Nine days ago, Citigroup announced it would pay $1 per share for Wachovia’s banking operations in a deal brokered by the Federal Deposit Insurance Corporation. Four days later, Wells Fargo announced it planned to buy Wachovia for approximately $7 per share in a deal not involving the FDIC or other government agency. Not surprisingly, a flurry of litigation immediately ensued.
The New York Times reported, “[b]oth sides were so angry that they found it difficult to talk directly to each other.” Currently, Federal Reserve Chairman Ben Bernanke and other federal officials are attempting to resolve the dispute, fearing a long battle would further upset our financial system.
Regardless of the litigation’s merits, this negotiation illustrates the importance of legally and tightly closing down all your significant deals as soon as possible. Here are my suggestions for this stage of the negotiation, often called the close:
1. Confirm all oral commitments in writing as soon as they have been made.
2. Get a ready-to-be-signed written agreement over to your counterpart ASAP which includes a reasonable deadline for his or her signature with an incentive to sign it by the deadline.
3. Include in your agreement a termination provision or fee that identifies significant damages or a specific penalty if a party breaches or walks away from the deal.
4. Don’t adversely affect your leverage and give up a good Plan B until you have a signed, sealed and delivered deal.
Done deals can unravel in a hurry if you aren’t careful. So take these steps to close them down.