CLOSING THE MEGA-DEAL - - GETTING TO THE “BEST AND FINAL” OFFER
This is the fourth and final part of a four part series in the Minutillo Newsletter about negotiating a mega-deal for a client company. All four parts of this series will be available at www.minutillolaw.com. For context and consistency, the first three parts of this series are summarized as follows:
Part One explained how intuition, not logic plays a vital role in negotiating the mega-deal. Relying on logic alone will not help you understand or disarm your opponent lead negotiator so that a productive negotiation can take place.
Part Two explained how to disarm your opponent by appearing vulnerable. The appearance of vulnerability is created by exposing a flaw about you as a lead negotiator, or a minor flaw about the subject product. Vulnerability leads to trust which is required so that negotiation on the mega-deal can be productive.
Part Three explained why it is important not to rush a mega-deal negotiation; to make friends not enemies of your opponent; and to take time to understand the cultural differences between you and your opponent so that you can properly communicate and advance the negotiation without offending the opponent lead negotiator.
Part three ended:
The longer, methodical negotiation on a mega-deal allows time for ideas, concepts, and friendships to develop. It takes time to develop sound ideas to resolve issues regarding the subject product and to vet all contract terms and conditions. As important, friendships can be formed by opponents during a lengthy negotiation to help it conclude favorably for your client company.
Short negotiation or long, it takes a great deal of effort to break through the usual tension experienced by negotiators stuck in a conference room so as to transform the atmosphere into a friendly one which is culturally respectful of all participants and conducive to success.
Which brings us to part four of this series:
How do you close the mega-deal? Getting to the “best and final” offer.
You’ve been negotiating without a break for days, if not weeks. You are close to agreement on price, product options, and terms but you are having difficulty favorably ending the negotiation and closing the deal. There are two ways to close the mega-deal:
You make a “best and final” offer. If you’ve properly “read” the opposing lead negotiator and believe that he or she will not walk away from the terms and conditions of the deal because the product or service being negotiated is important to the opponent company, and your prior offer is close to your opponent’s last offer, then abruptly provide the opposition with a best and final offer, not subject to further negotiation; or,
Force your opponent to make a “best and final” offer. If you do not believe that the best and final offer to be proposed by you will be accepted by the lead negotiator for the opposition but the last stated offer of the opposition is close to your target price and terms, then abruptly ask your opponent to make a best and final offer.
One way or the other, this will end the negotiation so that you can close the deal.
As an aside, an obvious rule, never counter your own last offer. If you made the last offer, then your opponent must make the next offer otherwise, you are obviously working against your own interests.
Regarding number 1 above, the first part of the analysis is to determine how badly the opponent company needs your product or service. Notice that I used the word “needs” not “wants.” If your client company has little competition, and the opponent company needs your product as an integral component to a larger system already in place or as an important piece to their business plan, then, it’s usually safe to make a best and final offer even if your offer is seemingly far off the last opponent’s offer on the table.
The trick with a best and final is to make the offer in a way that the opponent actually takes it seriously as a best and final and not as a negotiating ploy by you in order to merely get the price up or a term changed in your favor. Tone and demeanor are crucial during the presentation of a best and final offer. You must be abrupt, clear, concise, and forceful when presenting the best and final offer.
It is also important that everyone on your negotiating team, including the engineers, contract specialists, other attorneys, cost and pricing personnel, etc., agree with the offer and timing to make it. The best and final offer is such an important part of the negotiation that the more input from your team the better. Someone on the team may advance a different approach to be evaluated by the lead negotiator. In any event, if you want to drive the negotiation to a conclusion and feel the time is right, make the best and final offer.
One important aspect of making the best and final offer, you cannot take it back. Know that you are going to settle for price and terms either at the offer you make or lower. You cannot go back to a higher number or better terms.
Regarding number 2 above, knowing that your opponent’s last offer is satisfactory takes pressure off of you to make the decision to ask for a best and final offer from your opponent. If the opponent makes a best and final close to the last negotiated offer, then you can close the deal. On a few occasions, I’ve had my opponent’s best and final offer comparable to the offer that I would have advanced anyway. If you are close, ask your opponent to make a best and final.
Cutting Product Options
If the opponent’s best and final offer is not good enough for your client company, the last resort to successfully conclude the negotiations is to work with the opposition to cut back on product functionality, services, options, warranty, delivery, maintenance, or some other aspect of the deal as negotiated to reduce the price. If you believe that there is no other way to conclude negotiations, start cutting.
This sort of cutting will affect the negotiations in one of two ways, either it will bring the opposition to their senses that this really is as low as you can go on price and the best and final will be accepted, or cuts will happen to reduce the price and negotiations will conclude. Either way, negotiations will quickly conclude.
Drive the negotiation to a best and final offer consistent with the principles above and the negotiations will end so that you can get on to the next mega-deal negotiation for your client company.