For many businesses most negotiations are effectively business as usual - the acquisition and sale of the goods and services that generate the revenue for the business to survive and grow. Some negotiations are game changers; they transform the business. Mergers and acquisitions (M&A) are a common example of these ‘make or break’ deals. Unfortunately, the documented success rate of M&A over the last thirty years has been disappointing. Graham Kenny writing in Harvard Business Review states that between 70 and 90 percent fail.
For negotiators, there is a special challenge in negotiations that relate to mergers and acquisitions because although they are a one-off transaction with the other party, they can, and often do establish the necessary conditions for a new relationship with the acquired business. Failure to recognise that mutual gain negotiating is necessary for success can start the process of value destruction from the start.
A successful M&A practitioner, Anthony Mitchell has outlined the principles that underpin his negotiations in an article Five Key Lessons for M&A Success featured in The Deal magazine section of The Weekend Australian.
Based on 30 years of experience, Mitchell outlines a mutual gain approach to negotiating in mergers and acquisitions. His key lessons are:
- Build the relationship with the counter parties on a personal level. Get to know them as people, not positions on an organisation chart. Incompatible workplace cultures are often the root cause of failure. As Peter Drucker famously said, “Culture eats strategy for breakfast.”
Unlike Jerry (show me the money!) McGuire, Mitchell advises that discussing the dollars and legal technicalities will derail meaningful negotiations. The parties should agree on a vision for the merged enterprise and create a climate where both sets of objectives can be achieved through the merger. Discussing the dollars too early creates a ‘win/lose’ mindset, rather than one that creates value.
Mitchell advises patience, calm and empathy as these negotiations take place at the same time, as both parties are running their own enterprises. For some vendors their company represents a life’s work and they owe responsibilities to those who have helped create the enterprise. All these factors create both complexity and opportunity for mutual gain.
So while the merger or acquisition can be viewed as a ‘one off’ transaction, it is imperative that mutual gain principle lay the foundation for the new enterprise’s success.
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