Once upon a time, I negotiated an acquisition. It wasn't the best deal I'd ever negotiated -- not the biggest, not the best fit, not the lowest price -- but it was still a good deal for the company.

Then a curious thing happened. My boss, who had previously been supportive of the transaction, suddenly backed off. I wasn't sure what had happened. Maybe he saw something in the deal that scared him. Or perhaps he received an indication from the Board that there was something they didn't like. Or maybe he just couldn't make up his mind.

As quickly as it was in line for approval, the acquisition was off.

Like a typical executive, I talked to my boss to find out where we went wrong. He mentioned that the price looked high, but that otherwise he appeared happy with the agreement. So I tossed aside my pride, put my tail between my legs and went back to the target company and told them we needed to renegotiate.

I half expected they would throw me out the door. But it didn't happen. Instead the we worked out a scheme that resulted in a lower initial purchase price with a kicker for the sellers if the business met our forecast over the next three years.

I learned a key lesson from this experience -- that I'd left value on the table when I'd negotiated, and that when I was negotiating as a proxy on behalf of someone else, I was more effective at extracting that value.

But I hated doing it. I felt... diminished. I'd lost a substantial amount of credibility with the seller. Originally, I was the key executive, the one that would have been managing the business post-closing. Afterward, I was nothing more than an errand-boy sent by my boss to impose his will. The sellers were now looking past me to him. And we were all frustrated by the entire episode.

At first my boss was enthusiastic with the outcome, but a short time later he expressed concerns about the concentration of customers in the target company. It seemed they pulled in most of their revenue from just three customers, and "what if one of them wasn't happy about the deal?"

Again, the deal was off.

Again, I meekly returned to the sellers, and together we contacted the three customers, getting assurances that our ownership of the business wouldn't influence their purchase decisions.

Again, I returned home, triumphant. Again, the boss welcomed the changes. But soon there was yet another problem -- this time with their planned expansion into the United States (the target company was European).

One more time, the deal was off.

This time I didn't go back.

I simply couldn't put up with the complete destruction of my credibility in the eyes of the Seller. Not to mention the lack of credibility I apparently had with my boss, the board, and my peers on the executive team. And I felt like we were unreasonably jerking around the sellers (which we were).

The deal had been improved twice already, but apparently it still wasn't good enough. Despite the fact that my boss turned responsibility for the deal over to another proxy, the transaction fell apart. We'd gone back to the "well" one too many times.

I quit that job a few weeks later.

There are several important lessons I learned from this experience.

You negotiate better when you do so on behalf of someone else, particularly when you don't know their "bottom line"
Most deals are struck with room to capture more value on both sides.
If you try to redial the deal too many times, it will fall apart.
You can lose a committed employee by over-manipulating them.

24.3

Redialing the Deal

Tom Spears

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