Sheppard Mullin and Jarrard co-presented 10 Ways to Screw Up Your Deal, a webinar discussing the pitfalls that can sabotage a deal and best practices to avoid them. Here’s a link to the webinar: 10 Ways to Screw Up Your Deal | Sheppard Mullin and a summary of the webinar’s takeaways.
IF YOU WANT TO SCREW UP YOUR DEAL, THEN:
- Build the plane while you’re flying. If a deal is important enough to do, then it’s important enough to do the preparatory work before you launch the negotiations.
- Doing your homework, setting realistic goals and boundaries, and surveying the environment and variables that can impact a deal are important first steps to take when considering a transaction.
- These steps include defining what “success” really means, conducting preliminary internal diligence and operational polish to eliminate problems and deal delays, understanding the parties’ history and culture, and, importantly, considering your strategy related to labor unions, antitrust regulators, state attorneys general, and other governing bodies. In addition, know your key contract renewal dates so that you don’t wind up renegotiating a critical payor or provider agreement under the scrutiny of your transaction partner.
- If you have bad news to share – investigations, litigation, adverse business changes – disclose entirely while the buyer is worried about competing bidders. Holding it back can break trust and imperil the time and resources you have invested.
- Fail to recognize you are in a political campaign. Health care is always political at multiple levels, and successful healthcare transactions should be viewed as political campaigns you want to win – requiring tact, strategy and a clear narrative that goes beyond maximizing ROI.
- Remember that your leading constituents are always “voting.” Physicians vote with their referrals. Nurses vote by changing jobs or organizing. Concerned patients call their Representative. Businesses switch their health plans.
- The key to a successful campaign and transaction is to acknowledge the influential constituent groups and to leverage the powerful emotions involved in the healthcare industry to craft a compelling message that resonates at all levels and explains the benefit of the transaction.
- Put your money where your mouth is. Making money and the need for “scale” the story of your transaction is not a winning approach, especially in these politically charged times.
- The healthcare industry and its leaders are the subject of a great deal of scrutiny from regulators and consumers, with many convinced that providers prioritize profits over patients. This inherent skepticism means healthcare organizations considering a transaction should develop a communications and political strategy that appropriately frames the context of the deal and the intended goal before, during and after the deal process.
- Lay the ground work with the right communications and engagement to soften the ground for what you want to achieve. Communicate the business rationale drivers consistently and often before the deal is announced.
- Treat your people like mushrooms. Nothing creates and motivates opposition to a transaction like opaque communication and keeping people in the dark.
- Responsible transparency – the right amount of light at the right time – is critical to a deal’s success. Plan out what to disclose early on and what later, and why.
- Choose the right trusted messenger to foster an accepting environment. Always prepare for pushback. Being proactive can actually turn people who are detractors at the beginning into advocates. The power of “I was against this but now I’ve learned more and believe it’s the right thing” is real.
- Forget to keep your friends close, and your enemies closer. A friend may not always be a friend, and an enemy – those whom, at first blush, might derail your deal — may not always be an enemy.
- Seek out and listen to every key stakeholder to build trust and create allies and fully understand the political landscape
- Remember that positions can change when dollars get large or deals get personal. And it’s all personal. Like all of us, individuals worry first about their employment, their position of respect, their income and their relevance. So listen, show respect, explain how the deal will work and create allies.
- Dance to somebody else’s music. Always stay on message.
- Remain in control of your deal message. Do not allow others to shift the focus away to their preferred battleground.
- Anticipate the criticism – for every deal has its critics – and plan how to address it while remaining on message. Staying proactive – and not allowing your organization to be strategically distracted by negative voices — allows your organization to remain in control and the voice of reasoned authority.
- Ignore your deal killers. Assess regulatory risk before beginning a deal and develop mitigation strategies for possible deal killers, including regulatory review delay.
- With recent guidance changes from the Federal Trade Commission and Department of Justice, new state merger review laws, and active state attorneys general, there is increasing uncertainty about regulatory risks for both horizontal and vertical deals. Think about what you can share upfront with the antitrust regulators that will help them to better understand and scope the risk and benefit of your transaction.
- Make regulators’ lives easier by doing their homework for them. Take the opportunity to provide your input on the industry and provide work product they can use to effectively communicate to their supervisors and stakeholders. Control your own message.
- Make an epic mistake. Do not implement or convert a major technology system during a transaction. Remember Murphy’s Law: anything that can go wrong, will go wrong.
- Large scale changes to major technology systems are complicated and may cause internal problems, distract employees, and result in reduced performance during critical stages of the deal process. Unless the main reason for the transaction is to complete an IT system conversion and get access to mission-critical technology, it is best to focus on the transaction instead of overloading your workforce and dividing attention.
- Squirrel! Do not get distracted or lose sight of your deal strategy. Many issues will come and go over the course of a transaction process, each demanding attention. Address those issues worthy of your time, but don’t lose sight of the deal itself; drive the conversation back to your message and to what motivates your constituents.
- Forget your Backup Parachute. Don’t assume that just because you start a deal that you will close that deal.
- Many deals do not close. Having at least one viable contingency plan provides your organization an important safety net, as well as leverage in your deal negotiations. Without a viable alternative, your limits may be pushed until you are no longer negotiating a transaction, but negotiating your terms of surrender.
These are ten ways to screw up your own deal, but there are many more. In today’s regulatory and social climate, successful transactions demand the right team, effective preparation, communication strategies and consistent commitment to the ultimate goal. If you missed the webinar or want more detail or examples illustrating the above ways to screw up your deal, we encourage you to watch the recording of the webinar through the following link: 10 Ways to Screw Up Your Deal | Sheppard Mullin.