Negotiator’s Views On The News: Sharp–Foxconn Deal

Mega deals don’t always take long. Mega deals take long, when parties fail to build trust.

First things first:

This section focuses on current affairs, which are often charged with political and economic tension. It’s important to highlight that The Trusted Negotiator is not expressing an opinion on the matter. We are simply reflecting on the situation’s negotiation / deal-making process and outcome.

The deal in the media:

“Sharp Corp.’s President Kozo Takahashi and Foxconn Technology Group’s Chairman Terry Gou formally signed a rescue deal, ending a takeover drama that spanned four years of often difficult negotiations“ Bloomberg.com

“Taiwanese electronics assembler Foxconn Technology Group and Japan’s Sharp scrambled to salvage their proposed marriage as investors questioned whether the companies could restore trust in each other after an 11th-hour breakdown in takeover talks.“ Business Review, The Australian

Picture this. Foxconn is a Taiwanese company and simply the world’s largest electronics manufacturing contractor (the third-largest IT company by revenue)! On the other side of the negotiation table, there’s Sharp.

It took literally 4 years for these two giants to finally end an epic negotiation, which right from the start was promising to deliver high value to both sides.

Just on March 30th, 2016 Quartz online magazine published an article titled: “Below the surface – Foxconn’s four-year struggle to buy Sharp has ended—but the worst is yet to come.”

So, why did it take so long and what is the problem with the deal?

Let me decrypt what the drama is all about.

#1

A few years ago, foreign companies taking over of historically independent Japanese companies like Sharp, Sony or Toshiba was simply unthinkable. Now, in many cases, it’s matter of survival in view of the Chinese competition. So, undoubtedly, the hardest part of the negotiation for Sharp executives must have been adjusting and aligning their mindsets to permanently let go of their thirst for autonomy.

My takeaway from this point is a firm reminder that internal negotiations within your organisation or with yourself are the toughest.

#2

On 29th of February, 2016 the Business Review section of The Australian published: “According to a person familiar with the matter, Mr. Gou received a list of liabilities in an email from Sharp on Wednesday morning, during a meeting at Foxconn headquarters in Taipei. Dozens of people were in the room and they “went berserk,” this person said.” Clearly, it’s never wise to wait until the end of the negotiation to talk about “the elephant in the room”! Discussing the difficult business and personal issues, areas of disagreement, points of tension, etc, must be done as early as possible! And once you have decided to talk about “the elephant”, think about how you will talk about it. In the case of Sharp, the email format and its receipt in a public setting clearly did not paly to Sharp’s advantage. Here is a simple rule of thumb that I got from Michael Massari, Senior Vice President of Caesars Entertainment:

“If it’s not important to send mail. If it’s important, but not mission critical, pick up the phone. If it’s business critical, go see someone!”

#3

Atul Goyal, analyst at Jefferies & Co, has commented that the potential deal “is counterintuitive”.

Reading this comment made by an expert in this deal makes me concerned! After all, one of your key jobs during a negotiation is to clearly spell out the benefits of the proposal for the other party.

#4

The negotiator’s job does not end when the contract is signed. In actual fact, it’s when the real work begins.

Your and your counterpart’s profits, the synergies and the relationship are all made or broken in the implementation phase of the deal. So, given the rocky last moments of this negotiation, I wouldn’t be surprised to hear that both sides do not feel they have enhanced the relationship in the process and that hard times lie ahead.

Now the good news is that it is never too late to fix flaws in your negotiations process and revive trust in somewhat damaged relationships. And even if this deal didn’t have an ideal start, I wish and hope that Sharp and Foxconn find their feet in the implementation phase to realize a long and successful collaboration.