Closing the Deal in Negotiations: Should “Deal” Be a Dirty Word?

Closing the deal in negotiations often seems like the ultimate goal. But as one private-equity firm recognizes, organizations benefit when dealmakers focus well beyond the finish line.

By Katie Shonkon / Dealmaking

closing the deal in negotiations

When negotiators take a long-term approach to deal-making, the result is typically a win-win. Rather than simply trying to sign a contract on favorable terms, negotiators who discuss how those terms might play out over the life of the contract are more likely to set the partnership up for success. After all, when negotiators merely focus on closing the deal in negotiations, they risk neglecting the important step of planning what will come next.

David Layton, CEO of the Swiss private-equity firm Partners Group AG, recognized this when, at a global town-hall meeting in June, he forbid the firm’s employees from using the word “deal” altogether, as the Wall Street Journal reports.

According to Layton, partners who use the “D-word” at work will be fined $1,000 for each violation, with the money going to charity. And every time a junior employee writes or says the word “deal” at work, the firm will deduct $100 from a $10,000 donation to its charitable arm, according to Layton.

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It was a surprising directive for a company that did $27 billion in deals between October 2020 and October 2021—but an important step in shifting colleagues away from a transactional mindset, Layton told the Journal. When it started out in 1996, Partners Group followed the formula of buying companies using debt, making minor changes to them, and selling them at a profit. These days, Layton wants Partners employees to “act like they are owners of businesses, not merely the doers of deals,” according to the Journal. “We want to act like founders, not financiers,” Layton said.

In place of the word “deal,” Layton says he prefers words such as “stewardship, governance, strategy, culture, entrepreneurship, operational excellence, and sustainability.” He also objects to common characterizations of private-equity firms as “vultures,” instead comparing Partners to “penguins” who huddle together to protect their young against the cold.

A Sincere but Surface-level Shift

Banning the word “deal” may sound like a jokey stunt, but Layton followed through on the threat. When Marcel Erni, a Partners Group co-founder, used the word “deal” three times during his opening remarks at the company’s annual retreat in the Swiss Alps, Layton fined him 3,000 Swiss francs and had a photo of Erni paying up posted to the company’s internal message board.

There’s evidence that partners may be toeing the line: Donations to the company’s charitable arm were up 65% in 2021. But will the shift in terminology bring about a shift in mindset at Partners Group from deal-making to governance and relationship building in the negotiation process?

Turning to a slightly different realm, organizations sometimes try to whitewash undesirable or unethical behavior by “cloaking it in innocuous language,” write Max H. Bazerman and Ann E. Tenbrunsel in their book Blind Spots: Why We Fail to Do What’s Right and What to Do About It. In this manner, “pollution” becomes “runoff” or “waste”; employees are “laid off” or “made redundant” rather than “fired.” The goal of such euphemisms is not to improve behavior, but to make bad behavior more palatable so that it can continue.

Layton, by contrast, aims to change how employees negotiate. But if changes to closing the deal in negotiation are only cosmetic—a focus on surface-level vocabulary—that’s unlikely to happen. To meet the broader goal, firmwide strategic changes to negotiation and deal-making will be required.

Closing the Deal in Negotiations: Beyond the Finish Line

How can organizations encourage employees to work to ensure that, after closing the deal in negotiations, an agreement will prove to have been well worth the paper it’s printed on one, five, or 10 years later? The following guidelines can help:

  • Look beyond price. A single-minded focus on getting the best financial deal is typically the main culprit behind short-term thinking. Experienced negotiators understand that adding numerous issues to the mix will not only improve deal implementation but improve everyone’s outcomes. In his book Dealmaking: The New Strategy of Negotiauctions, Harvard Business School and Harvard Law School professor Guhan Subramanian explains that auctions often promote a narrow focus on price. When a seller announces an auction, consider asking if you can negotiate privately with them instead of or in addition to submitting a bid.

  • Give negotiators long-term incentives. Rather than offering negotiators bonuses for closing a deal, organizations can instead link financial rewards to progress made in the early years of a deal’s implementation, suggest Danny Ertel and Mark Gordon in their book The Point of the Deal: How to Negotiate When Yes Is Not Enough. Doing so will quite naturally focus negotiators on long-term concerns when figuring out how to close a deal successfully.

  • Keep negotiators involved in implementation. New partnerships often fall apart because the teams that constructed them are uninvolved with implementation. That’s a mistake, given that negotiators typically acquire a great deal of useful information about their organizations when crafting deals. For this reason, it can be wise to keep negotiators involved in a deal’s implementation, advises Tufts University professor Jeswald Salacuse.

What advice do you have for promoting long-term thinking when it comes to closing the deal in negotiations?