Styles of Negotiating a Business Transfer
I have some strong feelings about the most effective way to approach negotiations for a business transfer (or for that matter any kind of contract).
Those feelings, along with a bunch of white hair, have developed over the course of negotiating contracts involving hundreds of millions of dollars. Some negotiators approach contract negotiations as a win-lose proposition. Under this approach, the more “I” get, the less “you” get. Others approach negotiations from a win-win perspective – let’s see if we both can achieve our goals.
As a young in-house lawyer, I was involved in a classic win-lose negotiation involving a $200 million acquisition. The lawyers representing the seller were from a large New York firm – perhaps the most famous Mergers and Acquisition law firm in the United States. Everything about that negotiation was unpleasant, including yelling by the other party. And, I was unable to turn the negotiation into a win-win. Even simple points that could have been agreed to ended up being fought over. The law firm’s style in that negotiation was to wear us down and to provide pressure on every point in a long and detailed contract.
That negotiation had several results.
1. Neither party ended up with as good a deal as it could have negotiated. On our side, we had no desire to go out of our way to help the other side, since we felt we were being hammered on every single point anyway. On their side, they were simply uninterested in how the deal looked to us; they were only concerned about their own interests.
2. The contract took much longer (and cost much more in attorneys fees) to negotiate, since every point was contentious. The deal came close to falling apart several times.
3. The parties walked away with an impaired relationship. As the seller, we had little interest in helping the buyer after closing except to the limited extent we were expressly required to do so by the contract. Particularly, in larger transactions, continued seller help is important to the buyer, and the buyer in this case lost out on much of that help.
4. The buyer fired this law firm and did not use them on future acquisitions.
As opposed to this type of negotiation with its negative results, I’ve been involved in many win-win negotiations and the results have been almost uniformly positive. First, let’s examine what a win-win negotiation means. It doesn’t mean giving up significant points that are critical to you. It doesn’t mean agreeing to anything the other party wants. What it means is rationally discussing concerns that each party has about a particular issue and trying to address those concerns in a way that works for both sides.