Deal Feelings

In my experience building and selling companies, the time between signing an LOI and closing the deal were some of the most emotionally turbulent moments of my life. (View Highlight)

It’s an extraordinarily stressful period. One of the things Emil Michael taught me early in my career is that time kills all deals, and that you need to diligently compress the time between signing a term sheet and closing as much as humanly possible. One of the reasons is that as more time elapses you increase the likelihood that things can fall apart. In my opinion an equally important reason is that you need to minimize the mental anguish the process imposes on yourself and the team. (View Highlight)

Pre-LOI you experience a honeymoon period. You fall in absolute love with your counterpart. Your shared vision is going to take over the world. You’ll manifest your mission in a way you never dreamed of before. Teammates you care about deeply are going to make life-changing amounts of money (including yourself and your family). And all of the hard work everyone has put in over the previous years is going to be rewarded. (View Highlight)

Then you sign a term sheet and everything changes on a dime. As they always do, incentives explain part of the story. As a seller, you want to make sure you quickly realize the terms in the LOI you happily signed. But as a buyer, you need to make sure you know precisely what you are getting and that you’re mitigating any unnecessary risk (View Highlight)

The feelings of love, respect, and excitement that emerge between buyer and seller in the pre-LOI process are promptly thrown to the wayside and things can become an irrational zero-sum game. It becomes difficult to differentiate between what is subjectively desirable versus what is objectively important. Ideally, you have a relationship with the counterparty CEO, but you can’t escalate everything because it erodes goodwill and time kills all deals, so you choose your battles wisely (hopefully!) in belief that both sides can compromise along the way. (View Highlight)

Note: spot on with my experience, across 3 deals