“Rules of Three” in Cross-Border Business Negotiations
Posted November 11, 2017 in Articles
Earlier this year, Harvard Law School’s Program on Negotiation published an article highlighting some “rules of three” for achieving successful outcomes in strategic negotiations. While the article discussed these rules in the context of business negotiations generally, based on our experience, we believe that they are particularly noteworthy for entities engaged in cross-border transactions.
Tips for Cross-Border Transactions: Making Strategic Use of the “Rules of Three”
1. Use Three-Dimensional Thinking to Structure Negotiations and Outcomes
The article encourages negotiators to think in “three dimensions.” The first dimension, “‘at the table’ interpersonal skills and tactics,” is one that the author says most people use, but it is also as far as most negotiators go. In cross-border negotiations, this means remaining cognizant of diplomacy and avoiding accidental mistakes that have the potential to jeopardize a profitable deal.
The second and third dimensions – “setup moves” and “deal design” – can take on heightened importance in international negotiations as well. Setup moves involves taking necessary steps to make sure the decisionmakers come to the table, while deal design refers to structuring proposals that take potential long-term implications into consideration. When entering an unfamiliar foreign market, companies need to ensure they are not overlooking jurisdiction-specific issues and that they are not setting themselves up for failure by failing to consider factors outside of the four corners of the deal.
2. Have Three Alternatives to Avoid Over-Commitment Before the Deal Closes
If you only have one opportunity to pursue overseas growth, your level of pre-closing commitment to the deal will be high. On the other hand, if you have three (or more) alternatives, you can leverage each alternative to your advantage. This may mean three alternatives with the same negotiation partner or three separate opportunities with unrelated entities. In either case, by reducing your reliance on any one particular deal, you can both help yourself avoid being backed into less-than-favorable deal terms and make sure that you choose the transaction that truly represents the best opportunity in light of the varying factors at play.
3. Use Three Offers to Identify Your Counterparty’s Priorities
Finally, the article suggests that making three simultaneous offers, rather than one, you can identify your counterparty’s priorities and help position the remaining negotiations in your favor. As the author cautions, however, it is important to “ensure that [you] would be equally happy with any of these options before presenting them, and each offer should be relatively aggressive to allow room for later negotiation.”
While it may not always be feasible to offer three equally palatable alternatives in a cross-border acquisition deal, this is nonetheless a valuable principle to keep in mind. What can you offer to gain insights without exposing yourself to untenable risk? If you are struggling to make headway in your negotiations, will presenting options give your counterparty the sense of control it needs to move forward?
Inquire With Mithras Investments
If you need assistance with an international investment or acquisition, we encourage you to contact us for an initial consultation. With offices in Miami, Florida, we assist corporate clients with complex transactions worldwide. To speak with a cross-border negotiation consultant at Mithras Investments in confidence, please call (305) 517-7911 or send us a message online today.