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Study Hall: How to Keep Your Cool in High-Stress Business Deals · Earn Your Leisure

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• 1:51
  Speaker 3: Kind of break that down as far as for people
• 1:53
  Speaker 3: that are entrepreneurs of how you have to remain calm
• 1:58
  Speaker 3: under these type of umstances, because some people might have
• 2:01
  Speaker 3: just you know, fell to the pressure and did things
• 2:05
  Speaker 3: that they would have really regretted later on.
• 2:07
  Speaker 1: Yeah. Yeah, to be honest, I thought about that a
• 2:09
  Speaker 1: lot during that deal cycle. That I grew up in sales,
• 2:13
  Speaker 1: so tense negotiations were kind of familiar to me. I
• 2:17
  Speaker 1: grew up in football, where coaches would you know, become emotional,
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  Speaker 1: so that behavior wasn't as threatening to me as someone else,
• 2:25
  Speaker 1: And I grew up in the projects on a housing
• 2:27
  Speaker 1: estate where you know, for all of his bluster, he
• 2:30
  Speaker 1: was nowhere near intimidating as people as people I had seen.
• 2:33
  Speaker 1: So those things were super helpful to me. What I
• 2:37
  Speaker 1: learned in that process and have since always used when
• 2:41
  Speaker 1: exiting a company is that competitive leverage, competitive tension. You know,
• 2:46
  Speaker 1: it's key. Otherwise you're sitting opposite somebody trying to tell
• 2:50
  Speaker 1: them that they should just pay more for something because
• 2:52
  Speaker 1: you want more money for something, right, And that's difficult
• 2:55
  Speaker 1: when you both want to buy my thing, and I'm
• 2:58
  Speaker 1: able to say to you that the you've offered is nice,
• 3:01
  Speaker 1: but it's not nice enough for me to do the
• 3:04
  Speaker 1: deal with you because somebody else is willing to pay more.
• 3:07
  Speaker 1: That puts a very helpful distance between me and you
• 3:11
  Speaker 1: and the negotiation. Right. If I'm just saying, you know,
• 3:14
  Speaker 1: prices and one hundred has to be one twenty, that's
• 3:16
  Speaker 1: not as impactful as saying, if you can't get above
• 3:19
  Speaker 1: one twenty, there's somebody else who will do that. There.
• 3:21
  Speaker 3: And it's crazy because we just spoke with a sports
• 3:23
  Speaker 3: league that they are we're in, they're in a contract
• 3:29
  Speaker 3: with a major TV network, right, and they were saying
• 3:32
  Speaker 3: that they the TV network pretty much told them like, look,
• 3:36
  Speaker 3: I know that you don't have anybody else, but it's
• 3:38
  Speaker 3: bidding for this contract, so we really can't negotiate. But
• 3:43
  Speaker 3: I know that at some point you probably will have
• 3:46
  Speaker 3: so at that point in time then where you're going
• 3:49
  Speaker 3: to be in a position to actually have a conversation
• 3:52
  Speaker 3: with us. But until then you have no leverage.
• 3:54
  Speaker 1: Right.
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  Speaker 3: So it's important for people to know that, you know,
• 3:58
  Speaker 3: it's always good to have somebody else exactly that is
• 4:01
  Speaker 3: bidding for it, because even if they're not going to
• 4:04
  Speaker 3: buy it, at least it raises.
• 4:06
  Speaker 1: Exactly your interest exactly. In the last process, so with Fortira,
• 4:11
  Speaker 1: where we sold at a billion euros, I did something
• 4:15
  Speaker 1: I never did before, which was we had free parties
• 4:18
  Speaker 1: competing until the moment the deal was signed. Right, So
• 4:21
  Speaker 1: we ran Normally, what you do is you get offers,
• 4:25
  Speaker 1: you say, Okay, I like your offer, I'm going to
• 4:27
  Speaker 1: negotiate with you for thirty days to get it done.
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  Speaker 1: You have exclusivity for thirty days to get it done.
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  Speaker 1: It's what you normally do. In the last process, which
• 4:34
  Speaker 1: was twenty twenty two, we said, first man to the
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  Speaker 1: finish line, you know, get to it. As long as
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  Speaker 1: the offers financially were in the right zip code, whoever
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  Speaker 1: get it done first. And that was a new experience
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  Speaker 1: for me. And what that done in the negotiations was
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  Speaker 1: something I hadn't seen in my previous free transactions, which was,
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  Speaker 1: you know, somebody said I need this condition in the contract,
• 4:56
  Speaker 1: and it's a completely normal condition. I did it in
• 4:59
  Speaker 1: the previous three deals. It's not something you want to do,
• 5:02
  Speaker 1: But in this situation, I was just like, oh, actually,
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  Speaker 1: we don't really want to do that. No, you know,
• 5:06
  Speaker 1: no market conditions, deal norms. A lot of them didn't
• 5:10
  Speaker 1: get done because everybody understood that this was a race
• 5:13
  Speaker 1: to the finish line and was highly competitive. So that
• 5:16
  Speaker 1: like that changes dynamics in the negotiations when you've got
• 5:19
  Speaker 1: that kind of competitive tech.
• 5:20
  Speaker 4: Yeah, I think in terms of deals, a lot of
• 5:23
  Speaker 4: times people might have taken the twelve because they haven't
• 5:25
  Speaker 4: done the proper valuation of their actual business. Well, they
• 5:28
  Speaker 4: might say we may not get another offer, Well we'll
• 5:31
  Speaker 4: do it here and we'll try to work up to this.
• 5:32
  Speaker 4: So like, what's that process for you? Obviously that was
• 5:35
  Speaker 4: you wanted the one twenty five. The next deal is
• 5:38
  Speaker 4: we had a billion dollars, how are we figured out
• 5:41
  Speaker 4: the valuation and how are we negotiating on it?
• 5:44
  Speaker 1: So good thing about tech is there's tons of comps
• 5:48
  Speaker 1: and there's a lot of you know, there's a lot
• 5:52
  Speaker 1: of formulas that guide you to what the price should be. Right.
• 5:55
  Speaker 1: So a company, you know, a company in our space
• 5:59
  Speaker 1: that as over thirty percent margins, over seventy percent of
• 6:03
  Speaker 1: the revenue is recurring, that company's valuation will start at
• 6:07
  Speaker 1: nineteen times. It's ebitda like. That's you know, everybody knows that,
• 6:11
  Speaker 1: and nobody's going to come into the room and try
• 6:13
  Speaker 1: and offer you fifteen because everybody kind of gets that.
• 6:16
  Speaker 1: It starts there. So that's helpful. Then from that nineteen
• 6:19
  Speaker 1: times foundation, yeah, it's on you to sell your kind
• 6:24
  Speaker 1: of strategic advantage that you're offering a buyer, the opportunity
• 6:27
  Speaker 1: you're offering the buyer the eternal investment that buyer is
• 6:30
  Speaker 1: going to realize that bits on you between nineteen and
• 6:34
  Speaker 1: twenty five or thirty times ebe where the deal gets done.
• 6:36
  Speaker 1: But you get in tech, you get good you know,
• 6:39
  Speaker 1: you get good formulas that give you foundation of value.
• 6:42
  Speaker 1: I think that the main threat to underselling in those
• 6:46
  Speaker 1: situations is people sometimes think, well, they must know about right.
• 6:51
  Speaker 1: So in that case, we're a tiny company selling to
• 6:53
  Speaker 1: American Express. I think in that situation it would have
• 6:57
  Speaker 1: been easier for someone to say, these guys must know
• 7:00
  Speaker 1: what the valuation is. They must know better than we do.
• 7:02
  Speaker 1: They buy companies all the time. He's a smart guy.
• 7:06
  Speaker 1: I think that's actually a bigger risk. It was pretty
• 7:09
  Speaker 1: easy for me. I didn't make I wouldn't have made
• 7:11
  Speaker 1: any money at twelve million euros. So discussion clothes.
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