Case Studies

Case Studies – Negotiation Strategies

Litigation Settlement
Following management buyout of company and the subsequent failure of the business, the client, an audit firm, was being sued by a consortium of banks for allegedly misrepresenting the prospects of the business being purchased by management. One of the banks had been permitted to see the client’s evaluation of the businesses prospects and on that basis assembled a group of banks to make the loans needed to close the deal. The business collapsed shortly thereafter, leading to a suit against the client for approximately $1.6 billion.

The client was advised to feign low salience; i.e., they made themselves hard to get hold of and rejected numerous proposed meetings with the plaintiffs. The client was advised to try to get the court to declare the lead bank in the consortium as a co-defendant on the grounds that they shared the client’s assessment without permission. The lead bank was named as a codefendant. The client was advised to signal that it expected to go to court and that it was reluctant to negotiate a settlement. The banks eventually convinced the client to meet for discussions (when the model indicated the time was right) and a settlement was negotiated for about $65 million. At the time, the client’s outside attorney estimated that the least that the client litigation was that the client would pay $400 million.

Litigation Settlement: Toxic Tort
The client was allegedly responsible for the deaths of about 2,000 people resulting from an extremely serious industrial mishap that may have involved sabotage. The client was sued for over $3 billion and publicly offered to pay about $550 million. The offer was rejected. We were then engaged and concluded that the plaintiff — a foreign government — was less concerned about the amount paid than it was about being blamed for giving in to a multinational corporation. We designed a strategy by which a highly respected neutral party announced the settlement. It was for about $450 million, that is, $100 million less than the client had already revealed they were prepared to pay.

Merger Related Negotiation
We were asked to assess the price the client would have to pay to acquire another firm. We were also asked to assess what the management arrangements and the scope of the merger could be so as to optimize the outcome from our client’s perspective. We analyzed what the deal could look like if our client chose a friendly approach or a hostile take-over approach, or if our client sought to close the deal quickly or was prepared to wait several months. We urged the CEO of our client to meet directly with the CEO of the target firm and to ask the target CEO to put a price on the table at which he would settle then and there. Although no one else believed that the target CEO would put a price on the table, our client followed our advice and the target proposed exactly the price we said he would. This revealed that the target CEO was willing to close the deal for a lower price than our client had anticipated. The merger was completed successfully.

Regulatory Negotiation
Our client sought permission to complete a merger that the relevant regulatory agency had previously judged to be anti-competitive and, therefore, against the public interest. We demonstrated that all of the regulator’s preferred alternative arrangements were infeasible and that the proposed merger would increase the odds of a subsequent set of arrangements that would enhance competition in the ways desired by the regulatory agency and its government. The merger was successfully completed.

Equipment Sale
The client sought a multi-billion dollar contract in a foreign country where it had previously been banned from doing business because of poor performance. We recommended that they form a business alliance with a specific firm in the other country and we advised that this particular alliance was likely to be sufficiently pleasing to the government in question that they would overlook the former problems. The alliance was forged on terms that gave our client the bulk of the proposed business. The contract was award to our client and its alliance partner.

Estate Trustee Negligence
The client represented the family of a deceased person whose guardian had been grossly negligent. Unfortunately, the statute of limitations had expired. We advised that our client’s team of attorneys arrange a meeting with the defendants and that the attorney who had engaged us not be present as he was prepared to settle for any amount. Our strategy included an emotionally charged threat by an attorney and friend of the decedent to reveal the gross negligence to the press. The defendant’s attorneys asked our lead attorney to control his colleague and, as planned, our client’s lead attorney announced that, as everyone could see, he could not control the attorney/friend of the decedent. The case was settled on the spot for about $7 million, substantially more than our client had indicated was the best they could hope for given that the statute of limitations had expired.