Deal Fatigue

Getting it Done

In the course of my twelve years as a consultant to the private wealth management industry, I have been intimately involved in 119 advisor transitions or M&A transaction negotiations. In each one, without exception, I have seen each of the parties involved experience some level of “deal fatigue” with varying degrees of severity.

In the early stages of negotiation there is excitement and optimism. Each side needs and wants what the other side has to offer: a revenue stream, recapitalization, clientele, technology, culture, access to new markets, operating efficiencies, a future liquidity event, etc. Of course there is posturing, positioning, and showmanship but there is a clear sense of why it’s good for both and how to get it done. Sometimes it’s a game. Deal fatigue usually sets in after a period of tough negotiation, and often occurs just a few weeks before closing. The parties may lose their cool, minor issues become big problems, new issues come up, issues that had been resolved resurface, emotions run high, and trust erodes.

Why does deal fatigue happen? From my perspective, deal fatigue is a symptom resulting from the collision of two forces; control and opportunity awareness. Pre-deal both parties have, for the most part, complete control over their respective affairs. This is particularly true for sellers. When opportunity enters the picture, the seller acknowledges that some portion of existing control will be relinquished up to closing, after which it will be regained. Control contains a variety of ingredients, but the most important ingredient is time. Negotiations are emotionally charged and over time are exhausting. From the seller’s perspective, each new issue that pops up is a reminder of time spent away from minding the store, and the value of the opportunity diminishes.

In every transaction deal fatigue will be a reality, but deal death can be prevented by following these four steps:

1. Anticipate that deal fatigue will occur.
2. Remind yourself, and the other party, why you are both entering into the process.
3. Prepare an “issues list” and ask the other party to do the same and exchange lists. Prioritize the issues. Agree to a process.
4. Remind yourself, and the other party, why you are both in the process.
5. Don’t get too attached to the outcome. This will reduce stress and anxiety.
6. Plan on celebrating.

Successful negotiations, while at some level can certainly be adversarial, are really about collaboratively and creatively trying to solve problems. Throughout the process, keep your sense of perspective, and keep your sense of humor.