Mergers and Acquisitions For Dummies (56 page)
Read Mergers and Acquisitions For Dummies Online
Authors: Bill Snow
Be prepared for someone to call your bluff.
Know that if the other side reads your move correctly, you may be out of luck. Crawling back to the other side after a failed bluff may simply reduce your negotiating leverage.
If you suspect the other side is bluffing you on a subject, assess the strength of your position relative to the other side's position before you decide whether to call the bluff. If you're in a strong position â if you can ultimately walk away from the deal and you know that the other side needs to do a deal â you're in the driver's seat. Call the bluff. But if you're the one who needs to do a deal and the other side has a strong position, the bluff may not actually be a bluff. It may be the other side's actual position.
Avoiding Common M&A Negotiating Mistakes
The number one negotiating tactic to steer clear of is bullying. For some crazy reason, negotiating novices tend to think negotiating is about imposing their will on the other side with a take-no-prisoners approach. But M&A insiders simply laugh at negotiators whose main goal is being belligerent and tougher than the other side.
Bullying and cajoling don't work. A tyrannical or dictatorial style may suit you well if you're one of the bad Roman emperors, but for mere mortals, bullying simply gets in the way of getting a deal done. Someone experienced at negotiating M&A transactions either sidesteps the bullying, ignores it, or calls the bully out and flatly says, “I'm here to negotiate in good faith; I was hoping you'd do so as well.”
Bullying puts the bully in a tough spot. It either kills the deal or yields nothing, thus rendering the bully an impotent blowhard. It also creates a situation where the recipient of the aggression may someday return the favor.
The only time you may be able to get away with a bullying approach is if the other side is completely desperate to do a deal. But even then, the belligerent approach may well backfire on you some day when you need a favor from the other side or if you need the other side to stay involved in the business.
But bullying is only the tip of the iceberg in terms of potential negotiating pitfalls. Here are some other tactics to avoid while negotiating:
Drawing a line in the sand:
This approach is a favorite of the belligerent bullying novices. Drawing a line in the sand merely places the line-drawer in a corner. If, and invariably when, the drawer needs to close a deal, that line can become a moot point. At that point, the line-in-the-sand approach actually backfires; if the line-drawer is willing to cede a point formerly ensconced behind the line, what else will she give up?
Resorting to “take it or leave it”:
This tactic is the bratty cousin to the line-in-the-sand approach. Anyone who utters this line better be willing to have the other side leave it. If the other side simply walks away and the person who gave the ultimatum actually wants to do a deal, that person has simply exposed her position as weak and tenuous.
Yelling:
Yelling is the path of choice for the impatient and creatively bankrupt. Keep your temper under control. I know that can be difficult, especially when you find yourself in the midst of an inane argument with a silly, immature person, but blowing your top doesn't help advance the discussion. If calm, dispassionate logic and reason fail to win the day, histrionics do no better. And what's worse, yelling may simply poison the well and prevent future discussions.
If discussions do devolve into frustration, illogic, and shouting, simply stop talking. Tell the other side that you want to table that particular point and revisit it down the line. Halting discussions for a short period of time allows the other side to reflect on its point of view and revisit discussions with a more reasonable approach.
Bogging down in minutiae:
Getting sidetracked by insignificant points and worthless detail at the expense of hammering out the main issues needlessly slows a negotiation and may kill your deal. Prioritize the issues and remember this phrase: “Let's table that for later.”
Overselling:
In my first job out of college, a co-worker gave me a bit of advice that I've repeated ever since: When the other person says “yes,” stop talking and take the offer. After you and the other side find agreement, stop selling your point. Say thanks and move on to the next order of business.
Devolving into personal attacks:
Separate the business issues from the personal issues. Don't allow a business negotiation to spiral into a personal insult slugfest. I know that can be difficult; as I write this section, I'm in the midst of a frustrating negotiation myself. Bite that tongue, stick to the business issues, and refrain from making the discussions personal.
The recipe for a successful negotiation
Based on my experience, successful M&A negotiating is the result of carefully mixing a few key ingredients:
1. Slice and dice your strengths and weaknesses and then compare them to the other side's strengths and weaknesses.
Carefully strain out subjectivity and personal feelings, but make sure you reserve the objectivity.
2. Add a dash of understanding of the other side's motivation.
3. Stir in a heaping helping of sincere desire to craft a mutually beneficial deal.
Marinate through a careful combination of phone calls, e-mails, contracts, meetings, discussions, and more phone calls and let rise through due diligence and contract writing, and you too can have a successfully closed deal!
