Back to Blog

How to Defuse Hardball Negotiation Tactics in M&A

     

Negotiation is essentially an art form, and although some people have an innate ability to strike bargains with relative ease, many people must hone their negotiation skills through trial and error. Of course, there are obviously different types of skills needed depending on the negotiation situation. For example, it is quite different to negotiate a lower purchase price for equipment than it is to negotiate a massive merger. Nonetheless, there are definitely some core negotiation strategies that can be applied in virtually any scenario. And, people are likely to encounter similar roadblocks during the negotiation process regardless of the details and circumstances. In the business world, and especially in mergers and acquisitions (M&A), the negotiation team should expect to encounter certain types of hardball tactics. Here are some examples as well as some tips on how to defuse them to ensure that the negotiations continue:


Outrageous Demands

When companies are looking to make a deal, they obviously want to get the most value out of the situation as possible. In addition, for high value transactions, such as an M&A deal, the overall stakes and expectations are extremely high. As a result, companies should not be surprised if the negotiations start off with seemingly outrageous demands. It is relatively common for people to aim high but to end up closing a bit or a lot lower. For some companies involved in M&A, this may be an intentional tactic to see how much they can get, but there will definitely be instances when a company just legitimately believes it is entitled to make such demands. It is important to recognize the difference to ensure there is an appropriate response, but it  is never wise to take offense and respond with hostility or defensively. Instead, keep an open mind and gauge what it is they are really seeking that would cause them to make such a demand. If all parties have serious intentions, an eventual compromise can be reached.


Incongruent Objectives

This may or may not be an actual tactic to steer the direction of the negotiations. In some cases, companies on each side of the transaction simply will not be on the same page with regards to where they see things going. However, one party may simply be trying to influence the other side to shift its original course. This may require having to make substantial changes to the business before a sale will be possible. In this case, it really depends on whether the other side is a good fit or the whole situation is like trying to fit a square peg into a round hole. If the negotiations just go round and round without fail, then it may just be an ill-aligned arrangement. The willingness to compromise is always a strong indicator of a party’s true desires, so if this can’t happen, then it may be best to politely walk away.


Inflexibility

There is nothing more frustrating than trying to reason with someone who simply refuses to see reason. The whole point of negotiations is to negotiate an agreement that is suitable to both parties. This means that both sides will have to give up some of their initial expectations and concede on certain matters. A true compromise should leave both parties both satisfied and somewhat dissatisfied, as this means that a more fair balance has been struck. In the event that the negotiation team encounters repeated and stubborn inflexibility, there may not be a way around it. One side should not have to make all of the sacrifices. If that is indeed the case, then it is important to remain resolute and/or to kindly decline any further discussions, as negotiating with a side that is completely inflexible is a waste of time, money, and resources.


Threats and Ultimatums

It should not be surprising if some negotiators come across as aggressive and perhaps even like bullies. When one side has more power, basically financial leverage, that side tends to think it can dominate the proceedings. Granted, they may be able to set the tone, but they should not make vicious threats or present unfair ultimatums in an effort to get their way. This can actually be a huge red flag, as it is a good indication regarding the manner in which the transaction will unfold. Hopefully, if two companies commence the negotiation of a merger or acquisition, there will be a good faith attempt to make a deal that is fair, equitable, and realistic. If a threat or ultimatum is made at any point, especially one that is unexpected or completely unfair, the key is to stick to the facts of the situation and the agreed upon terms up until that point. In general, a calm and respectful approach will prevail.

Download the Guide to Secure File Sharing Software