$0.00 – $6.00
Two-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:||2|
|Neutral third party present:||None|
|Teaching notes available:||Yes|