Yahoo and the Art of Successful Negotiation

The recent Microsoft/Yahoo buyout meltdown is a perfect example of good and bad negotiation tactics. Microsoft’s Steve Ballmer had it right. We’ll have to wait and see whether Yahoo’s Jerry Yang had it wrong. At this point, I think he blew it.

Mr. Ballmer followed the number one rule for winning negotiations (see below). When the deal got to the point that the cost outweighed the perceived value to be received, he walked. Many are losers in the negotiating game when they become so enamored with doing a deal that they lose touch with reality. When that does happen they become vulnerable to being taken.

I was reminded of that negotiating fiasco because many years ago when, as CEO of ITT Life, I tried to buy that company from The Hartford. The wheels fell off our deal when the nutcases back in Connecticut continued to escalate their asking price far beyond what the company was worth.

My band of brothers and I finally ended up walking away from the deal – just as Ballmer did to Yahoo. Instead, we started a fabulously successful competitor – Life USA – and sold that company a dozen years later to financial services giant, Allianz S.G. In the meantime, ITT Life shriveled and died; The Hartford lost millions for their greed and arrogance.

Precepts to Power Negotiating

Jerry Yang could wind up losing not just millions, but billions for his negotiating tactics. But here’s the point: while you may never be involved in buying and selling billion dollar companies, all of us negotiate all of the time. And there are several critical precepts or principles involved in a successful negotiating process:

• Never be so in love with a deal that you can’t walk away.
• Understand the difference between bartering and negotiation.
• Always make it appear as though you gave up more than you received.
• Don’t’ be rigid
• Don’t be intimidating
• Don’t take as much out of the deal as possible and leave crumbs for the vanquished.

If you as a business manager never lose sight of these points you will usually be a winner in the negotiating dance, and you are guaranteed never to be a loser. You will always be a winner if you can make sure that all parties walk away from the table not only believing that they have just won, but totally convinced that they have absolutely gotten the best of the other party.

This negotiating program is founded on the notion that solving problems and reaching agreements ultimately means building relationships. There is something both sides have in common and that is to gain fair value for what they offer. Concentrating on solving these issues to the satisfaction of both parties builds relationships. Good relationships, of course, foster long-term success everywhere you turn.

Constantly remind yourself that when negotiating be willing to give up anything that you don’t want to keep. Let them win on every point except for those things that are inviolate to you. If you don’t care about it then don’t argue about it.
Too many times the rule is don’t give anything. And that’s dead wrong. Instead, get over on their side and help them achieve their objectives without violating the things that you need yourself. If you do that, you can walk out of any negotiation a winner.

Negotiating is neither rocket science nor a mystic art that only the gifted few can successfully handle. The bottom line in effective negotiation is this: negotiation is a learned skill and must result in a win-win situation. Preparation and planning are vital to a successful result. Know your wants and needs and negotiate the best deal for both parties. Striking a deal will seem much easier when you cheat on the rule that says one should win and one should lose. Instead, make your own rule that says – you win, I win!

3 responses to “Yahoo and the Art of Successful Negotiation

  1. Hi. I am a long time reader. I wanted to say that I like your blog and the layout.

    Peter Quinn

  2. Peter … Thanks for your comments and being a long time reader. Appreciate it.

  3. Dieter Floushbarton

    All good negotiating points but a few things to consider about our dear Mr. Yang and the Yahoo deal. Mr. Yang had no intentions of selling. Yahoo was not looking for buyers and in fact has been looking to and is nearing a partnership/sell off of it’s search division with/to Google. That is the division Microsoft was after specifically to compete with Google. Yahoo will soon be a leaner, meaner company and it’s stock is still trading higher than before the offer was made by MS. Microsoft, which has been courting Yahoo for three years now, is on a downward spiral and is attempting to buy Yahoo for the sole purpose of competing with Google for search/advertising dollars because Microsoft sucks at innovation and their only recourse is to buy companies that are innovative. Unfortunately, those companies are then often ground up, leaving only a smoldering husk after Microsoft is done with them and Yang knows it. Steve Balmer didn’t walk away, he was shown the door and I believe Yang will be be seen as the victor when the dust settles.

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