Break a Glass to Score a Deal

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In the wild and wooly world of international business deals everything goes, even if it does not always make sense.

The other day I had a fascinating meeting on the glittering shores of Lake Lugano with one of Europe’s leading aviation industry experts. We were discussing the finer points of the troubled world of European aviation and China’s role in the competition for transportation hubs. This is an area of great importance at a time when Chinese tourists flood the world and the One Belt, One Road initiative is in full tilt.

The aviation guru turned to me with a smile, chewing on his fine Cuban cigar, and said that he had been to China a few times over the years. He fondly remembered one of his first business trips to the Middle Kingdom. “I was standing with the Chairman of one of the largest aerospace enterprises having a celebratory cocktail when the glass slipped from my hand and crashed to the floor,” laughed the guru. “I was kind of jet lagged and was somewhat embarrassed by
the disturbance.”

Before the aviation expert had a chance to apologize for the mishap the host Chinese Chairman looked at him and shattered his glass on the floor as well. The Chairman laughed and said with a knowing grin, “Italian culture.” Then, in quick succession, glasses were dropped to the floor all around the banquet room in respect for the so-called Italian way and to echo the Chairman’s intelligence in understanding the culture of this faraway nation.

Nor did the matter rest there. Some time later the aviation expert bumped into an Italian friend just returning from a China visit with the same group. His friend turned to him and asked whether he could clarify something. While attending a banquet with the Chairman a toast was made to the new business relationship. During that toast the Chairman and his executive team proceeded to break their glasses on the floor. Of course, the new business partner was expected to and did follow the
“Italian way”.

Culture is in the eyes of the beholder when it comes to mobile communications.
Culture is in the eyes of the beholder when it comes to mobile communications.

When in Rome…

This particular story of the Italian way is certainly a strange one. However, every seasoned international businessman has his own bizarre recount of something strange that has happened over the years. Whether it is a challenge to a wrestling match by a Mongolian partner, drinking fresh camel’s milk in some Middle Eastern capital or washing down roasted scorpions with Maotai in Nanyang, all of us in global business have experiences.

When hearing of these unique encounters and looking at the international business landscape one truly has to wonder how global transactions ever get done. Given the differences in cultures and the methods of doing business, entrepreneurs and business executives must ride a fine line to close deals. Matters are complicated further by all the different communications tools, such as Skype, Wechat, Viber and Whatsapp that rule this arena, none of which ever seem to work well or clearly at the
crucial moment.

Yet somehow deals do get done – big ones too – even between groups that can barely understand one another. Inspite of strict currency controls, the Chinese are racking up records in cross-border M&As in the process of globalizing operations. With Brexit making the United Kingdom a bargain for the first time in years, and Europe a battered hunting ground for amazing opportunities, Chinese businessmen scurry to pick up their stake while the going is at its best.

Perhaps the common ground here is the essential element of any fair business proposition – hard cash paid for fair market value. With Chinese insurance companies buying five star European hotels, little known entrepreneurs picking up Premier League football clubs, and the mega-deals of SOEs spending billions for flagship assets, it is clear cultural barriers are being overcome to close deals.

When Chinese go abroad to celebrate events like IPOs and M&As they like to enjoy the experience as a unified group.
When Chinese go abroad to celebrate events like IPOs and M&As they like to enjoy the experience as a unified group.

When in Beijing…

It is sometimes hard for me to understand how some of these deals do get closed after meeting certain Chinese negotiators, people who have seldom travelled abroad and can hardly communicate in a foreign language. Yet, there does seem to be a deal making culture that has formed over the last few years and confidence is growing, not to mention the level of professionalism among local bankers and M&A specialists.

In recent months I have bumped into a number of corporate financiers that have joined leading enterprises to work on M&A projects. They hale from banks like JP Morgan and Credit Suisse and seem to know what they are doing. Though they are faced with the challenge of explaining a rigorous investment process honed in the world’s most respected institutions to bosses who rely more on their intuitions and gut feelings the dynamic seems to work on a more or less regular basis these days.

The same cannot always be said for those foreigners that deal with Chinese – either at home or abroad. In the last year or two, the tide has changed as foreign businessmen realize the China story will not disappear and at one point or another they should deal with this massive market. While the business schools have studied the China miracle from all angles, executives search for a more basic education to support their interaction with the market on a pragmatic day-to-day basis.

For that reason, governments and business associations alike now provide courses on the finer points of Chinese etiquette. As the Government of Canada puts it, “China’s culture and business practices differ from Canada’s. As you start or expand your business, having an understanding of Chinese business etiquette is important to your success. Knowing and practicing common customs will help you relax, avoid embarrassment, and focus on the matters at hand on critical occasions.”

The Canadian government goes on to provide pointers, even in such areas as how to drink properly: “While local wine can be preferred at banquets, the Chinese frequently offer strong distilled alcohol called baijiu or maotai for toasts – and there may be many toasts during a meal. Never drink from the toasting glass except during a toast – and don’t let the size of the glass fool you as to the power of the contents! The Chinese know their alcohol is considered strong for foreigners, and under normal circumstances they will not push you to drink.”

The Canadian etiquette instructors even look to make sure their charges are able to handle the load of liquor in order to strike a good deal, though as a Canadian I am somewhat offended that our esteemed government believes we are so naïve as to not know how to drink after years of university training. Nonetheless, the experts provide a final word to the wise. “Try to avoid drinking baijiu on an empty stomach as you will feel the effects of the alcohol quickly – it’s a good idea to eat something before the toasts begin.”

Dressing for Success

Other governments and business associations are in tune with the Canadian effort. All across the US and Europe, businessmen are being educated on how to dress, shake hands, eat and drink in a way to earn respect from their business partner. Additional support is provided on the language side with a set vocabulary of words and phrases that will open the door to a better dialogue with Middle Kingdom power brokers.

Another important area these new and improved etiquette classes cover is the art of giving gifts. After all, the red envelope process at Chinese New Year is a concept that few foreigners grasp in terms of how much to give and to whom. A mistake in this area, or any of the areas mentioned above, can lead to a loss of “face” for someone if not everyone. It can also herald the end of a
lucrative contract.

Of course, there are a lot of unspoken rules that the China neophyte will learn with time. For instance, the next time you accidentally drop your glass or spill your wine on the lap of a VIP, just pretend it is the custom of your country and everything will work out. That was the valuable lesson learned by our friend the aviation expert in establishing the newly ingrained Italian way that has now gone down in the annals of corporate folklore.

David Lake, SBR Editor-in-Chief, has worked in media for over three decades, published five books and contributed to leading business publications in New York, London, Tokyo and Hong Kong. Current duties include managing a range of media businesses in China, Central Asia, Turkey, the Middle East and Italy. In the Lake Lament's column he brings unique insights to the world of business and finance, drawing from his long experience in global markets, with a particularly focus on Mainland China events.

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