If a business venture in a high-stakes sector fails, the results can be catastrophic to individuals or industries. The pressure to assess each merger and acquisition to ensure viability is intense. Even smaller contracts can greatly impact a company’s bottom line. Knowing how to negotiate for the good of all stakeholders can mean the difference between success and failure. Here are some of the best ways to navigate contract negotiations and secure favorable terms while being fair to the other party.
How to Prepare for the Meeting
The majority of work happens before leaders agree to take a meeting. Management must understand market conditions and how they might impact deals with another brand.
For example, a technology enterprise may look to acquire a business that fills the gaps in their current services. Gather all the details of the pros and cons of signing the contract. Those in the negotiations should also get details from the other party. The more information management has when they go into the meeting, the better prepared they’ll be.
Very few negotiations are simple win-lose scenarios. Typically, deals are quite complex and multiple factors must be weighed alongside potential outcomes for different actions.
Ideally, decision-makers and negotiators constantly learn better communication skills and develop unique ideas that challenge old thinking that may no longer work in the modern era. Preparation starts well before the deal is even considered.
Assess Everyone’s Needs
Spend time considering the impact of a contract on both sides. Does the other entity have needs outside of the financial agreement? For example, a family-owned brand may worry about their longtime employees and if their jobs will be protected during an acquisition.
Negotiators should be cautious about promises and ensure the firm can deliver on any promises. Failing to complete the terms of the agreement can be a material breach, but companies can also commit non-material breaches. The offended party can often cancel the contract over such issues without penalties.
Key Tactics to Negotiations
Once the team prepares for the meeting and plans to proceed with contract negotiations, it’s time to prepare for meetings, compromises and final agreements. Here are some key tactics to use during the process to ensure a positive final result.
Professional Assertiveness
Before leadership meets with the other party, it’s crucial to understand soft skills such as professional assertiveness. Some people think coming on strong gives them an advantage in negotiations. However, when people feel attacked, they may be reluctant to work toward a resolution. A calm approach that shows command of the situation is preferable and will go farther in creating a contract everyone is happy with.
Clear Communication
Miscommunication often leads to disagreements over contracts. Although face-to-face meetings are usually necessary to hash out details, businesses should follow up with a written version of what was agreed on. Recording conversations is also a good idea, as all staff involved can go back and relisten to what was said to ensure they fully understand.
Leveraging Data
Enterprises can make better decisions on which contract points they can’t budge on by leveraging data-driven insights. With advances in artificial intelligence (AI), they have the opportunity to take massive amounts of data and sort through it.
The capabilities of AI memory allow organizations to gather vast amounts of data from both entities’ records and process it rapidly. Researchers can feed it changing technology and market trends, and it presents a clear picture of how viable an agreement is.
Comply With Regulations
Many high-stakes sectors require following the letter of the law to avoid penalties or accusations of violating antitrust. Companies should bring legal and industry-specific experts to the negotiating table to ensure contract agreements comply with federal and local regulations.
Avoiding ambiguity in the contract language can avoid any impropriety. If counsel or leaders find an issue with the contract terms, communicate concerns immediately to all stakeholders and seek a resolution that works for everyone.
More Caution Is Required
Negotiating contracts in high-stakes industries requires more attention to detail and assurance of current and future compliance. Knowing the best ways to negotiate, analyzing data and getting input from experts helps businesses navigate potential pitfalls and avoid them before they become problems.
Devin Partida writes about investor technologies, big data and apps. She is also the Editor-in-Chief of ReHack.com.
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