Coping with deal fatigue
I have had the good fortune to manage or be involved in more than 100 transactions or negotiations throughout the course of my career, and without exception, in all of them I have observed parties suffer what I call “deal fatigue.”
Deal fatigue is that feeling of frustration, exhaustion, irritation, and in some cases, resignation, that almost all involved parties (principals, attorneys and bankers alike) experience. Deal fatigue usually sets in after a period of negotiation, and typically happens during the few weeks before a deal is supposed to close. The participants in a deal tend to lose their cool more often, little issues become big issues, emotions run high, and the tendency to push back from the negotiating table (versus trying to jointly solve problems) increases geometrically.
One of my mentors used to tell me that if you have two adults (emotionally speaking) in a relationship, the relationship will typically be pretty healthy and work well. If you have an adult and a child in a relationship, the adult can still manage to make the relationship work, although it certainly takes more effort. However, if you have two children in a relationship, the odds that the relationship will work over the long term are very limited. When deal fatigue sets in, both parties have the potential to behave very much like children – when this happens, several bad things can happen.
Deal fatigue can cause one or both parties to simply give up and cease negotiating, killing the transaction. Deal fatigue can also create such hard feelings between the parties that even if the deal closes, irreparable damage to an otherwise trusting, productive relationship can result. Deal fatigue can also reduce the parties’ ability to resolve issues creatively, and can impair their ability to compromise and make the deal work. In short, if not proactively managed, deal fatigue can destroy months of hard work and expense.
On the flip side, I have also observed deal fatigue cause one or more of the parties to simply give in – similar to the parent who finally relents when their child has insisted for the umpteenth time that they should be allowed to watch TV. This is similarly unproductive as it typically causes resentment following closing for the party who “gave in.”
Why does deal fatigue happen? I think it has multiple, interrelated causes. The first is obvious – the parties are tired. Negotiations are emotionally charged and over time are exhausting. Imagine the patience level of the exhausted parent coming home to screaming kids. As negotiations progress, I also think each party becomes less and less patient with new issues raised by the other party – each party expects that the other has raised their important deal points, so when another issue pops up, they tend to lose their patience at best, and at worst they begin to distrust the other party.
Interestingly, it doesn’t seem to matter how long the parties have been negotiating, but as the parties approach the targeted closing date and anticipate the feeling of actually consummating the deal issues that earlier would have passed without emotion now command more emotion and energy. Think of that feeling in the last hour of a ten-hour drive – you cannot wait to get there, and if road construction slows traffic, your frustration level will be that much higher. There is simply a feeling of “let’s be done with this.”
So, how do you prevent deal fatigue? The first step is to anticipate it. If you know it is coming, you are that much more self-aware, and can proactively take steps to alleviate some of the tension, stress and fatigue. The second step is to never get too attached to the outcome – as a result, you can treat the negotiations as less significant than you might otherwise perceive them (which can heighten stress and anxiety) – in other words, keep your sense of perspective, and keep your sense of humor.
Third, try to take a step back every once in a while and recall why you entered into the negotiations in the first place – in all likelihood, there was a good reason for you to want to do the deal, and if you can keep that reason front and center, it will allow you to remain positive and focused on problem-solving. Remember that successful negotiations, while at some level can certainly be adversarial, are really about collaboratively and creatively trying to solve problems. Finally, remember that even if one party is acting as the child, one adult can make it work, even if it is difficult. As my mentor used to tell me, “Be the adult,” as hard as that is sometimes.
Chris Younger is Managing Director of CapitalValue Advisors, LLC (www.capitalvalue.net). Chris has over 20 years of experience in structuring deals and managing businesses, sales and operations. He was the co-founder and president of a4,200-employee telecommunications company, has purchased and sold over 30 businesses as a principal and investor, and has been an advisor to hundreds of companies. Additionally, he is the co-author with David Tolson of the book Harvest: The Definitive Guide To Selling Your Company, available on Amazon. He can be contacted at firstname.lastname@example.org.