Investment banking (iii) - deal negotiation

I recently had the opportunity attend a meeting, where a company and banks negotiates the terms and structure a debt financing. Here are a few things I've learnt from this ocassion:

- Make them pay:  make banks become invested (whether it's financial investment, time & energy, reputation, etc.) in the situation. Once invested, it is more unlikely that (s)he will just walk away from the negotiation, giving you more bargaining power. 

- Bargain and bargain (professionally): it is okay to say pricing is not acceptable, or that banks are demanding too much securities. Sometimes (though not always), the case is that banks are indeed making too much money from the deal, and they can compromise on a reduction in pricing.  

When you bargain, it is important to know:

i) Who is the decision maker: try to speak to that person directly

ii) What you want: pick your battles and focus on the important issues

When you bargain, you need to demonstrate: 

i) What banks are asking for is unrealistic: eg. restriction on dividend payment can be unrealistic, since dividend payment is needed to keep up company's share price 

ii) Changing the terms will create a win-win situation

iii) Bankers earn more from the deal than they think: eg. point out that by doing the deal, banks can gain valuable deal experience / track record / potential future opportunities.

iv) Presence of alternatives: more difficult to do in this case, but that may mean lining up other financing options  

  

Again, your questions / comments is most welcome!