Multi-Unit Franchisee Magazine Issue III, 2011 | Page 76
ExitStrategies
By Dean Zuccarello
Greed Is Good—Not!
Strive for a fair balance in transactions
G
ordon Gekko, the main
character in the 1987 blockbuster film Wall Street, quickly
became a popular cultural
icon of unrestrained greed. The “Greed
is good” phrase comes from his address
at a stockholder meeting:
“…greed—for lack of a better word—is
good. Greed is right. Greed works. Greed
clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all
of its forms—greed for life, for money, for love,
knowledge—has marked the upward surge of
mankind…”
• Is greed really good? Philosophically, that evolutionary spirit Gekko refers
to is not greed, but rather the concept of
self-interest. Enlightened self-interest
contemplates helping others achieve their
goals or providing benefits to society as a
means to advancing one’s own position.
Greed, on the other hand, is simply the
destructive addiction to accumulation. The
short-term spoils brought on by greed are
often fleeting, while the benefits from enlightened self-interest more often endure.
What does this have to do with the
deal world? A lot, as it turns out. Greed
often gets in the way of attaining the goal
of consummating a transaction. Why?
Because the greedy party will continue
to push for more and more, until they become so unreasonable that the other party
just walks away. The self-interested party,
on the other hand, knows how to drive a
good deal, but knows when to say when.
• Negotiation as a sport. Most people
in the business and deal world love to negotiate. In fact, we seem to be a universe
of negotiators. But what happens when
winning the negotiation becomes more
important than achieving the original goal
of closing the deal? At what point does it
become too much?
There seems to be a disturbing trend
gaining momentum whereby if you don’t
“get one over” on the other party, you
haven’t done a good deal. Has the notion
of “win-win” become a thing of the past?
A fair deal in which both parties compro-
74
Multi-Unit Franchisee Is s ue III, 2011
mise just does not seem to be good enough
anymore for some participants. But if this
mindset takes hold and becomes the new
normal, how can anyone realistically expect to complete a transaction? This is a
very dangerous path to go down in terms
of transaction success, and in terms of the
impact on the social fabric of our global
business environment and how reasonable business people conduct themselves.
The short-term
spoils brought
on by greed are
often fleeting,
while the
benefits from
enlightened selfinterest more
often endure.
• How did we get here? People have
been negotiating since the beginning of
time. But why has it become so contentious
lately? It may be that the painful recession
has left us with a void of optimism, and
parties to a deal may try to overcompensate for the negative environment. Many
buyers believe that any seller today must
be desperate. The reality, though, is that
many sellers are not desperate at all. The
result is that fewer transactions are consummated, and more parties walk away
from the table disappointed and regretful. In addition, some buyers who weathered the recession very well have allowed
themselves to be charmed by the “golden
rule”—the notion that since they have the
gold, they make the rules. Once again, we
see sellers exiting the negotiation process
fairly quickly when golden-rulers are on
the other side. Anecdotes of these “onesided” deal negotiations make their way
back to potential sellers, who want nothing to do with that process. This results
in fewer viable businesses on the market
and a potential backlog of transactions.
• Greed puts the deal at risk. It is
healthy to be aggressive—that’s enlightened self-interest. But don’t risk the deal
with greed. Successful negotiations focus
on achieving an objective, not on trying
to take advantage of the other side, or
scoring more negotiating points. The best
dealmakers know when they’ve pushed
enough. They have an innate sense of the
other party’s position and when they have
reached the limit. And they remain focused
on the ultimate goal. All too often, if negotiations get overly contentious, emotions
take over and the deal becomes difficult,
if not impossible, to resurrect.
• Prioritize your focus. In addition
to focusing on self-interest rather than
greed, it is important to focus on the truly
important deal issues, and not the trivial
stuff. Some deal negotiations fail as parties
focus on issues that are simply immaterial to a successful transaction. Successful
negotiations center on the critical factors
necessary to protect and ensure long-term
success for both parties. Trivial issues can
become a distraction, create unnecessary
negotiations and deal fatigue, and may
contribute to a failed deal process.
• Conclusion. Success in transactions,
as in business in general, is driven by a
healthy dose of self-interest. But if you
truly want success, check your greed at
the door. You’ll acc omplish more of your
goals, build goodwill, and create more
value in the long run.
Dean Zuccarello, CEO
and founder of The Cypress
Group, has more than 25
years of financial and transactional experience in mergers, acquisitions, divestitures, strategic planning,
and financing in the restaurant industry. The
Cypress Group is a privately owned investment
bank and advisory services firm focused exclusively on the multi-unit and franchise business
for more than 17 years. Contact him at 303680-4141 or [email protected].