Deal Making and

Negotiation
MARITES G. TAGAYTAYAN
MIT
Deal Making
 Dealmaking is defined as the art of crafting deals through negotiations focused on an
integrative, or value-creating process, rather than through distributive bargaining, or a
haggling process. Dealmaking includes the range of activities both at the bargaining table
and away from it that seek to bring two or more parties together toward some common end,
whether it is the sale of an asset, a vendor agreement, or a merger between corporations. The
Program on Negotiation emphasizes integrative bargaining in its dealmaking literature and
teaches methods and techniques from this school of thought in its executive education
courses.
Negotiation

 Negotiation is a method by which people settle differences. It is a process by which

compromise or agreement is reached while avoiding argument and dispute.
 In any disagreement, individuals understandably aim to achieve the best possible
outcome for their position (or perhaps an organization they represent). However, the
principles of fairness, seeking mutual benefit and maintaining a relationship are the keys
to a successful outcome.
Stages of Negotiation

 In order to achieve a desirable outcome, it may be useful to follow a structured

approach to negotiation. For example, in a work situation a meeting may need to
be arranged in which all parties involved can come together.
 The process of negotiation includes the following stages:
 Preparation
 Discussion
 Clarification of goals
 Negotiate towards a Win-Win outcome
 Agreement
 Implementation of a course of action
1. Preparation

Before any negotiation takes place, a decision needs to be

taken as to when and where a meeting will take place to
discuss the problem and who will attend.  Setting a limited
time-scale can also be helpful to prevent the disagreement
continuing.
2. Discussion

 During this stage, individuals or members of each side put

forward the case as they see it, i.e. their understanding of
the situation. 
3. Clarifying Goals

 From the discussion, the goals, interests and viewpoints of

both sides of the disagreement need to be clarified. 
4. Negotiate Towards a Win-Win Outcome

 This stage focuses on what is termed a 'win-win' outcome

where both sides feel they have gained something positive
through the process of negotiation and both sides feel their
point of view has been taken into consideration. 
5. Agreement

 Agreement can be achieved once understanding of both

sides’ viewpoints and interests have been considered. 

It is essential to for everybody involved to keep an open

mind in order to achieve an acceptable solution.  Any
agreement needs to be made perfectly clear so that both
sides know what has been decided.
6. Implementing a Course of Action

 Fromthe agreement, a course of action has to be

implemented to carry through the decision.
Dealmaking Tips: 7 Negotiation Tactics for Saving a
Deal from Collapse
 Negotiation Tip #1. Avoid Hostility
 It’s tempting to respond to a demand for renegotiations with hostile,
belligerent, or moralistic objections. Such responses are rarely effective,
however, as the other side typically will have determined already that its
vital interests require changes to the deal. Only by dealing with those
interests can the party resolve their conflict.
 Negotiation Tip #2. Weigh Your Claim Against the Value of the
Relationship
 Willingness to renegotiate a contract typically corresponds to the value one side attaches to a
potential future relationship with the other side (see also, 
Integrative Bargaining Examples: Expanding the Pie – Integrative versus Distributive Bargaining
Negotiation Strategies
). If the relationship is worth more than your claim for breach of contract, you ordinarily will be
willing to engage in renegotiation. If, on the other hand, you conclude that your claim is worth
more than the benefits from continuing a relationship, you may insist on your contractual rights to
the point of resorting to litigation.
 You may not be able to accurately evaluate the worth of a claim or the value of a renegotiated
contract without first engaging in discussions with the other side. Moreover, satisfaction of a claim
through litigation is almost always a lengthy and expensive process, a further motivation to
choosing to renegotiate.
 Negotiation Tip #3. Create Value in the Renegotiation
 When your counterpart demands renegotiation, you may expect that any
advantage he gains will guarantee a loss for you. An unwilling participant
in a renegotiation is likely to be intransigent – to quibble over the smallest
issues, to voice recriminations, and generally to block proposed changes.
Naturally, such talks are unlikely to lead to joint-gains. The challenge for
both sides is to create an atmosphere in which problem solving can take
place. Even if you feel forced into a corner, approach renegotiation as an
opportunity to raise new issues that will benefit both sides 
 Negotiation Tip #4. Fully Evaluate the Costs of Failure
 In many cases, the alternative to successful renegotiation is
litigation. As you approach the renegotiation process, you and your
counterpart must carefully assess the risks of later facing each other
as defendant and plaintiff. Doing so will allow you to accurately
evaluate the worth of various proposals. Notably, the side demanding
renegotiation is likely to undervalue the risks and costs of litigation,
while the party facing the demand will probably overvalue a
lawsuit’s benefits. Therefore, it’s important for each side to ensure
that the other has a realistic evaluation of alternatives to a successful
negotiation.
 Negotiation Tip #5. Involve All Necessary Parties
 A successful renegotiation requires the participation of not only
those who signed the original agreement but also of those who later
gained an interest in the transaction, such as labor unions, creditors,
suppliers, and government agencies. If you represent a bank that’s
renegotiating with a troubled real estate developer over a loan for a
partially completed office building, you’ll never reach a new
agreement without input from the unpaid construction contractor
whose lien on the property could block refinancing.
 Negotiation Tip #6. Design the Right Forum and Process
 Renegotiations often emerge from a crisis suffused with threats and high
emotion. Choosing the appropriate renegotiation process may help mollify
injured parties.
 Sometimes the terminology used to describe the renegotiation may influence its
success. Rather than using the label “renegotiation,” which conjures up
negative images of a drastically rewritten contract, parties might call the
process a “review,” or “restructuring,” “rescheduling,” or “contract
clarification.” Calling a renegotiation a “request for waiver” is yet another
means of respecting the agreement while giving the burdened party relief, if
only temporarily, from contractual obligations.
 Negotiation Tip #7. Consider Hiring a Mediator
 Amid the stress and ill will often generated by a renegotiation, a mediator or
other neutral third person may help the parties overcome obstacles to a
satisfactory renegotiated agreement. A mediator might contribute by designing
and managing the process in a way that provides a maximum opportunity to
create value, by assisting with communications in a way that facilitates positive
results, and by suggesting substantive solutions to the problems that parties
encounter during the course of their renegotiation.
References:

 https://www.pon.harvard.edu/daily/dealmaking-daily/negotiation-skills-and-negoti
ation-techniques-predicting-negotiator-decisions-and-behavior
/
 https://www.pon.harvard.edu/daily/dealmaking-daily/7-tips-for-what-to-do-after-t
he-deal-breaks-down
/
 https://www.skillsyouneed.com/ips/negotiation.html