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1、Negotiating Skills and Techniques,Presented by Bart GreenbergManatt,Phelps&Phillips,LLPContinuing Legal Education,Bridging the Gap.Business Issues,3,Can a“Simple”Solution Be Reached?,Splitting the PigTrading TermsOne Side“Blinks”or“Caves”“Trust Me”or“Wink-Wink,Nudge,Nudge”Typical where one party doe
2、s not want deal terms reduced to writingConsider the“CYA”Letter,4,“Trust Me”Example 1:,Merchant Banker Purchases Stock in Client with 50%Nonrecourse Note“Understanding”that Client Would Forgive Remaining 50%Recourse Portion of NoteClient Goes Bankrupt and Merchant Banker Sued by Trustee for Recourse
3、 Portion of Note,5,“Trust Me”Example 2:,To Accommodate Investor Tax Position,Documents Will Not Show That Shares Are Being Issued,in Part,for ServicesInvestor Breaches its Obligations Under Development AgreementClient Unable to Claw Back the Shares,6,“Trust Me”Example 3:,In 1990,Client Agrees to Acc
4、ept 49%of Shares In Order to Make Company Available for Minority Owned StatusFrom 1990 through 2003,K-1 Reports That Each Shareholder Has 50%Interest Since 2004,K-1 Allocates Ownership 49%and 51%,7,Will More“Creative”Thinking Help?,What is Creative Thinking?Getting from Point“A”to Point“B”by method
5、not commonly used or knownDefinition of Point“B”is keySubstantive knowledge must then be applied to determine the path,8,Examples of“Creative”Thinking:,Consider These Point“B”s:Getting shares to the CEO at no cost in order to start the capital gains clock but without causing a taxable event Protecti
6、ng Buyer with reasonable indemnification rights,but at the same time allowing Seller to sleep at nightFunding Target before Buyer has completed its due diligence,9,If Creative Thinking Wont Help.,Reasonable Parties are Typically Able to Resolve Business IssuesIf Parties are Not Able to Resolve Busin
7、ess Issues,Is Something Else Preventing Compromise?,Bridging the Gap.Unequal Bargaining Power,11,Unequal Bargaining Power,Absence of Compromise May Be Attributable to a Party Believing That It Has Sufficient Leverage to Force its Position on Other Party If so,and Negotiations Are Stalled,What Option
8、s Are Available?,12,Example of Unequal Bargaining Power,Client Has First Use of TrademarkMulti-Billion Dollar Conglomerate Infringes on Clients TrademarkClients Cease&Desist Letter to Conglomerate is RejectedClient Unable to Devote Enough Resources to Maintain Fight,13,Example of Unequal Bargaining
9、Power,Negotiated Buy-Out of Stock Held By 44%Shareholder FailsShareholder Files for Dissolution and Shareholders Spouse Takes Active Role in LitigationSpouse Unaware of the Nature of Certain ReimbursementsShareholder Therefore Highly Motivated to Settle Litigation,14,Techniques to Level the Playing
10、Field,Outsmarting Your OpponentRecognizing,and Negotiating Within,Your MeansManipulating Your Opponents“Greed”,15,Outsmarting Your Opponent,Your Opponents Position May Be Based on a Misunderstanding of LawIf so,and the Misunderstanding of Law Can Be Clearly Articulated to the Opponent,the Opponent M
11、ay Be Forced to Moderate its Position,16,“Outsmarting”Example 1:,Negotiated Buy-Out of Stock Held By Holders of 49%of Stock(One of Which is a Public Figure)FailsBylaws Indicate that Acts of Board Must be UnanimousBylaws Also Indicate that Quorum for Shareholder Meetings is 54%,17,“Outsmarting”Exampl
12、e 2:,Start-Up Develops Supply Chain Software for Multi-Billion Dollar ConglomerateStart-Up Wants to License Supply Chain Software to Third PartiesCounsel for Conglomerate Sends Cease&Desist Letter to Start-Up,18,Staying Within Your Means,The Party With Less Negotiating Power Needs to Understand Its
13、Limitations and Not Step Too Far Beyond the Point of Reason This is Also Known as“Beggars Cant Be Choosers”,19,“Staying”Example 1:,Unstable Target Terminates LOI Because It Does Not Like PriceTarget Incurs a Material Adverse ChangeTarget Informs Buyer that It Has 48 Hours to Close Sale or Target Wil
14、l File for BankruptcyBuyer Closes Sale Within 48 Hour Period at 1/3 LOI Purchase Price,20,“Staying”Example 2:,Diligence Reveals Outstanding Tax and Judgments Liens Against Target,But Target is Unwilling to Adjust Purchase PriceTarget Breaches its Facility Lease,Landlord evicts Target and Enters Into
15、 New Lease with BuyerBuyer Purchases Some of Targets Assets at Fraction of LOI Price,21,“Staying”Example 3:,Client Settles Patent Infringement Suit in 2004Client Breaches Settlement in 2005.Patent Holder Exacts“Pound of Flesh”in Connection with 2005 Settlement,22,Manipulating Your Opponents Greed,Pa
16、rty With Greater Bargaining Power Must Recognize When Enough is EnoughIn the Absence of Recognizing Such Limit,Excessive Greed on the Part of such Party May Serve to the Other Partys AdvantageThis is Also Known as“Pigs Get Fat,Hogs Get Slaughtered”,23,“Hogs”Example 1:,Client Focused on Revenue and N
17、ot ProfitabilityCustomer Payable at$2 Million and No Written Contract in PlaceLegal Counsel Advises Client to Stop Shipping Pending AgreementClient Continues to Ship and Payable Reaches$4.5 millionCustomer Files for Bankruptcy,24,“Hogs”Example 2:,Buyer Intends to“Grind”Seller at Closing for Price Ad
18、justmentBuyer Unloads“Bombshell”at ClosingBuyer Neglects to Realize That Exclusivity Has ExpiredSeller Takes Opportunity to Get Out of Deal with Buyer and Sells to Third Party in 48 hours,Bridging the Gap.Personality Issues,26,The Unsophisticated Opponent,Issue Mitigated by Competent CounselIf No Co
19、unsel or Counsel Does Not Mitigate:Client Should Consider Offering to Pay Portion of Opponents Legal Fees if It Hires Acceptable Counsel,27,The Unsophisticated Opponent(cont.),If Opponent Does Not Hire Competent Counsel:Client Should Assist OpponentClient Should Ask Its Counsel to Draft Opponents De
20、liverablesAll Documents May Need to Be“Dumbed Down”Client Counsel Needs to Deliver a CYA Letter,28,“Unsophisticated Opponent”Example 1:,Sample Provision:Seller acknowledges and agrees that,although Buyer and its legal counsel have assisted Seller in its preparation of the Disclosure Schedules,Seller
21、 has provided Buyer with all documents,agreements and other instruments that are responsive to each of the items to be disclosed in the Disclosure Schedule,Seller has read all of the Disclosure Schedules and fully understand the nature and contents thereof,and has been provided with an opportunity t
22、o comment and revise each of the Disclosure Schedules as it deems appropriate.Seller further represents and warrants that each of the Disclosure Schedules fully and accurately discloses all of the information required to be disclosed thereunder in order to ensure that the foregoing statements are tr
23、ue and complete and not misleading.,29,The Unfriendly Opponent,Typically Arises in a Distressed Sale Situation(i.e.,Not Voluntary)Best Strategy Is To Communicate at the Attorney Level or Via E-MailIf an“All-Hands”Meeting is Made Necessary,Consider Conference Call In Lieu of Physical Meeting,30,“Unfr
24、iendly Opponent”Example 1:,Closing Due Diligence Uncovers Significant IssueTension Already in Room Due to Prior Purchase Price AdjustmentsMessage Communicated Counsel to Counsel in“Side Bar”Closing Occurs in Two Separate Conference Rooms,31,The“Difficult”Counsel,Opposing Counsel May Be“Difficult”Due
25、 to Any of the Following:Counsel is Not Competent in the Relevant FieldCounsel is Overly AggressiveCounsel Has Hidden Agenda(e.g.,Does Not Want to Lose Client)or Is Otherwise Disinterested,32,The“Difficult”Counsel(cont.),Client May Want to Pay Portion of Opponents Legal Fees if It Hires Acceptable C
26、ounselIf Not.:Encourage More Client to Opponent Conversations(i.e.,Bypass Counsel)Client May Want Its Counsel to Draft Opponents Deliverables“Dumb Down”DocumentsTry All Hands Meeting so Client Counsel Can Interface with Opponent,33,“Difficult Counsel”Example 1:,“Aint No Big City Lawyer Gonna Tell Me
27、 What to Do!”Opponent Recognizes that Its Legal Counsel is an ImpedimentClient and Opponent Engage in Very Detailed Discussions With Each Counsel Only Working in the Background,34,The Intermeddling Prima Donna,Typically a Third Party to the Transaction,Such as a Minority Shareholder,a High Performin
28、g Sales Person or Developer of IP,Makes Demands on SellerCritical Decision is When Client or Opponent Should Negotiate With the“Terrorist”,35,“Intermeddling”Example 1:,Minority Shareholder Develops and Hosts Clients Web SiteDisgruntled Minority Shareholder Breaches Development Agreement and Alleges
29、Misconduct on Part of Controlling ShareholderHarassed Controlling Shareholder Puts Company Up for SaleMinority Shareholder Extracts Unfair Share of Purchase Price,36,“Intermeddling”Example 2:,Sellers Highest Performing Sales Person Is Encouraged by Wealthy Boyfriend to Renegotiate Comp.Package on Da
30、y of ClosingBuyer and Seller Each Contribute to Comp.Package to Get the Deal Done,37,“Intermeddling”Example 3:,Opponent,a 50%Shareholder,Seeks Unfair Reimbursements from Client,Who Is the Other 50%ShareholderOpponent Shows No Flexibility,So Client Resigns as Employee,Officer and Director and then Es
31、tablishes Competing BusinessParties Settle for$5,000,Bridging the Gap.Communication Methods,39,E-Mail Correspondences,Highly Efficient and User FriendlySomewhat Impersonal and Tone is Capable of Being MisunderstoodAttachment Size and Filter IssuesUnderstand and Manage the Risks of“Reply All”and E-ma
32、il CacheConfidentiality and Related Use of Document Protect and EncryptionUnwanted Metadata in Attachments,40,Conference Calls,Most Typically Used as a Side Bar or Going Over Business IssuesE-Mail Communication Typically Used to Posture and Frame Issues to Be DiscussedCant See“Body Language”and“Mult
33、i-Tasking”May Affect FocusBeware Side Bars Upon a Failure to Properly Disconnect,41,“Face-to-Face”Meetings,Time Consuming and ExpensiveTypically Used as a Last Resort to Steer the Deal Back on TrackConsider Using a“Lock the Door and Nobody Leaves”Approach to Move the Deal More QuicklyAllows Client C
34、ounsel to“Bypass”Opponents Counsel,42,The“Formal”Letter,Due to the Overwhelming Use of E-mail Correspondences,Reserve the Use of Formal Letter for High Impact Statements,43,“Going Dark”,Effective Tool for Determining How Badly Opposition Needs to do the DealOnce Initiated,Essentially Turns Into a Game of Chicken,44,The Form and Timing of Response,Response Time and Manner Need to Be Calculated In Order to Not Message to Opponent that Client Was Willing to Give Up More,Questions?,Negotiating Skills and Techniques,Thank you!Presented by Bart GreenbergManatt,Phelps&Phillips,LLP(714)371-,
