Recently I was reminded of the importance of re-reading the contracts that come out of complex partnerships and negotiations. I think that many of us have had the experience of working on fairly involved deals with the paperwork going back and forth and back and forth numerous times. Okay you finish the deal, hands are shook, backs are patted and everyone is the excited about how wonderful the deal is, the new partners are, and how much money we will all make.
Now, fast-forward a year or two, the partnership is doing fine (or maybe not) but regardless, changes are being considered either to various terms and conditions or that will impact these. Like everyone else, I’ve found myself in situations where new aspects of an existing deal are being considered and we pretty much operate off a summary of the deal (maybe even the one shown to the exec team when it was launched.) We all spent 100s of hours crafting this deal so we know all about it, and who needs to wade through all that legal mumbo jumbo one more time, right?
Wrong. I was recently in just this situation looking at making changes to revenue share arrangements. We were pretty much set, but there was one unrelated detail that didn’t seem to make sense. By the way this particular detail really had no bearing on the deal whatsoever, it just came to my attention and I wanted to understand it I decided to go back and look up this detail. While I was wading through the 160 page contract, I was reminded of what one of my clients, Ahmad the CFO with a large food service company, taught me.
Whenever he was looking at something that had to do with a deal, his FIRST INSTINCT seemed to be to grab the contract and see exactly what was spelled out there. Didn’t, matter how pressed he was, or how well he knew the deal, he needed to go back to the source. Smart guy. Successful guy.
In my case, I ended up doing the same and it turned out to be good that I did (though quite accidentally). There was a very important point in the original contract that we would all have missed that could potentially have a significant financial impact. We were able to address this easily. Again, I found this point not because I was looking for it, but purely by accident.
Recently, I saw Harold Levy speak. He is the Managing Director of Palm Ventures, former Chancellor of New York Public Schools (1 million kids!), ex general-council of Citicorp etc. Pretty impressive guy. He was speaking about doing business with bureaucracies. He made a number of hugely interesting points to an audience of Educational Tech people that sell software, content and other services to educational institutions.
The one point he made that that stands clearest though, was his advice to all, to READ THE CONTRACTS and make sure you know the material even better than the people you are doing business with.
Sounds like a pretty good idea. Could make you or save you a lot of money.