Negotiations and love songs

Unlike Paul Simon, any connection between commercial negotiation and love songs seems a very tenuous one, but the most satisfactory of deals that corporate law specialist Andrew Stilton has been involved with have generally been ones where negotiations have been hard but fair on both sides and where both parties have emerged (relatively) happy. In this article he looks back at some of the ways negotiations have been reached and key points to consider.

There is a school of thought (partially in the legal profession) that a successful negotiation means winning every single point, but that approach can be counter-productive, not least because it encourages the other party to be equally intransigent, which can make the transaction extremely painful for all concerned and even cause a good deal to be lost.

The best negotiators, in my book, make sure that, wherever possible, there is sufficient in the deal for the other side: this is not a matter of altruism but, on most deals, there are some “issues” which arise after completion, and parties are far more likely to resolve these in a sensible, commercial way, rather than rush off to the courts if they are, overall, happy with the deal which they have signed.

I am by no means a believer in karma, but sometimes an overly-aggressive approach can backfire spectacularly. On one occasion, some clients of mine were selling a company which was struggling. The buyers and their advisers were determined to fight tooth and nail to win every single point, because they felt that they held all the aces.

At 8.00am on the morning of completion, there were still a couple of issues to be resolved but, at that point, we discovered that the buyers were desperate to announce the deal to the market by 9.00am, in advance of their AGM later in the day. The boot was suddenly on the other foot and so my clients and I decided to have some fun and, over the next fifty-five minutes, systematically and successfully re-opened all of the major points which we had been forced to concede earlier in the negotiations.

The best negotiating team I ever worked with was for a company client who fielded Mr Nice … and Mr Even Nicer: between them, they readily and cheerfully conceded all of the peripheral points but, in a very charming but firm way, held firm on all of the points which really mattered (the ones which potentially had a real financial impact, rather than esoteric legal points).They had worked out in advance which points were, for them, the real “must-haves” and made sure that they won every single one of those.

As lawyers, of course, what we regard as eminently reasonable when acting for a buyer will be dismissed as totally unacceptable when acting for a seller. The reality, though, is that most of us act regularly for both buyers and sellers and borrowers and lenders and know pretty much what the legal agreements are going to look like at the end of the day. It is much better, therefore, to produce draft documents which are very close to where they expect to end up and then negotiate sensibly, while leaving the other side with a few “wins” to make sure that their honour is satisfied.