Negotiation: Your Starting Points

Any successful negotiation must have a fundamental framework based on knowing the following:
·         The alternative to negotiation
·         The minimum threshold for negotiated deal
·         How flexible a party is willing to be, and what trade-offs it is willing to make

Three concepts for establishing negotiation framework: BATNA (Best Alternative To Negotiated Agreement), Reservation Price and ZOPA (Zone Of Possible Agreement). And expanded to the fourth concept: value creation through trade.

BATNA
Developed by Roger Fisher and William Ury, it is one’s preferred course of action in the absence of a deal. Knowing your BATNA means knowing what you will do or what will happen if you fail to reach agreement. Always know your BATNA before entering into a negotiation. Otherwise you won’t whether a deal makes sense or when to walk away.

Example:  a consultant is negotiating with potential client about a month long assignment. It’s not clear what fee clear fee arrangement she’ll be able to negotiation, or even if she’ll reach an agreement. So, before she meets with this potential client, she considers her best alternative to an acceptable agreement. In this case, her BATNA is spending that month developing marketing studies for the other clients and she calculates can be billed out at $15,000

If your best alternative to a negotiated agreement determines the point at which you can say no to an unfavorable proposal.

If that BATNA is Strong, you can negotiate for more favorable terms, knowing that you have something better to fall back on if a deal cannot be arranged. If BATNA is weak, puts you in a weak bargaining position. Whenever a negotiator has a weak BATNA (or hasn’t taken the time to determine what that BATNA is), it is difficult to walk away from proposal. And if the other side knows that its opponent has a weak BATNA, the weak party has very little power to negotiate.

A weak BATNA can be improved, here three potential approaches to strengthening it:
1.       Improve your BATNA
2.       Identify the other side’s BATNA
3.       Weaken the other party’s BATNA

No negotiator is in a weaker position than one with no alternative to a deal. In that case, the other side can dictate the terms. The BATNA less party is a deal taker or not a deal maker. If you find yourself in this situation, you must have an alternative.

Most business negotiation involves many variables, some of which cannot be quantified or compared. In transaction that involves price and other features, you can make the BATNA less fuzzy by assigning a monetary value to various features and adjusting the BATNA value by that amount. But, not all situations are amenable to price adjustments, for simple reason that price is not always the fulcrum of negotiated deals. In that case, the negotiator must be able to make a trade-offs in both sizing up the deal and developing his/her BATNA.

Reservation Price
The reservation price (also referred to as the walk-away) is the least favorable point at which one will accept a deal. It could be derived from BATNA, but it is not usually the same thing.

Example: You are currently paying $20 per square foot for suburban office space. While preparing to negotiate with a commercial landlord for a lease in down-town high-rise, you decided that you won’t pay more than $30 per square foot. That’s your reservation price. Or, you can stay where you are at $20 (your BATNA). In the end of negotiation, the landlord declares that he will not accept less than $35. You terminate the negotiation and walk away from the deal.

In above case, the new location has different characteristic. Thus, there’s a subtle difference between your BATNA and your reservation price. The fact that $35 per square foot is the landlord’s reservation price.

ZOPA (Zone Of Possible Agreement)
ZOPA is the area range in which a deal that satisfies both parties can take place. Put another way, it is the set of agreement that potentially satisfy both parties. Each party’s reservation price determines one end of the ZOPA. Each party had a reservation price, and they bargained within the ZOPA. In doing so, each got a better price than his/her walk-away.

In some cases, both reservation prices were reversed, no overlap in the ranges in which two parties could not reach agreement – No ZOPA. No agreement would be possible, no matter how skilled the negotiators, unless there were other elements of value to be considered or if one or both side’s reservation price changed.

Value Creation through Trades
This fourth concept tells us that negotiating parties can improve their positions by trading the values at their disposal.

Example: Book barter between collectors of rare books. One party is building A book series and has B series –not his/her interested building.  While other party is building B book series and has A series –not his/her interested building. Both are extremely happy with the deal.

Value Creation through Trades is possible when a party has something he or she values less than does the other party –and vice versa. By trading these values, the parties lose little but gain greatly

Ref:

Negotiation, 1992, Harvard Business Essentials

Langkah M&A 1; Manage Pre M&A & Screen Candidates

Dalam melakukan Merger dan Acquisition (M&A), langkah pertama adalah Manage Pre-M&A Phase. Sesuai dengan formula Michael Porter, keuntungan M&A harus dilihat dari 4 hal berikut:

a. Dorongan dari pembeli (forces from buyers)

Kegiatan M&A harus mampu meningkatkan atau memperbaiki produk akhir ke konsumen.

b. Dorongan dari pendatang baru (forces from new comers)

Kegiatan M&A untuk mencapai economic of scale yang baru sehingga menang dalam kompetisi.

c. Dorongan dari penyuplai (forces from suppliers)

Kegiatan M&A untuk mengintegrasikan dan memperbaiki bahan mentah atau input

d. Tekanan dari pengganti (forces from substitute)

Kegiatan M&A untuk meningkatkan inovasi dan mencari segmen baru

Langkah kedua adalah Screen Candidates. Secara umum terdapat dua pola partnership, yaitu:

1.   Stategic Investor

Hal ini seperti yang dilakukan oleh Tiger Airways dengan mengakuisisi Mandala. Atau yang terakkhir, kegiatan ‘saling akuisisi’ antara Virgin Australia (DJ) dan Singapore Airlines (SIA). DJ mengakuisisi 60% saham Tiger Australia (TT) dari Tiger Airways (TA), sekaligus menjual 10% saham DJ ke SIA. Yang menarik bahwa TA sendiri 49% dimiliki oleh SIA.

2.   Financial Investor

Hal ini banyak dilakukan oleh para private equity, semisal Recapital dan Saratoga. Berbeda dengan strategic investor yang mempunyai bisnis identik untuk memperkuat pasar, maka financial investor lebih pada prinsip investment; buy low & sell high, buy high & sell higher. Misalnya, Saratoga Capital (SC) masuk ke bisnis Power lewat akuisisi 51% saham Medco Power Indonesia (MPI) dari Medcoenergi (MEI). Kemudian, MPI berencana IPO 2016 untuk mendapat fair market value ketika nanti dilepas kembali oleh SC.

Menurut Mckinsey, seleksi kandidat menggunakan beberapa parameter seperti dalam gambar di bawah.

Dari alur tersebut, dari banyak kandidat perusahaan yang bisa menjadi target M&A, maka ternyata hanya ada 2 kandidat layak menjadi target M&A. Maka yang berikutnya yang memutuskan adalah nilai dari perusahaan dan keuntungan yang didapat jika dilakukan M&A.

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(to be continued..)

(Candidate) Magister

Seorang (Candidate) Magister diuji oleh 2 Phd dan 1 Doktor. Alhamdulillah.. ujian sekolah (hampir) terlewati. Terima kasih atas dukungan semua pihak.

The new chapter is beginning.. :)

@ Paramadina Graduate School, July 13th 2012

Merger & Acquisition (M&A), Sebuah Tren Bisnis

Sebuah perusahaan dan industri menurut teori manajemen akan mengalami sebuah siklus hidup perusahaan atau industri. Dimulai dari perusahaan tersebut lahir, tumbuh, matang, penurunan dan akhirnya ditutup. Begitu pula sebuah industri, contohnya industri telekomunikasi yang saat ini sudah melewati masa tumbuh dan masuk tahap matang. Jika tidak dilakukan tindakan inovatif, maka bukan tidak mungkin industri telekomunikasi akan mengalami penurunan dan menjadi mati (tidak berarti perusahaan ditutup, tapi sudah tidak ada pertumbuhan di tengah biaya yang membesar seperti halnya telepon rumah).

Untuk meningkatkan performa perusahaan dalam menghadapi siklus tersebut terutama untuk tetap terus tumbuh, maka perusahaan akan menggunakan dua cara yakni dengan pertumbuhan organik dan non-organik. Pertumbuhan organik dengan mengandalkan dari pertumbuhan dari operasi perusahaan. Sedangkan pertumbuhan non-organik dengan melakukan merger dan atau akuisisi perusahaan lain.

Tren M&A berkembang pesat akhir-akhir ini terutama sejak munculnya para private equity (perusahaan ekuitas swasta) yang membeli perusahaan pasien BPPN saat krisis 1998 dan kemudian menjual lagi perusahaan tersebut setelah stabil dengan harga yang berlipat. M&A ini pulalah yang menjadikan orang-orang kaya baru dengan usia yang relatif mudah (40an, bandingkan dengan zaman Liem Si Liong dulu) seperti Sandiaga Uno, Roslan Roeslani, Edwin Soeryadjaja, serta kakak beradik Michael dan Budi Hartono (grup Djarum).

Contoh perusahaan hasil pekerjaan para Private Equity adalah Recapital (Sandi & Rosan) yang membeli Bank BTPN kemudian menjualnya kembali (grup yang sama sekarang mempunyai Bank Pundi, perubahan dari Bank Eksekutif), grup Djarum bersama sebuah investment banker membeli BCA dari pemerintah pasca krisis dan sekarang grup Djarum menjadi pemilik mayoritas BCA, serta Saratoga (Sandi & Edwin) yang mangambil alih Mandala Airlines bersama Tiger Airways.

Di dalam dunia Oil & Gas juga terjadi peningkatan volume M&A secara global selama 2008-2011 (PLS, Inc., 2012).

Karakteristik industri migas yang padat modal dan adanya ketidakpastian yang tinggi menyebabkan pengembangan lapangan migas dilakukan secara partnership antar perusahaan migas dalam bentuk aktivitas M&A. Dengan demikian perusahaan migas akan berbagi modal, resiko dan hasil investasi sebagai cara mereka untuk melakukan optimalisasi portfolio dalam investasi pengembangan lapangan migas. Secara langsung, aktivitas M&A tersebut juga menjadi salah satu pendorong pertumbuhan industri migas di seluruh dunia beberapa tahun terakhir.

M&A umumnya dilakukan dengan langkah-langkah sebagai berikut:

1. Manage pre-M&A Phase

2. Screen Candidates

3. Value Candidates

4. Negotiate the Price

5. Manage the post M&A

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to be continued

- Langkah M&A 1
- Langkah M&A 2

The Magnificent Seven

PGSF – Strategic Finance Class of 2010

For some people eighteen months seems like forever but to us, it was only yesterday. Time flies indeed. We accomplished many things in such sort of time. It was exhausting, sometime frustrating, but exciting at the same time. And we would be lying if we didn’t have good time. It was fun.

Everyone and each of us were blasting and learned new knowledge and what so called best practices. One was so enthusiastic and suddenly spoke fluent English learning the different between merger and acquisition from neighboring country lady lecture. One never skips school, well maybe only one or two. One copied-pasting class materials for his consulting business and made money from it. One was chasing virtual girl named Maya but never has gut how to start a conversation. One gave her first birth and brought along her new baby-son completing an exam. One has to rush home as soon as the Friday class is over driving for 76 miles to the south (we know what he’s up to). One went for pilgrim struggling for changing his life upon returned. People change and grow.

We are changing and growing. We should be proud of ourselves for standing still up to this point. Attending night classes after work is challenging but we survived. Finish line is just few seconds distance.

Let’s win our final battle and together we can make it. Soon we will get what we are dreaming for. Stay in touch valued friends. We are not across universe. We are just across the corner. Heaven knows what He is planning for us and we should keep the faith that our path will cross again…

[ PGS Campus, Last Night-Class - May 8, 2012 ]

* Thanks to Mas Arif M for the picture and words.