The involvement of advisors whose interests are not aligned with those of the deal-owners.
Last time we looked at item 3 of our 5 key reasons for the inefficiencies in the contracting process - conservatism / excess caution. This in turn built upon the issues of inappropriate starting documentation and what we refer to as “time poverty”.
The next item we consider here is misalignment of interests between external advisors and their clients.
Although we think it unfair to level this criticism at all external advisors, many of whom very much help steer the parties to a “sensible middle-ground” (leveraging their generally superior broader market exposure), there are undeniably at least two factors that can drive wholly unhelpful behaviours:
remuneration models. External advisors are still more often than not remunerated on a “time and materials” basis. This means that the longer a contract takes to sign, the more that advisor gets paid. When these external interests are so diametrically opposed to those of the two businesses, it is little wonder that often negotiations can be more protracted than necessary. It also creates the perverse situation where the more one-sided a template document an external advisor can draft for its client, the more it will be paid in getting subsequent agreements (using that template) over the line.
“showboating” in front of clients. We have often experienced this: an external advisor’s desire to demonstrate to his / her client that he/she is “tough” in negotiations and “wins” points, thereby, somehow justifying their hourly charge-out rate.
To be clear, we are not suggesting that these behaviours are the “norm”. Most advisors tend to pride themselves on closing out a deal quickly rather than prolonging it unnecessarily, however the practice does invariably exist - and it can push out timeframes significantly when it does.
In Clausify’s ideal world, the business people would retake ownership of the contracting process, engaging external advisors only for specific inputs requiring expertise.
What do you think? Have you experienced any of the unhelpful behaviours described above?
