Silicon Prairie News

View from the FishBowl - Negotiation Series: Know what you want … and what the other side wants…

Omaha August 10, 2011 by William Fisher

About the Author: William Fisher, a partner at Treetop Ventures in Omaha, is a regular guest contributor to Silicon Prairie News. In his series, View from the FishBowl, Fisher calls on his experience as a business executive and technology investor to lend his advice to entrepreneurs in the Silicon Prairie.

Fisher has served as a director for several prominent public companies and private firms, and he currently serves on the boards of Prism Technologies, Lodo Software and FTNI. To read his full bio, including a listing of companies he has been involved with, visit treetopventures.com.

Contact Fisher at fish@treetopventures.com.

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Negotiation Series: To read past posts in this series, see: "View from the FishBowl - Negotiation Series".

Photo by Thomas Hawk via Flickr

It takes two to tango…and negotiate. Therefore, there are typically two sides any negotiation and if you are able to figure out both sides, you will be successful more often.

Simple case; take a used automobile. Unlike a new car that has a sticker price, the used car is priced subject to a variety of different things. Miles, year, options, history, location … these all play a part. The seller has a price they are asking (and a price they will take). The buyer has a price they will initially offer (and a price they will pay). The game, if you will, is to find out the "limit" of the other side (what will they give or take) while not giving up the information that will harm you (what will you give or take). So, how do you accomplish this feat? The key is your ability to convince the other side that your arguments have merit.

Negotiations are about both sides setting their limits and both sides trying to convince the other side to change their limit. Simple! However, there are a variety of things that create complexity. For instance, price isn't always the biggest part of the puzzle and this is where I think the really good negotiators earn their keep. Terms, currency (cash or stock), outside influences … these are all considerations and the more you know about the thought processes of the other side, the better off you are.

I learned a good lesson related to this when I was engaged in the purchase of ACI (local payment software company) from Tandem Computers in late 1993. We had made some progress negotiating a price for the company that was acceptable to my partners (three VCs and a major bank) when we were informed there was another bidder who had put together a superior bid. (I never knew whether this was a negotiating ploy to get us to up our bid or not; we took it as being real). My first instinct (after calming down) was to talk to my partners about how to match the price. However, one of my local Omaha advisors had another idea.

The other bidder, if the bid was real, was a public company who was a large competitor of ACI, clearly would win a bidding war against a leveraged buyout by management. However, my advisor suggested that there was a chance that the government would either prevent the deal from happening or delay it beyond the deadline imposed by Tandem (last day of 1993). It was a long-shot but the Hart-Scott-Rodino Act of 1976 was enacted to prevent monopolies that were created from mergers of companies that would have a monopoly market effect and required companies contemplating merger to submit to the government for review and approval before completing the merger. This typically would take a minimum of 30 days and could be extended well beyond that (or possibly not get approved).

We decided to play that card. It was a calculated risk; I would call one of the senior execs and ask whether they were prepared in case the government wouldn't approve or delayed the approval. My point was that our bid would not merit any review and we were prepared to proceed; however, I couldn't guarantee that the syndicate would be able to be put back together in the case their deal fell through.

I made the call; kept my cool and said that I needed to have an answer in order to update my investors on whether we were proceeding or not but we were not increasing our offer. It took two days; it was agonizing but I finally got a call confirming that they (Tandem) were proceeding with our offer. Maybe it was a ploy to get us to raise our bid and when we didn't, they decided to proceed. Maybe it was a situation where they were afraid that they might not get government approval in an expeditious manner and therefore they decided to go with our offer. Not being privy to their logic, I will never know. Besides, I actually think I really don't want to know. In a strange way, it is the same feeling I get when I remember how sexy I was in high school. What great memories…

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