the “take it or leave it” moment. When you get there, don’t be scared of it. Make sure that, indeed, this is that moment (i.e. that negotiations will not solve the problem quickly), then throw yourself on the mercy of the court and see if it happens. If it does not come back to you, it was never yours ….

RHYTHM: I suppose the last over-arching thought I have regarding the rhythm of a deal is that the rhythm is always changing. As you work on each issue and deal point, you need to constantly monitor the rhythm to make sure that factors beyond your control do not vex and overshadow the reason that you decided to start negotiating a deal. And, if you play the rhythms of the deal, you have a much better chance of hitting the ground running under the agreement—because all sides will be less affected by the challenges of the deal making process.

Gobble, Gobble

December 5, 2006 8:56 PM

A late Thanksgiving thought: So much to be thankful for. So, very
much ....

My mother has a family tradition that helps us take a moment on Thanksgiving to give thanks for the many blessings in our lives. After dinner, a bowl full of un-popped corn kernels is passed around the table. Everyone takes three kernels. Then, one at a time, we place a kernel in front of us to represent something we are thankful for.

This year three didn’t even come close to cutting it. Beyond the top-flight favorites of family, friends, colleagues, new love, old love and every love in between, there just seemed to be so much more on my mind. There is a new sense of hope that is daring to show itself all around us. It is the excitement of change. Potential presidential candidates are even writing books about it ….

That is exceedingly cool. But, wait, there’s more.

I continue to marvel at my good fortune in finding so many great teachers in my life. I called my extended family of mentors on Thanksgiving day and thanked them. But, I have come to understand over the past few years that I learn an awful lot at this stage in my life from observing the behavior of others (both good and bad). This year, rather oddly, I find myself particularly thankful for the lessons I am being taught by the least admirable figures I have encountered in the last few years. I am so motivated by the desire not to become those people that I manage to maintain perspective in a world that doesn’t have a lot of perspective.

And, for that I am eternally grateful.