Deals Fall Five Times

The "Rule of Five" suggests that significant business deals typically face multiple near-collapses before successfully closing. This insight comes from the story of the Milk Road acquisition.

Key Deal Components

• Deals typically fall apart 5 times if they're going to get done
• The Milk Road acquisition followed this pattern with 3-4 breakdowns before closing

Why Deals Break Down

• Due diligence reveals unexpected issues

  • Example: Discovery of gambling revenue during Milk Road deal
  • Required adjustments to deal terms

• Misaligned expectations

  • Different valuations between parties
  • Varying views on company direction

How to Navigate Deal Breakdowns

• Stay flexible with terms

  • Be willing to adjust deal structure
  • Find creative solutions to problems

• Maintain relationship through difficulties

  • Keep communications open
  • Focus on long-term partnership potential

Keys to Successfully Closing

• Focus on relationship building

  • Get to know potential partners personally
  • Understand their motivations and goals

• Think long-term

  • Consider future value beyond immediate terms
  • Look for strategic alignment between parties

• Be transparent about issues

  • Address problems early
  • Share critical information upfront to avoid surprises

The framework suggests that deal breakdowns are normal and expected, rather than signs of failure. Success comes from persistence and working through multiple iterations of the agreement.