Avoiding Value Drain in Dealmaking – Game Theoretic Strategies | with Paul Papayoanou
Jul 1, 2024
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Paul Papayoanou discusses avoiding value drain in dealmaking, identifying four types of value-destructive behaviors. He emphasizes the importance of being a savvy strategist, balancing toughness and fairness. The role of preparation, reputation, and game theory in negotiation strategies is also explored, with insights on enhancing dealmaking outcomes in organizations.
Deal makers should avoid rushing through deals and focus on win-win solutions to prevent value destruction.
Savvy dealmakers assess options, understand counterparties, prioritize maintaining reputation, and use game theory for strategic success.
Deep dives
Common Mistakes in Dealmaking
Deal makers often fall into four common types of behavior that lead to value destruction: 'Get-er-done' rush through deals sacrificing value, 'Greed is good' mindset leads to win-lose deals, 'I want to be loved by you' focuses on relationships over value, and 'Ignorance is bliss' overlooks counterparties' perspectives resulting in competitive risks and lost value.
Traits of Savvy Strategists
Savvy strategists meticulously assess options, understand counterparties' positions, seek win-win solutions, consider post-deal scenarios, evaluate leverage, and prioritize maintaining a strong reputation. This strategic approach is grounded in game theory and fosters reliable, long-term relationships in dealmaking.
Transformation into Savvy Strategists
To transform dealmaking into savvy strategists, five key fundamentals are essential: 'Go slow to go fast', 'Tough but fair', 'Structure and frame' negotiations, 'Evaluate outcomes' to maximize value, and 'Set the table' with effective negotiation plans and tactics. These fundamentals blend practical game theory applications with strategic thinking for successful dealmaking outcomes.
In this episode, we delve into the common pitfalls that negotiators face which lead to value drain in dealmaking. Our guest Paul Papayoanou identifies four types of value-destructive behaviours and shares insights on avoiding these traps. He also outlines the characteristics of an effective dealmaker, emphasising the importance of being a savvy strategist who can balance toughness with fairness. Furthermore, we explore the role of preparation and reputation in successful negotiations, and how game theory can be applied to enhance negotiation strategies.
Paul Papayoanou is a Senior Advisor with Decision Frameworks, a boutique consultancy based in Houston, Texas, serving clients worldwide. He has taught at the University of California San Diego and Harvard University, and is the author of "Game Theory for Business: A Primer in Strategic Gaming." Paul's extensive experience in game theory and dealmaking provides invaluable insights for anyone looking to improve their negotiation skills. You can read his recent article on addressing value drain in dealmaking here (or e-mail Paul for the pdf version: paul@decisionframeworks.com).
Paul has already been a guest on our show. You can check out his episode on how to bid in an auction here or here.
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