WEBVTT - Study Hall: How to Keep Your Cool in High-Stress Business Deals

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<v Speaker 3>Kind of break that down as far as for people

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<v Speaker 3>that are entrepreneurs of how you have to remain calm

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<v Speaker 3>under these type of umstances, because some people might have

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<v Speaker 3>just you know, fell to the pressure and did things

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<v Speaker 3>that they would have really regretted later on.

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<v Speaker 1>Yeah. Yeah, to be honest, I thought about that a

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<v Speaker 1>lot during that deal cycle. That I grew up in sales,

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<v Speaker 1>so tense negotiations were kind of familiar to me. I

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<v Speaker 1>grew up in football, where coaches would you know, become emotional,

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<v Speaker 1>so that behavior wasn't as threatening to me as someone else,

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<v Speaker 1>And I grew up in the projects on a housing

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<v Speaker 1>estate where you know, for all of his bluster, he

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<v Speaker 1>was nowhere near intimidating as people as people I had seen.

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<v Speaker 1>So those things were super helpful to me. What I

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<v Speaker 1>learned in that process and have since always used when

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<v Speaker 1>exiting a company is that competitive leverage, competitive tension. You know,

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<v Speaker 1>it's key. Otherwise you're sitting opposite somebody trying to tell

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<v Speaker 1>them that they should just pay more for something because

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<v Speaker 1>you want more money for something, right, And that's difficult

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<v Speaker 1>when you both want to buy my thing, and I'm

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<v Speaker 1>able to say to you that the you've offered is nice,

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<v Speaker 1>but it's not nice enough for me to do the

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<v Speaker 1>deal with you because somebody else is willing to pay more.

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<v Speaker 1>That puts a very helpful distance between me and you

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<v Speaker 1>and the negotiation. Right. If I'm just saying, you know,

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<v Speaker 1>prices and one hundred has to be one twenty, that's

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<v Speaker 1>not as impactful as saying, if you can't get above

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<v Speaker 1>one twenty, there's somebody else who will do that. There.

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<v Speaker 3>And it's crazy because we just spoke with a sports

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<v Speaker 3>league that they are we're in, they're in a contract

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<v Speaker 3>with a major TV network, right, and they were saying

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<v Speaker 3>that they the TV network pretty much told them like, look,

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<v Speaker 3>I know that you don't have anybody else, but it's

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<v Speaker 3>bidding for this contract, so we really can't negotiate. But

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<v Speaker 3>I know that at some point you probably will have

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<v Speaker 3>so at that point in time then where you're going

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<v Speaker 3>to be in a position to actually have a conversation

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<v Speaker 3>with us. But until then you have no leverage.

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<v Speaker 1>Right.

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<v Speaker 3>So it's important for people to know that, you know,

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<v Speaker 3>it's always good to have somebody else exactly that is

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<v Speaker 3>bidding for it, because even if they're not going to

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<v Speaker 3>buy it, at least it raises.

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<v Speaker 1>Exactly your interest exactly. In the last process, so with Fortira,

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<v Speaker 1>where we sold at a billion euros, I did something

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<v Speaker 1>I never did before, which was we had free parties

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<v Speaker 1>competing until the moment the deal was signed. Right, So

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<v Speaker 1>we ran Normally, what you do is you get offers,

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<v Speaker 1>you say, Okay, I like your offer, I'm going to

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<v Speaker 1>negotiate with you for thirty days to get it done.

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<v Speaker 1>You have exclusivity for thirty days to get it done.

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<v Speaker 1>It's what you normally do. In the last process, which

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<v Speaker 1>was twenty twenty two, we said, first man to the

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<v Speaker 1>finish line, you know, get to it. As long as

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<v Speaker 1>the offers financially were in the right zip code, whoever

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<v Speaker 1>get it done first. And that was a new experience

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<v Speaker 1>for me. And what that done in the negotiations was

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<v Speaker 1>something I hadn't seen in my previous free transactions, which was,

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<v Speaker 1>you know, somebody said I need this condition in the contract,

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<v Speaker 1>and it's a completely normal condition. I did it in

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<v Speaker 1>the previous three deals. It's not something you want to do,

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<v Speaker 1>But in this situation, I was just like, oh, actually,

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<v Speaker 1>we don't really want to do that. No, you know,

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<v Speaker 1>no market conditions, deal norms. A lot of them didn't

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<v Speaker 1>get done because everybody understood that this was a race

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<v Speaker 1>to the finish line and was highly competitive. So that

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<v Speaker 1>like that changes dynamics in the negotiations when you've got

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<v Speaker 1>that kind of competitive tech.

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<v Speaker 4>Yeah, I think in terms of deals, a lot of

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<v Speaker 4>times people might have taken the twelve because they haven't

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<v Speaker 4>done the proper valuation of their actual business. Well, they

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<v Speaker 4>might say we may not get another offer, Well we'll

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<v Speaker 4>do it here and we'll try to work up to this.

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<v Speaker 4>So like, what's that process for you? Obviously that was

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<v Speaker 4>you wanted the one twenty five. The next deal is

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<v Speaker 4>we had a billion dollars, how are we figured out

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<v Speaker 4>the valuation and how are we negotiating on it?

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<v Speaker 1>So good thing about tech is there's tons of comps

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<v Speaker 1>and there's a lot of you know, there's a lot

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<v Speaker 1>of formulas that guide you to what the price should be. Right.

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<v Speaker 1>So a company, you know, a company in our space

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<v Speaker 1>that as over thirty percent margins, over seventy percent of

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<v Speaker 1>the revenue is recurring, that company's valuation will start at

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<v Speaker 1>nineteen times. It's ebitda like. That's you know, everybody knows that,

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<v Speaker 1>and nobody's going to come into the room and try

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<v Speaker 1>and offer you fifteen because everybody kind of gets that.

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<v Speaker 1>It starts there. So that's helpful. Then from that nineteen

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<v Speaker 1>times foundation, yeah, it's on you to sell your kind

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<v Speaker 1>of strategic advantage that you're offering a buyer, the opportunity

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<v Speaker 1>you're offering the buyer the eternal investment that buyer is

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<v Speaker 1>going to realize that bits on you between nineteen and

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<v Speaker 1>twenty five or thirty times ebe where the deal gets done.

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<v Speaker 1>But you get in tech, you get good you know,

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<v Speaker 1>you get good formulas that give you foundation of value.

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<v Speaker 1>I think that the main threat to underselling in those

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<v Speaker 1>situations is people sometimes think, well, they must know about right.

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<v Speaker 1>So in that case, we're a tiny company selling to

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<v Speaker 1>American Express. I think in that situation it would have

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<v Speaker 1>been easier for someone to say, these guys must know

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<v Speaker 1>what the valuation is. They must know better than we do.

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<v Speaker 1>They buy companies all the time. He's a smart guy.

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<v Speaker 1>I think that's actually a bigger risk. It was pretty

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<v Speaker 1>easy for me. I didn't make I wouldn't have made

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<v Speaker 1>any money at twelve million euros. So discussion clothes.

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