Magazine article Management Today

The Charles Allen Guide to Good Dealmaking

Magazine article Management Today

The Charles Allen Guide to Good Dealmaking

Article excerpt

RULE 1 Do your homework before you start. God is in the detail

RULE 2 Never have a hidden agenda OPENNESS PAYS DIVIDENDS

RULE 3 Always remain objective. Emotions can damage both sides

RULE 4 Don't indulge in ego play. You are negotiating on behalf of your company, this not personal

RULE 5 LISTEN, DON'T TALK

RULE 6 Understand what your rival wants out of the deal, personally as well for their organisation

RULE 7 Once agreement is close, move quickly. And don't leave ugly, unpleasant aspects till later Get them over with

RULE 8 Leave the final small print to the lawyers. There is nothing clever about being up until 4am negotiating over payment terms

RULE 9 A good deal is where EVERYONE THINKS THEY HAVE WON. A bad deal is where everyone thinks they have been screwed

RULE 10 There are no hard and fast rules. Every negotiation is different, every negotiation requires flexibility. If you follow a master plan without deviation you will quickly be exposed

Killing ground: now there's an evocative phrase. But to get there, Allen believes God is in the detail. Unlike many corporations of its size, Granada does not run a big acquisitions division, coming up with dozens of potential deals, many of which can never be realised. Allen prefers the more targeted approach, homing in on just one or two serious possibilities. And then researching them into the ground.

'When you embark on a hostile takeover,' he says, 'what you are basically selling to shareholders is the idea that you can run the company and thus safeguard their investment better than the existing management. To do that you have to know the company better than the existing management. And to do that you have to do your homework. When we moved for Forte we literally sent teams of people round every hotel, every Little Chef, we worked out precisely how we could re-engineer every menu to increase profit yields. It's amazing how much you learn when you physically test a product.'

Once the homework is done, Allen believes a dealmaker should move with conviction.

'I tell people I have a PVC fetish,' he says. 'It is a little acronym standing for Passion, Vision and Commitment. It drives every decision. Shareholders are interested in shareholder value. They will enter a negotiation thinking solely whether this deal is good for them. You have to convince them you are serious, committed and likely to deliver that for them.

In other words, in any negotiation, the other side needs to know what is in it for them.

'Absolutely. So, the most important thing is to listen rather than to talk. Most people don't really tell you what they want. They say personal issues are not important. But they are. If a negotiation is stalling it may be because the person on the other side wants to be chairman of the company but won't tell you. You must remember the question everyone wants answered is: What does it mean to me? So don't be coy, be candid. We have a culture of openness in our business which we carry into negotiations: no surprises, no bullshit.'

The personal angle is one of the reasons Allen finds hostile takeovers more straightforward than friendly mergers.

'Once you've agreed the outline deal in a friendly, then you move on to the positional power games,' he says. 'With a hostile takeover you are usually at arms' length and when the deal is done it's a simple case of saying to the existing management "goodbye".'

So: preparation is vital, as is listening, as is understanding your rivals. But what about the more aggressive elements of closing a deal, the hand-to-hand combat issues? …

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