Private Equity Story Time: The Reward for the Dead Deal

Be Very Cautions of Misaligned Incentives

As an associate in BigLaw, I worked on a private equity deal for months. We were days away from closing and the Partners were fighting over a legal issue that would never actually occur. I spent months of sleepless nights, canceled dates with my wife, and missed my daughter's birthday party for a deal dying in front of my eyes.

We represented a private equity seller and I could not understand why we did not get to a compromise that worked for the client. The issues were not insurmountable, but the legal arguments, conference calls, and draft markups were neverending.

I was so frustrated.

I vented to the lead M&A Partner, saying, I cannot believe this deal is going to die.

He smiled at me and said:

If we close this deal for this Seller, we get paid for one deal. If the deal dies, we get paid for two. We are a business, not a charity.

The deal did die and the partner did get to bill millions of dollars for two deals.

Those words stuck with me as a perfect example of misaligned incentives.

Now, in my M&A practice, when I engage with clients I make sure that our goals and fee compensation are alligned.