There was a very interesting political event last week which serves as a great lesson for the negotiation stage when buying a business.
In case you missed it, President Obama hosted the Israeli Prime Minister Benjamin Netanyahu. The day prior, President Obama made some very bold statements regarding the U.S. position on what it will take to establish peace between the Israelis and Palestinians. One of his points was that Israel would have to retract to pre-1967 borders. The following day, the Israeli Prime Minister, sitting next to Obama in the White House, stated unequivocally that Obama’s position is an impossible concession. Needless to say, this direct opposition from one leader to another, caused quite a furor.
I shall leave my political opinions aside on this one, however, I found it absolutely incredulous that President Obama would take such a public “line in the sand” approach altogether. His position was then completely undermined and marginalized by the Israeli rebuttal. Two days later, the president spoke to 10,000 attendees of The American Israel Public Affairs Committee conference and he dramatically softened his position.
This type of posturing happens all the time between buyers and sellers and the results are almost always the same. One party takes a hard line “deal breaker” position on a certain component of the deal. The other party completely dismisses it as being a detriment to any deal, almost to the point of absurdity. If first party backs down and changes their stance, they set a terrible precedent for all future discussions because the other party has seen them back down before, and fully expects it will happen again.
While there are situations when a party may have to take a stand, unless there is new information that surfaces regarding the particular matter, backing down can destroy one’s credibility and can negatively impact all future strategies.
The better approach is to always explore every possible resolution and to be creative when an issue arises where either party believes it is a deal-breaker. An “all or nothing” approach rarely emboldens the presenting party. An “all or nothing” approach rarely emboldens the presenting party. In fact, it generally has the opposite effect.
The business buying process has many stages and twists and turns.
A successful negotiator will work towards formulating a deep understanding of the other party’s position as well as clarity on how each ranks.
Although there can be components to a deal that may cause one party to walk, it is imperative to be selective if you employ this tactic at any point in the negotiation. Remember;
when a line is drawn in the sand, there is no turning back, for if you do, it will ruin your credibility for any other critical points in the ongoing negotiations.
Read more atricles about negotiating to buy a business.
Have a great week!
A POST EDIT NOTE: As always,comments to my posts are greatly appreciated, whether positive or negative. Some of the comments below completely miss the mark and the point of this posting. The intent is not to make a political statement. Rather, it serves as an analogy to demostrate how effective negotiating strategies can put one party in the proverbial driver’s seat of a deal and how negative approaches will impact the other side. How matters unfold in the Middle East is a subject for scholars far more versed on the subject than I am. But there is no doubt that the leverage in the “deal” at this point in time has shifted dramatically to PM Netanyahu’s perspective,and the global diplomatic reaction in the past few days validates the precise intent of using this situation as an analgy for the negotiating process between business buyers and sellers.