How to Negotiate like a Pro

As our regular listeners know, people, leadership and culture issues can make or break a deal. That's why I'm excited to be joining the HR M&A Roundtable's third annual conference. I'll be there alongside M and A giants like Ken Freeman, former CEO of Quest Diagnostics, Mark Cassidy of Vestigo Ventures and Sally Larson of LPL Financial. This year's conference is optimized for virtual attendance and is the best way I know to learn practical, hands on tips and techniques for managing the people, leadership and cultural issues. Visit mascience.comhr to learn more and get a discount code exclusively for MAScience listeners. Again, that's mascience.com hr I'm Kisam Patel and you're listening to M and A Science where we talk with deal professionals and learn valuable lessons from their experience. This podcast focuses on stories, strategies and what actually happened during M and A deals. Welcome to M and A Science Live where leading M and A practitioners share.

Lessons learned from their experience. When you use proven techniques in M and A, more value is created.

If you're interested in keeping up with the latest from M and a science, visit mascience.com and subscribe to our newsletter. Again, that's mascience.com I'm your host Kisan Patel, CEO and founder of M&A Science. Joining me today is Mladen Kresik, CEO at KNR Negotiations llc. Mladen is a professional negotiator specializing in business transactions and has assisted C level executives and companies with practical sales and negotiation strategies around the world. He's personally closed hundreds of transactions resulting.

In relationships worth billions of dollars.

Laden is founder of K and r Negotiations, a 20 year consultancy with professionals operating on every continent. Before K NR he was an attorney at IBM and then general Counsel and board member of Bristol Technology.

Today we're going to talk about how.

To negotiate like a pro.

That's a good setup. How to negotiate like a pro. That's a broad category. I often ask people, especially since I'm dealing with people in sales, people in procurement, people in M and A business. I ask them are you professional negotiators? And most people don't raise their hand and I ask them a very simple follow up question which is what do you do every day? What do you do every day of your professional life? Negotiate with your peers. You discuss things with your customers so you hopefully don't negotiate too hard internally with your family and all that stuff. Really our professional lives are built on negotiating things to some level of outcome. If we do this Every day of our professional lives. Shouldn't we all be professionals at it?

What led up for you to get this as your career focus?

Other than it comes somewhat naturally, but having a multi ethnic background, Let me put it this way. One of the first things I was involved in professionally when I graduated law school, I hate to admit, but I am a lawyer by trade, was I had a client who was selling a set of product centers. So they were selling a whole bunch of retail outlets to another industry member at the time, about 70 or 80 of these outlets. So it was an asset sale. And I had the task as a junior lawyer working on the deal, I had the task of procuring the lease assignments from all 73 or 78, I can't remember the exact number, landlords to get an assignment from this one very high name brand company to the buyer which was not as well known. So of course the landlords, none of them really wanted to allow the assignment of the leases. Why would we go from an A rated company to a questionable B rated company? So we are 48 hours before the closing is supposed to take place and I have one out of 78 assignments. So this is the days when you didn't have the communications we have today. You had fax machines at best. So I'm going, I'm panicking, I'm completely panicked. So I pick up the phone and I call every one of these landlords and I leave them all messages because not a single one of them picked up the phone and I said to them on the phone and I sent them the follow up facts. We are perfectly okay remaining primarily liable on the leases, which we were going to be anyway. But we want you to know that it is rather urgent that you give us these assignments. And it's okay if you don't just understand that there will be a boarded up storefront in your premium luxury building on Park Avenue and other places as of Monday morning, this was Friday. So as of Monday morning 8am and that's all I did slowly over that weekend. I never went to sleep. Faxes started coming in one after the other. By seven o' clock in the morning, Monday morning, I had every single one of them. So I learned that sometimes instinct works well in negotiations. And it was suggested to me by some of my superiors at the time, which were these much older people of 40 years old or so, which today of course seems like a junior person. They suggested that I do some other things involving negotiations from then on. So I got roped into a lot of negotiation scenarios that Were challenging and so on.

That's a great story.

I learned negotiations from an uncle that.

Took me to garage sales and did it that way to barter for video games.

It's fantastic.

Why is it important to learn how to negotiate?

I think we already mentioned it to some extent. It's something that we do every day, and a lot of people are intimidated by it because they think of hardcore negotiations, adversarial negotiations. But actually, negotiations are not an adversarial process. If you think about it from the standpoint that what is a negotiation? Negotiation is really an interaction between or among people, because sometimes there's multiple parties to reach an outcome. And if you think of it that way, especially in business, it's something we all ought to do and ought to do willingly. Does that mean that there are no adversarial moments? Of course not. And by the way, not everybody's comfortable with the adversarial aspects of negotiations. If that's the case, learn negotiations, learn about what needs to happen, and then get somebody else to help you. Sifting through the adversarial moments and breaking down things to their logical components, especially if things are more complicated than they should be.

It's definitely an important skill. Like we talked about from the beginning. It's just something that you encounter daily, and it's important to understand the dynamics of it.

Yeah, no question. No question. And it begins with simple things like understanding that negotiations really are something that occurs throughout your interaction with people. It's not something that just occurs when you're talking about, oh, I want to buy this or sell this for this price. It occurs in shaping things. It's the give and take. For example, when somebody is building a house about the specifications, what materials we should use, and so on, or if you're in an M and a deal, simple things is going to be an asset sale, Is it going to be an equity sale? And just the discussion of the pros and cons of both, and the risks and rewards associated with different alternatives. Those things are all negotiations that we could learn to do better. But first we got to recognize we're actually negotiating.

Good point there.

We see this a lot in sales. When people are selling, they say, we're not negotiating. We're just describing our product solution. I go, I think you probably are negotiating. Are you setting the client's expectations? Is the customer going to come back to you and expect you to deliver what you just told them? Are you going to be able to deliver it? And then they're going to then say, okay, discount Something offered because you can't deliver. Everything you just told me seven days.

Ago, everything that you provide that sets.

Expectation essentially is all part of negotiation.

Absolutely. It's a pervasive process. You can't really separate it from other activities that you do that involve interaction with people.

What's your value based approach to negotiations?

That's a good question. You got to separate sometimes the kinds of negotiations that you do. There are a number of schools of thought regarding problem solving and adversarial negotiations. And in reality, there is elements of both that permeate almost every negotiation that we do. The value based approach is all about understanding the other side's interest and uncovering those interests and negotiating to those interests so you can move them closer to your way of thinking. In fact, that's the way we define leverage. It's quite closely related to leverage. Our definition of leverage is a lot of people struggle with that. By the way, leverage is a term the way we use it in negotiations and it's used all the time. Leverage as a term doesn't exist in any other language other than English. It exists in a different context, but not in the context of interpersonal relations. We're talking about when we talk about negotiations. So it has to be translated for people. So years ago I gave it a lot of thought. What do we actually mean by leverage? Because it comes from physics. In physics it does exist in all other languages. In interpersonal relations, in German, French, my native tongue, Croatian, Japanese, Chinese, it really doesn't exist. It has to be explained. So if you think about it, in physics, leverage is the ability to move objects of heavier mass with less force. That's what levers give you. More levers in a pulley system more easily move objects of heavier mass with less force. Well, leverage in interpersonal relations is the ability to move people. And value based leverage, or what I call positive leverage, people move voluntarily. They move voluntarily because you're doing something for them. It's in their interest to move versus negative leverage, which by the way, is very valid because negative leverage tends to be risk based. So negative leverage that people don't move so voluntarily, they may move because they have to. Utilities, you got to pay the bill. Which is why utilities are regulated, by the way, because they're natural monopolies. They're regulated because they could charge anything they want. Because people have to have electricity, they have to have water, they have to have sewage. To me, the positive side of leverage is all value based. Is all value based. In fact, we use something, we use a tool Called the leverage slope, which is a very simple mathematical model that has value, especially unique value on the X axis and price and terms delta and price and terms on the Y axis. And if you draw the diagonal, which is the leverage slope, the higher the unique value, which we liken to business impact on the other side in B2B negotiations, the higher the theoretical prices that you can charge. It represents obviously more value you delivered more higher prices and becomes less elastic. But anyway, I'm going on theory of economic theory now, so I'll stop on that question because that is the value based approach negotiation. We need to know where we are on the leverage slope so we can articulate positive leverage. Because it's better when you're trying to formulate business relationships, it's better when you're trying to sell. But you have to remember negative leverage because people will act with more urgency in relation to risk. So negative leverage is very important.

So you got both positive and negative leverage. And I'm assuming you want to map this stuff out. I want to put all these pieces on the table to start thinking of what my strategy is going to be. What am I going to prioritize or try to set up first scenario. What's the thinking look like when that happens? Is it, hey, do I want to have my cards on my table and come up with multiple scenarios that I got three, five scenarios and then think through which I want to present first? Or what does that look like on the back end? Strategy side?

It's a broad question. Let me break it down. First of all, you have to understand the portfolio of leverage that exists on both sides because everybody has some leverage, things that give them leverage. The clients or the customers have leverage. The buyer has leverage, the seller has leverage leverage. The seller presumably has something the buyer wants. The buyer has leverage because they have money, they have maybe alternatives. So you have to understand those things. You have to break down the goals and the interests of the two sides. And I like to do that using something we call the risk reward matrix. In other words, I like to understand what is the other side worried about in terms of risk, if they act, if they don't act with me, what's the risk of not acting? And what are the rewards of not acting versus acting? Because that'll give me a good feel for what leverage lies in there and what need to do in order to get them to act. Presumably, I want them to act. That will start in my mind populating a little set of priorities. So for example, if the reason, again, I'll put In an M and A context, if I am the seller and I'm considering selling my business, I want to know not only what alternatives I have because they're going to give me some leverage, but I also want to know and understand what the action, non action risk rewards look like for the buyer. Action being acting with me, buying my company. And non action could be build your own, don't do anything, use your money for other things, the opportunity cost, or potentially do a deal with somebody else if there's somebody else available. So I want to identify the risks of action and non action in relation to alternatives. Build your own by me and I want to understand the rewards. And for the person who's the purchaser, there will always be alternative uses of money. So I have to understand something about their business.

How do you know all those variables? Do you have to ask questions and do discovery? What do you do?

Yeah, absolutely. A lot of people in negotiations who are hard charging are type A personalities. I actually am a type A personality. But one thing I've learned over the years is that patience and listening are two skills I really needed to develop in order to develop the portfolio of information, to do the kind of analysis we were just talking about, to understand the risks and rewards of different alternatives. And it's remarkable to me to some extent, I'm an external to a lot of negotiations. I'm hired in order to help somebody else negotiate a deal. So it's easier because I'm dealing with their children and not my children. So this is not to be critical of anybody. But I think when people are very immersed in their own deals, they lose that ability to sit back. Just sheer pressure, sheer business pressure. Sometimes they don't listen as well as they should. And you always have the opportunity to listen. You always have the opportunity to ask good questions. Even when I interview people for jobs or whatever. You're a professional interviewer. Very often in interviews that I do with people, especially young people, I make more of a judgment on what the questions they ask, then on the answers they give. Because I want to know what they've done their research, I want to know about them. I want to do my own research as well. By listening to the questions they ask, I can learn a lot about whether or not they're going to be listening and putting things together in a logical, structured manner.

And the questions you want to ask is going to help you identify some of those levers that you may not even know about.

Yeah. In deal making, absolutely. In dealmaking, there's no such thing as A bad question.

Give me some example questions.

That is a good question. Depends on the context. I'll tell you first, the question I absolutely hate and I hear people in sales in particular ask this question or advocate asking a question which is tell me what keeps you awake at night? Which is to me one of the stupides. I don't know if you've heard it, but to me it's one of the stupidest questions. First of all, it doesn't show that you've done any research, but people get annoyed at that kind of question. Wait, what do you mean what keeps me awake at night? The questions that I like to ask is, first of all, I want to understand the other side's business. There's no substitute for genuine curiosity. I'm always curious about businesses. So I want to know, and I don't care whether this is M and A context, the joint development, the complex transaction involving M and A and outsourcing or whatever. I want to understand their business. So I'm going to do a little bit of research on their business and then I'm going to look at what their drivers are and what kind of hurdles they have in their industry. And so I'm going to ask some questions around what are the biggest hurdles within those that I've seen on their website and all the research that we do and this today research is so easy on most of this stuff and everything is available. I'm going to identify the context for them because obviously a lot of information is available and then ask questions within that context. And then I also want to know what drives them, what are they motivated by? Individually, personally, because the personal motivations and sometimes there's a lot of that information available, especially with high ranking executives. Those people usually have taken over other people's jobs in some recent future or recent past. Why? What was the problem? Why would they hire? And I asked the question again in context, so it's not an obnoxious question. I'll say to them, look, we understand the company is doing this and this. And you came on board six months ago. What was the driver for the company and for you it's a perfectly legitimate question because I want to know two things. I want to know what's motivating them, which is the why question. I also want to know the what, which is the flip side of the why, which is what are their objectives? Current state, future state. Because if we're going to do a deal, usually it's got to be related to enabling them to get to that future state. Again, doesn't matter what kind of deal. If I can't in some way relate my deal to the future state, probably it's not going to happen. And it's got to be somewhere along those priorities.

You need to understand their drivers. Hey, is it just getting the check? What do they care about the people they have that they work with? What about empathy? Where does that fit into all this huge.

The definition of leadership is getting lost. And if you can show leadership characteristics when you're dealing with people they're likely to follow, you can start moving them closer to your way of thinking. And to me, one of the essential characteristics of leadership, there's two actually. I would say this way before the last 10 years when politics have become polarized and all and there's a lot of tension out there in leadership, my answer would have been the same because I'm troubled by the way corporate denizens behave. But humility and compassion to me are two essential elements of leadership. Because capability, obviously credibility, the ability to deliver are essential as well. But if you have a lot of capability and you have a lot of credibility and you have a lot of confidence that comes with those things, the only way you prevent that from turning into arrogance is humility and compassion. Empathy is within those two areas, especially if you're doing business and you're trying to get people closer to you where you're thinking. This brings back to positive leverage by the way. Again, doesn't mean that negative leverage doesn't apply. Because in certain cases you got to remind people they're about to make a stupid decision if they don't listen to you.

You got to balance it. Exactly what are skills you should develop in order to master negotiations goes back.

To patience and listening. Questioning techniques are critical. The confidence to sit back and just listen and not jump in. But you always have to think about it and give or take of sometimes intense negotiations. Most mistakes are made by people who open their mouth too much.

Right.

They over promise and under deliver, which is you should be doing the exact opposite. A lot of that has to do with patience and listening. And we have something we call the leverage cycle because it's such a simple set of concepts in terms of process. But not everybody does it. If you have patience and listening, you're going to gather information which boosts your knowledge's information in context about the other side, about the process environment, about the marketplace and so on. Once you have that information in context, the knowledge it's then that you can really build your confidence. And confidence is bilateral. You're not only trying to build your own confidence, you're trying to build the confidence in those people that you're dealing with. Because why would they listen? When was the last time you had somebody trying to sell you something or do business with you and you consider them a BS artist? How well do you listen to those people? It shuts off immediately.

Is flattery a technique you can use to make people feel good about themselves?

It goes back to one of these skill areas, the propensity to make concessions as a result of not having the knowledge or not having the confidence. Concessions that actually don't make sense to the other side. We were talking about splitting the difference offline before. We don't know enough to move the levers. We don't have the confidence and therefore that's a fallback. Let's split the difference if that's the case. Why can't you go all the way to my side? If you're going to go halfway for no reason, come all the way for no reason.

Right?

This is not to ignore the fact that people operate on the pressure, but you can be a lot more efficient if you understand the environment and save time. In fact, one of this is another. We sometimes do these role plays. We do role plays on actual deals. When I'm working with the client of mine working on a deal, then I'll role play with them. Scenarios that could occur will role play what we've identified from looking at the risk, rewards, leverage and so on. The questions that could be asked, the concessions that could be requested, and so on. So we like to role play that. And a lot of the role plays, we set them up so that first of all, it's like sparring the first time you get hit in the face. It's not a good idea for that to be in the actual boxing ring. You want to spar before you go in there. But these role plays are so important because they get people organized around managing the agenda. And when you think about being under pressure and having a lack of time, this is when people are scrambling and they're all over the place. They make unprincipled concessions. They say stupid things because they're rushing. They don't listen. Then I'll ask the folks that are role playing and say, look, you were given a set of facts. We've done this role play without adequate preparation, and you have a half an hour to do this. Is it more important or less important to be disciplined about managing the agenda? Everyone says, of course it's more important. You have less time. It's more important. But the propensity for the agenda to go out the window because we're scrambling, we're under pressure, is way higher. So that dichotomy actually sets people up for failure. So one of the other areas that I want people circling back, one of the other areas that I really want people to focus on, and I'm not sure it's a skill, but it's a discipline, is agenda management. And agenda management doesn't mean agenda control. Right. The other side is going to have their agendas. I'm perfectly okay with them putting stuff on the agenda that is within their control and what they need to do, it's perfectly legitimate. But I want to manage that agenda. I want to manage the resources that are going to be involved. I want to manage as much as possible the roles of the people in the context of negotiations, not their professional roles in terms of their educational skill. And I want to manage rules of engagement for my team. So we're all on the same page to the extent I can on the other side as well. That is a long winded way of saying patience and listening and agenda management.

That's what I got down. I have listening, asking questions to help you understand your points of leverage, both positive and negative. And also having a discipline around managing the agenda. By managing agenda, it's essentially really framing out, here's our time together, let's make the best use of it. And having that structure in place so you can get those pieces of information that you're looking for, but also entertain the other side in terms of what they're looking to get out of it.

There are two agendas at play really when you think about it. One is we call the macro agenda, which is the entire process of interaction that we're going to have in order to get to result. And in an M and A context, that macro agenda actually, if you think about it, could go from the letter of intent, the lockup period, through due diligence, all the way to closing and then sometimes beyond closing because there may be an earn out. There's all kinds of things that happen after closing in terms of integration and so on. So that macro agenda is critical and what I see mismanaged probably most often in that macro agenda is the three Rs, the resources, roles and rules of engagement. That due diligence takes way too long. Why? Because we're not really organized. This is like project management. You got to work backwards from your close date. And what is all the steps that we need to take in order to get there, you have other interviewers or interviewees who talk about that subject. So that's the macro agenda. The micro agenda is what happens in each interaction you have with the other side. Every micro agenda has one goal. It's to move the ball forward. So there has to be discipline around who you're going to have there. How are they going to interact, how are you going to summarize? Because you don't want to take on all the action items. You want both sides to have action items so they have skin in the game. What are you going to follow up with? Are you going to summarize everything so you can retain some level of draft control? So there's a whole bunch of elements. It's almost like going through Pilot's checklist on this stuff. So agenda management, both micro and macro, is critical. Absolutely. Especially in business, we're not talking about what movie to go out to see, although that could be very difficult negotiation.

I like the idea of looking at the micro because devil's in the details.

Devil is in the details. The whole micro agenda management on these large deals is people get together. They get together frequently. The discipline around the managing each of those interactions is not always there. Okay, we're going to have a meeting tomorrow. Okay, great. Nobody bothers to go. Okay, what's the agenda for that meeting? What do we actually have to cover? It'll be nice, it'll be a good meeting, It'll be my friends, but what are we actually covering? And it's so important to have at least some level of discipline. And by the way, the other side appreciates that. And on large services deals, especially if there's no buyer and seller in the traditional sense, but the service provider in a sense is the seller, how you behave in engaging with the customer tells them a lot about how you're going to behave in delivery of the service. So if you're disciplined about agenda management, it gives them a lot of comfort that you're actually going to be able to carry out what you're promising to carry out. And it doesn't take a lot. You can send an agenda that says, okay, we're going to cover X, Y and Z, three points and anything else, next steps, five points. And immediately the other side either will respond, say, okay, we also want to cover 1, 2, 3, which is great because now you're gathering information. Or they'll say, okay, and now you have some level of agenda control, agenda management in place.

I like that. You essentially are building confidence from both sides by creating that structure.

Yeah, absolutely. And if you're thinking again about M and A context, you want the other side to be confident, whether they're the buyer or the seller, that the right deal is the one with you.

Why is it people in sales tend to struggle with negotiations? What is it that makes succeeding negotiations difficult?

Where do I start? First of all, most people in sales, professional in sales, are pleasers. They want to have the relationship, which is not bad. But as a result, they feel like they have to say no on something that just doesn't come easily. The behavior is so endemic that it just permeates the salesperson. I'll give you an example. We were researching to purchase a new CRM tool for our business. This will sound familiar to you because you get these kinds of calls from AT&T and from everybody. So we're looking for a new CRM tool. And we had a call in the discussion with this one company, customer relationship management tool like Salesforce. And we say, okay, we have make up the number. We have 10 seats that we want to purchase initially. Maybe we'll go up to 20 over time. And then we don't call them back. And they had a price sheet for 10, it's this much. For 20, it's this much. So the sales guy, within 24 hours calls us back. I spoke with my management. We can do 20% better on 10 and 30% better on 20. He says, no, we can make it cheaper for you. We want to incent you, which is a terrible word, by the way. We want to incent you to move to our CRM system. I go, okay, very good. But we'll get back to you because we still have not had our internal discussion and we're looking at alternatives. Within 24 hours, he calls up with his manager. Yeah, we know you're very interested. We want your business. We want your business. We can do this for 50% off. I haven't asked. I haven't asked for one thing. I haven't made a request for a concession, Nothing. How credible are these guys? But they're so eager. They were nice. We weren't just right. To me, that behavior is both a combination of being aggressive and trying to please by guessing what will please.

They didn't spend the time to do the discovery to understand your points of leverage.

It doesn't take that long. And I understand they're working on 100 deals because this is small sale. This is not a huge sale for them. How often do you get these calls from cable companies and telcos and whoever else they constantly give you A better deal and a better deal, and none of it's principled in any way.

Yeah, it's the easiest thing to do.

Just throw stuff against the wall and see what sticks. It's not to be critical. And the other thing is, how often do you see an ad for a salesperson? If you ever see ads for salespeople on LinkedIn or other places, and how often do you see one that says, we want somebody who's a salesperson who's patient and a good listener.

Right.

We want somebody with hair on fire who runs at 100 miles an hour. That's what we want. So it's hard to get salespeople to be patient. But you know what? People are not educated just for sales coming out of college. They have other disciplines. And very often we find that a lot of really good salespeople come out of services, come out of technology backgrounds and so on, because they actually are inquisitive. Good consultants can make good salespeople as long as they get to end the job with the right training.

What tools and resources have you used that have helped you become a better negotiator?

Another good question. I've mentioned a bunch of tools already. In terms of resources, I am absolutely anal about using everything that's available on the web because there's so much available. You can find so much information about people that's important, pertinent information. In LinkedIn, for example, I don't know why people don't turn to it more. It always amazes me when I'm talking with people and they haven't done the basic research. That's so easy to do by looking somebody up, including me. On occasion, if I'm doing a deal with somebody and we go through these laborious introductions and I always like to say something when somebody else is introducing themselves. I like to say something that will show that I've done my homework. So in terms of resources tools, we have a portfolio of simple tools. I use a set of very simple tools. The risk reward analysis. It says four or six box quadrant, action, no action, rewards, and risk. It's something I can do on the back of an envelope and I sit down with somebody on the other side and we can actually map it out. Certainly with my team, I go more in depth and we'll map it up. We'll look at the no action as well as alternatives and so on. That's one of my favorites because that, to me, tests the validity of a deal very early on. And then as you evolve your portfolio information, you populate it more and more and it becomes a very robust portfolio of information which you can leverage. And then the corollary to that, which is something that I tend to use later in the cycle, is something I call the mid and all it is a tool for prioritizing issues that are going to come up in negotiations. And a lot of these issues are predictable. You also prioritize those risk and rewards. Some are mandatory. If I don't address this risk, I ain't doing this deal. In fact, the things that I want to address are mandatory risk areas. Most people are prone to inertia. That's the nature of. Especially if you're dealing with people in public sector or you're dealing with people with large bureaucratic companies. Inertia is the easiest default. So you want to get them off their ass. So you really do have to understand those risks that are associated with them acting and the risks that are associated with them not acting because that's the only way you're going to get them to move if there's a risk associated with their status quo. I wanted to prioritize those, have a clear understanding of what's mandatory. And the other thing about prioritization, MID stands for mandatory, important, desirable. I don't want 50 categories of priorities. It's just not useful. If we have 100 issues that go to some of these deals, you have 100 issues. I want to know which ones are the musts, which ones are the important, which are nice to have. That gives you a portfolio of trade offs. If I can give something that's desirable to me but it's mandatory, the other side or important, I can get something else in return that's more important to make. That creates positive leverage in many respects. So just the tools around prioritization are so important. And again, a lot of this Q.

And A. Yeah, I like that. I like that. Mandatory, important and desirable.

Yeah. And actually it's funny, we. I use it at home, my wife and I. It's mixed results in my house, but I said, we're going to do this renovation. We've been putting it off and now finally we had the time to think about it because everybody's home for the past year and she wants this and that. My kids who are older now and next generation coming, they have their own opinions. And I said, look, we're all over the place, let's sit down, let's write down what's mandatory, important and desirable. Why not use the stuff that I use professionally? And actually it's working because I'm not allowed to have mandatories that my wife disagrees with.

I like that approach. It reminds me, we do a kanban in our household, which is similar. Just keeping everything in descending order, priority.

Yeah, that's the same idea.

I want to ask you about the tough negotiation scenarios. You get the person that's just brutally hard to work with. They're not very communicating much at all and they're just very standoffish. You get the people that ghost you. Walk me through some of those scenarios that are more of the real why I want to talk to you and get your help.

This morning, actually, I was on with some colleagues from China and you always have some language and translation issues. And one of them was using a term that they are dealing with, a savage. They weren't using the word Neanderthal, but it was a similar term. Now, I know that's a translation issue, but obviously they were dealing with somebody who was extremely aggressive and wasn't particularly polite about the way that they were interacting. And actually those kinds of people I don't have as much of a problem with because those kinds of people, you just let them vent. And then you need to be firm in your stances that you're going to take. You need to operate on the risk side of the equation and not let them bully you into positions. So those to me are somewhat easier to deal with. Somebody who yells and screams a lot, let them vent, that's okay. And then you say, okay, now that you've taken a breath, can we continue? Don't let it take you off your game. That's the key. The key is to focus on the agenda, not be taken off your game. The more difficult person is the silent person, which is what you were alluding to personally, gives you no input. And in those situations you have to have the confidence to say, look, I've put a set of questions or a set of proposals, whatever stage you're at in front of you. If you're not going to give me any input, I don't know what else we have to talk about. And if all else fails, if you can escalate. If you're dealing with a CEO, you're not escalating. But if you're dealing with somebody who's not the CEO, which is most of the time, maybe you can escalate. Some situations are not that fixable. This is where patience comes in. You got to outpatient the other side. We were doing a deal a few years ago in Japan, and Japan, Japanese are notoriously patient in most cases. Most of the companies that we deal with there. And by the way, they're not going to make a decision culturally, especially Tokyo companies in north and east. They're not going to make a decision in the room. We had a proposal we had already put in front of them. We were now coming back to talk about the proposal because they had gone internally to build their consensus, whatever they were going to do, and they owed us a comeback. And I had a bunch of nervous Americans with me, but we had prepped. I said, look, this is going to be slow, this is going to be laborious. We're going to spend the time. Our Japanese counterparts come in very organized and sit down, hello. All the pleasantries are exchanged. And we said, have you had opportunity to consider what we talked about last time? And we would like to know, based on what we discussed about the agenda for the next meeting, what your position is. And they go, we have. And their lead negotiator, by the way, was trained in New Jersey. He wasn't a pure Japanese guy, but he was very interesting situation. He says, we did. He turns to his counterpart, says something in Japanese and just sits there. And one of the things that had happened once before with this team, before I was involved, was they had volunteered a number of concessions in the process that they absolutely didn't have to do because the Japanese team was patient, rightfully so. We can all be that patient. So my counterparts, after a minute of silence, which is terrifying, start my team. They start poking me in a chair. I get poked. I get past a note, should we do this? I go. And I said right back, we should do nothing. So we turned and I turned to my team and I said, have we talked about where we're going for lunch today? And we started having a side conversation. They started calming down and it was maybe 10 minutes in that the Japanese team spoke for the first time because we hadn't given a concession and we actually outpatiented the people who were patient. I'm not single, by the way. My negotiations in Japan have always been fantastic. We could learn a lot culturally from that type of a negotiation.

I want to hear some M and A examples.

Our audience is a lot of. For corporate M and A practitioners. I really wanted to get some examples of how some of these negotiations things apply in M and A or things. Have you seen that's been interesting.

I mentioned a couple already in terms of discipline around agenda management and a lot of M and A transactions that don't succeed because a lot of the discipline upfront isn't done. In terms of due diligence, properly including capabilities to integrate. And I see that a lot on the blood services deals that involve the outsourcing. And there's all kinds of crazy things that happen. People always have a high opinion of their own company. It's almost like people who own a house have a higher opinion of their house and want to sell it higher than it actually is going to sell for, because they've lived in it, they love their house. So I had a client, they had done a series of products very successfully that actually there was a deep argument about the trademarks because there was a very large company that owned related trademarks. So there was a huge overriding trademark issue there. And the owner of this company, my client, wanted to sell it. He wants to sell the company because he's on to other things and so on. And very successful entrepreneur. And I go to Michael, you can't sell this company. We'll call him Jay for just kicks. That way I can refer to name. I go, jay, you can't sell this company. Not subject to this kind of threat of trademark suits and all that, because entire company is built on the trademarks. He goes, watch me, okay, so he goes out into the marketplace and he becomes his own broker. He went, he decides he's going to do. He's just doing things. He finds a public company out there, an outfit that's willing to buy his company, but they don't want just this company. They like his company because it's associated with some other URLs that he owns. He owned a thousand different websites. So we go, oh, okay. Now we realize we have some leverage and the leverage comes from somewhere else, not the company that we're trying to sell. And this is about looking for leverage in different places. Long story short is we did the deal. There was the disclosures about the trademark issues and the letters and all. Everything is open book, right? So it's all disclosed. Obviously, there was a basket of funds in the deal that was allocated towards remedying those representations and so on, but we managed to sell the company, but we also managed to allocate more value in the deal. We realized where the real leverage was. Yes, there was value in the company and the products that he had, but there was more leverage on the side of the unknown, which were these websites that he had. So we patched it all together and actually it turned out a couple of years later when the time period for the warranties and reps passed, that only about 6, 7% out of the the total price that he would have gotten was clawed back as a result of those reps. My fear was going to be 30, 40%, which is why we tried to allocate and move more stuff to other assets. But again, you can find leverage on all strange ways. To me, this was one of the strangest scenarios too, because he had no business selling them under those circumstances. But he was at home. It was great.

It's interesting that you essentially need to put just as much effort as you're looking for points of leverage on the other side of the table, on your own side of the table.

Oh, without question, leverage is bilateral, multilateral. And by the way, leverage shifts. It shifts constantly. It shifts in a single meeting, a single micro agenda, single meeting. Leverage will shift, the other side will ask a question you don't have an answer to and all of a sudden you're on the defensive. And so you have to part of, part of your plan and part of your rules of engagement. It's got to be how we're going to handle things that come up that surprise us. Because every meeting, I don't care how much you prepare, and that's an oxymoron, how are you going to prepare for a surprise? If it's a surprise, I'm not prepared for it. If I'm prepared for it, it's not a surprise. But you can set a set of rules. This is where you say, okay, we get surprised and things are going good and we have good leverage, we have good momentum. Then the lead negotiator says, okay, keep going, let's set that aside. I don't want to say let's stable that because it's completely opposite. Meeting in the UK versus here. Tabling something in the UK means putting it on the table. In the US it means taking it off the table, putting it aside. If you say, okay, we'll set it aside, we'll keep going. If you're getting pummeled all over the place, it's a little bit like time out in sports. You say, okay, let's take a time out.

What's your favorite part of the negotiation process?

I love getting the deal done. It's not just getting the deal done. It really isn't. Because a lot of them, the deals that I work on, are long term deals. They have to work for a long time. So getting a deal done in a way that actually works, that delivers two, three years out and the problem solving, I get pulled into a lot of troubled projects, trouble situations, seeing people's eyes light up. When you start resolving that and Start turning around. Tense and negative situation doesn't always work. But that to me is definitely. That's what keeps me coming back.

Least favorite part of the negotiation process.

Least favor. I knew that was coming. I think probably dealing with people that don't know what they don't. It's almost impossible to have a discussion and get any movement. People that don't know what they're doing, that are ill informed, have paralysis of indecision and you're not going to get anywhere. I would much rather deal with a hard nosed negotiator, pounds the table, whatever, however they're going to behave that actually knows what they're doing. Because at the end of the day you could probably reason with them and you can figure out why they're taking the positions they're taking. And if they know what they're doing, you can reason with them. If they don't know what they're doing, then it becomes. And the paralysis of a decision that can be organizational paralysis. I hate dealing with companies that have organizational paralysis because they're constantly moving people and they're constantly. They're in turmoil. People say you can make deals with companies or people that are in pain. I think a lot of times those people who are experiencing extreme pain are worried about their jobs. They're looking behind their back all the time and they are paralyzed. They're afraid to make decisions.

What about the part of negotiation you struggle the most with?

That's an interesting question. I actually think it relates to a lot of things we talked about. To some extent I struggle most with one of the things I'm passionate about, which is agenda management. We all struggle because especially macro agenda management because getting people the resources lined up, especially on the other side, is not always easy. You might have control over your own resources, but you don't control the resources on the other side. That doesn't mean that I think I'm probably more successful at it today than I've been in the years ago when I was younger. But because I know that's also. That's an area that we all need to focus on.

That which you say is a skill that really has a learning curve to develop.

Yeah, it becomes second nature after a while.

Right, right.

Doing a lot of business internationally with people where English is the second language actually has helped me on the basic piece because you have to speak slowly, you have to avoid idiomatic expressions. You have to explain them. If you do use an idiomatic expression, you have to be conscious of those things. English is my second language. It's a little bit easier for me than others, but is still. It's hard. Agenda management and pacing is not easy.

Last question.

Yeah.

What's the craziest thing you've seen in M and A?

The craziest thing? Okay, I'll use what this is an M and A. It is actually, it's not inherent because it was M and A, but it happened to be an M and A deal. We were doing a deal overseas where we were representing a company that was selling part of its business, certain type of technology. And the other side that was going to purchase that part of business that was going to be creates a very famous company, one of the largest companies in the world, they were going to use this technology for some of their core products. So it was critical to them, it was critical to us. And I was representing also a world class company. We had exchanged some contracts. We go into our first full blown meeting to have a discussion with them. We haven't even sat down at that point. We know the lead negotiator on this other side that happened to be the assistant general counsel, she was very tough, very smart lady. We hadn't even sat down and she says to us, we're going to use our contract. If you don't like it, you can leave. Okay, so this is the way the first meeting starts. It's a very complex deal. It has to be done by the end of the year. I think this must have been September, October timeframe, because the use of technology has to start in the next cycle, which started in January. And she starts with that question. And we knew that they had an adversarial approach. And so the first thing I got to do, me and my partner had to do was reassure our team that hopefully this is not going to continue. So what we did was we said to them, we could have easily said, okay, fine, let's keep going. Because we're not losing a deal over whose contract to use. Okay, Just to be clear, by the way, neither are they because it's too important for both sides. You're talking about hundreds of millions. So I asked, instead of saying anything regarding that specific question, I said, can we have a room? So we were in their facility. Can we have a room so we can go and discuss this amongst ourselves? What do you mean? You pose the question that we must use your agreement or we can leave. That's a serious question. We need to consider it. And right away we saw that they were getting nervous. They found this room. We took a half an hour and in that Half an hour, her second in command must knock on the door about four or five times, starting with 10 minutes, 15 minutes, 20 minutes, whatever. Are you ready so we can start discussing? Because we had an agenda, right? We had worked on an agenda with them that we were supposed to cover. My entire intent in that room was to make them nervous, to try to cut through this bs, this posturing nonsense. And my team was. They were nervous initially. I said, look, we're not losing the deal over which contract to use. And we came up with a solution, which was a terrible solution. If I ever do it again, I would probably quit. But it was. It worked for the time being, which was to do a hybrid contract. We would exchange everything on both contracts and so on. Made it. Made it a nightmare. But at least we didn't cave on that point. But that was a strange negotiation. After we came back, they behaved for the next 24 hours. After that, they went back to the same behavior they had before the deal did get done and it was successful.

It's interesting and M and A, there's a lot of little antics that come up and I think egos that drive that. So really interesting. Enjoyed that story. Thank you so much for the conversation day. I enjoyed it. I learned a lot about negotiating and hopefully can have more in the future.

Sounds good. Kisan. Pleasure to be on.

Hey, thank you very much. And here's to the deal.

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