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Posted: October 19, 2010

Psychology of a deal

How to handle the emotion factor

Samuel Edwards

With the number of books, seminars, presentations, and other advice floating around these days on the subject of negotiation, it seems almost everyone has at least some training in the science of getting a deal done. Much of this advice takes a generally rational, problem-solving approach to discussions (see Getting to Yes, the leading work in the field).

One aspect that is not always talked about, however, is how to deal with the less rational and more human issues that arise during negotiations: the personalities, motivations, and emotions of the people sitting across the table-or sometimes right beside you.

Any deal has its share of different personalities: we have all encountered the charming but blustery CEO, the pragmatic but dour CFO, the hardliner, the jerk. But getting beyond these outward personalities to underlying motivations of the participants is what can really pay off for the negotiator. Is the guy with the big ego really the one calling the shots, or is it actually the calm and collected woman sitting to his right? If the latter, appeasing the ego may be necessary to keep the deal moving forward, but focusing on the decision maker when the real issues come up is what will actually get the deal closed.

Understanding the motivations of those involved can be more complex than it sounds. Sometimes one of the people working to negotiate the deal may actually prefer that it not close. This could be an employee who is happy with her current job (and might lose it after the deal) or a founder who thinks a better deal is out there. This hijacker may need to play along but may also be ready to derail the discussions at any point if given the opportunity. Keeping this person off balance and distracted by minor issues that you can later concede may blunt her ability to sabotage the deal.

Conversely, identifying a deal champion on the other side can be a boon to any negotiator. This champion could be someone who has been pushing the deal internally from the beginning and has a reputational stake in getting it done, or someone who simply believes the deal is the right opportunity at the right time. Even if the deal champion is unpleasant or difficult to work with, if you are able to fortify this person's role and give him power and ammunition at key times, he may end up providing the needed push to resolve the toughest points just as the deal seems to be falling apart.

All of these observations lead to the conclusion that knowing the tactical skills of negotiation will only get you so far. Negotiators must also understand the personalities and motivations of those involved. Deciding whether to get big points out on the table early or hold them for the end could well depend on whether the decision maker is actually in the room to start the discussions or is hidden somewhere only to appear on the last day before everyone flies home.

Similarly, the resources on your own team will be much more valuable if deployed effectively: sending your patient-but-firm lawyer into a private session with a hijacker may keep him distracted long enough for you to push through a last big issue. And having the ability to spot the different personalities and read people's motivations, or having a team member who can, will provide invaluable insight. So next time you gear up for a tough round of negotiations, don't forget that a little psychological due diligence on the players may well be essential parts of closing your deal.
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Sam Edwards is an associate in Holland & Hart's Denver office. He concentrates his practice in corporate and securities law, with an emphasis on venture capital and private equity financings, mergers and acquisitions, general corporate matters including choice of entity and formation, corporate structuring and restructuring and commercial matters such as lending and borrowing, employment and licensing and sales. Mr. Edwards also counsels the boards of publicly and privately held companies on a variety of matters, including fiduciary duties, corporate governance and disclosure and compliance issues. He can be reached at (303) 295-8053 or seedwards@hollandandhart.com.

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