Posted: May 16, 2013
More on trusted advisors versus rubber stamps
How to ensure the best possible dealStephen Dietrich
(Editor's note: This is the second of two parts. Read Part 1.)
As a young lawyer, I often heard the phrase, “That is a business issue.” That meant it wasn't something the advisor on the project was comfortable advising on or addressing. The answer wasn't clear cut or immediately apparent under the training or expertise of the particular professional.
Similar mantras are used by accountants, investment bankers and various consultants. Professionals are not comfortable stating an opinion in which no clear-cut answer is apparent – and that is precisely the time when a decision maker will likely appreciate and value thoughtful advice or dialogue with a trusted advisor.
Navigating a Deal with an Advisor
I had a client who was buying a business. My client was looking to partner following the closing with one of the minority owners of the selling group because the individual had operational expertise that the buyer was going to need going forward. As the negotiations with the potential partner unfolded, there seemed to be a constant tension or disconnect between the buyer and this minority partner on virtually every issue.
It was not that one was right and the other was wrong; both positions made sense. What became evident was that the two parties had very different views on how the business should be operated after the closing and how involved each of them should be in the business. The buyer had resolved many other significant issues with the sellers, but the relationship with the potential minority partner/operator was a growing negative in the transaction.
As the closing neared, the client had to decide whether to proceed. In the decision-making process, the buyer’s focus narrowed on what he had done to get to this point in the deal – all the time, energy and money spent to solve a large list of issues.
Given his focus, he was struggling to determine if the operator issue was one that could be worked out over time, if the partner was unreasonable or if the deal was good enough to close and address the operator issue later. There is no clear answer in a situation like this. What was clear was that the buyer needed to take a step back and regain perspective on the transaction.
My client and I reflected on one of the original conversations we had regarding the value in the deal. A key element of my client’s willingness to pursue the purchase – despite the fact that it was far from the buyer’s home and his other businesses – was having a local operator who was in sync with the buyer on operational matters.
This core issue had gotten lost. As my client and I discussed and reviewed the history of the deal, my client came to a conclusion very quickly. The client walked away from the deal and, as luck would have it, within a few weeks another deal arose closer to home. We closed on that transaction very quickly.
Understanding Human Nature
The inclusion of the human element as a factor in decisions might not change the ultimate outcome, but it might affect how a decision is implemented, who is affected, or the extent or depth of a path that is chosen. Looking at all possible angles and taking a few minutes to understand how people interact on the issue, how emotion might color a situation, or how a decision might affect people, can ensure the very best decision for the situation.
Stephen Dietrich is a shareholder at the international law firm of Greenberg Traurig, LLP. Dietrich represents corporate and other entities in mergers and acquisitions, debt and equity financing, and restructuring transactions. For more information, email him at firstname.lastname@example.org or call 303-572-6502.