Five negotiation tips for mining companies: #1 pay as much attention to plan B as to plan A
- By Pilot Law LLP
It may sound obvious, but sometimes negotiations in the mining industry are not worth pursuing once it becomes apparent that there is a better alternative to the proposal being negotiated.
I remember once when I was working on a financing for a mining company, the term sheet which seemed very attractive at first became less and less so as negotiations continued. The client’s advisors were unanimous in advising that the financing offer was unworkable and would be worse for the client than doing nothing. In the end, the advice was not taken, the financing proceeded, and the company ultimately became insolvent.
In the seminal book by Roger Fisher, William Ury, and Bruce Patton Getting to Yes: Negotiating Agreement Without Giving In, the authors explored the concept of a “Best Alternative to a Negotiated Agreement” or “BATNA”; I’d call it Plan B.
Simply put, going into a deal negotiation, you should always analyze what your alternative is to failed negotiations — for example, another deal, litigation or status quo. There is always a Plan B and it should always be forefront in your negotiating strategy. Failure to recognize this can result in protracted and ultimately unproductive negotiations. In the worst case, it can end in an agreement that is suboptimal.
I’d say, pay as much attention to Plan B as to Plan A.
The stronger your Plan B, the better your starting point in negotiations since you never have to settle for anything less than your Plan B. That only can help you in negotiating the best possible Plan A.
So, focus on your Plan B (BATNA) is the first of five negotiation tips for mining companies (read here the second tip) that I will be sharing with you.
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