Negotiations

• Author: David A. Steiger
• Pages: 305-336

Having successfully navigated through the due diligence process, a talented

and experienced lawyer or businessperson might be tempted to think that

he or she does not need much advice in actually negotiating a deal, even if

it is overseas. After all, aren’t negotiations essentially the same anywhere—

two individuals or groups of individuals who seek to come to a mutually

acceptable agreement? While this is to some extent true, as we have seen

in earlier chapters, negotiating transactions across borders complicates the

working world you otherwise know. Once again, having the right people

in the right place with the right information can be the difference between

success and failure. It all starts with having the right team of people at the

negotiating table.

Assembling Your Negotiating Team, or the Noah’s

Ark Principle: Every Specialist That

You Need, None That You Don’t

Howard Mills, of Deloitte, has a delightfully simple way of summarizing

the negotiation of cross-border transactions: “Doing something interna-

tional is going to be a team effort.” According to Mills this is because in an

international context, you are dealing with legal issues and people issues

(including cultural issues) on both sides of the border. That begs the question,

however: how do you determine who should be on your negotiating team?

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Negotiations

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Lest any of my friends, whether lawyers, consultants, or anyone else who

bills on an hourly basis, get too excited, my answer to that question—the

Noah’s Ark principle—does not mean having two of every profession on

Earth around the bargaining table. It means because of the ever-present

need to keep costs under control, it is essential to recognize that there is

only limited room on your negotiating “ark.” So it is necessary to take

great care in choosing whom you invite on board and being sure that you

have the professionals that your particular deal requires, including appro-

priate in-house personnel, outside counsel, and, quite possibly, consultants

of various stripes.

How do you recruit the negotiating team? At Caterpillar, Don Chenevert

reports that once diligence is done, the deal is handed off to the transac-

tion team that, logically enough, is made up of the same people who did

the diligence. That way, a consistent approach and high familiarity with

the target company’s issues is maintained.

It is important to note, however, that the team that handles the due dili-

gence phase is usually broader than the negotiating team. Chenevert will

have a negotiating team consisting of a client manager, an in-house lawyer

and his/her lieutenant, an outside accounting consultant, and an outside

lawyer with expertise in handling acquisitions. The outside lawyer is typi-

cally someone who lives in the subject jurisdiction where the transaction is

taking place. Paring down the negotiating team to the essentials is impor-

tant because of the need for proportionality. Chenevert has found that if

the other negotiating team has ve members, it is important to bring only

ve people with you into meetings. If more than ve people are needed over

the course of a deal, there is nothing to prevent you from rotating people

in and out of the team.

Successfully choosing the team members is a function of understanding

which skill sets are necessary to properly attend to all the details of the

given transaction.1 An engineering expert with specialized knowledge of

tolerances might be necessary if you are a manufacturing concern. Someone

1. Eric Lesser & Joanne Stephane, Preparing for Human Resources Business Transformation

Outsourcing, IBM B C S, 10–11 (2005), http:// www -935 .ibm .com

/services /multimedia /ge510 -4015 -hr -bto .pdf.

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familiar with migration issues could be necessary if information technology

(IT) is at the heart of a deal.

In order to control costs, it is likely that the in-house management and

legal staff will choose the makeup of the negotiating team. Still, the counsel-

ing role should not be forgotten—outside counsel and consultants should

advise their clients of the potential consequences of proceeding without

key skill sets being represented. In his experience, Mills has found that the

deals he has worked on have beneted from

good lawyers on both sides, a good international accountant, a good

banker, a nance person and a client that has some strong business

and some strong international skills. Hopefully, the client is someone

that understands a little bit of the culture or is willing to do some

homework on it.

Harvey Cohen, of Dinsmore & Shohl, also stresses the importance of having

“a detail person to handle the nance and accounting issues.” Based on his

experience, Cohen emphasizes the value of having that person physically

with you at the negotiating table.

The type of transaction often dictates who the necessary parties to your

negotiating team should be. In an outsourcing IT transaction, Vikas Bhalla,

of EXL, notes that legal function, human resources, migration, quality,

operations, and training issues are all involved. In a straightforward sales

transaction, on the other hand, different parties are needed. Patricia Gill,

formerly an in-house contract lawyer supporting Motorola sales teams,

recalls that Motorola’s proposal team generally included

a sales guy, a proposal manager, an in-house attorney, technical/engi-

neering staff, after market support, a tax guy and a nancing guy to

check on the buyer’s creditworthiness. This did not include people

who might be assisting the buyer with obtaining nancing through

the Export-Import bank or otherwise.

The takeaway here is that it is crucial to consider all the skill sets needed

now and foreseeably in the future, and to line up appropriate professionals

307NEGOTIATIONS

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