Different people will have their favourites, often starting with the legendary Getting to Yes by Roger Fisher and William Ury or Deepak Malhotra’s Negotiating Genius. The social dynamics of negotiation are fundamental to success, and you can find details of these and other texts in Further Reading at the end of this article.
Many of the techniques they suggest are the result of business experience and academic study. Often, though, much of the practical role of the in-house lawyer involves negotiation – whether in relation to commercial agreements, operational work, dispute resolution or litigation, and much more. By the time the issue reaches the legal team, negotiations may have become complex or difficult. This article looks at some of the techniques which can be used to ease the negotiation journey and avoid discussions breaking down – and some thoughts which can help when things get tough.
Setting the scene
What are you negotiating about? It may sound obvious, but in any negotiations, it is important to be understand exactly what they are about. If you are selling a business, is the key issue the price, or the scope of the business being sold? Are there assets which the seller wants to sell but the purchaser doesn’t want to take? Are the liabilities of the business retained or passed over? Some time spent on determining the scope of the transaction – and identifying what you might expect the other side to ask – is well worth the effort at the beginning of the deal.
What are the real issues? It has been said that there are only around 20 key issues in any business deal. That may be an over-simplification, but there are extremes – the price is clearly relevant and worth arguing about in detail; some elements of the boilerplate clauses in the sale document may not be. Before you start a process, it is well worth analysing what are your key issues. Inevitably they will develop as the negotiations proceed, but listing them up front helps you to understand what they are, what you may want to do about them, and how you can develop a plan for the negotiations.
Due diligence and SWOTs. You will want to know more about the issues in dispute than the other side does. To identify what you are negotiating about, carry out appropriate due diligence, and develop it into a simple SWOT (strengths, weaknesses, opportunities, threats) analysis to give yourself a clear understanding of your position. If you’re beginning to sell a business or asset, careful vendor due diligence and a SWOT matrix will allow you to position your negotiating strategy. If you’re buying, it will allow you to assess your position against other buyers. In either case, in a corporate transaction, you need to know exactly what’s in the data room to identify any problems. If you’re in litigation discussions, a SWOT analysis will help you to understand the relative strengths of the parties and to begin to prepare a cost plan so you understand the likelihood of winning and losing, and the relative costs.
Selling documents. In many corporate transactions, a sale document or information memorandum will be prepared to attract interest from buyers. If you’re the seller, you will want to take particular care over this – not just to ensure that it’s accurate so as to avoid future problems, but also that it draws out the key selling points. If the buyer is persuaded that they really need to buy, the negotiations will be much easier.
People factors
Who should negotiate? Successful negotiation comes from a combination of knowledge, expertise and relationship. There is no right answer as to who you should put forward to negotiate. It can be a business person, a mergers and acquisition specialist, or a lawyer – or some combination. It does, though, need to be someone who has a clear understanding of all the issues, and who can build a relationship with the other side. Personal animosity or dislike will arise from time to time, particularly if the other side misbehaves in negotiations, but it will get in the way of a successful outcome.
Understanding motivations. One step in avoiding difficulty, and building a professional relationship, is the development of an understanding of the motivation of your opponent. If you’re selling, why does a buyer want to buy? Even the largest corporate will have someone who is committed to the purchase. If you are in litigation or dispute – why? Is it simply down to money, or is personal pride or ego at play? Understanding the real motivation is critical.
Involving the decision makers. Often, complex negotiations will bog down in technical detail. This can be particularly important where crucial, but sometimes peripheral, third parties become involved, such as lenders and their lawyers. Consider when and how it is best to involve the real decision makers. Bringing the Chief Executive to a negotiating meeting, or moving to mediation in a dispute, can help to unblock a problem. Making decision makers sit through detailed technical meetings will be counter-productive, but bringing them to a focused meeting to deal with the real issues can be very powerful. Obviously, you will want to ensure your decision maker is fully briefed beforehand and understands your negotiation strategy.
Communication. If the negotiations are about to go wrong, at least make sure that everyone is arguing about the same thing. It is important to keep the lines of communication open, both at the level of the key negotiators and the lawyers. Many deals have been lost through misunderstanding and miscommunication. Speak to your opposite number regularly (and not just through email exchanges). Agree how and when you will check in through the transaction and you may head off many issues before they arise.
Objectives and outcomes
Know the bottom line. Frequently people enter negotiations with only a general objective – for instance to end litigation, or to sell a business – and without too much thought of the bottom line being sought. You should understand clearly what you expect to achieve, and what your options are if your desired position isn’t achievable.
Negotiating positions. From your SWOT analysis and due diligence, you should develop a series of clear negotiating positions. Your organisation may already have a written negotiating strategy – but if not, you might want to develop it now. In this way you can understand what you can give in negotiations, and what is an absolute position. You can also think about your strategy and how you get to a deal.
When to say no. It is also very helpful to have a clear understanding within your team of when to say no. There is no obligation to negotiate everything – it can be an entirely proper negotiating position to say no, to say that point is a red line and is not negotiable. If you do that, though, you need to be clear that a decision maker in the organisation will not contradict that at a later stage in the negotiations.
End games and outcomes. It follows that you will want to have planned the various scenarios which may arise from negotiations – what happens if things go wrong? Are the implications related only to the negotiations – or are they broader? Will your organisation be left with a business you don’t want and can’t run? If your counterparty is a customer or supplier, will business relationships be soured?
Some things to bear in mind
Structuring negotiations. It has been said that you should never go into a meeting not knowing what outcome you want, and how you can get there. That is particularly true of negotiation meetings. How can you can structure negotiations to reach your goal? What is the agenda for each meeting? Are you covering everything in a single meeting or dividing up the issues more manageably? Do you know what your opponent is going to say, or are you going cold into a meeting for them to deliver their comments? If so, what will your reaction be? It is worth doing all you can to narrow down the issues before you reach a meeting, and to ensure you package up solutions, rather than simply conceding items as you go along.
Litigation decisions. Is your negotiation about litigation – whether to litigate, how to play litigation, when to use mediation, or what particular tactics into use? Each of those will influence how easy, or tough, the negotiations will become. Does your litigation plan include an assessment of the implications of each decision?
Researching your opponents. How well do you know your opponents? It is often worth asking around among your contacts, your lawyers, and your advisers to understand how they behave in negotiations. Are they known for rigid positions – and if so, can you get insight into them? Sometimes organisations will even have gone into print on their negotiation style, or will have done a prior transaction with one of your contacts. Do they play games at the last minute, reneging on their previous position to seek a price reduction? How does your transaction fit into their overall organisation strategy? The better the picture you can build of their position, the more you are able to predict their negotiation position.
Future relationships. You are more than likely to come across your opponents in future. They may be your customers or suppliers, there may be trade relationships, and you may well need to maintain a professional relationship with your opposite number. Bear in mind the impact on your negotiations on the overall position – you do not want to win the battle but lose the war.
When things get really tough…
If you plan and prepare, your chances of bringing your negotiations to a satisfactory conclusion are greatly increased – but things can still get really tough. Your opponents may feel they have the upper hand. They may think they can batter you into submission. They may even have a culture of behaving aggressively.
This is where your preparation really comes to the fore. If you have got into the mind of the opponent, you will understand what you can use to persuade them to proceed. You will have assessed what you can give, and why. You will have identified who is the best person to face up to the opponent, and why.
You may also need to consider how to deal with personal animosity or even abuse. Sadly, there are organisations, and even lawyers, who feel that such behaviour is appropriate. Here the key is never to react to such behaviours, but to work around it wherever possible. If the other side’s lawyer is misbehaving, arrange conversations between commercial colleagues. If the problem is with the other side’s negotiator, seek to find a way through with the lawyer, or between decision makers. Consider if there is someone who can mediate between the parties.
If all else fails, bear in mind that many negotiations which appear to be at deadlock will be resolved over time. Disputes need to be resolved. Commercial arrangements need to be reached at some point. Organisations which have decided to sell – or buy – a business will often revisit their positions over time. Even if a negotiation appears to have failed, it is worth staying in touch with the other side from time to time to see what can be achieved.
Finally, consider that even the toughest negotiations are a development opportunity for you. You can hone your own skills, you can develop relationships, and enhance your reputation in your own organisation.
Further reading
Legal as a blocker – how to confront the perception provides insight into situations in which giving negative messages may be misread as legal becoming a block to progress.
Delivering negative messages provides some helpful advice for circumstances in which you need to deliver negative messages.
Getting to Yes Roger Fisher and William Ury Bantam House 1999
Negotiation Genius Deepak Malhotra and Max Bazerman Bantam Dell 2008
Pitch Anything: An Innovative Method for Presenting, Persuading and Winning the Deal Oren Klaff McGraw-Hill 2011
Difficult Conversations: how to discuss what matters most Stone D, Patton B, Heen Penguin Random House 2010
Never Split the Difference Chris Voss Random House Business 2017