Leonard Green & Partners LP
The toughest part of many deals is the lawyers. There's a certain sub-culture of attorneys who try to make relatively simple things complex and cumbersome. I generally try to avoid the attorneys' meetings because I don't have the patience. If you let certain people loose in a deal, they'll just kill it.
"The price aspect is tough. One of the things we've learned is to keep it simple. A lot of people try to win the small points and lose on the big picture.
"When we go to buy businesses, we try to make it as painless as possible on the seller. We spend a lot of time listening and figuring out what their objectives are, what we would be concerned about if we were in their shoes.
"We hate highly competitive auction situations where you have a short amount of time to make up your mind and lots of competition. We'd much rather have a slower pace and get to know the business.
"If I were to advise someone on deals, I would caution them not to buy businesses at cyclical peaks, not to believe that trends last forever, and to avoid overleveraging and falling in love with debt. We find the current debt environment very troubling."
Senior Managing Director
FTI Capital Advisors Group
It always helps to have good chemistry between the parties because sometimes those intangibles are more important than actual negotiations. If you don't have good chemistry, it doesn't make for a timely or efficient process. It can cause a transaction that otherwise makes sense to go sour.
"Often times, people get caught up in negotiating to the last degree, rather than building a consensus among all the various stakeholders in the deal. That usually involves compromise among all parties.
"What works for an investor is to come in, in a short time frame, and to get enough comfort with the company and agree to provide capital on a quick basis. Usually they'll link the capital to an option to take control of the business.
"If there are good dynamics between the principals involved and a real desire for the transaction to occur, then ultimately a deal will probably happen. It's just a matter of finding the right fit to put the two parties together. There are different tactics and negotiating styles, but generally it makes sense to build consensus."
Every step of a deal involves some kind of trick. We find that it usually boils down to the issue of trust that needs to be dealt with first with the client.
"Doing a deal isn't always pleasant because you can't always tell a client what they want to hear. As you develop the relationship, whether it's talking about negotiations, the process, or the purchase price in each case the trust is built up through various situations.
"The best way to lose a transaction is to avoid dealing with the tough issues. You have to be able to support your position and ultimately, you find that the other side will be more willing to negotiate.
"We do a lot of transactions with large public firms and buyers, and they can take tough news as long as it's presented professionally and it's backed up. The disastrous path is when you've avoided the tough issues and people are accused of negotiating in bad faith and of not disclosing properly.
"Most people probably say negotiating on price is the toughest area. But you can't just throw a price out there on the table and say: 'Take it or leave it.' We lead a buyer to where we think the price should be and they may come back and say, 'You're at the very top of the range and the company doesn't deserve a price at the top of the range."
J. Christopher Lewis
Riordan Lewis & Haden
The most important thing in this business is to listen. If you listen, you can tailor the transaction to fit the person's needs.
"Every deal is different, every seller is different. I make the joke that you have to be part-German and part-Italian. If you're German, you're thoughtful and analytical, and the Italian side is creative and flamboyant. You have to be flexible enough and adaptable enough to work within the entrepreneur's environment.
"In this business, we're part financial analyst and part therapist. Some people just want to sell and get on with life. Some have built the business and they spent more time with their employees than with their family.
Cumulatively, many employers have spent more time at work than with their kids, so you get to understand why there's such an emotional attachment. There are some that also don't care, they just want the money. Those are the sellers we try to avoid.
"We look for firms that really want to see their business continue to do well and where they feel we will be a good shepherd to make that happen and treat their employees correctly, where it's not just the end of the road."
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