Negotiauctions combine the competitive bidding of an auction with the one-on-one dealmaking of a negotiation.
Many (if not most) complex deals between buyers and sellers—from home sales to purchasing auctions to corporate mergers—qualify as negotiauctions.
Negotiauctions give sellers the opportunity to avoid making the difficult tradeoffs of traditional negotiations or auctions— competition versus value creation, for example, or many versus few bidders. In fact, sellers can take the best of both worlds— negotiations and auctions—to ensure they get a great deal.
Negotiauctions have the following features:
1. One-on-one negotiations. At some stage of negotiauctions, the seller engages one or more buyers in private discussions about the asset on the table.
2. One or more rounds of bidding. The seller also pits potential buyers against one another in an auction.
3. Several, but not too many, potential buyers.
Negotiauctions need enough parties to spark an auction but not so many that one-on-one negotiation would be difficult for the seller to manage.
4. Process ambiguity. In a traditional auction, the seller determines the process (whether there will be a single round of bidding or multiple rounds, for instance), and buyers are passive participants. In negotiauctions, by contrast, the process is up for grabs.
Buyers can try to shape the process to their advantage, as in the case of an auction contestant who approaches a seller about negotiating privately to move beyond the single issue of price.
In general, whether you are the process setter or a bidder in an auction that has features of a negotiation, don’t assume that the rules are set in stone. Instead, change the game by thinking about how you can influence the rules, parties, and assets to your advantage.
To improve your skills at managing even the most complex negotiations, download this free special report, Managing Multiparty Negotiations, from Harvard Law School.
Often in business negotiations, we must compete not only with a counterpart across the table but also with others fighting for the same deal. A procurement officer may announce to a longtime supplier that she is putting their contract up for an auction. Or bidders for a company might be invited to negotiate elements of … Read In Negotiauctions, Try a Game-Changing Move
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In corporate dealmaking, much of the action happens away from the negotiating table. Successful dealmakers understand that deal set-up and design greatly influence negotiation outcomes. In this program, you will examine the legal, tactical, and structural elements of dealmaking and acquire practical skills and techniques for navigating difficult tactics and … Read Secrets of Successful Dealmaking
If you’re in a negotiation with many parties who have varying positions, it may be tempting to join a coalition with parties who share at least some of your goals. But should you join one?
… Read Managing Multiparty Negotiations
Whether you are facing negotiations with Congress, colleagues, customers, or family members, the following negotiation books, published in recent years by experts from the Program on Negotiation, offer new perspectives on common negotiating dilemmas.
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Back in 2014, Nike was the undisputed king of superstar endorsements, dominating the field by paying top talent millions for the right to sell lines of collectible shoes in their names. But sportswear and footwear supplier Under Armour made a bold play to change the landscape. Basketball star Kevin Durant, then of the Oklahoma City … Read How To Avoid a Business Contract Bidding War
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How many time have you sat at the bargaining table, and wondered, “am I negotiating with liars?” And to your own self be true—how many times have you been untruthful in a negotiation? The example below shines a light on how lies can get negotiators into hot water.
Back in July 2014, Jesse Litvak, the former … Read Negotiating with Liars: Bluffing versus Puffing
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We connected with Guhan Subramanian, Joseph … Read More
We recently received a question regarding a change-of-control provision and how to move forward with potentially renegotiating a contract. We spoke with Faculty Chair, Program on Negotiation at Harvard Law School, Guhan Subramanian, to answer the question.
Q: I represent a company—let’s call it “ClientCorp”—that has a long-term contract with another company, “TargetCorp.” A change-of-control … Read More
It had seemed like the beginning of a fruitful relationship. In April 2012, six wealthy businessmen teamed up to buy the Philadelphia Inquirer and several affiliated businesses for $61.1 million, promising to work together to reverse the newspaper’s flagging fortunes. Their infusions of cash and appointment of a Pulitzer Prize–winning reporter, William K. Marimow, as … Read More
When Amazon and Apple each began scouting locations for a new campus in 2017, we might have expected them to follow similar negotiating strategies aimed at win-win bargaining. In fact, their searches were very different:
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Deal structuring and negotiating can feel challenging in the best of situations. But when you’re dealing with “bad acts,” there are additional factors to consider when you structure your negotiation strategy. This is what one reader asked about when facing a deal to buy out a company. Here’s their question:
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We recently spoke with Guhan Subramanian, the Joseph H. Flom Professor of Law and Business at Harvard Law School and the H. Douglas Weaver Professor of Business Law at Harvard Business School, regarding trends in merger and acquisition strategies and how that’s impacting negotiations.
Negotiation Briefings: In your research, you’ve found that the way in which … Read More
In 2017, Amazon announced it was taking bids from cities interested in being the site of its second headquarters, known as HQ2. The online behemoth said it would be investing $5 billion in a campus and creating 50,000 well-paying jobs. Cities and regions across North America snapped to attention, and Amazon received 238 proposals.
Amazon asked applicants … Read Beware the Winner’s Curse in Auctions
There are numerous advantages to hearing from external advisers and experts in a high-stakes negotiation. However, when talks are at an impasse, limiting the negotiation to a small number of participants may be a more beneficial problem solving approach than including outside opinions.
This was at the heart of a recent question answered by Guhan Subramanian, … Read More
Reverse auctions are becoming a more frequent reality of business contract negotiations as companies work to cut expenses. In most negotiations, however, price is not the only issue. Guhan Subramanian, Joseph Flom Professor of Law & Business at Harvard Law School and Douglas Weaver Professor of Business Law at Harvard Business School, answered a question … Read More
When two sides seem far apart on a contract dispute, careful and creative deal structuring and negotiating can often result in a winning agreement for both sides. Here’s an example of how that might look in a business deal, based on a question we recently received.
“My company, a large multinational, contracts with an outside vendor … Read More
When competing with multiple parties to secure a coveted resource, such as your dream house, a cool invention, or a talented new hire, it can be hard to stand out from the pack. Amazon faced that challenge in its $13.4 billion acquisition of upscale grocer Whole Foods in 2017, as reported by Alex Morrell for … Read More
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Dangling the prospect of a $5 billion campus and about 50,000 jobs, … Read More
The year 2017 offered plenty of negotiation hits and misses in the realms of government, business, and beyond. To avoid failed negotiations in 2018, politicians, business leaders, and the rest of us would be wise to explore the following recent negotiation books, which can help steer us through our most difficult negotiating dilemmas:
… Read Must-Read Negotiation Books for 2019
Sometimes negotiators focus too much on the bargaining session at hand, to the detriment of bargainers away from the negotiation table, a group whose concerns and input is just as valid as those of the negotiators themselves. Here are some negotiation tips to help make sure your bargaining strategies include the voices and concerns of … Read More
Have you ever won an auction only to realize later that you overbid for the prize? In competitive bidding situations, it’s easy to get carried away in the heat of the moment and overpay. The Boston Red Sox 2006 procurement of Japanese pitching phenomenon Daisuke “Dice-K” Matsuzaka offers a lesson in keeping cool in these … Read Bargaining at a Fever Pitch
Imagine you’re competing with multiple parties to secure a coveted resource, such as your dream house, a cool invention, or a talented new hire. How might you stand out from the pack and win the prize? While negotiating its $13.4 billion acquisition of upscale grocer Whole Foods in 2017, online retailer Amazon did so in … Read More
Imagine that you’re up for a new job that you’d like very much. At the end of a long hiring process, the HR manager asks you to name your price. You propose a salary that you believe to be ambitious, expecting some haggling to follow. Instead, the HR manager smiles and holds out her hand … Read More
This past July, the News Media Alliance (NMA), a trade association of approximately 2,000 U.S. and Canadian news organizations, announced that it was planning to ask Congress for a limited antitrust exemption to allow its members to negotiate collectively with Google and Facebook regarding digital advertising. With consumers increasingly accessing their news through web platforms, … Read More
When you have multiple negotiations to conduct with one or more partners, should you combine them into one big deal? In negotiations for the sale of new books by Barack and Michelle Obama, the answer was an emphatic yes.
Cast of characters
When famous political figures have a book to sell, they turn to one person: Robert … Read When Two Deals are Better than One
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Filmmaker Nate Parker sticks to his dreams in a heated “negotiauction.”
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Robert Barnett, a corporate attorney based in Washington, D.C., moonlights as a book agent for celebrity politicians—including Barack Obama, Laura Bush, and Bill and Hillary Clinton. New York editors line up to sign Barnett’s clients and, they hope, rake in blockbuster profits.
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How RTB works
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Guhan Subramanian, Joseph Flom Professor of Law and Business, Harvard Law School; Douglas Weaver Professor of Business Law, Harvard Business School; Author of Negotiauctions
When you have something to sell, should you hold an auction or negotiate a collaborative deal that delivers maximum value to both sides? In this article, professor Guhan Subramanian compares the risks … Read Negotiation? Auction? A Deal Maker’s Guide
PON Executive Committee member and author of the book Negotiauctions was featured in the New York Times DealBook discussing the effectiveness of go-shop provisions in contracts. To read the full article, click here.
Professor Subramanian found that “despite the conventional wisdom, go-shops were generally effective and did indeed result in subsequent bids. The one exception … Read More
Professor Guhan Subramanian was featured in Forbes India in April 2010. Professor Subramanian discusses his latest book Negotiauctions: New Dealmaking Strategies for a Competitive Marketplace, which was published in February 2010.
Click here to read the full article.
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Guhan Subramanian is one of the most prominent — and ambitious — legal academics of his generation. The 39-year-old is the only person who’s ever held tenured positions at Harvard’s law and business schools, and on the side he advises companies on M&A and corporate governance. After authoring numerous academic papers and a corporate law … Read More