During my EMBA tenure at NYU the Art of negotiation was one topic of intense preaching but subjective practice. The most impressive book for me was Herb Cohen’s – You Can Negotiate Anything. This book practically gave examples of practicing negotiation extensively in every walks of life and through very simple unattended levers. But a realization dawned on me over a period of time, that negotiation is no more about “win-win” but more about “loosing less, developing sustainable relationships and trust, heighten the willingness to transact once again”.

With more than 2 decades spent in SI, MSP, VAR, GCC set-up, IT outsourcing deal negotiations I have seen context aware negotiation techniques more successful with the “loose-less” mindset working with CxOs at Enterprises, Partners at PE firms, ISVs, OEMs, Staffing vendors and internal functions like legal, finance, HR, Infosec and more. My goal has always been to quantitatively strike a balance and help achieve mutual goals – preserve the value of the party on the other side of the table.

In one of my biggest learnings out of a 360 degree horizontal focused ISV partnership deal (Resell and MSP) for global services – negotiation seemed tougher than ever. But at some point it felt that rather than traditional levers of “quality”, “outcomes”, “cash exposure”, “cash flow”, “margins”, “taxes” etc a more intricate framework can unlock deeper value !!

Consider non PnL inflows from the ISV – innovation funds, market development fund, SI credits, early payment discounts, price protection guarantees, allowances for learning and academic certifications, ISV consult and support hours, even the weighted pipeline of ISV clients – model them numerically based on industry standards and appropriateness to the ISV segment – assign weightage – and derive the Present Value. From there forecast the Future Value at every year, factoring in the “market forecasted growth rate” of the ISV and the firms “Weighted Average Cost of Capital” over an assumed period of 10 years, when logical “Terminal Value” kicks-in.

Consider non PnL outflows from the Firm – hidden efforts for talent hunting and managing niche churn, CoE and lab set-up, developing verticalized PoCs, Customer or Lead Acquisition Cost, funnel build up cost, probability of cannibalization of existing business with other competing ISVs – again model them with industry standard numerical values – weight them – and determine the Present Value of the net exodus of capital. Amortize them as multi year expenses for the “Terminal period”.

Consider direct PnL impacting parameters – and this was the area where major deadlocks happen during final negotiation – being internal policies but driven by geopolitical and macroeconomic externalities. Again model best case, worst case and median case numbers and see the range on how much the traditional PnL gets impacted. Things like COLA / Inflation assumptions, Deal contingencies, T&E for non-normal situations, Tax policies across countries of operations, Exemptions / Withholding etc, Tariff volatility, Fx considerations etc and more.

Traditional Corporate finance would include all of the above segments into indirect cost, SG&A funds, deal contingencies, and may be take a write-off on EBITDA or GOP but having an intricate framework could create a new anchoring point of traditional negotiation view, since tolerance levels could be tweaked to get the range of acceptance and see the interval where NPV is > 0 and IRR > ROIC.

Having this range during negotiation not only will boost confidence and strengthened alternate acceptance criteria, but accentuate overall empathy during the negotiation cycle. It will let us focus on the long-term objective than getting gung-ho on small clauses. Net turn around time and negotiation bitterness will significantly improve, ensuring a relationship where the parties would love to transact again and often.

Downside is this would take more time to simulate and coin edge cases but whether this is worth preserving big deal relationships ? Of course yes, since firms boast or lament that 80 % of their books are repeat business !!

Note: This framework is my alternate aid to negotiate and is not market tested in deal negotiations. Contextual parity is highly recommended.