Countering Bias in Global M&A Transactions
Posted June 27, 2018 in Articles
From culture-based assumptions to groupthink within your own negotiating team or broader organization, there are a number of ways that bias can influence both the process and the outcome of a cross-border merger or acquisition. When preparing for a global transaction, or when facing issues that have the potential to have unfavorable consequences for your deal, it is important to both (i) be able to identify these biases, and (ii) know how to counter them effectively.
Identifying Biases on Both Sides of Cross-Border Mergers and Acquisitions
When considering the potential effect of bias, it is important to be aware of the risk for bias on both sides of the transaction. Could you (or a member of your team) be harboring uninformed opinions or relying on false generalizations that are translating into bias against your counterparty? Conversely, could members of your counterparty be making decisions and assumptions based upon biases that inaccurately reflect your culture, organization or personal characteristics? In cross-border transactions, acknowledging the potential for biases is the first step toward overcoming them – both in terms of avoiding insensitive actions and understanding that your counterparty’s actions may not come from a place of ill will.
In addition to assessing the risk of outward-facing biases, negotiators involved in cross-border transactions should be aware of the risk of internal biases as well. Here, we are primarily talking about groupthink, or the risk that members of your organization will prefer reaching an agreement over expressing their own independent opinions and concerns. Studies have shown groupthink is an issue that reaches into the highest levels of some corporate organizations. Ensuring that everyone voices their opinion can be crucial to getting all options on the table.
Ways to Overcome Bias During Cross-Cultural Negotiations
Now that you are aware of the risk of bias. What can you do about it? The following are some basic tips for preventing impertinent factors from influencing the outcome of a cross-cultural business negotiation:
- Due Diligence – The more you know about your counterparty, the less likely you are to let biases influence your actions and decisions. Researching your counterparty’s cultural norms and unique characteristics prior to engaging in cross-border negotiations will help you avoid costly (and potentially embarrassing) mistakes.
- Effective Communication – In cross-border transactions, effective communication is key. Knowing how to communicate effectively, and how to interpret inbound communications that may unintentionally reflect latent biases, will help ensure that your deal remains on track.
- Team Selection and Management – When assembling your transaction team, consider which individuals are most likely to be susceptible to groupthink, and structure your internal deal discussions in a way that fosters independent thought and creativity. The more team members feel intimidated or overpowered, the less likely they are to offer substantive contributions.
Contact Mithras Investments
At Mithras Investments, we provide due diligence, consulting and negotiation services for cross-border transactions worldwide. If you have concerns about the effects of bias, or if you need help identifying and quantifying the risks associated with a proposed transaction, you can call (305) 517-7911 or inquire online for a confidential consultation.