Bruce Wasserstein: Dealmaking Tips From the Master
The death of Lazard Ltd. Chief Executive Bruce Wasserstein this week caused much reflection on a career that combined genius smarts with on-target gut feel about people and what makes them tick.
For some, he was the best dealmaker of his age. And the company he directed, Lazard, was likewise one of the smartest around. So you'd likely pay a lot of money to sit down with Wasserstein and get advice on the art of the deal.
Luckily, Harvard Business Review did the work for you, in an interview last year. Here are some of his tips.
See the Big Picture. "We're careful to preserve the broad perspective, to prevent thinking that's too compartmentalized. Our pharma people, for instance, were inspired by the advantages of scale that became apparent in the oil industry and drove its consolidation. Or if we're looking at, say, the roll-up of the cable television business, we're going to ask, 'Is there an analogy with another industry, where the dynamics are similar?' If so, that industry is probably going to roll up as well. In that case, we should analyze what went right, what went wrong, and who did it well in cable, and figure out how to transport those lessons and advise firms in the other industry."
Dissect the Premises. "Law school taught me to focus on dissecting premises. Anyone who's a good logician can build an argument on just about any premises. The argument may be taut, but the premises may be faulty. When we do deals, I always ask, 'Are the premises sound? Is the risk exposure worth it for this particular company, and have I protected my client's back?' We proceed by identifying and evaluating qualitatively and quantitatively the key elements of risk in the transaction -- overall economy risk, strategic risk, operating business risk, financing risk, people risk. Similarly, you need to fully understand the upsides. What are the opportunities in cost cuts, synergies, internal development, additional investments, or revenue enhancement? It's useful to apply all the paraphernalia of mathematical science in an analysis, but focusing on the sense of things is a much better use of time."
Connect Black Boxes. "We think of each deal in terms of a flow chart with a series of black boxes. Each box represents a facet of the deal -- for example, valuation, financing structure, approach to the other party, negotiating tactics and deal process, taxes, legal structure, contracts, market reaction, and regulatory hurdles. Then we try to optimize within the boxes and weave the results into a cohesive recommendation. But each box affects the others: Soft language in a supposedly no-outs contract, for instance, will live to haunt a deal. So you have to keep going back to make adjustments."
Attract Top Talent. "You attract the people your system invites. If you create a bureaucratic system and have meetings every day at 8:00 am and send a report card in at the end of the day, you may think, intuitively, that's good management. That works for some companies. But if I did that, I'd lose my best people--the people I want. We sacrifice some degree of efficiency by deliberately having a somewhat less centrally managed culture... Our culture retains people who like the atmosphere--it's fun here. There's a lot of trust. Individuality and creativity are valued. People have a great deal of independence. And they get satisfaction from the visibility of their work."
It's a great interview with an extraordinary man. Read Giving Great Advice.