The Power Of The Four T’s

David Malcolm is President of Cal West Apartments and a community leader in San Diego with over five decades of work experience.

Your typical business deal is a fairly straightforward process that involves two parties completing one transaction. With these, the primary determiner of success is negotiation skills—about which much has been written.

But complex business deals are a different animal and require different skills, perspectives and expectations. As an excellent article in the Harvard Business Review explains, “Most big deals are built on a series of smaller ones.”

Having successfully completed many complex deals in my real estate career, I swear by the power of the four T’s: team, transparency, true needs and trust. I believe these can help you across the finish line when conducting deals.

What Defines A Complex Business Deal?

What makes a potential business deal complex is the number of variables. These include but are not limited to:

• Multiple parties.

• Multiple outside stakeholders.

• Multiple jurisdictions—local, regional, national or even international.

• Differing business models.

• More legal “hoops,” which are sure to “complexify” things.

In pursuing a complex deal, count on a longer negotiation process and count on it not following a straight line from the start to the goal line. Above all, there is a much higher degree of uncertainty and risk than in a simple business deal. And that is why the four T’s are crucial.

Team

To pull off a complex business deal, to amend a line from the movie Jaws, “You’re gonna need a bigger team.”

Your legal team will need to include more specialists like land-use attorneys, transactional attorneys, regulatory attorneys and others. Which ones will depend not only on the variables involved but also on the make-up of the other parties’ legal teams.

Of course, your team will need to include an accountant and other finance experts, possibly including forensic experts if there is a history you need to delve into. Other possible members include government relations consultants and lobbyists as well as public and community relations professionals to help build support and/or defuse opposition.

Each team member should have a track record of relevant experience and be able to play well with others.

Transparency

Attorneys like to keep their cards close to the vest. It’s more optimal, though, to have everyone’s cards on the table. Ideally, you will have at least one meeting with everyone in the room (in my experience, Zoom can work, but not as well). You need to know what the lawyers are telling their clients and not have them doing so behind your back. This gives you the chance to address potential problems before they become deal breakers.

Another key is to put all the relevant documents in one place, for example, DropBox, so everything is available to everyone. Don’t hide anything—not P&Ls, not legal agreements, not banking relationships. If someone thinks you’re hiding the ball, the deal could be doomed.

True Needs

You also need to find out the parties’ “true needs.” What does that mean? To begin with, to achieve my true needs, I need to disclose what those are. I just won’t tell the other parties how to meet my true needs at the risk of ignoring their true needs.

For example, consider when working with bankers. Maybe you want a loan with a certain interest rate, but a banker might need more fees and a lower interest rate or a higher interest rate with no fees. What if true needs can be met with a different term and no prepayment penalty with a higher interest rate?

See how you can create a win-win instead of taking a “take it or leave it” position.

Trust

You need a team of experts for logistics, but you also need total transparency and to know everyone’s true needs in order to achieve trust. No trust, no deal. I’ve found that it only takes one person to kill a deal.

Trust enables the multifaceted negotiations involved in a complex deal to proceed to a successful conclusion. One way I might build on this is to know everything I can about the people involved. This matters because it can allow you to gain insight into their true needs.

I once negotiated with someone whose brother had committed suicide. I also lost a brother to suicide, and we shared our experiences. That enhanced our mutual desire to close the deal.

Build Trust To Last

I took over the management of a very large trust with numerous office buildings at the peak of the 2008 Great Recession. The trust also owned a new building with no tenants and significant debt.

Two banks were involved and had to agree to significant relief. Fortunately, no one wanted bankruptcy. But the challenges included multiple properties in three states and the fact that the personal guarantor on the loans was deceased. We managed to get to a solution and everyone was happy.

Afterward, my team found bank errors that gave us the basis to demand more money. The lawyers (and virtually all of the business school students I present this to) said we should have gone after the cash. I declined because it was more important to be true to my word.

Since then, those banks have bent over backward to meet my needs. And that has resulted in benefits that would not have been achieved otherwise. Because they trust me.

At the end of the day, I believe the four T’s can help you get that complex business deal done, which can continue to pay off for years to come.

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