CHAPTER 4
Initiating Negotiations GETTING
THE
LAY
OF THE
LAND
have the same motive—profit—but opposing means of achieving it. The same can be said of companies looking for capital and those looking to invest. Each side needs the other, although the degree of need varies from project to project. Traditionally, buyers and investors set the rules and wait to be courted by commercial suitors. Sometimes, however, the seller calls the shots, as is often the case in the petroleum industry. At other times, an emerging market government seeking technology will play one foreign investor off of another, as has often happened in auto industry licensing. Usually, the party with the greatest sense of need will make the initial contact, which will set the tone for all pursuant negotiations. Appearing too needy can make the deal unattractive even before it’s on the table. Conversely, approaching a deal in a take-it-or-leave-it posture may only attract the most desperate partners, or none at all. Some basic contact points and guidelines can be followed to ensure that when contact is made, it’s seen in the most favorable light.
SELLERS AND BUYERS
Project Summary: Setting the Stage It’s essential that the negotiations get off to an auspicious start. Both the initiator and receiver of the inquiry must be excited about the prospects of the deal regardless of who is actually selling or buying. Many potentially lucrative deals have been stillborn because of too strong, too weak, too furtive, or too naive an initial contact. Truth is always the best approach, but a company must be careful about how much it reveals at the early stages. Revealing too much information will have a deleterious effect on future negotiations, while revealing too little may attract no one to the table. Preparing a project summary (often called a “sell sheet,” although it’s not confined to companies that are in a sell mode) will allow a company to effectively and consistently initiate, or respond to, potential proposals. Whether used for trade or investment purposes, the summary is a key part of the negotiation strategy as it will act as the script for either the solicitation of or as a response to an inquiry. It will set the tone of negotiations and pre-position all counterparts for long-term discussions. It should be prepared with the input of the actual negotiators, as they’ll be the ones who may have to defend its content at a later date. All data should be couched in terms that clearly suggest that the “results” are forecasted and that details of the project are subject to change. Since the purpose of the summary is to serve as entree to actual negotiations, the project should be described in the most positive terms the truth will allow. Similar to an executive summary of a business plan, the project summary should include the following:
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