Why Price Isn’t the Biggest Factor on Big Deals | Inc. |


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Most deals aren’t won on price alone. Align your value proposition with your buyer’s strategic needs and the deal will get bigger and possibly better.This is an excerpt from Tom Searcy’s latest book, “How to Close a Deal Like Warren Buffett—Lessons from the World’s Greatest Dealmaker” written with Henry DeVries and published by McGraw-Hill, available now.

When Walmart sold Warren Buffett their McLane Company Division, which was valued at $22 billion in 2003 at the time of the sale, they made a choice they never made before—to sell a part of the company.  Was it the money? A fair question, but Walmart has plenty of money—and although the $1.45 billion cash acquisition price was a nice chunk of change—the real reason was strategic benefit.

McLane was well run, profitable and successful, but it was still the ugly stepsister of the family. It had razor-thin margins and it’s ability to grow was limited because competitors to Walmart were wary about contributing in any way to the success of their biggest rival. McLane was the weakest link in the chain for Walmart. Buffett’s transaction was quick and easy and it brought an independence that would allow investments and revenues for McLane to grow without negatively impacting Walmart’s balance sheet. This was addition by subtraction.

An outright auction may have been more financially beneficial in the short run, but Walmart wanted to keep the capability of McLane as a part of its supply and distribution.

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