The Art of a Deal: A former Investment Banker’s view on the NBA Lockout

Ramblings by UB

NBA Lockout negotiations are about to get dicey. There is a deal on the table, there are deadlines and there is incredible uncertainty. For those keeping score, the regular season was already supposed to have started. So the main takeaway from all this is that, plenty of people dropped the ball. I spent 5 years in investment banking, and another couple of years floating around the mergers and acquisitions world. I have had the privilege to work with some self-professed studs of negotiating, barbarians at the gate, slick talking, rain making, and gods of the deal game.

Usually, I had other choice words to describe some of those people.

During my time in IB, I did learn a couple of things about the deal making process. I saw first-hand the blood, sweat and tears (lotta tears) that went into selling companies. I watched in awe (or yawn) as bankers threw out Sportscenter like catch phrases such as “competitive tension.”

I created tedious excel sheets that tracked every correspondence that we would have with potential buyers. Significant amounts of time and energy would be placed on making elaborate projections about where the business would go and selling the vision for the company’s future. I also had to make sure that when a potential buyer met company management, that all of the name cards were properly folded and placed in very feng shui manner. Laugh if you want, but I was an investment banking analyst and proud of it! In retrospect, I can’t possibly imagine why I didn’t have more dates lined up for my weekends when I would roll out of the office at midnight on a Saturday … strange.

Unfortunately, I did not work at J.T. Marlin, and wasn’t dripping swag like Ben Affleck in Boiler Room, “You Want details? Fine. I drive a Ferrari, 355 Cabriolet, What’s up? I have a ridiculous house in the South Fork. I have every toy you could possibly imagine. And best of all kids, I am liquid.” I double checked, and that’s a quote from the movie and not exactly how Mark Cuban and Michael Jordan started negotiations with the players.

Top 5 role of Ben Affleck's career.

So all that being said, I feel I am uniquely qualified to analyze how things have gone so incredibly wrong for the NBA, and why we will have a deal very shortly.

Competitive Tension

Whenever bankers have a company that, shall we say, has more issues than one of the umm…women..on Basketball Wives, we would immediately go towards the belief that extrapolating the best value would be to generate “competitive tension.” In other words, lets create the perception that there a lot of people interested in this turd sandwich…umm I mean company.

Unfortunately for the players, there is no competitive tension. Yeah, people can talk about playing in Europe or Japan or Crenshaw Blvd, but that is not scaring any of the owners. Everybody knows that nobody that’s been in the NBA wants to go and play anywhere else in the world. It would be like flying from Chicago to San Fran on Virgin America, and then getting stuck on some puddle jumper w/ 3 connections over 5 days to get back to where you started. (Note: we are not getting paid by Virgin America for that plug, but if you are flying to Cali, do yourself a favour and book Virgin America! Its awesome, I can’t go back!)

Think about it, instead of the United Center, you’re in some random gym in Europe, where there may or may not be enough security to prevent the crowds from throwing random garbage on you and worse. Also, how about sharing hotel rooms w/ teammates, instead of the usual veteran NBA groupies. On a side note, you haven’t lived until you’ve waited until after an NBA game ends and you see Hoodrat Central congregate by the entrance tunnels. I keep telling everybody, the NBA is faaaaaaan-tastic!

The owners know this, the fans know this, and most of the players know this. It is Billy Hunter’s job to broker the best deal possible under these circumstances. Not sure what the holdup is. Currently, we’re basically talking about a 50/50 split on the BRI, and all sides are a little irritated. That sounds like compromise to me.

We are one more bad press conference away from David Stern pulling a Gordon Gekko from the original Wall Street and screaming: “You’re walking around blind without a cane, pal. A fool and his money are lucky enough to get together in the first place.” Taking a puff of a cigarette, screaming “Let slip the dogs of war” and having an army of IRS agents descend upon the players and their agents. Shoutout to Jacob the Jeweler!!!
(feel free to google the reference at your own leisure).

Greed is good!

Show Me the Money

Taking a page from Steven A. Smith, the owners cut the checks, they’re the billionaires and ergo they have the leverage plain and simple. You can dress up the situation as much as you want, but at the end of the day billionaires tend to have more financial means than millionaires. Especially when the millionaires are in their early twenties, and tend to spend money like it is going out of style. I’m not blaming them, when bonus season at the banks comes around let’s just say tailors, car dealers and strip clubs have a healthy influx of business and incredibly suburban, sickly, sleep deprived kids walking around the city saying things like “making it rain” and “stunting”. I can’t imagine what it would be like to be awesome at basketball, have an entourage and women at your beck and call. So, I am not mad at any of them for having some spending extravagances.

I will however blame them for thinking that the owners are totally out to screw them and that they don’t need to give an inch on some of these negotiations. At some point, it is essential to take a step back and understand how the cards are dealt (this is a lesson that many of my poker-holic friends have mentioned on occasion. You all know who you are!)

In the words of Denzel from Training Day: “The s@#$’s chess, it ain’t checkers”

King Kong ain't got !@# on him!

The NBA represents the best economic reality for the players. Everybody needs to quit acting like this is not the case.

The banker’s biggest role in a deal process is to manage client expectations. I feel that Billy Hunter and crew did everything right in terms of getting the players united and ready to fight. However, the proper messaging needs to be sent that at the end of the day, based on the economic realities that exist, a compromise is in the best interest of everybody at this point

What an Investment Banker Would Tell the Players

Bankers enjoy speaking from a 30,000 feet perspective. So buckle up! [Insert sentence here where banker tells everybody in the room he is about to speak from 30,000 feet – (I like to give my readers the occasional creative liberty. This blog is cutting edge baby!)] The final issue is what the percentage spit between the owners and players should be on basketball related income (BRI). At this point, the banker would sense that a deal is feasible. We have fought the good fight. We have come out w/ a pretty amicable deal on all other points.

The banker would remind the players that cost of the missed games is approaching and eventually will exceed any incremental percentage gain that the players would hope to achieve on BRI and the peripheral issues on the table. In other words, hey we’re actually screwing ourselves out of cash here! Not to mention, the collateral damage on the cities, communities, vendors, hotels, clubs, restaurants, airlines and countless other revenue points that are generated by the NBA as a whole. Based on how the economy is, no one is going to convince me that President Obama hasn’t had a West Wing / Jed Bartlett moment and threatened pistol whip David Stern and Billy Hunter with the threat of federalizing the league in order to get everybody back on the court!

Let’s just hope that this gets resolved in a more amicable manner than the ending of Reservoir Dogs! (http://www.youtube.com/watch?v=1c0FN8ajIlY – the first two minutes of the link show you absolutely how NOT to resolve a dispute.) On a side note, I sent our homey Darren Rovell a tweet asking if we could just get Goldman Sachs to broker a deal. As of the publishing of this article, DR has not responded. I think he’s big-timing me right now. I see you homey w/ your fancy new show on CNBC! We’ll continue to effort to get comments from DR!

Thanks for reading, hit us up on Facebook and twitter (@10thYearSeniors). #SupportTheMovement!

2 Comments to “The Art of a Deal: A former Investment Banker’s view on the NBA Lockout”

  1. oh boy… as a former banker.. I could relate to wayyyy too many of the references….

  2. haha yea i can imagine. this guy toiled at AG Edwards for 2 years and then Bank of Montreal for another 2 years after that in Chicago. I loved the JT Marylin references.

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