During the last thirty years, negotiation theorists have transformed our understanding of how to succeed in making a deal.  “Getting to Yes,” published in 1981 by Roger Fisher and Bill Ury, has been translated into more than 30 languages and has sold millions of copies.  The basic principles of their book – focusing on interests instead of positions, separating the people from the problem, using principled benchmarks for disputed issues – continue to guide thoughtful negotiators.

Have we similarly advanced in our understanding of why negotiations fail?

Recent advances in behavioral economics, neuroscience, and cognitive psychology have opened the door to such understanding.  Although I am a mediator and a lawyer – not a scientist – here’s what I have gleaned from these advances.

The most common reasons why negotiations fail boil down to issues of trust and respect.

To be sure, negotiations sometimes fail because there’s simply not enough money on the table.  But what about the negotiations where there’s a “zone of possible agreement” – what tanks those deals?

Let’s go back to our evolutionary beginnings as a species.  Our ancestors – going way back – included both trusting and mistrusting hominids.  Guess which branch survived?  Faced with new challenges and a dangerous world, the more skeptical of our ancestors lived to tell the tale and produce offspring.  Our wariness and skepticism are hardwired into our neural circuitry.  Scientists call this tendency “negativity bias” – our first reaction to something new is tilted toward the negative.

When working with people – particularly people that we need to trust in order to make a deal – one of our biggest questions cannot be answered.  We want to know their intentions, and our instinct is to mistrust.  We cannot examine their minds, and so we try to discern their character – a predictor of future actions.

A psychological phenomenon known as “fundamental attribution error” causes us to believe that our intentions are good, while others – we fear – may be trying to take advantage of us.  (Of course, they too are thinking the same thing.)

The antidotes to mistrust are communication, candor, and relationship.

What about respect?  Feeling disrespected has led to many a public failure in the negotiation of sports contracts (e.g., Pedro Martinez).  Why is respect so important?  One of our greatest needs is to feel that we are “good,” and one of our greatest fears is that we are not.  The reality, of course, is that all of us are a combination of both – we have feelings that we are proud of and others that cause us to feel shame.

Respect is what we feel from others when they acknowledge our goodness.  Respect means “I am willing to trust you” – at least conditionally.

Pres. Ronald Reagan famously advised: “trust but verify.”  One might add “respect” to that maxim.

By offering our business partners respect and trust, we let them know that we are conditionally willing to believe that the good in them will meet with the good in us, so that we can make a deal together.

Jeremy Halpern, Partner, Nutter, McClennen & Fish, LLP, Geraldine Alias, Principal, North Bridge Growth Equity and Matthew Witheiler, Principal, Flybridge Capital Partners (PDF)

 March 23, 2012 Professional Advisors Event Brings Together Expert Leaders in
Privately Held Business & Exit Planning

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BOSTON, MA –XPX Boston (Exit Planning Exchange), an organization of professionals who advise business owners on planning for exit and ways to maximize the value of their companies for ownership transfer, will host the organization’s 2012 Summit on March 23, 2012 at Babson College. This one-of-a-kind gathering of 150 exit planning professionals, including attorneys, accountants, wealth advisors, marketing professionals, and other business advisors, will hear advice from top industry experts, and participate in thought-provoking workshops and networking.

According to Dan Guglielmo, Co-Founder of XPX and Chairman of the XPX Boston Chapter, “Seventy-two (72%) percent of business owners seeking to sell their companies cannot find a buyer. Many business owners do not understand the steps necessary to prepare their company for sale or the full range of ways to exit their business.

Adds Summit Chairman, Michael Oleksak, “This Summit continues to raise awareness for how critically important successful exit planning is to this generation of baby-boomer owners. This fourth day-long educational event will enable professional advisors to learn and deepen their expertise, share ideas and engage in thoughtful discussion, and broaden their networks for collaboration.”

The event’s keynote speaker will be William Taylor, co-founder, former owner and senior editor of Fast Company magazine, co-author of best seller Mavericks at Work, and author of Practically Radical. Taylor will speak on: “Nobody Is As Smart As Everybody—The Practically Radical Style of Leadership.”

This fourth daylong Summit hosted by XPX offers attendees the opportunity to expand their knowledge and skills through exit planning case studies, strategies, and best practices while interacting with like-minded professionals including wealth managers, accountants, commercial and investment bankers, management consultants, marketing and public relations professionals, estate planning and corporate attorneys. Participants may choose to attend several breakout sessions including variations on “TEDs” – 12-minute inspired presentations around the themes of business ownership and exit issues—Thoughts on Exit planning Directions.

The XPX Summit will be held on March 23rd from 7:30 a.m. to 5:00 p.m. at Babson College in Wellesley, MA. Space is limited. On-line registration is available at: http://xpxboston.com.

About Exit Planning Exchange (XPX)

XPX was formed in 2007 with the mission of helping business owners to find qualified professionals with deep exit planning expertise; support the growth of the emerging exit planning field; enable members to share their intellectual capital with other members; develop the educational programs required for this emerging discipline; and provide members with exclusive networking, education and collaboration opportunities. Based in Boston, XPX currently has chapters in Boston, Connecticut, Philadelphia, Washington D.C. Metro, and Tampa Bay, and continues to expand. The organization’s members represent a range of professionals who serve privately-held businesses.

For questions regarding XPX Summit 2012 please contact Angie Ellis via email at angie@exitplanningexchange.com.

By: Jeremy Halpern
Partner, Nutter McClennen & Fish LLP

Venture Capital and Private Equity get a lot of media attention. Sometimes they are the “genius” talent scouts of the business world, investing into companies with astounding foresight. In other narratives, they are the ruthless capitalists, taking control of companies and ejecting management teams from the driver’s seat like carjackers. As it turns out, neither of these stories are very accurate.

Venture Capital and Private Equity firms are key components of the corporate finance landscape, offering growth capital and liquidity at critical moments in the evolution of companies when more traditional sources of cash, like banks or public markets, are unavailable or unwilling to invest. But like all professional investors, these firms have a job to perform on behalf of their limited partners. These firms survive their own torturous sales and diligence processes to convince pension funds, banks, universities, hedge funds, fund-to-funds, and other institutional investors that they will successfully earn returns superior to public indexes and other asset classes. This is no job for the faint of heart.

Interestingly, the differences between venture capitalists and private equity firms are often misunderstood, in part because some firms have both types of investment funds housed under the same umbrella. Publicly they are often treated as the same kinds of investors, where the only difference is the average deal size. The story goes that venture capital will put in a few million, but private equity will put in tens or hundreds of millions into companies. While average deal size is a critical differentiator between the two types of capital because of the implications for the fund structure and business model, it is by no means the only difference. I have worked on private equity deals as low as $4,000,000 and venture capital deals for greater than $50,000,000.

But the real issues are that, for the most part, they do not invest in the same kinds of companies. Primarily they differ when it comes to the stage of companies in which they invest, as well as the breadth of industries they will consider. In addition, they have differing requirements on total market size, likely return range, return horizon, technology risk appetite, market adoption risk, competitive environment, liquidity for founders, size of investor stake and whether a prospective portfolio needs a new disruptive technology or only potential for sustainable future cash flows.

Companies seeking capital from venture capital and private equity are well advised to first understand the priorities and goals of these firms, and to understand which might be a fit for their current needs. Once understood, crafting an investment deal that aligns the interests of all parties is not only possible, but usually provides benefits far superior than investments from banks, public markets or other sources of silent cash. Why? Because the premise of both kinds of firms is that outsized returns are the result of the human capital deployed by the firms into the investment. It is the venture capitalist and private equity teams that help move companies forward. As such, the very first job of any company seeking capital is to form relationships and to judge the quality of the humans involved. While firm level reputations are good general guides, they are absolutely no substitute for working with individual partners and teams at the investment firms to gauge whether these are the kind of investment and operational partners you want for years to come.

Equally, many growth or expansion stage companies often believe that obtaining fresh capital will solve all of their problems. While more cash can usually (but not always) accelerate operational goals, the wrong type or timing of new capital is often not in the best interests of current equity holders. A financing plan that articulates and balances the need and uses of cash with the resulting dilution and preferential treatment of the new money is critical. But that is the beginning of the analysis not the end. Companies and investors need to align on issues of control, leverage, management, culture, values and their operating relationship. Only after this courtship results in (mostly) true love will there be a venture capital or private equity deal that is right for you.

To learn more please join Jeremy Halpern, Partner, Nutter McClennen & Fish LLP, Matthew Witheiler, Principal, Flybridge Capital Partners and Geraldine Alias, Principal, North Bridge Growth Equity, at the XPX Boston Breakfast on February 29, 2012: Unraveling the Mysteries of Venture Capital and Private Equity.

With all the distrust taking place around us today in government, business, churches, the media, banks, sports, and an array of other institutions, trust is clearly one of the most fundamental aspects of our lives. The most recent report out from the Edelman Trust Barometer – http://www.edelman.com/trust/2011 – indicates that trust in the United States has significantly declined this year from previous years. As Americans, we often think of ourselves as trustworthy, but for a number of reasons, people of other countries do not agree. Why?

Behaviors are what build or destroy trust – and the core element of Trust begins with self. If you don’t trust yourself, there is probably a good reason for it because only you know yourself best.The next level of trust is that associated with ones nearby relationships…do you talk about others in disparaging terms when they are not present? Do you honor commitments or do you say one thing and then do another? Relationships of trust are built over time – and they affect all aspects of our business and personal lives. An extension of personal trust is organizational trust – how responsibly or trustworthy is the organization which you lead. Do you do the right things for the right reasons? Do you have more than a simple legal obligation to your customers? After all, organizational trust usually leads to market and societal trust. As service providers, there certainly are moral and ethical implications around your business practices – what are they and how do you measure up?

One thing most people don’t fully appreciate about Trust is that it comes with definitiveeconomic implications personally and organizationally- high and low Trust operating environments have financial implications for every business. When high levels of trust exist, things move faster, there is less “games playing”, and with speed comes progress and cost savings. Time to market improves and a feeling of pride and even joy tends to permeate the organization when trust is at a high level. Unfortunately, the reverse of these attributes exists when the atmosphere is one of low trust, suspicion, and fear. So, for economic reasons, as well as good common sense, we all need to strive to understand Trust and make it an active, mindful, and ongoing part of the way we conduct our life and our businesses. These things and more are going to be discussed in a lively XPX session on January 24^th at Babson – come and enjoy a new perspective on a foundational principal of everyday living.

Phil Thomas is an experienced public and private company senior executive. He is a five-time CEO having led both private and public companies. Prior to his business career, he served eight years with distinction as a decorated U.S. Naval Intelligence Officer and subsequently completed executive development courses at the Harvard and Stanford Business Schools.

During his 30 year military and business career, he has traveled extensively throughout the world and was twice named as a finalist in the Ernst and Young “Entrepreneur of the year” award program; several of his companies received awards such as “Most Innovative New Product”, “Best High Tech Company”, and twice as one of the “Top 100 Best Managed Companies in California”. He has been featured in a two page, color article in Forbes Business Magazine and has appeared in a variety of industry publications.

Breakfast Meetings
January 19 - Your Business at the Brink: Working Through Conflict to Open Your Future: Debbie Bing, Principal at CFAR Center for Applied Research reviewed the risks and opportunities business owners face when they experience conflict in their businesses, and offered productive ways to resolve conflict without avoiding it.

February 16 - What Business Owners Need to Know About Private Equity: Mark Jrolf, Managing Partner of Heritage Partners spoke about the process of preparing a company for ownership transfer, when a business owner should consider private equity options, and key attributes that private equity firms look for in an investment.

April 14 - Economies at the Crossroads: Why Your Thinking About the Global Economy Must Change: Robert Gough, Jr., Ph.D. economist, educator, on-air personality and President and CEO of  G-enovation candidly assessed how we got to where we are and discussed the need for innovative and internationally integrated solutions.

May 18 - An Owners’ Perspective: Merging Towards an Exit: Jeff Garr, CEO and partner at HR Knowledge and Ken Bettenhauser, President of Brokerage Services each created successful benefits and payroll companies, but the time came when they decided they needed to grow faster than they could organically in order to achieve long-term success. Jeff and Ken shared their thought process around why they decided a merger was the answer to growth, how they developed their business plan, mitigated risk, dealt with challenges, and leveraged their most trusted relationships.

June 15 - On the Right Track: How Your Communications Efforts Can Either Make or Break a Sale: Julia Tanen and Eileen Newman of KCSA Strategic Communications explained how you can help your clients to develop well thought out plans that allow both sides of the transaction to successfully manage stakeholders through the changes, while retaining the full value of the company being sold.

July 14 - Owners’ Perspective: Lessons Learned From the Sale of My Business: During this panel discussion, moderated by Bonni Carson DiMatteo, CMC, we heard from three business owners who successfully exited their businesses, Peter Fairbanks, former CEO of Bluestone Energy Services Ltd. and the current President of the new company Bluestone Energy Services LLC, Nancy Keddy, former co-founder of Everon Technology Services, LLC and the current CEO and co-founder of Touch Ahead Software and Rich Sullivan former co-founded RDS Machine, Inc. These entrepreneurs who had businesses in a variety of sizes and industries shared their lessons learned from the exit process.

Summit
March 15 - Assess, Adapt and Arrive: Navigating through challenging terrain: This summit featured three dynamic keynote speakers experienced in selling businesses or successful exits. In addition to the keynote presentations participants choose two of six break-out sessions and four of twelve “TEDs.”

Owners’ Academy
April 6 – The Vital Difference: Converting the Value of Your Business into Tangible Wealth – Riding the Elephant Through the Pass: This session took a critical look at how to manage your emotions to your advantage for the big pay-off. Paul LaFerriere and Dorrie Parini, a married couple and business partners, successfully founded, grew, managed and ultimately sold their business in 2007 pursuant to a management led buy out. Russell Shippee, representing the 4th generation, sold the family insurance agency, E.W. Shippee and Sons, Inc. on its 100th anniversary.

September 27 - Surviving the Power Shift – As a Business Owner, Which Will be Your Fate: Will You Succeed Gracefully, or Will You be Toppled?: Few things are more difficult and important to a business and its owners than leadership succession. Carl Famiglietti, MFA – Moody, Famiglietti & Andronico facilitated the succession stories of brothers Bill and Phil Noonan of Contravisory Investment Management who bought the business from their father and Fred Alper, former owner of Morris Alper, Inc. a food brokerage company. Fred bought his business from his father and then sold it years later to management.

December 8 - Selling Your Business: Preparing for and Negotiating Your Big Payday: Selling a privately held business is complex. It is wrought with both emotional and technical difficulty, and remarkably few business owners meet their exit objectives. Chip Johns of Vanguard Sailboats and Kevin Comer of Vision Technology discussed how they successfully navigated the business seas from start-up to the sale.

Roundtables
May 25 - Suddenly Fortunate…Now What?: Understanding an exiting business owner found wealth and the important role it plays in their life and the lives of others can be a daunting challenge. For many, philanthropic giving is an important goal. Brian Layton, Vice President of Bernstein Global Wealth Management and Jenna Smith Gomes, Director of Development of The Boston Foundation discussed How Much? Where? When? and How? They explored a practical research-based approach to these key decision variables. Jenna and Brian also reviewed the tax economics of gifting, and helping advisors and clients to think about how best to balance benefits to family and philanthropy.

October 27 – Demystifying the ESOP as an Exit Planning Tool: Two of the nation’s leading experts and Boston XPX members, Jim Higgins of SES Advisors, Inc. and Rob Edwards of Steiker, Fischer, Edwards & Greenapple, P.C., demystified the ESOP and provided attendees with a better understanding of how and when an ESOP can best be used as a tool for building a sound exit planning solution.

Networking Events
May 11 - Joint XPX program with MVVF and FBA – Managing Mergers and Acquisitions: This panel discussion helped attendees evaluate whether their company was already positioned to reap its intrinsic value when the unexpected event or unsolicited offer puts your company in play.

August 18 - Outdoor Cocktail Reception Along the Charles River: A pleasant evening outdoors networking with fellow professionals interested in the exit planning space. The evening included 30 minutes of speed networking, facilitated by Ted Gorski, Chief Effectiveness Officer at Get Your Edge.

December 14 - Evening of Holiday Networking: An evening of networking with fellow professionals interested in the exit planning space was enjoyed by those attending.

XPX – Gesmer Updegrove Fall 3-Part Series: A Guide for Service Providers…Creating our Own Plans for Growth and Exit with MFA – Moody, Famiglietti & Andronico, LLP, Webster Bank and Gesmer Updegrove
September 8 - Part 1: Developing Business, One Relationship at a Time: This breakfast looked inward at your business rather than looking outward at your clients’ business. Our panel Steve Snyder of Gesmer Updegrove, Travis Drouin of MFA – Moody, Famiglietti & Andronico and Lyn Kaplan of Insperity discussed client relationships, networking, social media and other tools to develop relationships. Barry Clapp of Clapp Ltd. was the moderator.

October 13 - Part 2: Stop Selling and Start Giving: Jim Ayraud, CEO and Founder of Next Level, Inc., challenged participants to reconsider their approach to business development and the “sales process” and provide a road map for new business development success.

November 10 - Part 3: Service Provider Success Stories: Travis Drouin of MFA – Moody, Famiglietti & Andronico moderated a panel of three very successful entrepreneurs who have had successful exits from their service business. Learn how Brian LeClair, John Snyder and Jane Johnson built their companies, their thought processes as they considered liquidity alternatives, how they identified suitors, and the trials and tribulations of the exit process.

Member-Only Dinner
June 7 - Member-Only Dinner: An evening of networking with other XPX Boston members.