Archive for the ‘deals’ Category

« Older Entries

Do You Want To Play A Game? EA & Take-Two’s Negotiating Failure

Tuesday, September 23rd, 2008
EA Tried To Negotiate To Buy Take-Two Software

EA Tried To Negotiate To Buy Take-Two Software

At this blog, we firmly believe that the best negotiating learning comes from observing the real world – not from just reading yet-another-book-on-negotiating. Thankfully, there continue to be a number of fantastic stories in the news that provide key lessons on how companies negotiate with each other and, all too often, what goes wrong…

Set the scene. The players in this particular ongoing drama were Electronic Arts (EA) and Take-Two Interactive Software. EA is a well known developer of video games for a number of different platforms. EA has a number of very popular titles including the best selling “Madden Football“. Take-Two is a young upstart firm that sells the insanely popular “Grand Theft Auto” games. Our story really starts seven months ago when EA made an unsolicited bid of $2B for Take-Two.

So what happened? Take-Two basically said “Thanks, but no thanks.” They stated that they thought that the EA offer of $25.74/share was too low. One reason that they said this was because their most recent game, Grand Theft Auto iV, had already sold over 10M copies.

What happened next? EA ended up letting its hostile takeover bid expire. However, as recently as this August it still seemed as though a deal might be had. EA announced that they were entering into confidential discussions with Take-Two during which EA would have access to non-public info about Take-Two’s business plans.

Where do things stand now? EA has announced that they will not make another offer for Take-Two.

What happened here? Underneath all of the discussions of how to merge two large software firms was a ticking time-bomb: the 2008 Christmas season. From the beginning, EA had made it clear that in order for the deal to make sense for them, they would have had to have been able to integrate the Take-Two product catalog into the EA catalog in time for the Christmas season. What this meant is that a deal would have had to been inked by mid-September in order to allow enough time for this to happen.

What can we learn from this failed deal? If there is a schedule issue, then you need to stay aware of it during the entire negotiation. The other side of this coin is that if you don’t want a deal to happen (like Take-Two) then simply by dragging your feet you can cause the deal to go away.

How important have dates been in your negotiations? Have you ever had a chance to use a looming date to help move one of your negotiations along? Has a negotiation ever been derailed by an inability to wrap things up by a given date? Leave a comment and let me know what you think.

Tags: , , , , , , ,
Posted in art of negotiation, deals | No Comments »

Real World Negotiating: Boeing vs. The IAM

Monday, September 8th, 2008

Boeing and the IAM are in labor negotiations
If you’ve been following the news lately, you are probably aware the that the International Association of Machinists (IAM) has gone on strike against the Boeing corporation. News reports are saying that Boeing stands to lose up to $100M every day that the machinists are on strike – wow, that’s a lot of money! Boeing’s and the IAM’s situation provides a unique ecosystem for us to peer into in order to watch a high stakes negotiation while it’s in progress. Both sides are actively maneuvering to boost their negotiating power and take power away from the other side so there is a lot for us to learn here.

What’s Being Negotiated? The IAM is negotiating a new 3-year contract with Boeing. Note that the contract is fairly short. Boeing likes it this way because they aren’t comfortable with their ability to predict the future and they don’t want to be required to keep a lot of union workers on staff if the market turns on them in the future.

What’s the Hang-Up? The usual key issues revolve around wages and health-care costs. However the big hang up has proved to be job security. Boeing’s new 787 Dreamliner program has shown that the company is willing to outsource much of the creation of parts to international suppliers and have local staff just be responsible for final assembly. The current conflict is a direct result of a disagreement over how much say the union should have in future Boeing decisions on how much work should be shipped out to other suppliers.

Why Is This Such A Big Deal? Right now suppliers can deliver parts directly to the Boeing assembly lines. The union workers fear that the next step will be for the suppliers to install their parts directly onto the plane – thus removing the need for the union workers.

What kind of interesting tactics have been used during this negotiation? What’s caught my eye is that both sides seem to be trying to influence outside parties in order to apply pressure to the main negotiating parties. Case in point:

  • Boeing presented a counter proposal to the union just before the Labor Day weekend. It was clear that they were hoping that this proposal would generate a great deal of family dinner table conversation. Boeing was hoping that the machinists wives/husbands would exert pressure to accept the contact because a strike would become very expensive very quickly in a world with $4/gallon gas.
  • The IAM’s president had met with Boeing’s Chairman months ago and warned him that the outsourcing issue would be an important one. Then he told the newspapers that he had told him this.

So what happens now? We’ll have to wait and see but it should be quite interesting. Boeing has a backlog of 3,600 planes that are already late for delivery. This strike could cause those planes to slip even more. The union thinks that they have enough leverage that if they have to stay off the job until 2009, they are willing to do so. Let’s see who does what next!

Posted in Boeing, deals, Dreamliner, Machinists, management, money, strike | 1 Comment »

Does Your Body Language Mumble?

Monday, September 1st, 2008

Learn to spot what the other side's body language is telling you during a negotiation

Ah body language, the secret communications channel that we couldn’t turn off if we wanted to. When we are negotiating it’s important to remember that your body is giving off all sorts of signals that you may or may not want it to be sending. I’m not sure if you can prevent your personal body language from stuttering or mumbling like you can your spoken words, but the good news is that you are not the only one talking this way. The other side is also giving you many clues as to what they are thinking and what their next move might be. If you are attuned to watch for and read the other side’s body language, then you just might find yourself in the driver’s seat for this negotiation. Let’s see if we can decode some of the messages that are being sent your way:

  • Key point: it’s when there is change in someone’s gestures that we should take notice. When they start to make a new gesture, that indicates that they have just started to feel someway. Don’t get hung up by individual gestures, rather focus on groups of gestures – they are the ones that are really telling you a story.
  • Our (and their) attitude is formed by initial interaction with people. We quickly form an attitude of openness or attitude of defensiveness. Keep your eyes open and pick up on these initial body gestures when you first meet the other side.

Let’s talk about some single gestures. Remember, don’t fret about these if you see them individually, it’s when you see them in groups that they are really sending you a message:

  • Cooperation & agreement: Gestures that expose the body imply trust, communicate “yes” , obvious and meant to be seen. Arms away from the body or over the head are a good example of this.
  • Slow & deliberate gestures: Open hands: show a willingness to meet the situation. Uncrossed arms and legs are another good example of this.
  • Moving forward: in negotiations we really like to see these gestures because they indicate that we’re going to make some progress – Hands on hips , feet apart. Often the signs of a high achiever, or a go-getter who wants to reach a negotiated agreement.
  • Hands on chest , this is a way to reinforce sincerity
  • Rubbing palms , shows both eagerness & expectancy
  • Appraisal & interest: there are a lot of ways to show this, one of the more common is when the head is tilted.

  • Hand to cheek gestures: Chin in hand, finger along bottom , evaluating what we are saying: interest, calm evaluation; Stroking the chin , making a decision about what you are saying
  • Interest In The Conversation: more interest , leaning forward you , I’m with you; less interest , leaning back, away from you.
  • Confidence: good eye contact, steepling with fingers , higher up from lap, more confidant (up by the eyes , too confidant!), hand in packet w/ a finger out , confidence, hands laced behind the head , confidence, legs crossed also means they are feeling quite smug.

There you have it – a laundry list of body gestures that you can look for during your next negotiation. Remember that the other side is probably going to be focused on the actual steps in the negotiation and may not be working to pick up on your body language. If so, you’ve just found a great advantage that just might help you to come out ahead!

Have you ever observed someone’s body language during a negotiation and then used that information during the negotiation? Has your body ever given away information that you wished that it hadn’t? Leave a comment and let me know what you think.

Tags: , , , ,

Posted in body language, communications, deals, planning, strategy | No Comments »

Do You Mind If I "Nibble" On You?

Tuesday, August 26th, 2008

The nibble is a negotiating technique that allows the buyer to get just a little bit more

Ah, the things that they don’t teach us in school – like the fine art of nibbling. No, I’m not talking about the process by which you take an hour to eat a cookie by making small bites all around the outside until the whole cookie has been eaten. Instead, I’m referring to the well loved negotiating tactic (among others). In the rest of the world, nibbling is a well accepted business practice by most cultures. In the U.S. it is generally frowned upon and those who use it are viewed as being cheap. However, it works. It works quite often. Maybe we should find out more…

One of my friends, Mike, is a professional Nibbler. Awhile back I was spending a weekend with him when he decided to go out furniture shopping and so I tagged along. Mike found a breakfast room table that he really liked and after going back and forth with the sales person, he had finally reached a price that they could both agree on. Then Mike did something that was unusual. He asked the salesman to throw in the painting that was on the wall in the display area. The surprised salesman thought for a moment, and then agreed. Mike thanked him and got out his checkbook, paused, and then looking directly at the salesman said “… and do you think that we could throw in those pillows that are over on that sofa as part of this deal?” The salesman took a bit longer to answer this time. He said that he could only provide two of the four pillows as a part of the deal. Mike said that that was fine and proceeded to write out his check.

So what had Mike done here? He had gone in to buy a breakfast table and had walked out with a breakfast table, a painting, and two throw pillows. Truly he was a master Nibbler! The art of nibbling has been around since the dawn of man. The answer to the question of whether or not you should nibble in a given business situation is a matter of your judgment.

Why does Nibbling work? There are five main reasons why the nibble is such an effective negotiating technique:

  1. The other side really, really wants to close this deal.
  2. The other side has invested a lot of effort to get this far, why blow it now?
  3. The “nibble” has a small value in comparison with the value of the whole deal.
  4. You are seen as a potential repeat customer if they give in on this one small point.
  5. They want you to be left with the feeling that you got a bargain.

Beware the Invisible Nibble! Nibbles can still occur even after a deal is closed. Generally these unseen nibbles are made by buyers who end up paying their bills late, asking for special delivery options or requesting free training that was not part of the original deal.

How Do You Stop The Nibble? So what could have that furniture salesman done to stop my friend Mike from so effectively nibbling on him? Here are a few tips:

  • He could have had a published price list. Once Mike saw that he could negotiate the price of the table, everything else was up for grabs.

  • He could have insisted that the table was one deal and anything else would have to be another deal.
  • He could have said that he didn’t have the authority to agree to Mike’s nibble request.
  • He could have resisted the desire to give in to Mike’s requests. If he had been able to hold out just a bit longer, Mike, the nibbler, would have given up.

So now you have another negotiating technique to use. This one will take some guts and the inner strength to give it a try even if you know that you’ll be viewed as being cheap. Are you willing to give it a go?

Have you ever had someone try the Nibble on you? Did it work? Have you ever tried to use the Nibble? What were you buying? Did it work out for you or did you get shut down? Leave a comment and let me know.

Tags: , , , , ,

Posted in best deals, deals, how to negotiate, money, nibble, satisfied | 2 Comments »

Testing The Waters: Does The Other Side Really Mean That?

Friday, August 8th, 2008

A firm position set by the other side can often be overcome during negotiations

Just a little over 20 years ago, I found myself in the middle-east on a business trip. The folks that I was traveling with decided to go down to the bazaar after dinner to see what was available. While shopping I happened upon an old man who was selling (fake) Rolexs. When I asked him how much one was, he told me $20. As I reached into my pocket to pay him, one of my traveling companions stopped me and in a quiet voice said “He doesn’t really mean it, negotiate with him.” It turns out that he was right – I ended up getting the watch for $10. Just in case you are wondering, yes, it does not pay to purchase fakes because that watch stopped working two weeks later.

This same situation often happens during business negotiations. The other side will state that one of their positions such as a firm price or position is non-negotiable. What do you do now? The last thing that you want to have happen is for the negotiations to end badly. You’ve got to find out if this is really the case or if they are just saying that as part of their negotiating strategy. The WRONG thing to do is to charge right at them and offer them a lower price / different position.

Instead, what you want to do is to “test” just how firm the other side’s position is. Just because they say that it’s immovable, doesn’t mean that it really is. Testing means that you need to change the nature of the deal. Take the firm item and add some additional pieces to it. Change the quantities that you are talking about. Change the delivery time: make it longer or shorter. What you want to do is to mix in items that are not fixed with the ones that are fixed and then go back and negotiate the bottom line. What you may find out is that what was once fixed, is no longer so!

Now this is not the only approach that you can take. Depending on how the negotiations are proceeding, there are four alternative steps that you could take:

  1. Try walking out – this may make them chase after you and offer to revisit their “firm” position.

  2. Charge on and keep on talking as though you never heard them state that it was a firm position. Note that this approach is extremely dangerous if they call you on it.
  3. Protest to a higher power – bring the other side’s boss into the negotiation and complain. Once again this can be dangerous if the boss is the one who told them that the point was firm.
  4. Finally, reduce the size of the deal being discussed by determining if there are some things that you can do yourself.

So what do you think – is there ever a case where something is really, really, firm and non-negotiable? Have you tried any of my suggestions in the past and did they work for you? Even better, has anyone tried to get around one of your firm points during a negotiation?

Tags: , , , , ,

Posted in deals, firm position, how to deal, non-negotiable, sales, strategy | 8 Comments »

« Older Entries