Tom Millitzer

Soviet Style Negotiations - You Can Negotiate Anything

Earlier in my carrier I negotiated franchises for the largest cable television company in the United States. I learned a lot, had the opportunity to really screw things up (Did not) and learned a great deal about motivation and negotiation styles.

Most people do not go into a proceeding considering what negotiation posture they should take. They are a product of their own self-psychology, history, goals and prejudices - they just show up. Sellers are often too close to the deal. They have an idea of the outcome they desire, but not the path.

Enough said – I want to introduce you to  Herb Cohen. He negotiated and settled the NFL Player's Strike and participated in the START Arms Control Negotiations with the Soviet Union. I read his book You Can Negotiate Anything in those cable television days, it changed my life.

 

 

 

Since the President is in Russia I wanted to touch on “The Soviet Style” of negotiations. I have found that it is the easiest to recognize and historically has had the best best results for my clients.

In You Can Negotiate Anything Cohen reviews and demonstrates several techniques. A few snippets , about “Winning at all cost − the Soviet style” or the “Win-Lose” approach.

Herb advanced six methods used in the technique, four relevant ones as follows;

1.   Extreme Initial Positions

       a. Buyers low offer or a Seller’s higher than market anticipations.

2.   Limited Authority: The negotiator may not have final decision authority.

This is where a broker or attorney comes in handy for the Seller.

                This is extremely powerful.

3.   Stingy In Their Concessions

4.   Deadlines Are Ignored

Cohen goes into several criteria for when and why to use this method. You will quickly see why it works in a hosting M&A environment, primarily:

1.    No Continuing Relationship: There is no continuing relationship. 

2.    No Remorse Afterwards: The end justifying the means.

3.    No Awareness by Victim: The victim must be naïve, innocent and unaware. 

I find this last one extremely interesting as Sellers are what I term are “first timers”.  Without guidance they are often held hostage.

There are many things in life to consider but in buying or selling a hosting company you need to come in prepared.  You need to know what strategy you are up against and know when to change that strategy. Pick up Cohen’s book, it is an easy read, but has the right words in the correct order.

I am going into detail regarding several negotiation styles and tactics during my presentation at HostingCon.

Later - Tom

More about Tom Millitzer, President of NCC -- E-mail Tom Direct

See Tom at HostingCon present: Dissecting a Hosting Company Acquisition Wednesday, 8-12-2009

July 2nd -- Time to Make It Or Break It

When growing up I always felt that when July 4th arrives summer was halfway over. I guess Memorial Day looked so much closer than it did the last day of school.

It is interesting how we cubbyhole certain days and seasons in our personal and business life. Wednesday is hump day, April 15th is tax day, the third Thursday in November is Thanksgiving that is followed by Black Friday.  Then there is July 2nd.

July 2nd.   Owners, boards, banks often use different metrics to manage the success of your business. This is often set forth around the first of the year.  Sometimes these seem contrary to logic, but I don’t make the rules but often observe them. As you can surmise management and staff often have bonuses tied to the mandated success.

Timing is everything, hence July 2nd.

July 2nd represents the day when your actual business activities enter the second half of the year. It’s sort of interesting:

·      You will either grow your revenues over the first half or not.

·      You could have an acquisition in the pipeline.

·      You have the opportunity to add new markets or remain with the status quo.

Amelia Earhart was lost over the Pacific July 2, 1937

So what makes July 2nd important? In many respects it is your last chance baby.

From here on the year is really clicking down, it seems the days click down like a sub-machine gun --- tat-tat-tat-rip-rip-rip.   Your opportunity to obtain those annual goals are slipping buy.

Did the board want a major acquisition this year?  Did you consider expanding? Were you considering selling and realize that if you wait another year your tax bit is going to be significantly higher?  Were you going to downsize but have just put it off?

It’s July 2nd, this is the real world, we love holidays, 4th of July, but yes this is the real world July 2, 2009.  If you don’t start soon the game is over.  There are enough days to obtain many goals, but always one less tomorrow.

MY Concern - What I am trying to communicate: I am very concerned that many independent owners will be backed up toward that later part of the year and finally realize that substantial income tax increases will bite them after 2009.  I wrote July 2nd primarily for you, if you are considering selling in 2009 you need to act.

 Confessions of a web host company broker:  We once sold a company in a stock transaction, (The buyer was purchasing the stock of an S-Corp), the seller kept on pushing for a fairly fast close. After the close the sellers accountant realized the seller had held the stock for 349 days, moving this from long term to short term capital gains. 

Later - Tom

---

More about Tom Millitzer, President of NCC -- E-mail Tom Direct

See Tom at HostingCon present: Dissecting a Hosting Company Acquisition Wednesday, 8-12-2009

Millitzer Presenting at HostingCon - Bring Your Family

If you have not heard, I am presenting  “Dissecting a Hosting Company Acquisition” at HostingCon on Wednesday August 12th. Hosting executives were doing back flips when this was announced.

Other than this obvious, and rare, self-promotion; the previous paragraph is a lead in for an important subject. Taxes.

Saving taxes is another form of making money. AS WE ARE ALL IN DC where taxes are conceived and born, I can not think of a better place to make some money. Bring your family.

It is a timed honored tradition for independent business people, owners and investors to go to conventions. If you are like many private companies the largest shareholders are yourself, spouse and the children.  They need to go to DC. They need to know more about your business.  They need some quality time with management. You and your family can write policy drafts at the Library of Congress and other strategic locations in DC. These locations are so important the concierge has a detailed list.

Unfortunately your legislative representatives are taking several well-earned weeks off and will not be available. However you can only meet with their staff, if they are around, or you can conduct the independent study course list as noted above.

So as blatantly as I can qualm, write the trip off, write it off until your accountant would be in tears. Make the reservations and Make Some Money. Take the family, just meet them by the pool after the “Dissecting a Hosting Company Acquisition” session on Wednesday afternoon.

Confessions of an hosting M&A broker:  After reviewing thousands of Operating Statements, I would be surprised if more than 10 went “over the edge” in deducting gray items.

Later - Tom

More about Tom Millitzer, President of NCC -- E-mail Tom Direct

See Tom at HostingCon present: Dissecting a Hosting Company Acquisition Wednesday, 8-12-2009

Sell Your Hosting Company - Give them what they want

Your partner, shareholder or loved one comes up and says, “I think we should consider selling the hosting company.”

Exiting, the polite word, better stated as selling your business should be part of your business plan strategy and analysis.  It should be an annual event and part of your discussion with your partners, corporate board meeting or at lunch with your family management associate. 

Have an annual meeting or part of a meeting devoted to selling your hosting company. This meeting allows you to move a bit outside that day-to-day box. Many companies keep on trucking toward that distant horizon, not knowing what the horizon is.   While you will probably not sell this year, you have opened a host of questions that can drive you and your business to greater success when you do pull the trigger. 

Here are some general ideas this will elicit:

• What are our individual goals?  You may find out that mister 51% has a completely different goal than mister 49%. These goals may not even be financial.
• Why, when and what  (+ other “W” words) would make us sell? Where is your company positioned today, and where should it be positioned for a future sale?
• If someone walked through that door tomorrow and said I want to buy your company, at what price would it be a realistic “no brainer”?
• Should you consider a meeting or discussion with an outside firm to understand the sales process, get a sanity check and value confirmation.  Even if your horizon looks fairly distant.
• If your group sees a potential exit in the next 5 years what should you do today?  You may consider certain balance sheet items, leases and other items that can enhance your long-term sale.

Now get it over with, broach the subject, and write a bunch of questions on the Blackberry. Have the meeting.  Afterwards you can slide your questions and concerns back in the desk until next year.

Now when some one says “I think we should consider selling the hosting company.” You reply, "Oh its that time of year."

Confessions of a broker: Sellers that make a sudden decision to sell often underperform the market.

Later - Tom

More about Tom Millitzer, President of NCC -- E-mail Tom Direct

See Tom at HostingCon present: Dissecting a Hosting Company Acquisition Wednesday, 8-12-2009

I Believe in Santa – But Not Earth Day

It began one Saturday when my wife and I volunteered at an event to plant trees in a local park.  First was the lecture, I am not good lectures, specially nature lectures that inform me that tree manufactures kill 14 million trees a year so I can get my newspaper. I think some of the children were about to cry. My wife quickly stuffed the newspaper in her purse.  I wanted to tell them about the replanting that goes on and on in these tree farms so they can stay in tree business forestever, but I was overruled by family management.

There were about 50 people at the event and all of 35 trees to plant.  We were to get into small groups of about three people, take a tree and plant at the marked location. My wife and I decided our group was large enough.  We planted a tree. I got another tree, it to was planted.  Lisa and I planted 11 trees.

Everyone there was an environmentalist, I prefer to be called a capitalist. 

In researching this dialogue I wanted to point out great examples of environmental achievement taking place in the web hosting industry. I found many, many people are doing what they consider good for the environment. I say, “they consider” as I am not confident the all the science is correct.  But on the whole it looks good. The best article I found was from The Whir entitled Choosing a Green Web Host, it will fill in many of the gaps.

I am concerned about some rhetoric I am hearing about “going green”.  For example companies taking products that already exist and branding them green, where they are marginally green. This detracts from firms that are actually doing something that works and is efficient and takes a capital commitment such as installing a vast array of solar panels rather then  “going green” by turning the air-conditioning down.

It is marketing tool however, but it should have some teeth behind it.

For those of you that have credibly gone green plan, I salute you.

Tom Millitzer, President NCC

More about Tom, NCC Website   E-mail Direct