On Not Making a Federal Case of Every Transaction

July 21st, 2009

Clients hire me for subject matter expertise and to help negotiate transactions. Having worked through a lot of deals in my 10 years as a lawyer, I have some sense of what works, what doesn’t, how to evaluate risk in a deal and how to draft an agreement that takes on just the right amount of risk.

The other side in the deal has an attorney doing the same thing, and once the deal is done we both step out and let the business principals begin the relationship that the agreement covers. In this process it is really easy for the lawyers to get hung up trying to perfectly craft every term in the agreement. This can drag out the negotiation and run up costs. If the negotiations are especially bruising it can also create a bit of tension for the principals at the start of the relationship.

How, then, can one avoid turning every contract into a major battle? Here are a few ideas:

1) Don’t get personal. Contract negotiation is not a battle of wills. It feels that way sometimes, especially when it seems like the other side is determined to throw out all of my suggestions and force its own terms on my client, but the focus needs to stay on reaching a deal that works, not a document I created.  Egos should be checked at the door so the parties can focus on the facts.

2) Work with those facts. I talk through scenarios with my client and the other side and use concrete examples as much as possible so that everyone can understand why a certain term is important.  Tit-for-tat negotiation where each side can only concede something if the other does can stay in the bazaar as far as I am concerned.  I talk through my client’s economics (without giving up confidential information, of course) so the other side can understand why prices are set where they are, why insurance provisions can’t change for this deal, etc.  When the other side understands the *reasons* they need to work much harder to counter my client’s proposals.

3) Listen actively. Asking questions and making a visible effort to understand the other side’s business requirements pays huge dividends. It might seem counterintuitive based on #2 above (if I ask the other side for its reasoning won’t it be harder for me to say no to them?), but it isn’t.  The acts of listening, acknowledging concerns and finding ways to help the other side cover those concerns encourages them to do the same with us.  When we all understand one another’s needs really well we can jointly work out collaborative solutions.

Every deal is different and some definitely go sideways despite everyone’s best efforts to keep things moving properly. Still, when I am able to approach a negotiation with these best practices in mind I find that the deal moves much more smoothly, quickly and with the best legal fees/contract value ratio.  My clients like that.

Reblog this post [with Zemanta]
Tags: ,
  • Comments Off on On Not Making a Federal Case of Every Transaction