CREATING TARGETS OF
OPPORTUNITY:
WHY TRAVELLING TO
NEGOTIATE A DEAL MATTERS
I have always valued face to face meetings over all other
connection alternatives that the current and evolving communication technologies
provide.
A very recent experience proved once again, how actually
taking the time (and pay the travel costs) to meet a potential licensee at
their home turf can accelerate or in fact salvage a potential deal that was stalling.
We have been engaged with a potential licensee with its base
of operations in faraway lands. The initial contact had been made a little over
year ago through emails. It was evident from the get go that contemplated deal
was interesting to both sides and both parties were forthcoming in stating
their interest in taking the matter forward.
Initial contacts and subsequent fact finding / due diligence
stages took full advantages of common communication tools such as emails, skype
calls, document sharing platforms. However, despite the fact that both parties were quite sophisticated
and clearly serious about communicating with each other, there were sometimes considerable
time gaps in responding to inquiries and requests for further details. We
started to lose the initial momentum and as matters started to lag, there was a
very real risk that one party or the other may, most likely inadvertently, drop
the ball.
As far as I can tell, there were three main reasons why the
negotiations started to slow down. 1) The overall value of the potential deal
was, while welcome and promising for both parties, was not substantial or
critical; 2) For the deal to generate value, there were some contingencies to
be addressed as the technology was relatively early-stage and incremental; 3)
The parties had never met face to face before, this matter compounded by the
fact that parties resided far apart with a substantial time difference that
made scheduling conference calls difficult.
As negotiations started the drag on, the opportunity cost of
the possible deal started to rise.
Two things happened, by chance to vitalize the deal. One of
the parties’ agents travelled to Turkey for an independent reason but took
advantage of the trip to visit us. Thus, they were able to visit our premises and meeting people
involved in the deal, including the inventor. Almost in parallel, I was invited
to speak at a Conference at a country that was near to where our potential
licensee was located. So I decided to leave a couple of days early, and spend
some more money out of my travel budget to go and visit our potential partner.
The face to face meeting took about two hours. Very quickly,
we were able to iron out all of the small details, agree upon the general terms
of the collaboration, identify very specific action items and setup a couple of
milestones as well as a deadline to execute a finalized contract. Thus, the deal
is very much alive and a successful final closing very likely. Obviously, before the contract is executed,
the deal may still disintegrate if one or both of the parties fail to meet a
milestone or a dead line. It was also within the realm of possibilities that
parties, once in a face to face meeting, realized that areas of mutual benefit
and synergy were in fact not present. Such an outcome, while certainly
disappointing for us, would have still been beneficial as it is also important
to be able to kill deal negotiations as early as possible so that neither party
wastes any more time or resources.
In short, taking time (and consequently paying for travel costs,
which can sometimes be substantial) to go visit your potential strategic
partner is worth the effort. If nothing else, it shows your partner that you
take the deal seriously and are committed to see if through. It also
establishes an initial element of trust, especially important for parties who don’t
have prior experience with each other. Talking over things and addressing
potential questions or concerns immediately creates a platform from which you
start working together. You are also able to see other party’s body language.
Body language and ability to read and interpret it is important.
At the end of the day, the time and money investment that
long distance travel entails, even with relatively small deals, both parties
end up winners once the deal is made or abandoned for lack of mutual benefit.
Thus, one should see the travel costs of doing business internationally, not
just as mere costs of doing business, but
a cost of doing business well.
