The Naked Negotiator

The best deals are the ones you have the courage to walk away from. Bad deals entrap you, destroy rather than add value, and suck up vast amounts of management fix-up time. The best deal makers go into a deal with a clear list of non-negotiable must haves.

Frank Borelli, the former chief financial officer of financial services from Marsh and McLennan won’t buy a firm unless it meets his non-negotiable list of must-haves. Borelli’s three must haves are:

1. The acquired company must earn at least the company’s cost of capital
2. The expenses of acquiring the company must not be so high they decrease his firm’s earnings
3. The target company’s growth rate has to be greater than Marsh and McLennan’s own.

Between 1992 and 1996 Borelli turned down the chance to buy 3 companies before he found Johnson & Higgins, a firm that met all three of his must haves. The acquisition proved of great value.

Patience, discipline and clear priorities are signs of great dealmaking.

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