Even Len Pagon Jr. can balk when it’s time to sign on the dotted line.
It happened in 2008, when Rosetta was ready and waiting to buy Pagon’s Brulant Inc. The deal was all but done, but he felt the pull to return to the negotiating table.
“I knew things were not good,” says Pagon, now chairman and CEO at Next Sparc. “The market was dropping by a lot. At the same time, our business was way outperforming our forecasts. I was strongly considering re-trading our deal.”
Pagon ultimately sold Brulant to Rosetta, which Publicis acquired in 2011 for $575 million.
“I realized the best deal is sometimes the one that gets closed,” Pagon says. “While I could have re-traded earlier in the summer, I was just grateful that my deal was done. Not being greedy and not over-negotiating is really important.”
In this week’s Dealmaker Strategies, we talk with Pagon about his approach to making the right moves at the negotiating table.
Minimize the turns
People can sometimes really grind on certain deals, Pagon says. They get hung up on details that in the end, aren’t nearly as important as they seem.
“In my experience, a good or great deal doesn’t necessarily matter at the margins,” he says. “People might be grinding on a valuation or working capital. But if the deal turns out to be good and you’re hoping to get dollars, the nickels and dimes don’t really matter.”
The constant churn of the negotiating process can eventually hurt your chances of getting a deal done.
“Where things break down is when people are constantly negotiating, and they are changing this and that,” Pagon says. “That will ruin trust and could ruin a deal. If possible, minimize the amount of time and the turnarounds in negotiations.”
Push through fatigue
There are usually a few moments in any business deal where it feels like it’s all going to fall apart, Pagon says.
“You worked really hard on the deal, and all of a sudden they’re drawing some lines and you’re drawing some lines, and whatever issue or risk that’s on the table just won’t go away,” he says. “Or you think you have an issue handled and it just keeps coming back, whether you’re the buyer or the seller. It gets really fatiguing and then super intense because you’re trying to get the deal closed, but you’re just exhausted. To some extent, even if you love the deal, you just want it over with one way or the other.”
Have a backup plan
Ideally, you always have a backup plan in place just in case negotiations break down.
“I’ve had a couple deals, one as a seller and another one as a buyer; you get the purchase agreements and you’ve spent a couple of hundred thousand dollars on legal fees and due diligence,” Pagon says. “And then at the last minute, the seller walks in says, ‘I’m not signing it. I changed my mind.’ He sends me an email the day where he’s supposed to sign all the agreements and says, ‘I’m not doing the deal.’ When something doesn’t work out, ideally, you want to have a backup plan and keep moving forward.”
The bottom line
No matter how arduous negotiations get, understand that the real work often begins after the agreements are signed.
“Getting a deal closed and then working on the business is the best part,” Pagon says. “But it’s also, ‘All right, now we have to execute.’ You feel some success and satisfaction, but really, the work just begins when you close a deal.
“Actually getting it over the finish line and getting it closed, and now working on the business, is a big part of the satisfaction. Now you’re getting to work on the business and prove out your assumptions, hypothesis and investment thesis.”
Related post: How a failed deal led to a better price for Brulant