Deals are notoriously idiosyncratic, but the same Achilles heel plagues them all: it doesn’t take much to derail them. Every deal has a different culprit. Sometimes negotiations succumb to structural flaws or irreconcilable economic impasses. But too often the death knell is needlessly sounded by addressable shortcomings: flawed strategies and tactics, torpedoed by bad interpersonal dynamics and ill-conceived communication patterns.
Strategies that work
Successful dealmakers understand that the longer a deal takes, the less likely it is to close. So they wage war against ever-present enemies: inefficient/inflammatory communications and overly-burdensome documents.
The best negotiators actively run transactions to drive toward closing. Though their styles and tactics differ, they are universally great listeners, with high emotional quotients and genuine empathy. They accept that both sides of a negotiating table have legitimate needs that must be recognized and satisfied for there to be a deal.
Instead of trying to win every point, they employ deceptively simple tactics:
- Seek trust and build on common interests.
- Distinguish “wheat” from “chaff.”
- Fight only over issues with meaningful monetary impact relative to transaction size and price.
- Leave only the most narrow set of material issues to resolve.
At every turn, great dealmakers seize control and fight against the major barriers to closing:
- Passage of time.
- Miscommunication and ambiguity.
- Unnecessary interpersonal deal friction.
What truly matters? All issues are not equal-weighted in importance. Great dealmakers confidently distinguish “nice to haves” from “need to haves.”
Transactions close when counterparty rapport and mutual confidence is established and transaction momentum builds. Personal relationships matter. As trust rises, less guarded information flows more freely, creating dialogue and leading to positive results.
Once lost or reduced, trust and momentum are excruciatingly difficult to regain. Each unnecessary, ineffective, or ambiguous document or email wastes time, adds cost and degrades momentum and trust. They consume energy and deal goodwill, and provoke negative counterparty reaction.
Some modest suggestions
In an M&A context, the transaction ecosystem inhabitants are buyer and seller (counterparties), and their respective agents (investment bankers, lawyers and accountants).
Counterparties sit on opposite sides of an increasingly metaphorical negotiating table. They share a need for a document codifying an agreed exchange of assets and currency, permitting transfer from seller to buyer, and demarcating and allocating counterparties’ risks and rewards.
Only the M&A principals have sufficient power and leverage to affirmatively set a transactional “tone,” as well as establish guidelines (including human dynamics) for all counterparties and their agents. The principals can mutually establish the deal’s “rules of the road.” Buyer and seller can and should demand transaction documents designed to facilitate (not frustrate) dealmaking.
Deal negotiation is most effective if:
- All documents and written communications minimize ambiguous, confusing, inconsistent or irrelevant material.
- Direct bilateral communication is maximized.
Ineffective tactics and communication can undermine even the greatest of strategies.
