Part 2: Gaining leverage – and using it wisely
By Deanna Petersen, Chief Business Officer of AVROBIO, as part of the From The Trenches feature of LifeSciVC.
In a recent blog post, I walked through my tips for reading your adversaries’ body language while maintaining your own poker face throughout negotiations.
In this second post, I’ll share practical tactics for gaining leverage and using it wisely. Women of biotech, there’s also a special section for you – so read on!
Be prepared to walk
Going into a negotiation, you should never have the mindset that it’ll be a win to settle for the industry average or find an acceptable middle ground. Your goal is to get the best deal you possibly can. You have to go into it ready to claw and scrap for every inch.
That means you need to be prepared to walk away from a deal if it’s not satisfactory. Walking away can be a savvy negotiating tactic; I’ve used it effectively to bring the other side back to the table in a much more conciliatory mood. Indeed, I’ve found that you can make your adversary very anxious if you make it clear that you’re exceptionally unhappy with the pace of progress. If they really want to make a deal, they may move quickly to bring you back on board.
The key here is the phrase “if they really want to make a deal.”
Walking away is a tactic you should deploy sparingly, and only after you feel confident you have accurately assessed your adversaries’ true state of mind, using all the verbal and nonverbal cues at your disposal.
In general, I don’t find that bluffing is a useful tactic in negotiating. If you get caught bluffing, you will be perceived as untrustworthy. Your credibility will be in question not just for this negotiation but for all others in the future; believe me, word spreads fast. You can push the truth right to the edge, but no farther. You have to know where to draw that line.
To give you an example of an unsuccessful bluff: once I was negotiating with a Cambridge biotech that claimed there were three other parties in the mix (doesn’t everybody?). We started negotiations in a conciliatory mood, thinking we would have to outbid the other parties. Yet as we evaluated the other side’s responses, we realized they were not behaving as though they had backup options in the wings. We effectively called their bluff, and the leverage swung to our side.
Don’t tip your hand
Rookie negotiators often make the mistake of giving away leverage by tipping their hand. Some of the mistakes I’ve seen (and taken advantage of!) include:
- Confessing that you’re under time pressure – for instance, needing to get the deal done before the next earnings call.
- Giving your adversary financials that they need to beat, rather than making them guess.
- Telling the other side what your bottom line is so they can go straight there.
- Setting ultimatums but then not sticking to them.
- Setting expiration dates but then letting them slip.
Use any of those slip-ups to your advantage. If the other side is under intense time pressure, for example, I might slow-walk the negotiations, knowing that it’s likely they’ll be more willing to cave the closer we get to their deadline.
I once was negotiating a time-limited option and the other party (the licensor, who had the leverage) insisted on a tight timeline. We agreed. Once we blew through that timeline and they kept negotiating with us, we knew they weren’t going to go away. The leverage swung to us and we were able to re-up the option with an extended timeframe that worked better.
Make your concessions count
Negotiating is all about leverage. If you don’t have it, you have to create it.
Part of that, as I’ve written before, involves asking for more than you expect to get. You want to put forward demands that have a strong rationale behind them but that are you are secretly willing to concede on, when the time is right.
To give a practical example, you might ask for three things (audit rights, reporting obligations and a true-up) but then allow the other side to fight and pull back two of those, leaving you with one. The other side feels like they’ve just scored a big win: you’re conceding on two of the three! In reality, you didn’t care about either of those two, but by framing it this way, you were able to get the one clause you most valued. That’s how you create leverage. If you handled the negotiations well, you not only got that one clause – but also extracted value in exchange for the two “concessions.”
That leads me to two truisms: never concede anything without getting something for it. And always point out what a big concession you’ve made.
Recognize that the last push is the hardest
I once heard a saying that, when moving, it takes 10% of your time to pack 90% of your house, and 90% of your time to pack the last 10%. It’s the same thing with a deal. The hardest stuff by its nature comes last, because the easier stuff is always resolved first.
As you get toward the end of a deal, I recommend trying to bundle key points to create a take-it-or-leave-it. You might, for instance, say that you’ll agree to these three revisions to the terms if they’ll agree to these other three. It’s hard for anyone to resist a package deal that has the potential to resolve multiple troublesome sticking points in one clean sweep, especially if each side gets a few much-sought-after wins.
Be your own best advocate
No matter how experienced you are, you can always keep learning. I’ve probably participated in at least 10 courses on successful negotiating over the years. One of the most interesting focused on gender roles and taught me that it’s critical to deploy your negotiating skills on your own behalf – and not just on behalf of the companies you represent.
The course was presented by a father-daughter team who had just written a book together called, “A Woman’s Guide to Successful Negotiating.” Among other things, I learned that many women never negotiate for themselves; they don’t try to get a higher salary when given a job offer or seek a higher title when asked to take on more responsibilities. Men, by contrast, do this routinely.
My takeaway: every woman should know that her male counterparts are likely using their negotiating skills to advocate for themselves, as well as to close deals. This gives men an advantage in the workplace – but it doesn’t need to be like that. Women in biotech (and in any industry, for that matter) must find the strength and courage to negotiate on their own behalf. I have offered this counsel to many young women who come to me for career advice.
I hope you find these tips helpful as you embark on your next negotiation. I’ve been fortunate to have terrific mentors throughout my career, and I am always glad for the opportunity to help guide others. While negotiating a BD deal is not for the faint of heart – in fact, it might be one of the most stressful experiences you can encounter – it’s also one of the most rewarding.
So, get to work creating leverage. And remember: no blinking.