Avoiding friction
Acquisitions proceed most easily if all deal participants are informed directly by the buyer and seller (the counterparties) that the deal principals share the goal of closing quickly and with minimum friction. Some friction can’t be and shouldn’t be avoided. Every issue is not win-win. That said, lots of friction is unnecessary; the unintentional byproduct of a poorly conceived process.
Ideally, negotiation is mutual education; focused exchanges of information, needs, views and value propositions. The definitive document should clearly and simply express the buyer’s and seller’s mutual expectations resulting from their informed negotiation process.
In a perfect world, Apple would design user-friendly acquisition agreements; easily navigable, visually intuitive and using everyday words. The buyer and seller should be able to understand “their” document (and respective business and financial consequences) without having a lawyer interpret it for them.
Too lofty an ambition for such complex subject matter? History suggests otherwise. Since 1998, public companies have complied with Securities and Exchange Commission “Plain English,” six SEC-mandated rules that enormously improved the “readability” of public documents. They are:
- Short sentences.
- Everyday words.
- Active voice.
- Tables or bullet lists for complex material.
- No legal “jargon,” highly technical business terms or double negatives.
- Using first person rather than third person.
The securities industry initially expressed misgivings and strongly resisted these rules. No one likes change. But after adoption, the industry immediately adapted and SEC documents became remarkably easier for non-corporate finance experts to understand.
Extending this approach to M&A transactions would:
- Shorten documents.
- Sharpen focus on the relevant.
- Minimize opportunities for disagreement.
The longer a document, the more there is to negotiate. This increases cost and friction, lengthening negotiations — and longer time periods reduce the probability of closing.
Put yourself in the recipient’s shoes. Will a reader easily understand your email’s context, content and requested action step? Effective communication can only be measured by what the recipient heard, read or retained. Judge yourself accordingly.
Emails promote hasty and ambiguous replies, extreme positions and sarcastic responses. All are self-indulgent and deal-destructive. Avoid them.
What’s the best approach? Initially asynchronous digital document exchanges have value; but trading dueling drafts rapidly reaches a point of marginal utility. Email lacks physical, social and vocal clues critical to human connection, compromise and resolution.
The analog world quickly becomes more effective than digital. Many emails are best responded to by phone (quaint though that may seem to some). Real-time, synchronous conversations and meetings facilitate dialogue rather than asynchronous sequential monologue.
“Dialogue” means someone talks while someone listens; really listens. Listens without defense or judgment to understand and actively seek commonality rather than to deflect, rebut or distinguish. Deep, active, engaged listening is key to “hearing,” communicating and successful negotiating. You can’t listen to an email.
Finally, many of us were raised with the useful “KISS” principle: “Keep it Simple Stupid.” Perhaps we should add an important “S” ― KISSS: Keep it SHORT and Simple, Stupid.
Marc Morgenstern is the managing partner at Blue Mesa Partners. He is a mentor capitalist serving on five entrepreneurial corporate boards (Cleveland and Bay Area), as chairman of CadenceCounsel and senior adviser for LoungeBuddy. He has structured and negotiated hundreds of transactions as principal, business advisor or legal counsel. He is also on the Rex Foundation (SF), and Rock and Roll Hall of Fame and Museum boards. Marc also is a prolific author, speaker and recognized national thought leader. To contact him, email [email protected], or visit www.bluemesapartners.com.
