It takes a lot more than charm, a fancy lunch, a great product and the right price to make deals happen, particularly for newer businesses that can’t point to their endless list of big “name” customers. Discussing the issue with a career M&A pro whose work has spanned 16 countries and hundreds of negotiations, Craig Mullett told me of his system for getting deals done. It offers a great primer of the homework every CEO and sales rep should complete long before entering the conference room, lunchroom, or fancy restaurant.
Personally, I’ve always preferred having a great product and letting my belief in its value carry the day–along with my charisma, passion, and American Express card. But Mullett proposes a more succinct, repeatable system he’s come to call the “Five P’s:” prepare, probe, possibilities, propose and partner. It’s worked well for him in two completely different lives as the M&A leader for a major corporation, and in the buying and selling of smaller and mid-size firms leading Branison Group.
Here they are, in brief:
1. Prepare
The power of information can surpass many other competing power sources when you are evaluating your negotiating counter-parties. Spending time researching the other party’s interests and possible positions, as well as accurately understanding your own, is the first key part of preparation. Craig compiles detailed information on the seller’s needs and timeline, the buyer’s strategic/financial options and possible negotiation outcomes. He then visualizes all these factors in a deal diagram and assigns roles to help his team rapidly respond in the next phases.
2. Probe
Asking for clarity to confirm any assumptions is beneficial to both sides and can be done both before and during the negotiation. Use e-mail to get some key questions answered in writing before the meeting and then ask follow-up questions face-to-face. Send a draft agenda and ask for comments, knowing that the buyer’s changes to the discussion points highlight issues of key importance to them. Being able to understand the mindset of the other party provides valuable indicators on what will lead to the most successful deal.
3. Possibilities
Expanding the range of possible deal outcomes increases both the likelihood and robustness of any deal. While price is of paramount importance to both sides, money was not the only interest each side has in developing a deal. Map out the various non-monetary issues, such as certainty of the timeline to closing, payment options and management retention and then frame these as differentiated bundles for a potential deal.
As a buyer, you can use this information to reconfirm what had been learned from preparation and probing in terms of what is important to the seller. This also enables the seller to expand the bundled options and feel like they are contributing meaningfully to the final proposal.
4. Propose
Once the possibilities have been ranked and contrasted to get agreement from all sides, a proposal can be crafted that reflects the best possible outcome. Try to do this visually (on a whiteboard) focused on the solution space. Seeing the proposal come together jointly,then translating the agreed concepts into a final detailed proposal, sets a positive momentum between the parties towards partnering.
5. Partner
Implementing any agreement relies on the parties’ actions post-deal. For example, a buyer needs to have the management team of the seller committed to the business after acquiring it, while the selling owner needs to be committed to getting the deal done and not fighting over post-closing issues afterwards. Using the negotiation process to build rapport and develop contract mechanisms to encourage alignment helps achieve both objectives.
This negotiating framework can be adapted and used for personal negotiations (such as your salary package) or large-scale multi-party negotiations (such as trade treaties). Although the preparation stage can be hard work, it should allow the other stages to flow easier until you reach the successful partnering stage.
Even though distractions and deadlines may create stress, achieving a great deal for everyone is always much more fun.