Let's Make A Deal! 5 Tactics for Becoming a Better Negotiator — Part IV

21 May, 2020

READ PART I, PART II, PART III or PART V

Many people think talented negotiators were born with innate skills. And although there is an element of truth to that, it’s also true that good negotiating skills can be learned. Negotiating skills can be improved through experience, which can be very expensive in an M&A context, through reading academic research on negotiation techniques and by learning best practices from negotiation experts.

For this 5-part series focused on improving negotiating skills, we interviewed 63 corporate executives to find out their perceptions of what skills make for a good negotiator and whether those perceptions match up with available research. Keep in mind that the conclusions we reached are what we consider best practices, not dogma. Every negotiation is unique, and the tactics outlined here will not apply to every business situation. But these best practices make for a good foundation.

PART IV — HOW DO YOU MAKE THE FIRST OFFER?

Question: How exactly do you make the first offer?

  1. Verbally provide a price range — 31%
  2. Verbally provide a point value — 26%
  3. Provide a point value in writing with some support — 31%
  4. All of the above, plus provide supporting analysis — 4%
  5. All of the above, plus provide your position on non-monetary issues — 8%

In this question, the corporate executives were fairly evenly split between the first three answers. The best practice for presenting an offer, however, is D, the answer that the fewest selected.

Academic research has found that the more precise you are, and the more objective criteria you can use to support your analysis, the more seriously you will be taken by the counterparty and the more impactful your position will be. If you provide a price range, like 50 to 60 million dollars, the buyer will hear 50. And because you’ve not been precise, you’re less likely to have set a precise anchor.

Providing a point value verbally is generally better than a price range. But a point value presented verbally doesn’t convey the serious intent that you would convey if you present it in writing. Supporting analysis provides objective criteria that lends credibility to your position and gives your analysis of the value of your company more gravitas.

Offers should always be done in writing. Why? First, because it conveys serious intent, and secondly, there are multiple stakeholders who will be considering the offer on the other side, and something in writing is much more likely to get passed around and considered among company executives and board members than is a verbal offer.

NEXT: PART V — HOW DO YOU REACT TO THE BUYER’S OFFER?