Q&A installment of Paul Giannamore's Sell-Side M&A Masterclass series, answering viewer-submitted questions about negotiation tactics in sell-side mergers and acquisitions. Topics include how buyers verify competing bidders, maintaining leverage with a single buyer, extracting information without over-disclosing, creating urgency and deadlines, managing emotions in negotiations, getting a buyer to bid against themselves, detecting bluffs, power dynamics among buyer, seller, and banker, use of Dutch auctions, and skills that distinguish elite dealmakers. Timestamps cover each question from introduction through advice for junior dealmakers. # Channel Identity Observations: Sell-Side M&A Masterclass Q&A ## Creator Self-Description (Explicit Claims) - **Professional identity**: The creator introduces himself directly: > "Hi, I'm Paul Janomore. I'm an investment banker and I negotiate for a living." - **Firm affiliation**: He closes with a firm reference (rendered "PTOAC" in the transcript) and a services pitch: > "we love to kill it for our clients here at PTOAC. If you're thinking about an M&A transaction anywhere in the world, I'd be happy to chat with you." - **Practice focus**: He describes his current work as sell-side heavy: > "I'm doing a lot of sellside stuff now, but I'm going to do a buy side series." ## Intended Audience (Observable Presentation) - **Junior dealmakers / M&A professionals**: One question explicitly addresses > "what would your advice be to me as a junior dealmaker?" — and the creator answers directly: > "if I'm talking to junior dealmakers out there..." (describing his early Excel-modeling career). - **Prospective seller clients**: Advice framed for business owners, e.g., the "Jim" key-account-executive scenario: > "Let's say that you are selling your business and I'm your adviser." - **Viewer question submitters**: The format is a Q&A responding to audience-submitted questions: > "Today I'm here to answer viewer questions" and later > "I get hundreds of these messages on LinkedIn... I'm making an attempt." - **Industry-interested viewers**: Title hashtag "#privateequity" signals a finance/PE-adjacent audience. ## Claimed Scope of the Channel - **Series structure**: The video is part of an ongoing "Masterclass" series — the creator references prior and future episodes: - > "information was a very very important topic of the first episode in this series" - > "I'm going to do a whole episode on opening moves and shutdown moves" - > "within the next weeks, I think I'm going to do an entire episode on emotions" - > "when we actually get through buy side M&A... I'm going to do a buy side series" - **Topic scope**: Sell-side M&A negotiation tactics — auction design (sealed-bid, English, Dutch), leverage, deadlines, buyer psychology, emotional management, and process rules. ## Demonstrated Presentation Patterns - **Q&A format driven by community input**: Questions arrive via LinkedIn and (going forward) YouTube comments: > "The best way to do this going forward is just drop a comment or question into YouTube." - **Educational, anecdote-backed teaching**: Concepts illustrated with a Texas Hold'em / Sklansky poker analogy, a "$50 million best and final" bluffing hypothetical, and a recalled deal anecdote about a buyer's sealed-bid "best and final" letter that changed process rules. - **Named-reference citation habit**: References David Sklansky's *Theory of Poker*, Kahneman's *Thinking Fast and Slow*, Chris Voss's *Never Split the Difference*, and a named mentor ("Frank Clatron") — demonstrating an authority-building, reading-list style. - **Cross-platform promotion**: Viewers directed to LinkedIn: > "You can also join me on LinkedIn. My link is in the description below" — plus a firm contact link for prospective clients. - **Business development integrated into content**: The video functions partly as lead generation for his investment banking practice ("If you're thinking about an M&A transaction anywhere in the world"). ## Claims vs. Demonstration Distinction - **Claimed**: Professional status ("investment banker"), negotiation expertise, firm ("PTOAC"), and prior deal experience (e.g., the "no more transaction" Dutch auction, one-buyer auctions that "have been extremely successful"). - **Demonstrated (observable)**: Deep, structured knowledge of auction mechanics, negotiation psychology, and emotional management; sustained pedagogical delivery; responsiveness to audience questions. - **Not independently verifiable from this material**: Specific deal outcomes, firm reputation, or the accuracy of anecdotes (e.g., the sealed-bid letter story, the Voss breakfast meeting). # Delivery Observation: Sell-Side M&A Masterclass Q&A ## Speaker & Format - Speaker introduces himself by role and expertise upfront: *"Hi, I'm Paul Janomore. I'm an investment banker and I negotiate for a living."* - Format is a **viewer Q&A**: he reads questions aloud, then answers at length. He explicitly acknowledges sourcing: *"I get hundreds of these u messages on LinkedIn... I'm making an attempt."* - He bookends the video with audience engagement and a call to action: *"drop a comment or question into YouTube"* and a pitch for his firm. ## Extended Analogy as Core Teaching Device The dominant delivery habit is **anchoring negotiation concepts in extended analogies**, sustained over long stretches: - **Poker analogy**: He spends roughly the first two minutes on Texas Hold'em and David Sklansky's *Theory of Poker*, then maps it explicitly: *"I think about poker as decision making with incomplete information... And I think about M&A as decision-making with incomplete information trying to force your opponents to make mistakes. Almost the same thing."* - **Dark parking lot analogy** for emotion: *"let's say it's 2:00 in the morning, you walk out into a very dark parking lot and you hear a loud noise... if you were walking in that same garage in bright sunlight at high noon... you might not even have paid attention."* - He even maps process stages onto the game: *"You've got the flop, you've got the river, you've got the turn, information is being released at each stage."* ## Recurring Vocabulary & Catchphrases Several phrases repeat enough to count as stable habits: - **"Ferret out information"** — repeated with pronunciation variants ("fariting out," "fair it out," "fair down information"), always meaning extracting information from the other side. - **"Right?"** as a constant check-in tag — appears dozens of times (*"I've played optimally and I've gained, right?"*, *"Same thing in a formal process."*) - **"So on and so forth"** as a list-terminator — appears repeatedly (*"what are their facial expressions, do they have any tells, so on and so forth."*) - **"You know"** as a filler throughout. - **"As a matter of fact"** — used twice as an emphasis marker. - **"Best and final"** — recurring deal vocabulary in the bluffing and sealed-bid segments. ## Question-Reading Habit He frequently **re-reads or restates the question mid-answer**, sometimes scrolling back: *"this question here went on to say, let's go back down here. Um, do you find yourself in a situation where you have one buyer yet that buyer is unaware of the fact?"* This suggests he is reading from a visible list and re-orienting himself. ## Example-Driven, Role-Played Scenarios He teaches through **invented concrete scenarios with named or generic characters**: - A hypothetical account executive: *"let's say the key account exec's name is Jim, right? And Jim's got a year left on his contract."* - Direct dialogue: *"Hey, Jim, you know, we're a year out from your contract. I'd like to up this. You've done a great job."* - Buyer bluff scenario with specific numbers: *"Here's my offer. $50 million, best and final."* ## Named-Source Citation Habit He repeatedly grounds claims in **books and named practitioners**: - David Sklansky, *Theory of Poker* - Kahneman's *Thinking Fast and Slow* — *"I've probably read that 15 times"* - Chris Voss, *Never Split the Difference* — including a personal anecdote: *"Chris Foss was down here a couple of months ago for breakfast."* - A mentor: *"I worked with a guy named Frank Clatron"* ## Self-Disclosure as Credibility He sprinkles in personal practice details: - On silence: *"it gets to the point right now I actually get ridiculed sometime in my own office that I'll sit there for 45 minutes and not say anything."* - On his library: *"if you look at my library, it's full of psychological references."* - On junior work: *"You spend 15 hours a day punching numbers into Excel. It was miserable. It sucked."* ## Forward Referencing / Series Habits A strong pattern of **teasing future episodes**: *"within the next few weeks, I think I'm going to do an entire episode on emotions"*, *"I'm going to do a whole episode on opening moves and shutdown moves"*, *"I'm going to do a buy side series."* He also references prior episodes: *"we talked in the last session about the Dutch auction."* This confirms an episodic series structure. ## Reframing Questions He sometimes **rewrites viewer questions to suit his framing**: *"I'm going to change this question a little bit from most aggressive to I guess let me say most sophisticated."* Similarly, on the "one skill" question, he pushes back: *"I don't know if that there is one skill... I could talk about kind of attributes of elite dealmakers."* ## Direct Advice to Juniors He periodically addresses **junior dealmakers explicitly**: *"if I'm talking to junior dealmakers out there... when I graduated from school, it was all about finance and accounting."* ## Tone Conversational, first-person, authority-through-experience register — *"I've run one buyer auctions before that have been extremely successful."* Hedging language appears where experience is thin: *"I can't think of one particular instance..."*, *"I don't know that I've ever really seen... a deadline backfire."* ## Uncertainty Notes - Transcript artifacts (e.g., "fariting," "big slip," "no more transaction," "PTOAC," "Frank Clatron") appear to be transcription errors; speaker names and firm references are uncertain as rendered. - Whether "You know" / "right?" frequency reflects live speech or transcription punctuation cannot be fully distinguished; the tags themselves are directly observable. # Position Extraction: Sell-Side M&A Masterclass Q&A — Buyer Tactics, Leverage, and Negotiation Strategies **Speaker:** Paul Janomore (self-identified investment banker, sell-side M&A advisor; transcript spelling may vary, e.g., "PTOAC" firm reference). All positions below are his, answering viewer questions. --- ## 1. Framework: M&A as Poker - Cites **David Sklansky's** *Theory of Poker* (late 1990s) and the **fundamental theory of poker**: you gain whenever opponents play differently than they would if they could see your hand; they gain when you do the same. - Position: **"M&A is decision-making with incomplete information trying to force your opponents to make mistakes"** — nearly identical to Texas Hold'em. - Analogy: a formal M&A process releases information in stages like the flop, turn, and river. - Uses the term **"deception"** with an explicit qualification: he does not mean deceiving the counterparty per se, but bluffing, concealing, and "ferreting out" information. ## 2. Dealing With Only One Buyer - **Claim:** It happens occasionally but he "can't think of one instance" where he began a formal process *expecting* only one buyer. Sometimes outreach yields only one indication of interest. - In a sealed-bid auction, buyers **cannot know** there are other bidders — they can only infer that a process is running. - **Primary leverage loss from one buyer is psychological:** the sell side "runs a little bit scared" of a busted auction, versus having a fallback with two buyers. - **Advice (general rule):** run the one-buyer process exactly as if there were five or ten buyers — same iterative bidding stages; emotionally acknowledge "I have one buyer" without letting it change your play. - **Qualification:** with judgment over time, you learn when a buyer might be scared off; he claims he has run successful one-buyer auctions. - Sophisticated buyers will detect a weak hand "by the way that you act." ## 3. Extracting Information Without Revealing Too Much Two broad classifications of information: - **Asset-qualifying information** (fundamentals, legal constraints) — best obtained through **direct questioning**. - **Leverage-factor information** (necessity, desire, time pressure, what's at stake) — better obtained through **indirect probing and observing behavior**. Illustrative example (hypothetical): key account executive "Jim" with a year left on his contract and weak retention terms. - **Rule:** direct questions are far better when **materially separated in time and space from a negotiation** — direct questioning mid-negotiation raises red flags and can expose you to extortion. - **Warning:** if Jim asks "Are you selling the business?" and you lie and he relies on it, it "could potentially be fraudulent inducement." - Suggested tactics: casual conversation (beer, account reviews, meetings), building data from colleagues, informal dinners/drinks before formal meetings. - **Caution to sellers:** inadvertent revelations (an upcoming trip, a spouse wanting to relocate) can shift leverage to the buyer. - Mentions maintaining a **mental checklist per buyer** of leverage-factor questions and the "disparity of desire" between client and each buyer. ## 4. Creating Urgency / Deadlines - **Position:** strategic use of deadlines; people make poor decisions under time pressure; all buyers should face the **same deadline**. - Acknowledges "deadlines are made to be broken" is partly true, but deadlines can have teeth (e.g., "we move to the next round without you"). - **Judgment required:** a small slip (investment committee meets Monday) can be accommodated. - **Claim:** he has never seen a deadline backfire on the sell side. Deadlines backfire only through loss of credibility — if aggressive deadlines are consistently missed, the other side disregards them. ## 5. Seller Emotions as Deal Killer - **Strong claim:** "Probably the biggest deal killer out there [in mid-market M&A] is the emotions of the sellers"; more deals blow up from emotions on both sides than from fundamentals/ diligence findings. (His opinion and personal experience, as he qualifies.) - Sellers often tie ego and identity to the business ("that is their baby"); a buyer materially changing terms can be taken as a personal affront, poisoning trust. - Advisor's job includes **absorbing emotions** and **emotional reappraisal**: reframe a buyer's hard negotiation as the buyer doing its job, not a personal attack. - Uses the dark-parking-lot/noise analogy to show emotional state changes decisions. - Announces a future episode on emotions. ## 6. Making a Buyer Bid Against Themselves - Two methods offered: (1) refuse engagement without a better offer — "make me a serious offer and then we'll have a serious discussion"; (2) the controlled one-buyer auction where the buyer bids against himself unknowingly. He offers nothing beyond these. ## 7. Creating Perceived Competition With One Buyer - Mold perceptions from the onset; treat the single buyer with the same bid instructions and process as a 20-buyer process. (Restates the one-buyer general rule.) ## 8. Conventional Wisdom He Believes Is Wrong - **Claim:** many sellers wrongly believe price is objective — a "going rate" all buyers pay. Reality: every buyer has different capacity to pay, value-creation ability, and strategic intent; the sell side's job is to extract as much of that value creation as possible. - Note his qualification: he answers "seller conventional wisdom" because practitioner-vs-seller conventions differ. ## 9. Most Sophisticated Buyer Move to Kill Competition - Standard aggressive move: the **preemptive offer** to lock out competition. He reframes the question from "most aggressive" to "most sophisticated." - **Case study (observed, ~$50M deal):** a fatigued buyer, worried the seller would shop his offer, submitted a sealed "best and final" bid with conditions: final round of bidding; seller takes the best offer and closes, no further shopping; all bids opened simultaneously; all bids exact dollar amounts (no "highest plus a dollar"). He judged this a sophisticated rule-change that shut out competition and seller "shenanigans." - Lesson: sellers also get deal fatigue and may accept rule changes; buy-side practitioners should think of subtle ways to influence process rules. ## 10. Who Has the Power — Buyer, Seller, or Banker? - **Fact-specific**; power derives from leverage factors. Fifty desperate buyers = seller power; no buyers = buyer power. - **The banker should have no independent power** — he views himself as an extension/agent of the seller. The banker manufactures client power primarily by **educating the client** (information handling, leverage points, process design). ## 11. Psychologically Dominating Without Being Adversarial - **Position:** run a formal process — "the process does the work for you." With buyers competing, he need not negotiate or be adversarial at all. This is why he prefers formal processes. ## 12. Why Not Use the Dutch Auction More Often? - Dutch auction is **great for speed**, but he often doesn't need speed; it introduces risk to him too — if no one hits the falling price, he ends up worse. - **Reasoning against whole-deal Dutch auctions** (never attempted, doesn't know anyone who has): ascending English auctions exploit the **sunk cost fallacy** — buyers escalate commitment through incremental time, money, diligence, and emotional attachment; a descending auction lacks those iterative steps. - Qualifications: it worked well in "the no more transaction" (a specific referenced deal) and in subsequent uses; he will likely use it again, but **only in specific cases** — not an all-purpose tool like the sealed-bid ascending English auction. ## 13. Detecting Buyer Bluffs - **Position:** buyer bluffing is riskier for the buyer than the seller. Example: a buyer declares "$50M best and final" but would pay $60M; if the seller **believes** it, the business sells at $51M and the buyer is never even called back. "That's a very bad position for a buyer to be in — to be bluffing and actually be believed." - Practically, he doesn't dwell on whether buyers are bluffing: if he has better offers, he may simply invite them to improve. Defers deeper treatment to a future buy-side series. ## 14. What Separates Elite Dealmakers Rejects the premise of "one skill"; M&A is holistic and a **craft learned by apprenticeship** (cites mentor "Frank Clatron" — spelling per transcript — as a formative influence). Attributes he lists: - **Fast pattern recognition** — sizing up the "battlefield" of buyers from repeated exposure. - **Emotional detachment, not suppression** — the goal is "a great deal," not "a deal done"; avoid neediness. Related warning: ensure your deal is not *extremely* important to your banker, because bankers have emotional needs too. - **Helping clients manage their emotions.** (He notes this was personally difficult and learned over years.) - **Far more listening than talking** — he describes tolerating 10–45 minutes of silence in negotiations; silence helps gauge the other side's neediness. He reports being teased by colleagues about this. - **Willingness to sit and think** through many simultaneous data points (e.g., eight buyers, eight conversations). - **Psychology literacy** — recommends *Thinking Fast and Slow* (claims ~15 readings); his library includes psychoanalytic therapy references. Mentions Chris Voss (*Never Split the Difference*): initially discounted the book as not germane to his deal type, now finds parts (e.g., "validations of feeling") helpful, while **explicitly noting disagreement with Voss on the use of deadlines**. - Closing claim: "decisions are emotionally made," so reappraisal work with clients matters. --- ## Unresolved Tensions / Contradictions Preserved - **"Deception" vs. denial of deceiving:** he embraces poker-style bluffing and concealment while disclaiming deception "per se" — the boundary is left implicit. - **Deadlines:** "deadlines are made to be broken" vs. putting "teeth" behind them; accommodation vs. toughness is delegated to judgment. His disagreement with Chris Voss on deadlines is asserted but not resolved here. - **Never-say-never one-buyer framing:** he both says he can't recall starting a process expecting one buyer and that one-buyer outcomes occur "a lot of the time." - **Dutch auction:** praised for speed and successful in his uses, yet flagged as risky and not general-purpose — the conditions for its use are not specified. - Fraud-inducement warning (lying to Jim) sits alongside recommended concealment strategies — the ethical line is drawn only at that specific liability example. # Speaker Attribution & Provenance Record ## Video - **Title:** Sell-Side M&A Masterclass Q&A: Buyer Tactics, Leverage, and Negotiation Strategies #privateequity - **ID:** 01a168c8-21f4-711d-9286-53f93343a2b0 - **No curated metadata supplied.** ## Speakers & Roles ### Primary (and only) speaker - **Paul Janomore** (name as transcribed; transcript spelling uncertain) — **Creator / host** - Self-identified: *"Hi, I'm Paul Janomore. I'm an investment banker and I negotiate for a living."* - Answers viewer-submitted Q&A questions throughout the entire video. ### Questioners (indirect, no voice) - **Viewers** — questions submitted via comments and **LinkedIn**; not audible speakers. One questioner self-identifies context as a **junior dealmaker**. ### Mentioned third parties (not speakers) - **David Sklansky** — author of *The Theory of Poker* (cited re: fundamental theory of poker, late 1990s). - **Frank Clatron** (transcription spelling uncertain) — named as a mentor investment banker. - **Chris Foss** — author of *Never Split the Difference*; described as having had breakfast with the creator "a couple of months ago." - **"Jim"** — hypothetical key account executive in an illustrative scenario. - The creator's **VP of M&A execution** — referenced for a personal anecdote (silence on negotiations); not a speaker. ## Format & Provenance Notes - **Format:** Q&A episode answering viewer questions; part of an ongoing **series** (references "segment one of this series," "last session," and planned future episodes on emotions and buy-side M&A). - **Auction example:** A cited deal anecdote (~$50M process, sealed best-and-final letter with simultaneous opening and exact-dollar bids) is presented as witnessed firsthand; no party names given. - **Referenced transactions:** A "**no more** transaction" (transcription uncertain) where the creator used a **Dutch auction** — named without further detail. ## Referenced Sources (spoken, not linked) - *The Theory of Poker* — David Sklansky - *Thinking, Fast and Slow* (creator states he's read it ~15 times; dates it 2012) - *Never Split the Difference* — Chris Foss - Concepts: sunk cost fallacy, Dutch vs. English auctions, preemptive offers, emotional reappraisal, fraudulent inducement. ## Promotional Segments — Flagged - **Closing promotion (end of video):** *"we love to kill it for our clients here at PTOAC. If you're thinking about an M&A transaction anywhere in the world… reach out to us here at PTOAC by clicking on the contact us link in the description below."* (Firm name transcription uncertain — "PTOAC.") - **Call to action:** Invites viewers to leave YouTube comments/questions for future episodes and to join him on **LinkedIn** (link stated to be in description). ## Comment Availability - **Comments actively solicited:** the creator explicitly requests questions via YouTube comments and states they will review and respond in future episodes. - Comment section status itself (open/closed) is not confirmed by the source. ## Uncertainty Notes - Names rendered per an imperfect transcript: "Janomore," "Skolansky/Slanski" (inconsistent spellings), "Clatron," "PTOAC" may contain transcription errors. - No timestamps available in the source. Hi, I'm Paul Janomore. I'm an investment banker and I negotiate for a living. Today I'm here to answer viewer questions and I'm going to start with some questions here on buyers. Uh the first two questions are how do buyers know there are other buyers bidding and you're not bluffing? And a similar question is you mentioned multiple times that dealing with one buyer negatively influences your leverage. Do you ever find yourself in a situation where you have one buyer yet the buyer is unaware of this fact? How do you cope and what would your advice be to me as a junior dealmaker? Well, let's talk a little bit about that. You know, when I think about a formal M&A process, I think a lot about Texas poker. Back in the late '90s, David Skolansky wrote a book called Theory of Poker. And in that book, he posited his fundamental theory of poker. And and basically what he said was every time you play your hand differently from how you would have played it if you could see your opponent's cards, they gain. And every time your opponents play their hands differently than had they been able to see your hand, you gain. And so I think about poker as decision making with incomplete information and trying to force your opponents into making a mistake. And I think about M&A as decision-making with incomplete information trying to force your opponents to make mistakes. Almost the same thing. And so if we start with a Texas Holdem example, for all of you who are not familiar with Texas Holdem, I apologize, but when you think about Texas Holdem, let's say that you're dealt big slip, right? You've got ace king and I'm dealt a queen jack, for example. Now I can't see your cards. You can't see my cards. The flop comes down. King 103 offshoot. Now you're arguably holding a better hand, but I can't see your hand and you can't see my hand. If I were to fold um acknowledging that you have a better hand, I've played optimally and I've gained, right? I've chuck my cards. Um I played as if I could see what was in your hands. Now, had I gone all in, right, and you called, I would not have been playing optimally because you were holding the better hand at the flop. And let's say that the turn and the river don't help me. Your expected value has increased and you just want a big pot. That's what David Slanski is referring to with playing hands as if we could see our opponent's hands. And in the same way, like when you think about a formal M&A process, it it's almost in a lot of ways akin to Texas Holdem because you're setting up a formal process just just like the game of Texas Holdm, right? You've got the flop, you've got the river, you've got the turn, information is being released at each stage of the process. Same thing in a formal process. So, buyers know that there are other buyers. Well, if you're running a sealed bid auction, they don't know that. Obviously, they can infer that from the standpoint that you're actually running a process. Now, am I often dealt with dealing with one buyer? Uh, not often, but it happens time to time. And it's very rare. As a matter of fact, I can't think of one particular instance where I began a formal process expecting to only deal with one buyer. Um, but sometimes that happens, right? You put together the materials, you send them out to potential biders, and then you get one indication of interest. You've got only one buyer. You got some decisions to make. Um, now that buyer is involved in a formal process now, right? So, that buyer has tended their initial bid. They may assume that there's a lot of other buyers. They may assume that they're the only buyer. I don't know. Um, what they can't see is what's in my hand, and what's in my hand is their bid, the only bid. Um, so they need to determine how they're going to play their hand and I've got to determine how I can play my hand. Now, I'm going to use the term deception here because poker is a lot about deception. And I don't mean it um in deceiving the other party, per se, but we're dealing with bluffs. We're dealing with concealing information. We're dealing with fariting out information. If you're playing poker, you're trying to determine what's in your opponent's hands. And you can do that based on past performance. How do they play? tight, loose, what's their demeanor at the table, what are their facial expressions, do they have any tells, so on and so forth. Uh, in the same way, the buyer in that process would be attempting to far it out information on my side of the table. So, I do often find myself um in a situation where there's one buyer, you know, and this question here went on to say, let's go back down here. Um, do you find yourself in a situation where you have one buyer yet that buyer is unaware of the fact? Um, and you mentioned multiple times that dealing with one buyer can negatively influence your leverage. Yes. I think the primary way having one buyer negatively influences leverage is really psychological because if you have one buyer, you on the sell side are going to run a little bit scared, right? So, let's look at one buyer versus two. Let's say that I have two buyers that are both very, very interested in buying the asset and they're aggressive in their bidding. I could afford to run an aggressive process. I can afford to negotiate hard because I've got two buyers there and if one falls out, I've still got another bird in the hand. If I'm dealing with one buyer, I might be a little bit concerned. I might play a little bit scared uh because I don't want to lose that buyer and end up with a busted auction. It's in that particular case where you really have to run that process, I think a lot of times, the way that you would if you had multiple buyers because if the buyer's sophisticated and the buyer's used to dealing with these sorts of processes, they're going to figure it out by the way that you act. So, I guess in summary on that question, there are a lot of times that you'll end up with one buyer. And I think the general rule here is to run that process with one buyer just as you would if you had five or 10 different buyers. You run through the iterative bidding stages. You acknowledge in your mind from an emotional perspective. You get it out there and integrate it. And what I mean by that is you say in your mind, I have one buyer and I can't let my own emotions and psychology cause me to play my hand any different than I would have had I had multiple buyers. That's the general rule. I think over time with judgment, you start to learn maybe sometimes there's a buyer that might not be so aggressive and you have the ability to scare them off. So, you have to use judgment there. But, I think as a general rule, you would run that process in the exact same manner that you would with multiple buyers. And I've run one I've run one buyer auctions before that have been extremely successful. So, don't get scared by the fact that you have just one buyer. What techniques do you use to extract valuable information without revealing too much? So information was in a very very important topic of the first episode in this series and I want to go back to that because when I think about information in an M&A process, I think about two broad classifications of information. On the one hand, we have information that qualifies the asset. So for example the fundamentals the business the legal constructs and constraints the company so on and so forth right the information about the asset and then we have information regarding leverage factors and your job whether you're on the buy side or the sell side is to ferret it out as much information as you possibly can while concealing information on your side. So if we think again again about those broad classifications, we have the asset itself and we have leverage factors. Now let's think about how do we fair it out information. We can do direct questioning. We can do indirect probing. We can consult third party information sources, public filings and individuals so on and so forth. And then we can observe behavior. And the information qualifying the asset is typically garnered through direct questioning. Right? You can sit down and have a conversation with a seller, for example, about the asset in question. Where it gets more tricky and in some ways just as important as information qualifying the asset is information regarding leverage factors in the negotiations. And while you can do some direct questioning there, you're often better on an indirect basis as well as observing behaviors. And so I want to talk a little bit about that because I don't think I I got so into it in segment one of this of the series. Let's say that you are selling your business and I'm your adviser and we sit down and we say, "Okay, we're going to start prepping this thing to go to market and you've got some key account executives here that have appear to have deep relationships, some big clients. and if we lose them, uh, they might take business to the competition. What have you done to lock them up? And you look and say, well, we've done a decent job, but we don't have the best contracts in place. And our main guy, he's got another year on his contract. Um, but we probably could do better locking them up. Now, we don't know what buyers are going to do. We haven't started the process yet, but we've identified issues that might cause us some problems later on down the line. Like so for example, a key account rep decides to take off. That could be particularly negative for our M&A deal. So when we think about fair information, let's say the key account exec's name is Jim, right? And Jim's got a year left on his contract. Now, you could go and sit down with Jim and directly begin to question him. You could say, "Hey, Jim, you know, we're a year out from your contract. I'd like to up this. You've done a great job. um let's renegotiate a contract for you. You could do that and then you could start asking him questions like for example how important is his relationship to account A B C but in the context of the negotiation itself when you start asking direct questions that's going to raise some questions in his mind like why the heck are you asking me that and it's going to put you in a position where he could potentially extort you. So, I think some things to to to keep in mind is direct questions are far better when they're materially separated in time and space from a negotiation itself. So, it's one thing to to sit down with Jim tomorrow night, have a beer with him, and say, "Hey, Jim, let's talk about accounts A, B, and C." try to garner information as to how important he really is to determine whether or not he's a flight risk and and if he does fly, will he take the accounts with him? You're doing that outside of the construct of a negotiation. So, it's not going to raise a lot of red flags. Um, if you want to take a more indirect approach instead of asking him directly, you might find yourself in a position where again you're just doing reviews of the accounts. Maybe you're going to a meeting here and there with him and starting to build the data yourself. You're talking to other folks at the firm trying to understand how much leverage this guy might have in negotiations. You know, if he catches on to what you're doing, he might turn around and say, "Hey, why are we renegotiating my contract right now? Are you selling the business? If you lie to him and he relies on that, it could potentially be fraudulent inducement." So, you want to stay out of direct questioning in the middle of an actual negotiation. And so if we take this to a broader M&A context perspective, when I start to think about leverage factors, the types of things I'm trying to determine is necessity, desire, time pressure, um, who's got what at stake for doing a deal. And I find that a lot of the indirect probing at the very early onset of a deal is is is probably where you're going to make your money. And what I mean by that is let's say you're running a sellside process and you the seller want to understand as much as you can about the buyer and their motiv motivations and their capacity to pay. You're going to want to do that over dinner and drinks um maybe the night before a formal meeting. You're going to want to have a lot of indirect conversation. And this is why I always advise clients do a lot of listening. Ask a lot of questions. be very careful from what you review because the buyer is going to be trying to find out the same information. The buyer is going to try to figure out if uh you've got an important trip coming up that you got to take. So, you need to get a deal done at a certain point in time that your wife just retired and wants to move to another country. There's a lot of things that you can inadvertently reveal which will shift leverage from you on the sell side to the buy side. So, direct probing, indirect questions, third party You know, another way to of course fair down information, one of the most important is basically by observation. And that observation takes place within the construct of the formal deal process. How people react to things, how aggressive they are, how non-aggressive they are. You can kind of start to garner how important the deal is based upon how people interact with you and the signals that they give you within the process. So I always say to myself and for years every time I start a process um you know I've got a what's a mental checklist? It used to be a written checklist but now it's a mental checklist for me for each and every different buyer that we deal with. what is a pertinent information regarding the leverage factors that I'm trying to get and what sort of questions will I ask in order to get that information to help me decide what sort of leverage and what is the disparity of desire between my client the seller and each individual buyer. So what's the most effective way to create a false sense of urgency in a negotiation without it backfiring? Well, I think the ideal way to do that is through the strategic use of deadlines. As I've discussed before, there's power in time pressure. People do not like to make decisions under time pressure. In fact, they tend to make poor decisions under time pressure. If you're the seller, you want to use this to your advantage. And so, you want all buyers under the exact same level of time pressure. And you do that by setting deadlines. And you know, the saying is deadlines are made to be broken. And to a certain extent, that's true. But you can put some teeth behind deadlines, for example. And if you've got a bid deadline, right, set for this Thursday at 5:00 p.m., a buyer may say to you, "What happens if I don't get my bid in by Thursday at 5:00 p.m.?" Now, you need to use some judgment here. Um, Thursday at 5:00 p.m. might mean like, hey, the investment committee won't be able to meet until Monday morning. So, the earliest I'll get my bid in is Friday or Monday afternoon. It would be appropriate to allow that individual to tender bid on Monday afternoon. Um, but using deadlines and putting everyone under the same deadline puts buyers in a position to potentially lose. So, another answer might be, you know, if you don't get it in on time, we're moving on to the next round without you. And again, judgment comes into play here. I don't know that I've ever really seen, at least on the salsa I'm trying to think of, I've seen a deadline backfire. I think deadlines can backfire if you use them in such a way that it tends to have a negative impact on your own credibility. Meaning if you use an aggressive deadline schedule and all the buyers are just running late, which can happen, but that happens consistently. I think the other side of the table kind of starts to disregard your your deadlines in general, right? And they're going to kind of do whatever they want. So, to a certain degree, it um it behooves you when you set a deadline and not give a tremendous amount of leeway surrounding the use of that deadline. Yeah. Have you ever seen a negotiation completely unravel because of a seller's emotional decision? Absolutely. As a matter of fact, I think in mid-market M&A, probably the biggest deal killer out there is the emotions of the sellers. And within the next few weeks, I think I'm going to do an entire episode on emotions within the context of M&A because it is a big one. And you know, one of the most important jobs of an investment bank or MA advisor is really absorbing a lot of those emotions because understanding emotions, understanding the emotion and the psychology of the seller and how they're going to deal with things, I think is really, really important. And you know, one of the things that often happens in M&A is you get a you have a man or a woman who owns a $100 million business, for example, negotiates for a living, right? Out there doing contracts left and right, very successful in building a business, but now it's time to sell it. That person is emotionally attached to that business. That is their baby, and their ego and identity is tied to it. and any affront to that business in any way, shape or form tends to irritate them and they take it very personally. And so you'll have situations where um a buyer might put one offer on the table and then two weeks later materially change some terms as they gather more information. Um, and of course the seller takes that personally and now all of a sudden can't trust that buyer and thinks that buyer's toying with them and gets angry and emotions tend to cloud judgment, right? Emotions tend to like for example, if you have a uh let's let's use a typical example, right? Like fear and anxiety tend to be pretty similar on the emotional spectrum. And let's say it's 2:00 in the morning, you walk out into a very dark parking lot and you hear a loud noise. Well, at 2:00 in the morning, because you've got a little bit of anxiety, you're walking alone in a potentially dangerous area, you hear a loud noise, you're going to jump and you're going to quickly turn around and your heart might start to beat faster. Your palms might sweat. uh if you were walking in that same garage in bright sunlight at high noon and you heard that same not you that same noise, you might not even have paid attention to it. So the emotional state and the core state that you're in can definitely change the decisions that you make. Um, and without understanding that, you know, one of my key jobs is actually making under making sellers understand how emotions do influence their decision-m and we use a variety of different techniques and I'm going to go into these in a in a future episode. But, you know, one of those techniques is, you know, emotional reappraisal. If a buyer changes a deal term, if a buyer negotiates very hard, if a buyer does something that appears to be an affront to the seller, the seller shouldn't take it personally. The seller should reframe that and look at it as the buyer actually acting on the best behalf of its client, its firm, whoever, making the best decision it can for its client, acting appropriately within the context of what that buyer is supposed to be doing. And it's not a personal attack on the seller. It's the buyer actually doing its job. And so if the seller can understand that that yes, this buyer is doing his job now, I'm not going to get offended, but I'm going to do my job. Then I think you can break down some of the emotional veilance and focus more on some better decision-m. Again, I'm going to get into this extensively because, and this is a great question. I mean, the seller's emotional state um and emotional unraveling can certainly blow up a deal. And it's probably in my opinion and at least in my personal experience, uh more deals blow up because of the motions on the sell side as well as the buy side than they do for fundamentals of a business where you know something is in DD is found that blows the deal up. Now, it's usually u negotiations and emotions causing things to run arai. What's the best way to make a buyer bid against themselves without realizing it? Well, there's a lot of ways to get a buyer to bid against themselves. I mean, one very simple term, and I don't know if they'll realize it or not, is somebody makes you an offer. You say, "Hey, make me a serious offer, and then we'll have a serious discussion, right?" And so, you're not even willing to have a discussion unless another offer comes in. That's one way to do it. I don't know if the buyer will realize necessarily what's going on or not. Um, another way is you can find yourself in a, as we talked about earlier, a controlled auction process with one buyer the entire time he's bitten against himself and doesn't know it. So, um, I can't think of anything above and beyond that one. Next question. If a seller has only one serious buyer at the table, how do you still create perceived competition? Now, there's a ton of these one buyer questions coming in. Um, I'm I'm hoping you'll never have to deal with that. But, uh, for those that you do, we talked a little bit about it before, but again, it's about molding perceptions on the onset, right? If there's only one buyer at the onset, often times you won't know it until you start a process, and you start that process anyway. You give them bid instructions as you would if you were running a process with 20 buyers. You deal with that buyer in the exact same way that you would deal with that buyer in the context of a broader process with dozens of buyers. What's one piece of conventional M&A wisdom that you believe is flatout wrong? Now, conventional in terms of what myself and practitioners believe and conventional versus what sellers believe might be two very different things. The latter is easier for me to come up with though. Um, I think a lot of sellers out there believe that price is objective. They believe that there's a quote unquote going rate for a business. They believe that all buyers will effectively pay the same amount for a particular asset which we know is very very incorrect. Right? The combination of business A and business B creates value. So business B being the buyer, business A being the seller, every buyer is going to have a different capacity to pay. They're going to have a different ability to create value. They're going to have a different strategic intent for doing that deal. and therefore they're going to be able to pay different amount for that business. Your only job on the sell side is to extract as much of that value creation out of that transaction as you can for the client. Next question. This one came in through LinkedIn as well. I appre I get hundreds of these u messages on LinkedIn. I get a lot of great questions. I can't respond to all of them, but I I'm making an attempt. So, I'm going through them here. This one's great. What's the most aggressive move you've seen a buyer make in an attempt to kill competition in the auction process? You know, I'm going to do a whole episode on opening moves and shutdown moves. And, you know, we talked in the last session about the Dutch auction. We talked about the preemptive offer. Um, you know, probably the the most standard is the preemptive offer, right? If buyers really understand um the context in terms of valuation as well as what the competitive scenario looks like, sometimes they can slide in early in a process with a preemptive offer and basically lock out competition. I'm going to change this question a little bit from most aggressive to I guess let me say most sophisticated. Right? So sometimes these sorts of moves don't have to be aggressive. They just have to be insightful and sophisticated. Um, and sometimes on the onset they don't even seem aggressive, but the results and the consequences are that of aggression. Um, you know, I once saw a process where there were a small handful of buyers on a transaction and let's say the price was 50 million at this point in time. a buyer was starting to get a little bit deal fatigued and he was a little bit concerned that the seller was going to shop his offer. So, he decided he was going to use effectively an opening maneuver and change process rules. And here's what he said. He wrote a letter that said, "Enclosed is a sealed bid. This is my best and final and we're prepared to close immediately." um you could open this bid on the following terms and his terms were this was the final round of bidding. Um the seller would take the best offer from this round and close that deal. No further shopping. All of the other bids had to be open simultaneously with this bid. And all of the other bids needed to be um exact dollar amounts. And what I mean by that, it couldn't be highest bidder plus a dollar, right? It could be highest bid plus a dollar. It had to be actual dollar amounts. And I thought that was a pretty sophisticated way for a buyer to come in, change process rules, move a deal into final round, get all biders to put their best and final on the table, and have the seller open them all up simultaneously uh and thereby shutting out any additional competition uh and as well as any add any additional shenanigans uh from the seller. So, um, when I think about process rules, as we talked about in the last couple of sessions, I mean, there's a million different ways to run a process. And I think buyers who are sophisticated and experienced um, can think of very subtle ways to attempt to change process rules that sometimes sellers will just do because sellers get deal fatigue as well and want to be done with the process. Um, so I think it's important for you if you're on the buy side to think about what are the subtle ways that you could influence a seller to change process rules that might work in your favor. Some interesting questions came through here. Uh, one was in an M&A deal, who really has the power? The buyer, the seller, or the banker? And I think that's obviously extremely fact specific. Um, and what I mean by that is power is based upon leverage factors. So, every deal is going to be different, right? Like, so if you've got a business that has 50 buyers that literally can't live without buying your business, right? Um, you're going to have a lot of leverage. Uh, if you've got no one that wants to buy your business, you, the seller, are not going to have any leverage or power. The buyer is going to have a lot of power. You know the banker should not necessarily have any power at all. The banker is an agent of a buyer or an agent of a seller and effectively is almost an offshoot of the seller. So I think of myself personally as the seller. So when I am running a process, I am the seller. I am an agent of the seller, an extension of the seller. Um and the way that I can give my client additional power or leverage in the process is number one, educate that client, right? make sure that the client understands about fairing out information, revealing information, concealing information, all the different points of leverage, how to run the process, so on and so forth. That's how we can manufacture power on our side. I It's an interesting question. I appreciate it. Um, what's the most effective way to psychologically dominate an M&A negotiation without seeming adversarial? If you run a process, you pretty much don't have to do anything. The process does the work for you, right? And so you could, and that's why I I love to run formal processes for the most part because it is a bakedin way to actually negotiate without having to be adversarial. I mean, we've talked about this extensively. If I've got a bunch of buyers competing doing this whole same side of the table negotiation, I'm I don't need to be adversarial, right? I don't need to negotiate with anyone. They're doing the work for me. So, I think the most effective psychological way to dominate is run that formal process and do it the right way. Another question here is about the Dutch auction. Um, it was the first time I had used it on the no more transaction. Why don't I use it more often? You know, the Dutch auction is great for speed and I often don't need more speed in an M&A transaction. Um, as I discussed, the Dutch auction introduces risk for buyers, but it also introduces risk for me as well because, you know, I've got a price that's falling and if no one hits that bid and people stand back, I might ultimately end up in a worse position than I was before I began that Dutch auction. Um, I think from a fundamentals perspective, the Dutch auction was great where we were running an English auction and we were driving the price up and then we kind of came at obliquely with the Dutch auction. I don't know that a Dutch auction would work, and I've never attempted this, nor do I know anyone that has. Um, selling a business entirely by a Dutch auction. I I suspect maybe it's been done somewhere. I haven't done it and I I don't know how great that would be because I do talk about um extensively that sunk cost fallacy, right? The investment principle where buyers are less likely to walk away and you will often times get escalation from them the more they've the more resources they've expended, the more time, money, and effort they've put into a deal. And as you're walking through kind of a ascending price English auction, they're spending more money on DD. They're spending more time there. There's a lot more effort. There's more thought. They become emotionally attached in some ways to the principles in the transaction, to the deal, their names on it. Um, and I don't think you would get that if you had a descending price auction, right? So, you wouldn't have those iterative steps, right? you've got a price that starts high and these guys are just trying to hit the bid versus taking them up slowly and incrementally. Uh it's an interesting question. It It's something that um will I likely do it again? I'm sure I will. Uh have I done it again since? No more? Yes. It's just not something that um I think that I would hang my hat on. Um and I would only use it in very specific cases. It worked well in the no more transaction. Um, and it worked well in the subsequent times I've used it, but uh I don't think it's an all-purpose tool like a closed bid ascending English auction would be. How do you determine when a buyer is bluffing? Um, I think on the buy side, bluffing tends to be um a very risky maneuver. And here's why. Um, on the one hand, somebody can call your bluff, but sometimes if you're a buyer, if you think about it, it's almost worse for for you to be bluffing and for a seller to actually believe you. And here's what I mean by that. Let's say that you're a buyer and you say, "Here's my offer. $50 million, best and final. I'm not paying a penny more for this business." And the seller looks at you and takes you at your word, says, "Okay, 50 million. Best you can do. I completely understand you." Goes back, has dinner, goes and has a meeting the next morning. Uh, next morning the business sells for $51 million and you were willing to pay 60. Um, now that seller didn't call it your bluff. That seller actually believed what you said. And that's a very very bad position for a buyer to be in to be bluffing and actually be believed. Um, because then there's no more interaction. Like that seller didn't even call you back up. That seller believed you, thought you were sincere. So, you know, I don't I don't really concern myself so much if um a buyer is bluffing. You know, sometimes buyers will come in with best and finals. Hey, Paul, our this is our best and final offer at 50 million bucks. Now, if I have other buyers at better prices, then I'm not really particularly concerned whether they're bluffing or not. I might go back to them and give them an opportunity to increase their offer. Um, so I I would say that the risk more, you know, when we actually get through buy side M&A, I'm doing a lot of sellside stuff now, but I'm going to do a buy side series. And when we talk about buyside M&A, I'm going to go into the bluffing because bluffing for me is pretty dangerous ground I think a lot of times for buyers more so than sellers. And we'll get into that. All right. I think the last question we'll get to today is what's the one skill that separates elite dealmakers from average ones? And you know, I don't know if that there is one skill. I think it's kind of, you know, holistic. I guess fundamentally instead of talking about one skill, I could talk about kind of attributes of elite dealmakers. Um, I think elite dealmakers have the ability to size up the context of the battlefield pretty quickly. Remember, like when you're doing deals all the time, you're recognizing, you know, it's a lot of pattern recognition. You see a lot of the same things over and over. Um, so you you have to be able to recognize what the context of the board looks like in terms of the buyers out there. I think you have to be able to really emotionally detach yourself from the negotiations. And I don't mean suppress emotions per se. I don't mean don't feel. I just mean that you have to find yourself in a position where you are not needy, right? like um I think it's important everyone out there that's going to engage an investment banker needs to make sure that their deal while important to the investment banker is not extremely important to the investment banker because they're going to have the same emotional needs that you the seller will have and that's not a good position to be in. So you've got to be able to emotionally detach yourself as a dealmaker and say you know my job is to get my client a great deal. It's not to get a deal done. to get a great deal and I need to be able to step back emotionally from the transaction. I think great deal makers uh have the ability to help their clients manage their own emotions. Um I think that you know and this was something that was very difficult for me actually and I've had to learn this over the years. Great deal makers do substantially far more listening than talking, right? Um, it really is about extracting as much information as you possibly can from each situation that you're dealing with and not doing a ton of talking. I mean, I I get it gets to the point right now I actually get ridiculed sometime in my own office that I'll sit there for 45 minutes and not say anything. And I'm the guy who, you know, my VP about Mina execution always makes fun of me from the standpoint he's like, "Sometimes it's really awkward to be on the phone with you when we're on some of these negotiations because I can literally sit there for 10 minutes and not say anything at all while the other side figures out what they're going to say." Like I I appreciate long periods of silence. I don't have the need to fill the air. Um, and I think that's a skill that very, very elite dealmakers pick up over time. And, um, you've got to be comfortable with being in very awkward situations and and awkward silences because at the end of the day, that's really what helps you kind of gauge neediness on the other side of the table. Um I think elite dealmakers um learn to not react emotionally. You know, I talked about emotional detachment, but it's also like you have to be okay kind of sitting with yourself and really thinking about things. You know, in any M&A deal, you've got just an ungodly amount of data points coming at you, right? Let's just say you're negotiating with eight buyers trying to sell one business. So, you're following eight different conversations, eight different buyers who have different goals and objectives, who want to do different things, who have different abilities actually to close the deal. So, you've got to be able and willing to sit down and really think through things on behalf of your clients. I I would say the other thing about elite dealmakers, I mean M&A is a craft, right? You can't go to I mean there's M&A courses obviously, but it's not like you go to it's not like being a doctor where you go to medical school, right? It's it's a craft. It's more of an apprentice. So when people learn how to do this, how I learned how to do it is I worked with a guy named Frank Clatron and he was one of the best contemporary DIY. He's still alive. I should talk to him about him in past tense, but Frank um was a phenomenal investment banker and to be able to sit in and watch what he did and learn. Um so I just have a lot of great mentors over the years. And so again, it's a craft. You pick it up over time. You watch what folks do. Um you develop the skills, I think, just like any craft. So you're not doing the exact same thing day over day. You're really pushing yourself to the limits. Um, and I think for me, you know, one of the things that really helped me, you know, if I'm talking to junior dealmakers out there, you know, when I graduated from school, you know, it was all about finance and accounting. You get into investment banking or Excel jockeying, right? You spend 15 hours a day um, punching numbers into Excel. It was miserable. It sucked. But you learned about financial modeling and so on and so forth. when you start really getting into actual M&A, I think really understanding psychology is important, you know, and you can start with basic books like, you know, thinking fast and slow. I think that, you know, that book came out in 2012. I've probably read that 15 times, no doubt. And it's a 4 or 500page book. And so, if you look at my library, it's full of psychological references from psychonamic therapy and so on and so forth. So, understanding these sorts of things and you know, Chris Foss was down here a couple of months ago for breakfast. He wrote Never Split the Difference. Great guy. And I when I first read his book, I discounted a lot of the things that he said. Uh because it's not really particularly gerine to the type of negotiating I do, but there are some things that he's mentioned in that book. And as I've gone back and thought about and had discussions with him that I think um are very helpful in the type of negotiations that I do on a day-to-day basis, specifically validations of failing, so on and so forth. He and I do have some disagreements about the use of deadlines. Um, but I do think there are a lot of things on the topic of emotions and the topic of psychology that I think is very helpful. Not only dealing with buyers, but if you're a sellside adviser, it's dealing with your own client and helping your clients reappraise and reframe their emotional state in order to make logical and reasonable decisions because, you know, at the end of the day, decisions are emotionally made, right? And it's important, I think, to be able to work through uh that with your your client. So, well, I appreciate everyone who has sent in questions. The best way to do this going forward is just drop a comment or question into YouTube and we'll definitely take a look at all those and attempt to respond here in future episodes. You can also join me on LinkedIn. My link is in the description below. And finally, we love to kill it for our clients here at PTOAC. If you're thinking about an M&A transaction anywhere in the world, I'd be happy to chat with you. You could reach out to us here at PTOAC by clicking on the contact us link in the description below. Again, thank you for joining me today and I'll see you on the next one.