Through the World War II years of 1942 – 1945, the United States Office of War Information (OWI) implemented propaganda campaigns in an effort to unify the American citizenry behind the war cause. One of the more renown campaigns was “Loose Lips Sink Ships”. The propaganda campaign, including posters depicting this slogan, communicated a very meaningful, tactical message to the American public: dissemination of information – even information which the public didn’t consciously consider relevant to the war effort or particularly secretive – could have the unintended consequence of providing an advantage to America’s enemies.
In any dynamic where competing parties attempt to maximize gains and minimize losses – wars, games, and yes, deal negotiations – the ability or inability of the opposing parties to access, control the flow of, and properly process information will significantly affect the outcome. This is what the OWI’s sloganeering was driving at in WWII, and it’s no less true in negotiating an M&A deal (though obviously the stakes aren’t as high).
As such, one of the greatest challenges to a professional negotiator in an M&A deal is the control and management of the flow of information between the various parties involved: buyer, seller, buyer’s representative, seller’s representative, and attorneys. Hardly intuitive, it’s not simply the selection of the substance which is communicated that matters. The amount of information, method of communication, and the timing can also be highly relevant.
In extreme cases, sloppy and undisciplined information management can kill a deal. More often though, sloppy and undisciplined information management precipitates a sub-optimal outcome, with the party on the receiving end given an advantage, and the disclosing party left in a precarious bargaining position.
So, here are a few tips I often share with clients to prevent them from being put at a disadvantage in an M&A negotiation, specifically relating to the nature of information.
1. Content: The most obvious one and often believed to be the only one. The content is that which is that information communicated explicitly through verbal or written means.
2. Mode: I already referenced the written and the verbal above. But those are hardly the only two modes by which information is communicated. Especially in the context of a face-to-face negotiation, non-verbal, visual cues can communicate a wealth of information to the other party.
3. Affect: Under certain circumstances, the emotional state of a bargaining party can be read very clearly, sometimes not even consciously, by the opposing party. Affect, and the intensity of emotion, is a meaningful form of information that can be detected in the verbal, written, and most notably, non-verbal modes. A good example of this is what’s referred to as “tilt” in poker: the condition of a player becoming frustrated with his play, consequently emoting through facial and bodily cues that the other players at the table sense and take advantage of.
4. Timing: Response times of information disclosures are an extremely important aspect of deal negotiation. Whether a party responds too quickly or slowly, the speed at which information is exchanged is also communicating information about the psychological state of the respective parties.
In any type of negotiation or bargaining dynamic, it is important to be aware of all four aspects of the exchange of information, not just the explicit content. In fact, being aware of it isn’t even good enough. They must be actively incorporated into a negotiator’s bargaining technique.
So, while it’s fairly obvious why “loose lips sink ships”, it’s important to keep in mind that when negotiating an M&A transaction, timing, affect, and mode can do the same.
Adam T. Hark is Managing Director of Wellesley Hills Financial. With 15+ years of consulting in payments technology, SaaS, and fintech, Adam advises clients on growth, exits, and market positioning strategies. Adam can be reached at ath@wellesleyhillsfinancial.com.
