• Simon Haigh

Effective Deal-Making: Part 4


The ‘7P’ process

In this fourth article in a series on effective deal-making, I look in more detail at the fifth, sixth and final Ps for successful deal-making – Performance, Putting it all to bed, and Pay-out or post-mortem

Performance - We have now arrived at a point on the deal journey where the deal has been planned, there is a strategy and an execution team is in place. This P demonstrates the fundamental importance of deal performance itself.

Rehearse - While planning is critical, deal-closing is not just a theoretical exercise – practice does help to make perfect. So, in addition to planning all the strategic and tactical aspects of your deal journey, including team members and communication tactics, you should methodically rehearse how you will achieve your objectives and close the deal.

Be the first to propose - Being first to make a proposal is very important in helping you to end up with the deal you want. This is primarily because, as humans, we tend to be heavily influenced by information that is offered to us first (this is sometimes referred to as ‘anchoring’).

Do not wait for what the other side is prepared to give you. Instead, do your due diligence and then let the other side know what you are prepared to offer them. When you put an issue on the table first through your proposal, it places a line in the sand as the starting point of the discussion. Always try to go first unless, for some reason, you have had little or no chance to do any due diligence – or somehow you are not, at that opening stage, aware of the true value in the deal and therefore need to hedge your bets at this point. If, for whatever reason, the other side goes first, reframe while thanking them for their suggestion – for example, ‘Thanks, but my proposal is…’.

When the other side makes an initial offer, it can be quite difficult to see past it. Yet there is value in the power of ‘considering the opposite’– in other words, seeking out and considering information that is inconsistent with the other party’s first offer – and presenting it as a counterargument.

Open as ambitiously as possible - There is no formula for what you should open a deal with. Instead you must consider and balance many issues, such as relationships, where your organisation stands business-wise, who is in the deal room and so on. You will quickly know if you have not been ambitious enough – mainly from the speed at which the other side accepts your first proposal.

You will quickly know if you have not been ambitious enough - mainly from the speed at which the other side accepts your first proposal Therefore, be sure you open as ambitiously as possible, though of course be mindful of cultural differences in the way you frame your opening. Also, try to avoid making an opening offer that could offend or stress your counterpart. Unreasonably extreme offers are likely to drive the other side to search for counterarguments. In general, the more you ask for, the more you can expect. Going first and as high as you can, you could end up achieving more than you might otherwise have done – you may make the other side believe they have won something by ‘bringing you down’.

Use deadlines as a focusing tactic - It is wise when you are leading the discussion to set time expectations. Nothing focuses the mind better than a deadline. In addition, deadlines can force people (including you) to agree to things that they normally would not, so deadlines can be a double-edged sword. Nonetheless, time is a key factor in ensuring sufficient preparation and planning for the deal. Be diligent in your use of time – to avoid being pressured. That said, there is a fine line between managing the course of the deal on the one hand and being seen to want to rush things for your own good. You need to be tactful and situation-aware when setting deadlines.

Incentives always appeal - Deal-closing is not an objective, emotionless activity, operating separate from the vagaries of human sentiment, emotion, wants and needs. That is why incentives work. To successfully use incentives to reel in a deal, again you need to know what is important to the other side. To be attractive, the incentive must obviously address the other party’s needs and wants. Asking questions and truly hearing the answers, through active rather than passive listening, is the only way to find out.

It is not over until it is over - Sometimes the deal discussions will grind to a halt for various reasons, intentional or unintentional. This is why getting your planning and preparation for power as right as possible is so important in terms of anticipating as many eventualities as possible. When a deal grinds to a halt, the flow-on implications can be dangerous, including lost or irretrievable time, financial loss, structural impacts or damaged egos.

Getting a deal back on track - If a deal derails, you can try to get the discussions back on track by changing your deal team, making a new proposal or reframing your existing proposal. Other tactics include escalating the matter to your boss, altering your deal zone parameters, or calling a ‘cooling off’ time-out.

Do not walk away too early - Do not forget that just because the deal is not proceeding, this does not mean you have not done everything possible to finalise it. The other side’s reasons may not be related to your deal-closing abilities. For example, their hands may be tied by circumstances in their own company or even from a macro-economic perspective.

As a very last resort, consider walking away from the deal only if it becomes clear that you are just not going to get anywhere. But you need to be very sure that a deal is not going to happen – in our experience, people throw in the towel too early, only to regret it later. That said, there are some lines that you should simply not cross: being asked to compromise your ethics or to deal below my bottom line.

Putting it to bed - You have now arrived at the all-important finale. You have strategised, planned, developed and used relationships and networks, built a team, made and received proposals, reconsidered and thrown in a fair amount of psychology, patience, wisdom and fortitude to boot. This P looks at last-minute checks and other tactics to use when you reach the deal close. It also explores the importance of memorialising and future-proofing deals to ensure good governance, risk control and implementation. This is obviously where lawyers become most engaged by clients in the deal process.

Check that nothing has been left off the table - At this stage, just as a deal is about to close, you can use a brief checklist of questions to make sure there is nothing still to be discussed. This checklist is invaluable before the parties step into the actual deal closure. Use closed questions where possible, so that simple ‘yes’ or ‘no’ answers can be given. For example, a ‘no’ answer to ‘Have we left anything out of the deal discussions to date?’ is an unambiguous agreement to move forward to conclude the deal, while a ‘yes’ to the same question means there is still work to be done. The converse applies to ‘Are you now in a position to close?’ If you can get the opposing dealmaker or chief negotiator to confirm that all is on track for a successful deal, then you are well set up to seal the deal.

Once you have finished the checklist questions, pay attention to your own instincts. Are you happy with where things are heading? Are all the members of the opposing team happy? Can you sense any dissent among them? There is nothing more toxic than a disaffected member of the opposing side whispering negatives behind the scenes. Check for mutual understanding on all the deal’s key points. This is where your deal summary is invaluable. Deals can derail at this point when the parties realise that unrecognised differences, no matter how subtle, exist in each other’s understanding of the deal. So, you must try to verify, before you move to close the deal, that you are both about to sign the same deal and that no further adjustments or recalibrations are necessary.

The deal is not over when you shake hands - Even though you have rehearsed the close and established the ostensible confirmation of the opposing team, you still need to ‘cross some Ts’ and ‘dot some Is’ in sealing the deal. Summarise the deal at this point and compare where you have landed with the deal against your likely outcome. If you have fallen short, you have one last chance to try adjusting the deal parameters – though we rarely see this happen at this late stage. If you are successful in reframing the discussion and you achieve positive movement in the deal, then ensure that the other side explicitly agrees that this is their new understanding so as to minimise the possibility of later conflict. Despite your best efforts in putting a good deal on the table, the vagaries of deal-closing mean that things can - and often do - go wrong. Not all deal discussion will result in a successful deal

Agree on the implementation plan prior to execution - You have done it. Your final proposal has been accepted and the deal has been summarised and accepted. However, despite the natural elation of both parties, this is yet another point in the deal prior to contract signing where I have seen deals unravel. You need to agree on the deal implementation plan or the mechanisms for actually implementing the deal. It is really important to do so at this point, as you do not want to set unachievable activity and implementation goals that may result in dispute at a later date.

Prepare for divorce - just in case - Incorporate a mediation or arbitration clause in their deal contract – just in case. It is always better to be prepared for the ‘divorce’, in case it arrives. A simple, uncomplicated, well-drafted dispute resolution clause can – and, in my experience, often does – stave off the potential distraction of misunderstanding and ongoing debate.

Pay-out or post-mortem - Job done – this is when you can sit back and take credit for a successful deal execution. But, sometimes, closing a deal is not always possible and you need to learn not to take such occasions to heart. Every deal – successful or otherwise – contains within it lessons for the future.

Measure every deal success-wise - From a corporate growth perspective, you should have systems in place to measure success in terms of striking the deal – on every deal. These systems should monitor all aspects of the deal performance, outcomes and, indeed, even the lessons you take from a failed deal. It is well worth scheduling some time immediately after the conclusion of a deal – when perhaps you will feel least like doing it – to systematically review the elements of the deal journey, identify areas for improvement in future deals and note newly introduced tactics that worked well and could be used again.

Do not be hard on yourself - Despite your best efforts in putting a good deal on the table, the vagaries of deal-closing mean that things can – and often do – go wrong. Not all deal discussions will result in a successful deal. Sometimes deadlock or dispute will arise. Be aware that a ‘no’ from the other side does not always mean the deal is at an end. Too often parties walk away at this point, but many times in deal discussions have we heard ‘no’ and yet seen a way forward. A good deal-closer will use ‘no’ as a cue to reframe and try a new tactic. Be aware too that not consummating a deal does not always mean failure. It might even be the right outcome – perhaps a deal was never really there. We ha ve seen this occur, for example, because despite the strategic appeal, the numbers just did not work out or because the proposed arrangement was not in the longer-term interests of one or both parties. There may be occasions where the deal has not actually failed but instead, on review, appears to be too one-sided. Here, you could try and ask for a renegotiation process, but this will usually take all your deal-closing skills to succeed. Your success in persuading the other side of this will usually very much depend upon the work you have put in to date in building an amicable relationship and/or clear mutual value proposition.

Conduct a formal post-mortem - Win or lose, ensure you capture the lessons to use in the next deal by doing a formal post-mortem of your whole deal journey.

SEE ALSO - Effective deal-making: part 1 - Effective deal-making: part 2 - Effective deal-making: part 3


newbox

© 2020 SimonHaigh.com, ExpertDealCloser.com & GCMAdvisory.com.

All rights reserved. SimonHaigh.com & EDC are part of the GCM Advisory group.

Email: simon@simonhaigh.com or simon@gcmadvisory.com

Site proudly created by