At our most recent VCF Presents Enrique Brito spoke on the topic of negotiation and how it relates to M&A transactions. Brito talked about both the science and the art of negotiation, breaking down the fundamentals that we can all work on to become better negotiators. He centered his presentation around the three principles that lead to a successful negotiation: The Right Mindset, The Right Process, and The Right Execution.
The Right Mindset
Brito stressed that the right mindset starts with two beliefs. The first is that everything is negotiable – when you see a price you should look at it as a preference and an invitation to negotiate. The second is that a better deal can only be found if you ask. In the United States, it is the mindset of most Americans that while some things are negotiable such as a car or a house others, such as buying a coat at the mall, are not. We should use all transactions that we are involved in to practice becoming a better negotiator. That doesn’t mean haggling to get the lowest price, but you should always negotiate to ensure you are getting the most value.
Brito elaborated on the difference between “interest” and “position”. When negotiating, you must understand the position (what you want) and more importantly the interest (why you want it) in order to be successful. By understanding your interests and the other side’s interests, you are better suited to negotiate a win-win deal.
The Right Process
Negotiation is a process, not an event. Negotiation is both an Art and a Science. It should be viewed as a conversation, not a battle of positions. Brito broke negotiation down into six stages:
- Document Lessons
He stressed that there is no substitute for preparation. 80% of the outcome of a negotiation will be determined by your preparation, which is completely in your control. Negotiations are stressful and science tells us when we enter a stressful situation that we have not prepared or practiced for we will not be thinking logically. Negotiations are won and lost before you ever engage with the other side.
The Right Execution
Once you have prepared, follow your plan with an agenda. For each meeting know what the purpose is, what outcome you expect, and what the next steps need to be. Take the lead and control the process you have prepared for in order to implement a win-win execution. M&A negotiations are emotional so the better prepared you are the better chance you have of obtaining the outcome you expected. Remember, negotiations are a combination of price, terms and conditions and as all of this comes together, you must be clear on what you want while also understanding the interests of the other side. Be prepared to trade with the other side, but never give up something without getting something in return.
Brito continued with the many strategies and tactics that you can use to help you execute a successful negotiation. You can watch Brito’s full presentation here. We hope you will take the time to view this excellent overview of the Art and Science of negotiating the M&A deal. Brito’s presentation provides valuable insights on negotiation that will give you strategic information for the next time you are across the table looking to execute a win-win negotiation.