Using Humor to Help Close M&A Deals
Humor can be a powerful tool to push through negotiation barriers in M&A transactions. I remember one sell-side deal in particular where humor, brilliantly applied, probably saved the day.
We were negotiating the final points of the acquisition contract. In the conference room that evening were the two owners from the sell-side (our clients), the CEO and CFO from the buy-side and two bankers – one of which was me.
Thus far, the negotiations had been cordial, although a little contentious at times. As is usually the case toward the end of a deal, both parties were eager to finish the process, sign the contract and move forward. But at this meeting, the buyers and our client got their horns locked on a $100,000 item. They went back and forth on this point, beating it to death and testing the relationship. The buyer insisted a certain item would convey. The seller was adamant it would not. We were at an impasse and it did not appear either side was willing to budge. As the exchange progressed, both sides dug in deeper and the temperature in the room elevated a few degrees. You know that feeling when you walk out of a conference room to grab something from your office and when you walk back in, you realize how humid and stale the air is? This was that meeting. Both sides were becoming frustrated over a fairly small point, relative to the deal size. Both sides wanted a win, albeit a small one. At the height of the negotiation intensity, our client said to the buyers,
“Are you familiar with those Tickle-Me-Elmo dolls?”
“Uh… yes…”, said the buyer.
Our client continued, “A floor supervisor in charge of production for the dolls was asked to hire a friend of the General Manager, which he did. On the new hire’s first day of work, the General Manager walked down to the shop floor to check on his friend. When he got to his friend’s station, the GM noticed the new hire was putting two marbles on the doll with a rubber band. In confusion, the GM said to the supervisor, ‘Come take a look at this.’ The supervisor walked over, saw what was happening and said, ‘No, I said give him two test tickles!’”
We all had a good laugh, letting the humor cut the tension in the room. Then our client said, “You can have the $100,000.”
Tension diffused. Contract negotiation point covered. Relationship preserved. Respect gained.
I believe our client sensed this deal point needed to be conceded to conclude the transaction and that he had negotiated to the limit of the buyer’s patience. Our client successfully used humor to get the deal back on track. He reset the atmosphere in the room and reestablished rapport with the buyers. The transaction progressed smoothly after this and in the end, both parties were pleased with the outcome and continued to work together for several years after the transaction.
The point is, there is a place for humor in the deal process.