Georg BerkelTwo-party, one-issue distributive negotiation about the acquisition of a renewable energy firm
The potential acquirer of a technology firm wishes to participate in a fantastically huge project for the production of renewable energy in Northern Africa and the Middle East (Desertec). The acquisition target is viable, yet its owners lack the resources to continue to compete. The exercise condenses the acquisition down to the lone issue of price. Based on a real case, the exercise is best used at the beginning of a course. It covers all basics of distributive negotiations and allows for deducting the tactics of value distributing from the participant´s results.
Since the acquisition target is not publically traded –the transaction is a one-off between the parties who will not work together anymore in the future— the outcome of this negotiation is determined by how successful the parties divide their proverbial pie. This serves as an eye-opener to many students, allowing them to see the structural similarities between the multi-million-dollar-transaction at hand and day to day negotiations that they may be more familiar with. At the same time it allows them to check and assess their own performance, attitude, and preferences vis-à-vis the requirements of successful value distribution. Lastly, the exercise offers a glimpse into the world of value creation and segues to the possible next exercises in the course.
Confidential Instructions for:
- All of the above
- Teaching Notes
- Results Spreadsheet (in Excel format, emailed separately)
- This exercise possesses a very large zone of possible agreement (ZOPA), the concepts of which can thereby be introduced, together with the underlying ideas of BATNA and Reservation Price.
- Due to the large ZOPA, practically all students will reach an agreement, which is of course good on the one hand, and will allow the students to clearly see the differences in how good their achieved result is on the other hand.
- Students thereby benchmark themselves against the others, and realize that their success was not determined by differences in information or time, but rather in different behaviors they chose to employ. This typically opens participants up for the discussion of the mechanics of value distribution, and the tactical requirements for mastering this successfully.
- Especially in the rare cases where an agreement is found outside the ZOPA, the case also lends itself to discussing the boundaries between professional negotiation tactics and unethical behavior. It encourages students to recognize and examine their own unspoken assumptions and attitudes about pie sharing ethics and behavior.
- The exercise includes one side item that students often catch. (Both parties in the scenario would prefer to keep the existing production site of the seller intact, including keeping his/her staff.) This item can serve as an occasion to drawn the line between distributive and integrative negotiations – and to build a bridge into this upcoming topic in the course.
Anchoring; BATNA; Bluffing; Closure; Commitment; Compatible issues; Fairness; Information exchange; quantifying; individual gains; Legitimacy; Misrepresentation; Objective criteria; Offers, first; Reservation price; Systems of negotiation; Pie sharing; Value Distribution, tactics of
Solar Power Attributes
- Time required:
- 2 Hours
- Number of participants:
- Teams involved:
- Agent present:
- Neutral third party present:
- Teaching notes available:
- Georg Berkel
Soft copy vs. hard copy
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Ordering a single copy for review
If you wish to review the materials for a particular role simulation to decide whether you’d like to use it, then you should order a single Teacher’s Package for that role simulation. A PDF, or soft copy, version of the Teacher’s Package is also available as a free download from the description page of most role simulations and case studies. There is no need to order participant materials as well as a Teacher’s Package, as all Teacher’s Packages include copies of all participant materials. In addition, some Teacher’s Packages (but not all) include additional teaching materials such as teaching notes or overhead masters. Please note that the materials in Teacher’s Packages are for the instructor’s review and reference only, and may not be duplicated for use with participants.
Ordering copies for multiple participants
If you wish to order multiple copies of a role simulation for use in a course or workshop, simply enter the total number of participants in the box next to “Participant Copies.” There is no need to calculate how many of each role is required; the Teaching Negotiation Resource Center will calculate the appropriate numbers of each role to provide, based on the total number of participants. For example, if you wish to order a 2-party role simulation for use with a class of 30 students, you would enter “30” in the box next to “Participant Copies.” You then would receive 15 copies of one role and 15 copies of the other role, for use with your 30 participants. As another example, if you ordered 30 participant copies of a 6-party role simulation, you would receive 5 copies of each role.
In the event that the number of participant copies you order is not evenly divisible by the number of roles in the simulation, you will receive extra copies of one or more roles. Participants receiving the extra roles may partner with other participants playing the same role, thus negotiating as a team. So, for instance, if you ordered 31 copies of a 2-party role simulation, you would receive 15 copies of the first role and 16 copies of the second role. One of the participants playing the second role would partner with another participant playing that same role, and the two would negotiate as a team.