NEGOTIATION CASTING CALL
Learning Advanced Negotiation Techniques
by Playing Your Part
Welcome: Acquiring Advanced Negotiation Skills
WHAT WE WILL ACHIEVE:
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Augmenting Existing Skills so Successful Outcomes Occur in
both Transactions and Litigation
Nailing down Ethics: Distinguishing “Puffing” from Lying
Delivering Pragmatic Takeaways – from the Perspectives of
a Transactions Lawyer, Litigation Lawyers and Corporate
Counsel
Acquiring Advanced Negotiation Skills
TODAY’S LEARNING ENVIRONMENT:
All The World’s a Stage: Today’s Attendees are the Players!
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Interactive Learning Experience
 The Transaction: Table to Table Negotiations
 The Dispute: Preparation and Leverage Exercise
 All in for Ethics: Mediation Role Play
- Voting What’s In, What’s Out?
Acquiring Advanced Negotiation Skills
INTRODUCTION: THE PRODUCERS &
DIRECTORS
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Adams and Reese LLP
 Kolin Holladay (Transactions)
 Susan Mack (Litigation)
 Liz Roussel (Litigation)
Corporate Counsel
 Kim Bykov, Vice President, Senior Counsel, CA, Inc.
 Jennifer Nelson, General Counsel/SVP Consumer Products
Regulatory Affairs, The MAESA Group
 Marian Saxena, Senior Counsel, Hewlett Packard Enterprise
Acquiring Advanced Negotiation Skills
OVERVIEW OF ACT I
THE TRANSACTION: ACQUIRING FIRE
SAFETY PROFESSIONALS (70 MINUTES)
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The Setting: Core Concepts (15 Minutes)
The Plot: Hypothetical Acquisition Facts (5 Minutes)
The Players: James Smith (Seller)
Amanda Jones (Seller’s CEO)
Young & Rich (Buyer)
 Casting Call, Rehearsal: Each Table Takes One of Three Roles (see Table
Tents, 15 Minutes)
 Showtime: Table to Table Negotiations (20 Minutes)
 Reviews are In: Reporting of Outcome and Strategy (15 Minutes)
 One Reporter Per Group, Please
Acquiring Advanced Negotiation Skills
OVERVIEW OF ACT II
THE FALL-OUT – CLAIM AND
COUNTERCLAIM (45 MINUTES)
The Plot: Hypothetical Dispute Facts (5 Minutes)
• Scene 1: Introduction to Key Takeaways (3 Minutes)
• Scene 2: Preparing and Creating Leverage (12 minutes)
 Discussion – How to Achieve Better Positioning
 Table Exercise – How Can Smith, Young & Rich Better Prepare
for Negotiation and Create Leverage?
ACT I
TRANSACTION
Acquiring Advanced Negotiation Skills
NEGOTIATION OF A TRANSACTION:
PRACTICAL TIPS
“Genius is one percent inspiration, ninety-nine percent perspiration.”
-- Thomas Edison
Inspire: to influence, move, or guide
Acquiring Advanced Negotiation Skills
NEGOTIATION OF A TRANSACTION:
PRACTICAL TIPS
 Perspiration
• Before the Negotiation
 Assess Leverage
 Ascertain Objectives
 Set Goals
• During the Negotiation
 Use Objectives as your Guide
 Adjust Goals
Acquiring Advanced Negotiation Skills
NEGOTIATION OF A TRANSACTION:
PRACTICAL TIPS
 Inspiration
• Approach, Communication and Timing
 Approach – Identify Your Counterparty’s Strategy
 Communication – Pinpoint your approach
 Timing
Acquiring Advanced Negotiation Skills
THE PLOT: ACQUISITION OF FIRE SAFETY
PROFESSIONALS, LLC
Fire Safety Professionals, LLC
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Founded in Texas by Firefighter James Smith in 2000
Primary revenue source = contracts to provide fire safety services at
industrial facilities
Secondary revenue source = consulting contracts to provide training and
other collaborative services
Ten contracts with historical annual aggregate revenue of $60 million
o Boulder Industries by far the largest client relationship – generates
$26 million annually
Acquiring Advanced Negotiation Skills
THE PLOT: ACQUISITION OF FIRE SAFETY
PROFESSIONALS, LLC (cont.)
Fire Safety Professionals, LLC (FSP)
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Smith owns 95%, current CEO Jones owns 5%
Key FSP employee has resigned – formerly responsible for the Boulder
Industries account
Sales Process
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2016 – Smith decides to sell
 wants to pursue another business opportunity – selling two-way
radios to industrial facilities
Broker retained and finds Young & Rich, prospective buyer
Acquiring Advanced Negotiation Skills
THE PLAYERS: JIM SMITH
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Sole managing member of FSP
In 2014, ceded FSP day-to-day control to Jones, formerly CFO
Would like to retain minority stake in FSP
Wants continuing stream of revenue from FSP
Will not invest further capital in FSP
Open to earn-out
Acquiring Advanced Negotiation Skills
THE PLAYERS: AMANDA JONES
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In 2014, promoted to CEO with substantial pay raise and 5% share of
business
CPA, not firefighter
 Learned FSP’s business on the job
Significant personal relationships with FSP’s clients
Institutional knowledge of FSP’s operations
Wants to retain CEO position
 Wants to get more money
Acquiring Advanced Negotiation Skills
THE PLAYERS: YOUNG & RICH
(SEAN YOUNG AND KELLY RICH)
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From Atlanta, Ivy League MBAs from wealthy families
Started Young & Rich, LLC in 2006
 Own funds and investors’ funds
Never held executive position other than in companies in which they have
invested
No fire safety experience
Business Model:
 Purchase controlling interest in company
 Hold company for 5-7 years, then sell for profit
Acquiring Advanced Negotiation Skills
THE PLAYERS: YOUNG & RICH
(SEAN YOUNG AND KELLY RICH) (cont.)
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Aware from due diligence that Boulder Industries may competitively bid the
FSP business for the first time
Want to limit day-to-day experience in FSP as target
Wish list for transaction:
 Want 100% ownership interest, but may be amenable to allowing Jones
or Smith to retain minority ownership interest
 Want to insure 5-year post-closing covenant to prohibit Smith and
Jones from competing in fire safety business
Acquiring Advanced Negotiation Skills
THE MOTIVATION: THE FINANCIAL
PICTURE
 FSP’s Financial Statement
• 2015 = $12 million → retained earnings
= $4.2 million → EBITDA
• 2015 = $1.5 million distribution to Smith and Jones
 Smith
• As CEO, earned $1.2 million
• In 2015, received only distribution of $1.35 million
 Jones
• As CEO, earns $1 million salary
• In 2015, received distribution of $150,000
Acquiring Advanced Negotiation Skills
DEAL TERMS – TO BE REFLECTED IN
PURCHASE AGREEMENT
Must address:
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Smith’s retention of FSP membership interest (if any)
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Smith’s opportunity for earn-out payment (if any)
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Jones’ transfer of 5% ownership interest (if any)
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Jones’ retention as CEO (or not)
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Smith’s obtaining Consulting Agreement (or not)
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Restrictive Covenants (or not) for either Smith or Jones
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Day-to-Day involvement by Young & Rich (or not)
Acquiring Advanced Negotiation Skills
FSP/YOUNG & RICH NEGOTIATION: HOW
WILL YOU HANDLE THE PROCESS?
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Each table takes a role – Smith (A); Jones (B); or Young & Rich (C)
Each table prepares for negotiation
 Use Negotiation Objective Template
Form Groups of A, B and C
Negotiate to Close
 Record “Achieved,” “Not Achieved” and “Compromise”
Report out from each group
CONCLUSION OF ACT I
THE DENOUEMENT: WHAT THE
PURCHASE AGREEMENT LOOKED LIKE
-- Report by Producer --
ACT II
LITIGATION
Acquiring Advanced Negotiation Skills
THE PLOT: FSP REVISITED – THE DISPUTE
Boulder Contract is lost shortly after sale
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Smith sues Young & Rich
 Alleges breach of fiduciary duty to FSP by company
mismanagement and breach of his consulting contract
 Damages = Smith is ineligible for earn-out payment and was not
paid the full amount under his consulting contract
 Maintains Young & Rich was:
 Inattentive to Boulder Industries’ needs
 Failed to use Jones’ talents
 Failed to rely appropriately on Smith’s expertise and
relationships
 Improper focus on West Coast Expansion
Acquiring Advanced Negotiation Skills
THE PLOT: FSP REVISITED – THE DISPUTE
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Young & Rich:
 Countersuit alleges:
 Existence of certain so-called “negative audits” performed
by Boulder and not disclosed in due diligence
 Loss of Boulder Industries contract caused by “negative
audits”
 Non-disclosure of audits means Smith breached securities
laws
 Smith breached Purchase Agreement’s Representations and
Warranties clause
Acquiring Advanced Negotiation Skills
THE PLOT: FSP REVISITED – THE DISPUTE
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Young & Rich:
 Also allege Smith “checked out,” expressing no interest in
devoting time or attention to FSP’s operations or continued
success
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Jones:
 Did not sue
Acquiring Advanced Negotiation Skills
STRATEGIES: BUILDING LEVERAGE WHEN
NEGOTIATING A DISPUTE
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Begin the moment notice of dispute is provided
 Know your strengths and weaknesses
 Learn your opponent’s strengths and weaknesses
Create Leverage
 Not strictly governed by who has the better case on the merits
 Use the discovery process strategically
 Stay on the offensive
 Get an early easy win
 Strike when the iron is hot
Acquiring Advanced Negotiation Skills
TABLE EXERCISE: PREPARATION &
CREATION OF LEVERAGE
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Identify tables – Smith, Young & Rich
 Only former Jones tables need to choose
How will you prepare to prevail on your claims and to defeat your
opponent’s?
What can you do to create leverage for settlement negotiations?
Acquiring Advanced Negotiation Skills
WHERE IS THE LINE: ETHICS ILLUSTRATED –
A ROLE PLAY MEDIATION SESSION
While watching this mediation related to our fact pattern, please keep in mind the
following:
ABA Model Rule 3.3 Candor Toward the Tribunal
(a) A lawyer shall not knowingly:
(1) make a false statement of fact or law to a tribunal or fail to correct a
false statement of material fact or law previously made to the
tribunal by the lawyer
(2) fail to disclose to the tribunal legal authority in the controlling
jurisdiction known to the lawyer to be directly adverse to the
position of the client and not disclosed by opposing counsel
(3) offer evidence that the lawyer knows to be false
Acquiring Advanced Negotiation Skills
WHERE IS THE LINE: ETHICS ILLUSTRATED –
A ROLE PLAY MEDIATION SESSION
While watching this mediation related to our fact pattern, please keep in
mind the following:
ABA Model Rule 4.1 Truthfulness in Statements to Others
In the course of representing a client, a lawyer shall not knowingly:
(a) make a false statement of material fact or law to a third person
or
(b) fail to disclose a material fact to a third person where disclosure
is necessary to avoid assisting a criminal or fraudulent act by a
client, unless disclosure is prohibited by Rule 1.6
Acquiring Advanced Negotiation Skills
WHERE IS THE LINE: ETHICS ILLUSTRATED –
A ROLE PLAY MEDIATION SESSION
SECRET FACTS:
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Young & Rich received an email from Boulder Industries enumerating the
reasons it terminated its contract with FSP. No mention is made of the
“negative audits.”
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Smith knows that a key reason FSP underperformed and he is not eligible for
an earn-out is that Mr. Big, the former top-performing FSP Sales Executive on
the Boulder Industries account has just moved to Industrial Fire and he
siphoned off most of FSP’s business. He does not believe this is the sole
cause of his damages.
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Young & Rich’s attorneys have done independent legal Texas-based research
and found that the LLC membership sold does not qualify as a security. Young
& Rich only get attorneys’ fees if they have a successful securities claim.
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Both attorneys know what their respective clients know.
Acquiring Advanced Negotiation Skills
WHERE IS THE LINE: ETHICS ILLUSTRATED –
A ROLE PLAY MEDIATION SESSION
Now that you have viewed the mediation, please answer (by a show of hands)
which statements/omissions are OVER the ethical line –
• Ann Thrope’s failure to advise the mediator that Smith knows that Mr. Big,
the former top-performing FSP Sales Executive on the Boulder Industries
account has just moved to Industrial Fire and he siphoned off most of FSP’s
business?
• Tori Deal’s failure to disclose Boulder Industries’ email containing no
reference to the “negative audits?”
• Tori Deal’s assertion that her research shows that, in Texas, sale of
membership interests in an LLC constitutes sales of a security?
Acquiring Advanced Negotiation Skills
IN THE MIDDLE OF THE ACTION: THE
NEGOTIATION ITSELF
Remember:
• Know your team’s position (lawyers, principals and corporate
counsel) and plan before you begin the negotiation
• Dance the Dance – the rhythm is “offer, counteroffer, close”
• Assess and be true to your negotiating style
• Control the tempo
• If negotiations go awry, don’t panic; stop the bleeding and move
forward
• Avoid the “principle of the thing”
• Take yes for yes, maybe for yes, no for maybe
Acquiring Advanced Negotiation Skills
WHEN ALL ELSE FAILS: HOW TO GET
BEYOND AN IMPASSE
 Brackets
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Take it or leave it
High-Low offers
Baseball arbitration
Take a break / reassemble later
Walk away
Finale: Acquiring Advanced Negotiation Skills
We hope you enjoyed our drama!
Thank you and please remember
to complete your evaluations!