I could write a book on this, but I am sure it’s already been written.
My interest turned to the events surrounding the breakup and reformation of several college sports leagues recently. Over and over I read the ramblings of sports writers and fans as they continue to chatter and wring their hands at each tidbit of news about the realignment of their favorite college basketball team. What struck me was that no one I was reading had any understanding of how deals come together and close – or end. Here is a brief overview of deals. It doesn’t matter if the deal is the purchase of a piece of equipment, a house, a business or the commitment to move your college athletic association to another conference. Deal mechanics are the same. Here they are.
First, everything is negotiable.
You may read that such and such is a barrier to getting a deal done, and you may worry that this obstacle is a deal killer, only to read later that when the deal closed the problem was surmounted. This is because when really good advisors are used in deal making, they know how to negotiate even the stickiest of problems.
Second, price is important, but terms drive the deal.
When you read a contract and you see half a page that outlines the deal and 19 pages of fine print you will learn that the terms drive the deal. Don’t believe that the price or cost information you hear is the final deal. Terms drive deals to conclusion. The seller never provides full disclosure. Ever! Sellers never fully disclose motive or problems. This is why buyers must do and pay for ‘due diligence.’ What you read in the papers about this team joining this conference for this reason is never the entire story. Pronouncements and denials are part of the narrative of creating and closing deals. The truth of a deal is hopefully fleshed out in private ‘due diligence’, not in public declarations.
Finally, deals are never done until the check clears the bank.
Don’t get excited until someone writes a check that ends up deposited in someone else’s account. Deals get started for the promise of gain, but they often close only with the fear of loss. The scales that measure cost and value dip back and forth in deal negotiations, but the biggest swings occur near the end of deal closure as one or both sides feel the fear of losing a good deal.
Here is the lesson, the take away, when doing a deal that is bigger than buying a car:
– Always use an advisor or intermediary to negotiate for you
– Pay for the ‘due diligence’
– Always be emotionally able to walk away from the deal if the price and/or the terms are less than acceptable.
Don’t do a bad deal, don’t do a “not sure” deal. Only do good deals. Don’t listen to what is said about deals in the news. That’s only part of the story.