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 V — HOW DO YOU REACT TO THE BUYER’S OFFER?
Question: An offer is put on the table; how should you react?
Show indignation—you’re wasting my time — 0%
Ask clarifying questions — 45%
Express disappointment and say we have a lot more work to do — 18%
Immediately make a counter proposal — 3%
Conclude the meeting and take time to consider — 35%
Here, the top two responses were B and E. Asking clarifying questions sounds like a good response, but in many ways it validates the other party’s position. Since you’re already starting to respond to it, it is a sign that they have successfully anchored their position in your mind.
It’s important to use what you’ve learned during negotiations when it’s your turn to react to an offer or make a counter offer. Most people need time to digest information before reacting to it. What the research says is that the best strategy is to either conclude the meeting and come back later after you’ve formed your response (E), or to express some disappointment, insinuating that there is more work to do (C), and then conclude the meeting.
PART I — Prepare for Negotiations
Identify key issues, know your (and estimate your counterparty’s) aspiration and threshold values (BATNA) in order to find the zone of potential agreement (ZOPA).
PART II — Anchoring
Be proactive and establish a reference point against which subsequent positions are adjusted.
PART III — Be Aggressive
Know the buyer’s best alternative to a negotiated agreement and suggest a price that is close to what you believe is their absolute limit.
PART IV — Objective Criteria
Provide an offer in writing using objective criteria to support your position. Employ principles to negotiations and try to avoid force of wills.
PART V — Learn from Negotiations
Pause negotiations to reflect on what was conveyed.
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