As the saying goes in our industry, any landing you can walk away from is a good one. I wonder, does that saying apply to an aircraft transaction? Is the only criterion for a “good” deal one in which a sale is consummated at a price that both buyer and seller feel to be acceptable (not to be confused with a price either side is happy about)?
Over the years I have come to find out that many of my clients have very differing opinions about what makes a good deal. For some, it is all about the cash. The most important factor is to maximize the sale price (or minimize the purchase price). Transactions that are purely driven by price can be difficult ones. If price is the only driver behind an agreement, what happens if the economics of a deal change as unexpected squawks are discovered in pre-buy? What happens if the market changes during the course of negotiations and another opportunity presents itself to the buyer? If price is the only consideration, a deal can take on a contentious nature very easily and is typically fragile right up to the point of closing.
Other clients tend to pursue more of a relationship with the party on the other side of the table. These clients are still very price conscious, but given the choice would prefer to net a bit less in order to enter into a contract with someone they feel is trustworthy and has similar values concerning aircraft care and maintenance. These transactions tend to be very enjoyable for everyone involved. They also tend to have a much higher percentage of closing. If unexpected problems arise, the good-will established between the parties is typically sufficient so that a resolution can be hammered out without too much trouble.
It takes a village to raise a child, and it takes almost as many people to complete a “good” aircraft transaction. The seller’s broker must have a good rapport with the buyer’s point of contact (be that an agent or employee). The Aviation Managers on both sides of the table must respect each other’s operation and goals throughout the transaction. The buyer must feel comfortable with the Seller’s maintenance department. Attorneys on both sides of the table must have big picture goals in mind and be open to getting creative in order to satisfy the concerns of both parties. When dealing with heavy iron, the principal himself may not be very involved, but on smaller aircraft it becomes very important that the principals on both sides stay on an even keel.
I have heard it said that “every good deal dies at least once before you do it”. I’ve also heard that the basis for a good deal is “one in which the buyer feels he over-paid a little and the seller feels he under-paid a little”. Those may be true, but I think the most important characteristic of a “good deal” is that long term relationships are developed between the parties involved. When that happens, any issues that arise can be worked through and buyer and seller can continue to help each other even after closing day. A “bad deal” consumes a huge amount of resources, emotions and time. That should be kept in mind when an offer comes in from a party that just doesn’t feel right.
After reading this, I hope you will take the time to consider the affiliation you have with your broker. If price was the most important consideration you had when selecting representation, how sure are you that he will be able to facilitate a deeper relationship between those involved in your next transaction.
Hope this gives you some things to chew on.
Back next week!
Toby J. Smith
JBA Aviation, Inc.