We Can’t We Close This Deal? January 2014


Business deals can be greatly delayed and ultimately fail to close for many reasons.  Oftentimes, however, it is “non-business” issues that prevent parties from coming to terms on the “business issues.”

I recently served as a neutral facilitator of negotiations among co-owners of a medical products company relating to the proposed purchase of one of the co-owner’s shareholding interest in the company by the others. The stock purchase negotiations had proceeded over a 13-month period, always appearing to be heading toward a signed agreement and ultimate closing, only to be derailed by seemingly insignificant issues.

Upset and frustrated over the inability to close the deal, the proposed selling shareholder and the proposed buying shareholders invited me to facilitate discussions designed to get at whatever was standing in the way of the closing of the stock purchase transaction. The first couple of hours were spent taking a close look at the various issues that had resulted in impasse. All of them seemed to be resolvable, and none of them appeared to rise to the level of “deal breakers.” Yet the deal continued to stall.

One pattern of consequence did become apparent early on: the proposed selling shareholder seemed to be the one who would always come up with the “stumbling blocks” to closure. At the 2-hour mark, I invited the proposed selling shareholder into an adjoining room to see whether he was aware of having created the series of impasses.

After some discussion, he suddenly blurted out that he had built the company from infancy 30-years earlier into a significant player in the medical products field, serving the entire time as its chief executive officer, and was convinced that no one else could keep the ship afloat and headed in the right direction. Upon further reflection, he explained that, having had no children during his marriage, the business was literally “his baby.” While he admitted that the time had probably arrived for him to step down as CEO, sell his interest in the company and realize his profit, he also admitted that he was holding on to the business for dear life, because letting go of the reins and cashing out would mark the end of his reason for being. 

Business owners and executives are often least well-equipped and most uncomfortable with discussions and negotiations that move from clearly defined “business issues” to less tangible “non-business” issues (oftentimes, emotional in nature). Yet, it is usually the less tangible, “non-business” issues that prevent a deal from closing. It becomes the role of a neutral facilitator to attempt to turn the discussion toward those “non-business” issues. Once the “non-business” issues are surfaced and considered, there is usually a way of addressing them in tangible “business” terms, so that they do not continue to be the unstated reason for a deal failing to close.  

In the case of our co-owners, once the reluctant selling shareholder’s “less tangible” concerns were raised and considered, he and his co-shareholders/fellow managers were able to conclude a deal that kept the proposed seller in the loop for a mutually desirable period of time, under circumstances where he could comfortably conclude his service to the company without the previously undefined level of anxiety that had impeded closing. The key deal terms were as follows: (i) upon closing, the 68-year old selling shareholder would become a full-time consultant to the company for a period of 5 years, during which he would continue to serve as the company’s chief executive officer, help transition management responsibilities to a new team, and assist the company in realizing important goals in the areas of growth, expansion and product diversification; (ii) he would be financially rewarded for these efforts by: (a) receiving a significant portion of the purchase price at closing; (b) receiving a post-closing “earn-out” (i.e., additional purchase price amounts tied to the company’s achieving certain business performance goals) in each of the 5 years of his consultancy; (c) remain on the Board of Directors during his consultancy; (d) being entitled to a bonus during the 5-year period following the end of his consultancy, for new business developed on behalf of the company; and (e) receiving a lifetime membership in a very upscale country club, where he could improve his golf game, continue to develop business on behalf of the company and interact with his peers in the business community. Based on all of the above, the selling shareholder felt comfortable with the notion that his “baby” and he would be secure and that he could move on to the next challenge (i.e., improving his golf game).

The morals of the story are obvious: In any business negotiation, it is important to pay careful attention to both “business” and “non-business” issues. More often than not, it is the “non-business” issues that create the greatest obstacle to successfully concluding a business deal, and it may take a neutral facilitator to find and eliminate those obstacles.




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Joel Fishman
Joel Fishman has worked almost four decades as a business lawyer and mediator of business disputes. Representing large, middle market, and entrepreneurial businesses in a broad range of industries including entertainment, communications, new media, and technology, Fishman represents clients in the formation, financing, operation, and expansion of businesses, as well as with the leasing, purchase, development, financing, and sale of all types of real estate. Fishman is active in the Southern California community, and he frequently writes for the Los Angeles Daily Journal on mediation as well as corporate and real estate legal topics.

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