Startup general interest

When negotiating it pays to ask ‘why do you care?’

By June 22, 2011 2 Comments

This last couple of months have been particularly intense for me in large part because a number of deals I was working on all came to a head at the same time.  As a result I have spent a lot of time locked in negotiations and over and over again I’ve been struck by the progress you get by taking time to ask the other side why it is they care about any given point, or by playing out scenarios to understand what each side is trying to protect against.

Most of the deals have been multi-party transactions, so some of the time I’ve been negotiating on behalf of DFJ Esprit, and some of the time I’ve been mediating to help the other parties find common ground.  In this second scenario I’ve seen judicious use of the tactic described above move discussions quickly from the two sides talking at each other and not making progress to talking to each other and looking for the white spaces where both sides get what they want.  In fact, I’ve seen that time and time again.

Taking time to understand the other side is particularly helpful when the two parties have a different background or approach.  One of the counterparties we have been dealing with is US based where their standard approach to a number of legal issues is very different, particularly when it comes to the way recourse packages work.  (Recourse packages determine the right that the buyer has for compensation if it turns out they have been misled during the sale process.)  A number of times we got into situations where we were arguing standard practice against each other and we got through these to find a compromise middle position by playing through scenarios to find out what the other side really cares about and then tuning the legal language appropriately.