The Art of the Fail: Lessons from the Trumpcare Debacle

As far as daytime dramas go, the the White House Administration’s ongoing challenges in passing its healthcare bill continue to dominate the news and make for “must-see” TV. After years of declaring they’d repeal the Affordable Care Act (AKA Obamacare) at the first chance possible, Republicans finally gain control of elected government and find they can’t garner enough votes to pull the trigger. For someone like President Donald Trump, who not only prides himself on his ability to make deals, but used that self-professed talent as a major selling point in his election campaign, this spectacle is quite an embarrassment. While negotiations continue and the bill isn’t exactly dead, looking at how events have unfolded so far provides some important lessons for dealmakers, whether the deal is political, financial or otherwise.

Let’s take a look at what Trumpcare can teach us about how to close the deal …

What We Have Here is a Failure to Negotiate

For decades, Donald Trump has positioned himself as a master negotiator, and yet, there appeared to be little, if any, negotiating that was done with his healthcare bill. Instead, the administration attempted to ram it through, relying on the congressional majority enjoyed by the Republican Party. Complaints about the American Health Care Act, or AHCA, the proposed replacement to Obamacare, were met with dismissal and/or condescension, regardless of whether they originated from Republicans or Democrats. Obviously, this is not how one crafts a successful deal. It takes two to tango, after all, and Trump’s unwillingness to debate the merits of the AHCA and negotiate its terms led to its initial demise.

Key Takeaway: In a merger or acquisition scenario, even firms coming from a position of relative power need to engage and negotiate with the other parties at the table for a deal to happen. Snapchat famously turned down Facebook’s offer of $3 billion in cash in 2014, in no small part due to their “my way or the highway” approach; a softer touch and greater flexibility may have seen Facebook successfully add Snapchat to their portfolio and not have left them still playing catch-up three years later.

Knowing Others is Wisdom

One major reason the Trump Administration couldn’t get the votes for the AHCA is a group of Republican Representatives who are members of the Freedom Caucus that withheld their support. This group of conservative and libertarian congressmen are united in their desire for having government play a very small role in the day-to-day life of Americans and they felt the new bill did not roll back enough of what they saw as the Affordable Care Act’s oversteps of government authority.

Crossing the President this way can be a risky strategy, but many members of the Freedom Caucus are emboldened not only by the same wave of conservatism that swept Trump to power, but also by their own relative outperformance in the election. For example, Justin Amash of Michigan, Mark Meadows of North Carolina, and Jim Jordan of Ohio each won their districts by much wider margins than Trump’s victories in these battleground states. As such, they feel assured that their actions represent the wants of their constituents, making the fervor with which they rejected the AHCA make perfect sense. Unfortunately for the President, carving out the Freedom Caucus from the Republican seats in the House of Representatives effectively removes the majority upon which he was leaning, and, without appreciating where they were coming from and why, there was no way President Trump was going to win their support.

Key Takeaway: In the boardroom, a dealmaker must similarly understand who else is at the table in order to be successful. Ask what it is they want to get out of the deal: are they looking solely for a pay-out, or do they consider the company to be their legacy and want to ensure its long-term success? Perhaps they’re concerned about the well-being of their employees and want some kind of baked-in guarantee for them, as well.

An article in the Harvard Business Review recounts the story of a large company buying up a smaller one in 2005, implementing a more casual culture in the process. This was symbolically achieved with the removal of ties from the dress code, a move considered innocuous by the larger firm. However, this had big implications for the employees in the smaller firm and their culture, leading to a de facto revolt internally. As a result, in under two years, the smaller company was spun off through a management buy-out. Much like President Trump, the acquiring firm’s confidence that their methods were best and the idea of being “large and in charge” led to the deal becoming a failure. By neglecting their deals’ implications on a personal level, both the President and the acquiring company profiled in the HBR article made a costly mistake.

Success is a Two-Way Street

Regardless of your political leanings, or how you feel about the relative merits of Trumpcare versus Obamacare, everyone can agree that The Donald nailed it with the title of his biography: Dealmaking is very much an art. And while this means there is no single guaranteed recipe for success, it also means there are ways outside of simply technical skills and hard numbers to ensure that your deals get done. Being cognizant of who your counterparts are, their wants and needs, and being willing to negotiate and compromise with them is vitally important to the success of any and all deals, whether they’re taking place in the boardroom of a company or the south wing of the Capitol Building. As the Trump Administration works to bring its healthcare bill back to life (if it were an M&A deal, it’s project name would undoubtedly be “Phoenix”…), it remains to be seen whether Trump will get his dealmaking mojo back, but however the drama plays out, we’ll all be watching.

Kevan Hartford

Kevan Hartford is a Toronto-based finance professional working in asset management.