When do you just need to hang in there, and when are you being strung along? Some tips to get you on the right track.
Over the last 18 years, I have been inside almost every big and small Pharma company pitching a deal of some sort for one company (my own) or another (not my own).
Some years ago I had a very cool technology that would fit perfectly into another company’s product. I contacted the CEO who agreed with me, and we set out to do our due diligence, and, hopefully, close the deal.
While we came to an early understanding of how the companies fit together, the specific terms of the collaboration seemed to take forever to work out. As the months dragged on, I thought daily about calling it quits but pinged the company weekly in hopes of getting to a quicker close. There was even a time when my CFO said, “Let’s at least threaten to walk.” My response was, "Rome wasn’t built in a day."
Each week we made some progress, especially on the trust side. The timeline stretched to nine months, during which I was told that they loved the deal and was motivated but needed more time to work on it internally.
At the end of the sixth month, it finally happened. We heard that the delay had nothing to do with us but everything to do with internal financials. Our patience was rewarded. We got the terms nailed down and signature pages completed. Threatening to walk away would have ruined the trust between us. The deal turned out to be a great opportunity for both parties, as I originally envisioned.
That experience has guided me through all my subsequent transactions, including the road show for my initial public offering, the sale of my company, and the raising of capital for several businesses.
Here are five things I have learned about closing deals:
Start every deal with a clear view of how both sides benefit by knowing the core business. This, to me, is always the hardest analysis. You need to know what the value of the deal is. You can’t ask for less than the project is worth, of course, but overreaching can also kill a deal. Sometimes the added value of the deal is intangible. I try to paint a picture for all showing just that.
The hardest deal to close is the one that you need to stay alive. Never believe that one lost deal will be the downfall of your company.
Work to build trust. Get to know the people you will be in business with and, more importantly, how they work best. Posturing erodes the trust you have built.
Patience is a virtue. No matter how much you want the deal to close quickly, deals always take time, patience and an understanding of what the person on the other side of the table is dealing with internally.
Don’t be biased by your contact’s title. Remember that even if the person across the table isn’t the final decision maker, they will likely be your first internal champion.
Deals never happen quickly or the way you originally envision. But if you approach them in the right way, patience, honesty, and trust can go a long way.
Pamela Contag: Pamela R. Contag, Ph.D. is currently the CEO of Cygnet Biofuels. Pam founded four venture-backed start-up companies, including Xenogen, which went public in 2004 and was subsequently acquired by Caliper Life Sciences. She is widely published in the field of Microbiology and Optical imaging and has over 36 patents and patent applications.