Tags: BATNA, Dealmaking, exclusive negotiations, Guhan Subramanian, negotiating, negotiated agreement, negotiation, negotiation briefings, negotiation period, negotiating situations, negotiating skills, negotiator, area of potential third-party agreement, an exclusive deadline sets a clear deadline for negotiations. As such, it requires one or both parties to put on the table its best and final offer before the expiry of the exclusivity period. Indeed, an exclusive negotiation period is the equivalent of the “trial stages,” which often result in a last-minute agreement in the trial environment. In 2003, the Vivendi seller only negotiated with General Electric, after General Electric passed three rounds of bidding and stated that it was willing to pay more than the other bidder. In opening an auction, Vivendi ensured that exclusive negotiations were conducted with the highest bidder. While these factors increase the likelihood of an agreement, exclusive trading periods have their drawbacks. The exclusivity is very valuable for the buyer with few options, but therefore expensive for the seller, who has many alternatives. As a seller, you should, in this case, make sure you fully exploit the benefits of non-exclusivity – negotiating with several parties and, for example, playing each other – before engaging in exclusive negotiations. An exclusive negotiation period can facilitate agreements in different ways. First, both parties may indicate that they believe there is a possible match zone (ZOPA); Otherwise, they would not waste their time agreeing to negotiate exclusively.
This signal can help build the trust that the parties need to explore the common benefits. For example, when nbc and Paramount Television agreed in 2001 to an exclusive 30-day period to renew the hit show Frasier, both parties implicitly acknowledged that there was no better focus for the show than NBC. However, in this case, both parties degrade their BATNs in much the same way. If neither party makes a much greater sacrifice of defection alternatives, approval of an exclusive negotiation period should have little impact on the relative bargaining power or the final outcome of the agreement. The extent of this effect depends on the length of the exclusivity period decided. A one-year lockout, common in the world of mergers and acquisitions (M-As), harms BATNAs far more than the 30-day ban, typical of many business environments. Of course, in most trading situations, their primary goal is to improve your BATNA, but not to make it worse, in order to increase your overall bargaining power. Adapted from “Hands Off! Negotiation Exclusivity” by Guhan Subramanian in the October issue of Negotiation Briefings Newsletters. What do you think of an expanded negotiation? Share your thoughts with our readers in the comments section below.