As humans, we actually negotiate our entire lives: for example, as a toddler whether you can have another candy if you go to bed on time, as an adolescent whether you can come home later if you clean up your bedroom, and as an employee about your salary.
And of course in business acquisitions where a buyer and a seller must come to an agreement on the purchase price of the shares and the other terms of the deal.
Pitfalls
Negotiations can be challenging and there are several pitfalls that people can fall into. Listed below are six (not exhaustive) of these pitfalls:
- Lack of preparation: one of the biggest pitfalls is going into negotiations unprepared. It is important to take the time to determine your goals, interests and alternatives before taking your seat at the negotiating table. Without proper preparation, you can weaken your position because, for example, you do not respond adequately to arguments from the other party;
- Emotional reactions: emotions can run high at the negotiating table, but try to remain calm and rational. If you react too emotionally, you may make irrational decisions that you later regret;
- Making too many concessions: it is tempting to make concessions and compromises to reach a quick deal, but it is important to keep your goals in mind. If you compromise too quickly and too much, it can lead to a deal that is not in your favor. By the way, there is nothing wrong with compromising, but also be firm in pursuing your main goals;
- Lack of communication and listening: effective communication is essential during negotiations. It is important to listen carefully to the other party and be open to their views and interests. If you don't listen well, you may miss information and signals that may be important to you precisely for closing the deal;
- Rigid adherence to positions: if you stick too rigidly to your own views and are not willing to be flexible, it can lead to an impasse. Negotiations often require some give and take to reach a satisfactory agreement;
- Not focusing on win-win solutions: aiming for a win-win solution, where both parties benefit, is often the best approach in negotiations. However, sometimes people focus too much on their own interests and lose sight of the broader picture. Use your creativity to look for solutions that benefit both parties.
Negotiation is a craft, especially in acquisition transactions. It requires agility, flexibility, humor, persuasiveness and firmness, sometimes the ability to be vulnerable and of course empathy for the other party. In short, a broad pallet of skills, knowledge and experience to work as an 'accomplished' negotiator.
And by being aware of the pitfalls and improving your negotiating skills, you increase your chances of a successful transaction outcome. This takes training as well as experience, but pays off in the end.
