Case Study – The Art Of Negotiation

Often cases come down to a horse trade about the settlement sum. This is the point at which all the detail of the legal argument is swept aside, and the parties agree that they want to settle by one party paying the other a sum of money, but what sum?

This negotiation can be particularly tricky where the parties know each other well because they can guess the strategies each other will use and the strengths and weaknesses of their opponent.

This was exactly the situation we faced in a dispute between two business parties. The resolution of the dispute was for our client to buy his co-director out. Our client was the classic ‘I’ll meet you halfway’ negotiator and the co-director knew it.

Our opponent determined that our client would start with a low offer and then gradually increase it against counter-offers to end up at a sum that was around the highest our client would be prepared to go, and they may even agree to go a bit further to have the whole process over with quickly. Adding to our concerns the price our client advised us he would be prepared to pay was high and probably included an element to counter our client’s feeling of guilt that things had got to this stage.

To counter this we devised a negotiation strategy to avoid our client paying more than what was reasonable and fair, and to help avoid a protracted negotiation in what was a somewhat acrimonious split. Instead of starting with the lowest offer, we made a detailed analysis of the real value of what our client would be ‘buying’. We then made an offer for the business based on this analysis which we shared with our opponent. We set out what our client would be gaining but also the significant risks and problems he would face with his co-director leaving the business. We then set a price based on this and said it was our client’s best offer.

Predictably our client’s co-director came back with a counter-offer that was way above the offered price. Instead of increasing the offer, we discounted the costs of responding to the counter-offer and then offered a lower settlement sum. We repeated in our response that this was now ‘our client’s best offer’. Incredulous and perhaps confused our opponent again demanded a sum in excess of the sum offered, expecting our client’s offer to be increased.

Again, we reverted with a reduced offer and stated this as ‘our client’s best offer’. We received the same response, demanding an increased sum and we reverted with yet another reduction.

At this point, our client was questioning the method and needed reassurance but only a short time afterwards our opponent responded to say he would accept what was on the table and that he could ‘no longer afford to talk to us’.

How we added value

The buyout price our client paid was far less than he was prepared to pay to resolve this business split. Our strategy avoided a price escalation and vital funds were preserved for our client’s business; the dispute also concluded quicker than usual, leaving our client free to concentrate on the business much earlier than would otherwise have been the case.

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