3 Deal-breakers: Let These Kenny Rogers Lyrics Serve as a Reminder

While I have been known to quote lyrics to 80s songs and Brat Pack movies in daily conversation, there is no set of lyrics are more relevant to business deals than those recorded by Kenny Rogers in 1978 for The Gambler. You do indeed need to "know when to hold 'em, know when to fold 'em, know when to walk away, and know when to run." While younger generations may not know who he is, these lyrics offer many lessons that are still relevant to business today!

But what are some caution signs and potential deal-breakers that should prompt you to walk away from a deal? While there are many red flags, the big three are:

1. The Terms Don't Work for You (Anymore).

While the parties may have agreed on initial terms, during the due diligence period, your attorney, accountant, or other advisor may reveal new or different information that changes your upfront analysis. Not all is lost - you may be able to salvage the deal with more appropriate terms by re-negotiating based on the material changes. Attorneys are well versed in deals, and can advise you on the effect of the differences to determine whether they are material, and to develop the most appropriate strategies for negotiation.

If the other side is not willing to negotiate following the discovery of new information, you will need to determine what your walk-away price is, and stick to it. The beauty of a deal is that it's the right thing at the right price, which carries an appropriate risk level. Overpaying for the right thing will just cut into your profits, and limit what you can invest in the company moving forward - which will also have the effect of cutting into your profits. Similarly, undertaking more risk than necessary can pay off if the potential harms don't come to fruition, but it can also be a recipe for failure. Check your passion for the deal at the door, don't worry about sunk costs or lost time, and let the numbers speak for themselves. This is business.

2. If Cooperating Consistently Means You're the One Who Caves.

A sound business deal means you give and get. If the other side is a moving target, or tries to throw in last minute or unexpected terms, that can be a sign that the other party doesn't know what it wants, hasn't committed to entertaining any deal, or is difficult. They may not be ready, or there may be one or more hold-outs on their side. Regardless, a non-committal partner is not worth the effort - and can be a nightmare with whom to do business.

Alternatively, if the giving is all yours and the getting is heaped on the other side, the balance is off. This could be a sign of poor communication, lack of common values, or lack of mutual respect - all of which are paramount to the long term success of a deal. If the deal involves a partnership, joint venture, or some similar arrangement, this is a flashing red warning sign that the partnership is not going to work. But if the deal involves a purchase and sale, and you will not need to deal with the seller after the transaction has closed, this may be nothing more than an indication that you are being out-negotiated and need some help. Your attorney can assist with negotiations, or take over the negotiations on your behalf to help bring the deal into the end zone.

3. Something Seems Off.

As an entrepreneur, you probably already know to trust your gut. There are times that your instincts may be wrong, but more often than not, a funny feeling is a yet-to-be-realized insight. And more often than not, it is spot on. Moreover, suspecting there is something fishy is a sign that your comfort level with the deal is not what it should be - and that alone is justification to pass. If your time and energy is spent wondering when the other shoe will drop, your focus is not likely going to be on the business or the investment.

Walking away from a deal is never easy, but recovering from mediocre or bad deals takes time and energy, and diverts your attention and resources away from deals in which you should participate. Some deals are ripe for the picking - but others demand that you walk away, or even run. (But in doing so, be sure to walk away in a civil and courteous manner, because walking away may even convince the other side to call you back with better terms, or another deal.)

The foregoing is provided for informational purposes only, is not an advertisement, does not constitute legal advice or legal opinion, and does not create an attorney-client relationship. The content may not apply to the specific facts or a particular matter. You should not act or rely on any information contained in this article without first seeking the advice of an attorney licensed to practice in your jurisdiction.