Negotiation Tactics: Winning with Creativity and Critical Analysis
Business negotiation is frequently associated with the concept of "tactics." Unfortunately, this concept suggests that negotiation is a sporting talent laden with finesse and gamesmanship rather than hard work and critical analysis and that if properly practiced it produces predictable and overwhelming results.
It is true that certain gaming elements characterize the business world and, in particular, acquisition transactions. Nevertheless, while in past decades Hollywood and certain Wall Street heavyweights promoted the unrealistic image that gamesmanship is the basis for successful negotiation, such an image becomes even more unrealistic as business confronts the economics of the twenty-first century, which carry a more strategic approach to acquisition transactions.
It is erroneous to assume that properly applying specific tactics or rules to negotiation will yield successful results. On the contrary, there are no absolutes. What works for one transaction may not work for another.
Generally, negotiation does not require the achievement of "Trumpian" heights (or depths). It requires instead an emphasis on a pragmatic approach that responds to the more normal situation characterizing acquisition transactions: parties with fairly equal bargaining positions who desire to negotiate and successfully close a deal on mutually acceptable terms, rather than pillage and plunder each other's company.
The primary goal of effective negotiation should be to achieve a deal that both parties can live with and that accomplishes your purposes without making the other party walk away from the deal or permanently scarring a valuable relationship. Negotiation in this context requires informed, creative compromise and accommodation. However, it clearly does not mean charity. If you have a superior bargaining position or the other party gives you everything you want, the deal should be promptly negotiated and closed. You then have the luxury of accommodating the other party later only if business circumstances make that necessary. But, in the more likely situation where a party resists certain matters and such resistance is not unreasonable, an attempt should be made to search for favorable common ground.
Effective compromise requires homework and credibility as well as critical analysis and perspective regarding the other party and the deal. It is self-defeating to become preoccupied solely with your goals and concerns and neglect the necessary analysis on how to solve the other party's legitimate concerns. Accordingly, it is necessary to critically size up the other party and seek to resolve his concerns in a manner acceptable to you.
Deal making requires maintaining a pragmatic perspective and giving careful consideration to the impact that changes will have on the overall transaction. Effective negotiating requires that when both sides stick on a point they become analytical and inventive and devise a common middle ground, if possible, that does not defeat the substance of an advantageous deal.
Successful negotiations take place in an atmosphere of reasonableness. A confrontational approach is undesirable in all but a few instances. Reducing adversarial points to a minimum and staging issues as matters of legitimate, mutual concern requiring collective efforts at resolution usually yields long-term benefits.
That is not to suggest that there is no place for hardball or brinkmanship. However, it is important to be absolutely sure of the circumstances and terms that merit such an approach. You want to avoid irrevocably impairing communication and losing a deal that you desired and could have structured on beneficial terms. Furthermore, it is not a good idea to bluff; you can pay a high price in lost credibility.
A key to good negotiation is the ability to recognize a deal that should not be made or cannot be made on reasonably acceptable terms due to the bargaining position or attitude of the other party. This is often the case if the other party or its representatives constantly create crisis and impasse. When this happens, the points either are valuable to the other party (or that party wants you to think they are) or it is their style. It may be good judgment to terminate negotiations because a reasonable deal is probably not possible. Obviously, this type of situation should be sized up as early as possible.
A pragmatic viewpoint is usually the essential starting point for effective negotiation and successful deal making. Success in negotiating also is frequently based on homework, anticipation, perspective concerning the parties and their present and prospective circumstances, and the discovery of negative or positive factors that the other party may not see or fully appreciate or be able to capitalize on.
It is important to anticipate issues and characterize, stage, and time the presentation and resolution of these matters to your maximum advantage. For example, seizing points early before they have been critically analyzed by others can establish an advantage if the person seizing the initiative is well informed. Taking the initiative on such matters as tax attributes, purchase price allocation (even with the constraints of present tax law) and financial formulas or components can reap benefits as a deal is developing. From this perspective, it is often advisable to meet with your advisors before commencing even preliminary negotiation discussions so you will be alert for advantages to seize and pitfalls to avoid.
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