Get your kicks from future-proofed deals – it’ all a matter of goals!

Published: Feb 05 , 2016
Author: David Bannister

A few years ago I read an interesting article based on the work of a renowned US business school which gave the results of studies into acquisitions and mergers in international business over a period of years.  The conclusion, briefly summarised, was that what these deals produced in practice was a long way short of what had been predicted for them at the outset – fewer than a third of deals met the expectations which had been heralded for them when they were being contemplated and shareholders were being convinced to endorse them.  It is interesting that some of Scotwork’s emerging research into negotiating behaviours (we will be saying more about this in the months to come) indicates that untrained negotiators don’t see the negotiating process as adding a great deal of long term business value or as strengthening relationships.  It seems the process is just a necessary evil to many who have to carry it out.  Trained negotiators, however, seem to have a different view.

I was put in mind of these things when I read a brief article recently in The Times newspaper.  It concerned a deal done between two football clubs: Monaco and Manchester United (I declare an interest here, I am a passionate and very long term supporter of the latter team).  The deal concerned a young player, Anthony Martial who was transferred to Manchester United from Monaco in 2015.  The deal, for a reported fee of €80 million, was the largest ever for a teenage footballer- Martial was nineteen years old at the time.  Other details of the deal have, however, been leaked and include some interesting features.  If Martial scores 25 goals in competitive matches for Manchester United, Monaco will be entitled to a payment of €10 million.  Moreover if he is shortlisted for the Ballon d’Or (the soccer equivalent of the Oscars) then a further €10 million is due to Monaco.  If, however, Martial achieves neither of these desirable targets then Manchester United could sell the player, but if he is sold before 2018 for a figure between €60 million and €100 million, than Monaco will earn 50% of the profit which Manchester United make.

This intrigued me: how clever were the Monaco negotiators to recognise the importance of such a player to the Manchester club and to future-proof the deal when they recognised that they would not be able to keep their young asset for themselves?  All negotiated deals necessarily involve an element of risk – we change the status quo in the belief at the time that we will benefit from the negotiated change.  However, it may be a good lesson for us all to learn from the Monegasque negotiators that the deal we do can include a component to minimise the risk associated with the deal.  Of course, none of us know the compromises which took place to get the deal through on the €80 million price in the first place but thinking creatively about how many elements you can include in your deals and recognising that you can trade against future events and benefit from them is genuinely creative.

Me? I just wish Anthony Martial was scoring enough goals to put that €10 million payment in danger!

David Bannister


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David Bannister
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Muck Shift

Just when is a deal not a deal…? I heard this story from a friend of mine the other week; there are some lessons to be learned! So, my pal is a developer and is building some houses on what is essentially a square site. Two sides of the square can be accessed from the road in a neighboring housing estate and the other two are beside a field owned by another developer. There is a huge pile of muck to shift before the actual building project; this phase is known in the trade – and not unreasonably - as a "muck-shift"! As there will be 80 -100 lorries coming in and out each day for 6 weeks, it was considered more convenient to access the site over the field, so an approach was made to the developer to discuss the terms under which he would allow access. This is a standard arrangement and the deal typically is that the field would be returned to the owner in its original condition. Developer makes a bit of money, where otherwise he wouldn’t; homeowners in the adjoining estate are less inconvenienced; builder does not need to spend money cleaning the streets and getting them back to a usable state at the end of the project. Win-win.

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