Russ Harrison Speaks: Change the Nature of the Conversation
The case at hand was brought by a fellow Alliance member who wanted to acquire a company that would not allow any due diligence on its critical technology. Here’s what Russ Harrison, President and CEO of The Leadership Group and an Alliance Director, shared with his Alliance peers.
If you were in this situation, what would you do?
“From what you’ve shared, it sounds like the potential acquiring company has been burned in the past and now is reticent to disclose any insights about its technology for competitive reasons. It’s a valid concern, but so is yours – you must do due diligence on the company you want to acquire.
“If it was my company, I would try a different approach. Without making it a legal conversation, I would negotiate liquidated damages up front so we can identify a satisfactory outcome for the selling company if the deal did not go forward as a consequence of our behavior in due diligence. Basically, you’re offering some form of payment in order to contain the risk. This way, worst case, the selling company could share its information, and if we violate their confidence, the company could be compensated as agreed in advance.
“However, in my experience, I’ve found that when you talk about these types of risks, you’re often dealing with a mythology about how big the risk actually is. It’s important to ask, ‘What is the worst thing that could happen—and if that happens, what would we do?’ When you talk about it, you usually discover the worst-case scenario is readily avoidable.
“By the time you run through the traps of what could actually occur, the issue kind of dissipates and falls off the table. This is because you will be specifically incented not to allow the worst thing to happen, and the other party will know you are serious about indemnifying against the risk they fear. In the end, it takes changing the nature of the conversation to make it work.”