Published on: Thursday 08 May 2008 by Administrator
Four seasons in one deal
Paul Carter Hemlin, Founder of Contract Management Direct provides some clarity over the ‘science' of successful dealmaking...
I recently read an excellent article in the FT by Mike Southon, author of the Beermat Entrepreneur, in which he used the metaphor of the four seasons to describe the key stages that one must progress through in making a deal in order to arrive at a signed contract. As a veteran of numerous deals of all shapes and sizes and considerably varying negotiation periods, I immediately warmed to this concept and have expanded it below to help set out a brief, common sense approach for any purchasing manager planning to negotiate a deal.
The key principle is to achieve as much as possible in each ‘season' to reap the rewards and efficiencies in the next.
Staring with spring, Southon states that this is the time for "new and creative ideas often accompanied by optimism and enthusiasm" and he is right. You have to approach every deal with a positive mindset, this is it the time for getting everyone's ideas onto a flip-chart to see what can be done better, quicker, cheaper, more sustainably etc. There is always a pressure in the early phase of any bargain to sit down with ‘the other side' which is perceived to be tangible progress, but you need to ‘shape' the deal first before getting into the detail. On a beautiful spring morning there can be a temptation to plant new bulbs to give the garden some much needed colour after winter, however we all know what will happen if a heavy frost soon follows.
Moving into summer, there is more energy and this is the time to get your trading partners around a table for face to face discussions to put some deal principles on paper that you can refer to throughout the negotiation process to ensure you both stay focused and on track. You can now start to progress the deal in more detail with your contract managers making a start on the draft documents. Make sure you tend the right seedlings at this point and don't get distracted by the early bloomers. Look after your acceptance criteria, scope of services, service levels and payment terms. The hardy perennials such as Limits of Liability and Indemnities should not be your top priority just yet.
The autumn is the time to bring the lawyers and accountants in as the intellectual rigour is put into process. If you bring them in too soon it can cause a deal to lose its momentum and grind to a halt, with this the deal team can become frustrated and potentially resentful.
The final season is of course winter, the due diligence is completed and the deal is done. The agreement you have been nurturing through the previous three seasons has developed into a signed contract, where one hopes the initial promises will soon become deliverables and reality.
© Contract Management Direct 2008
This article was published in Supply Management Magazine: www.supplymanagement.com
Mike Southon's article "Dealmakers are natural Stars" was published in the Weekend FT on 26/27 January 2008 and can be found at: http://www.ft.com/
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