How to Avoid Becoming Overcommitted to a Deal (or at Least Letting It Show)
Posted July 18, 2016 in Articles
In business negotiations, when one party becomes overcommitted to the deal, the other party usually ends up with the upper hand. If your negotiation “partner” knows that you are not in a position to walk away, the leverage swings in their favor, and they can press harder for concessions now knowing that you are willing to accept a bad deal.
Whether for financial or emotional reasons, it is easy to become overcommitted in all types of transactions – including complex mergers and acquisitions. So, how do you avoid becoming overcommitted? Or, if you can’t avoid it, how do you avoid letting it show?
Assess Each Side’s Commitment to the Deal
One of the most important things you can do is to assess both parties’ commitment at the outset of the negotiations, if not earlier. How emotionally-invested are you in the deal? How big is your financial commitment? Do you need the deal to go through once you engage; and, if so, is it worth the risk? But, don’t just ask these questions of yourself – consider them from your counterparty’s perspective as well. If you are risking over-commitment but your counterparty is also, then you may still be on a level playing field.
Explore Your Alternatives
As part of assessing your commitment level, you should be thoroughly exploring your alternatives. Importantly, this exploration should not stop until the deal closes. Even if you are overcommitted when you engage, circumstances can change. New opportunities may arise that will shift the leverage in your favor. In short, you may not be as committed as you think. Do not let a lack of foresight or due diligence scuttle your deal.
Continue to Show Strength
If you are overcommitted, how do you prevent this from impacting your negotiations? In many cases, the answer is to continue to show strength. Do not assume that your counterparty knows your position; and, equally (if not more) important, do not let them dictate your position. Negotiating from a position of strength looks very different from negotiating from a position of weakness, and there is no reason to let your weakness show.
Keep Things Moving
When parties are willing to accept whatever terms they are offered, they tend to get stagnant. They give in, and they wait for their counterparty to tell them what is going to happen next.
Instead of regressing to this passive approach, consider being even more proactive. This is a kind of “chaos theory” approach. While true chaos is rarely a good thing, by consistently pushing for progress, launching new strategies and working all available channels, you can project a position of power that will keep your counterparty reacting to your moves instead of trying to push the envelope.
Mithras Investments | Global Consulting for Complex Mergers and Acquisitions
At Mithras Investments, we provide experienced negotiation and consulting services for companies involved in complex and international business transactions. From initial due diligence and risk analysis to negotiating on a global scale, we can handle all aspects of your merger or acquisition. To learn more about our services, please request an initial consultation online or call (305) 517-7911 today.