Closing the Deal

As a very new lawyer, I once found myself sitting across the
table from a seasoned and well-respected attorney. We were negotiating the
terms of a transaction between our respective clients and had almost reached
agreement. I say almost because I was insisting that we memorialize several
meaningless concessions in favor of my client. Truth be told, my client hadnt
thought of any of these remaining issues, and wouldnt have insisted upon
making their resolution part of our agreement. In my efforts to achieve a
win, I was quickly getting in the way of a successful outcome for my own
client. Thankfully, my adversary stepped in and helped me get past myself so
that our respective clients could move along.

I like to believe that early stumble was a product of
inexperience. Unfortunately, that assessment may be inaccurate. Every day,
otherwise able and seasoned businesspeople make this same mistake and impede
their own ability to achieve a good outcome by insisting that their counterpart
accept defeat. Although this approach may occasionally be an appropriate
position in litigation, it almost never works in the transactional arena. The
buyer may need the seller to assist in the transition of key customer or
supplier relationships. Alternatively, the buyer may need the sellers help to
smooth relations with critical employees. In either case, or indeed a myriad
other possible cases, a scorched-earth approach to negotiation is unlikely to
succeed. The deal may close, but the seller is unlikely to be motivated to help
the buyer make the business successful after the sale. By the same token, a
seller who insists on extracting every potential aspect of value in a
transaction, to the detriment of the buyer, is unlikely to succeed. Faced with
such a seller, the smart buyer will often simply walk away from the deal. The
skilled negotiator will avoid this trap by mapping out a strategy and
prioritizing issues before sitting down at the bargaining table.

While adopting a take-no-prisoners approach is a quick way
to lose credibility, it is by no means the exclusive road to failure at the
negotiating table. A second, and perhaps equally common method to achieve that
result, is to bluff. As many scholars have noted, the odds of achieving a
successful result are stacked against a party attempting to bluff.

Consider the party who asserts that a particular issue is a
deal breaker. If the party is bluffing, there are three potential outcomes:

1. The bluff
   may be viewed by the non-bluffing party as truth but acceptable. If so, the
   party will not wish to call the bluff, and will instead accommodate that
   position and move on to issues of greater importance;
2. The
   non-bluffing party may view the bluff as truth but unacceptable. If so, the
   party also will not call the bluff, but will be unwilling to move forward. The
   bluffing party will have created an impasse, where a fictional reality (the
   assertion of make-or-break status for the issue) is at loggerheads with actual
   reality: the importance of the issue for the non-bluffing party; or
3. The
   non-bluffing party may view the bluff as fiction, and may call the bluff. If
   so, the bluffing party must either drop the issue (thereby admitting to the
   bluff and losing credibility) or perpetuate the fiction and risk losing the
   deal.

Only the first of these three outcomes is a good result.

Almost without exception, businesspeople and those who
counsel them tend to be driven and competitive. By harnessing these traits, our
business leaders achieve spectacular successes. By tempering these traits at
the negotiating table, however, these same leaders are able to create
successful transactions, where all sides to the transaction walk away from the
deal committed to the success of the venture.

This is a sponsored legal report from Lane Powell PC. Brian B. DeFoe is a shareholder at Lane Powell and
a business lawyer whose practice focuses on matters involving
corporation finance, the federal and state regulation of securities, and
product regulatory issues. In the course of his practice, he has had the
pleasure to assist numerous clients in merger, acquisition and corporate
finance transactions. In addition, he has also advised numerous clients on
matters of compliance with state and federal securities laws in connection with
public and private securities offerings, as well as interactions with
securities regulatory authorities. He can be reached at
[email protected] or 206.223.7948.