Scott Wolstein learned a long time ago about the power of listening when it comes to dealmaking.
“I used to have a partner for many years who always tried to convince the other side that he was right,” says Wolstein, partner and developer at The Wolstein Group. “Maybe that’s more common than the other approach. For me, listening is not difficult at all. It’s really a skill. Being able to sit back and understand what’s important to the other side is critical to get the outcome that you desire.”
Wolstein has built a long and successful career making things happen on the Northeast Ohio real estate landscape. The Wolstein Group has partnered with Fairmount Properties to restore historic spaces and develop highly coveted suburban locales. One of the projects is the Flats East Bank redevelopment project.
Wolstein understands as well as anyone, however, that not every deal is meant to happen.
In this edition of Dealmaker Q&A, we went back and pulled together some material that we just didn’t have room for in this January video interview. We talked about how to know when to walk away, how to minimize mistakes and why you need a strong team to be an effective dealmaker.
How difficult is it to walk away from a deal you really want to close?
It’s difficult when you’re an optimistic, positive person, but it’s always worse to make a bad deal than to reach to make a deal. I follow college football very closely. One of the recruiting experts always says you never worry about the recruits you didn’t get. You worry about the ones you got because if you make a mistake with the ones that you signed, that’s what can cause you to fail. You’re not going to fail because of somebody who got away. You’re going to fail because the players you signed aren’t good enough. It’s the same way in business. You have to worry about keeping your eye on the ball and making sure this is a deal you really want to make. It may seem that way at the outset. But as it evolves, it just might get too difficult and become a deal where you have to walk away.
What’s your approach at the negotiating table?
There are always a few things at the end that the parties don’t agree on. You just have to go through them one by one by one and decide what you’re willing to give in exchange for what you want to get. You have to keep thinking what’s important to the other side and what is less important to you. I don’t care how big a deal is or how small it is, or how simple or complex it is. At the 11th hour, there are going to be a few loose ends that you’re going to have to negotiate. You’re going to have to give up something and you’re going to have to hold firm on some other issues.
Hopefully on the issues you feel are indispensable, you can convince the other side to come your way. Sometimes it requires being very tough. That’s not always easy to do for a dealmaker. You need to be willing to walk away or at least make the other side believe you’re willing to walk away. That requires looking somebody in the eye, being credible and saying, ‘You know what? If we can’t get this issue resolved on this basis, there is no deal. Let’s just put our pencils down and move on.’
How do you minimize mistakes in your dealmaking activity?
You can never do too much homework before you do a deal. It’s very easy to get entranced with an opportunity and to want it really badly. But before you can really be intelligent about pursuing a deal, you really have to dig deep and ask yourself all the difficult questions. It’s not just what can go right and or why you want to make the deal. You have to look at everything that could possibly go wrong and everything you see in the numbers that might not be sustainable.
That’s probably my greatest weakness. I’m a very optimistic person. I’ve worked with some people in my career who are much more critical thinkers. It’s taught me that you really need to step back and make sure you’ve looked behind every tree to find every pitfall. If any of those things transpire post-acquisition, you will find you’ve made a mistake. Look, we’ve all made bad deals. It’s impossible to play the game a lot throughout your career without making mistakes. You just try to do your homework ahead of time and make sure you can minimize those mistakes.
What role does attitude play as a dealmaker?
I tell young people all the time that the people around you have to want you to succeed. Anybody can trip you up and make you fail, whether it’s your own team, your adversaries, your service providers, your vendors or maybe your lenders. You have to conduct yourself in business in a way that you are well-liked and people enjoy doing business with you. That goes for all your constituencies, particularly your employees. You should go to the office every day and feel like these are people who part of your family. You need to be able to inspire them. Sometimes that requires a pat on the back and sometimes it requires some handholding. No matter what your business you’re running and no matter what you’re doing, you’re going to encounter some very turbulent times. Being able to keep the team focused and positive through turbulent times is really a very important part of leadership.
How to reach: The Wolstein Group, www.flatseastbank.com
Photo Credit: James Douglas