Sep 5 2008

Hands in the Cookie Jar

Hands in the Cookie Jar

It feels like I’m closing a lot of transactions lately. Today is another one – we are closing on a house. Somehow, no matter how much of an owner you are of your business, wiring money out of your own personal bank account is a bit harder than wiring from the corporate account.

I’ve observed something over the years with transaction closings – both personal and business. I call it the Hands in the Cookie Jar phenomenon. When a lot of money is on the table and trading hands, and when there are a lot of parties involved (not just the principles, but various agents and lawyers as well), the closer you get to the transaction closing, the more hands appear outstretched ready to grab a small piece of the money.

Today, it was about agents, lawyers, banks, mortgage brokers. And as we found out on yesterday’s walk-through of the house, it is also about the “guys,” as our real estate agent referred to them. You know, the tree guy, the termite guy, the plumbing and heating guy, on and on. Everyone is swarming to collect checks for all the work they’re doing or think they’re doing, some of which is valuable, and some of which just feels like highway robbery.

With corporate transactions, it’s usually more about the principles or people closer in. Sure, you have to pay bankers and lawyers, but corporate transactions are the time when others in the company — board members, execs, employees — all want to try to cut their own new deal at the last minute. We’ve had some bad experiences with this in the past, including a senior employee who threatened to quit if he didn’t get what he thought he should get out of a deal. And those situations are probably the most difficult to deal with.

Some of this is inevitable. Things come up that you didn’t anticipate in advance. Circumstances change. But in general, my approach to these things is that the best way to avoid the Hands in the Cookie Jar phenomenon is to document everything earlier on in the process and be unyielding as you get closer in. Just because money is changing hands doesn’t mean more hands get to be in the mix!