赖小琪
This week’s negotiation is more challenging than the previous one. I acted as the Chief Financial Officer of Biofarm, a U.S-based pharmaceutical company that had annual sales of $ 700 million. The company needed to buy or build a plant in the U.S to produce a genetically engineered antibiotic compound named Depox. I had to consider for the company whether to build a new plant or buy one. In the end, after second thought, I decided to buy a smaller pharmaceutical company’s plant because building a new plant would cost tons of money and we had to suffer a great opportunity cost. Apart from that, we had to train a new work force. The total time for finishing the new plant before it’s ready for production was 12 months, during each of which our company would suffer a loss of 1 million profits that cannot be recovered. Therefore, I decided to buy Seltek’s plant and negotiated with their Chief Financial Officer.
Before the negotiation, I got familiar with Seltek’s current situations, including their product information, operational performance, ongoing facilities and the value of their land and buildings. Then, along with my teammates, we calculated a number range within which we shall pay for their plant. We could pay a maximum sum of 25 millions. But we would like to bargain with the initial proposition of 16 million.
When the negotiation began, the counterpart asked for 30 million. They calculated the total value in this way: 20 million for the plant, 8 million for the insurance, 2 million for the well-trained work force. Needless to say, we would never agree with this number because it was far beyond our anticipated one. So we must bargain with them. We claimed that, for the plant itself, it was appraised by a real estate market two years ago at 20 million, but the local real estate market has declined by 20% in the past two years due to the economic recession. Therefore, we could only pay a maximum of 15 million for the plant. But the other party mentioned that there were also a lot of ongoing facilities in the plant and that we needed to pay for them as well. We thought it was rational and agreed to pay another 1 million for the facilities. The other party agreed on the number of 16 million at last. Then we moved on to negotiate on the insurance. The other party misunderstood the number “8 million”. They had thought they spent 8 million for the insurance of the plant. But indeed, they paid far less than that because the “8 million” was for the total loss. That is to say, if the plant was damaged totally, the insurance company would pay a maximum of 8 million for the total loss. Thus, the “8 million” was not the premium. So their request of our paying 8 million for the insurance was unreasonable and we refused it. Finally they had to make a comprise that we did not need to pay the insurance to them. As with the price of the so-called well-trained work force, they asked for 2 million. Definitely we thought it was too much. But the other party tried to persuade us to accept the price by constantly reminding us that their work force was well trained and could go into production immediately. They also asserted that the relevant work force for pharmaceutical companies was rare and hard to recruit. But we also rebutted them by saying that though their work force was well trained, but our products were different from theirs. Therefore, the so-called well trained staff also had to be retrained for a certain period of time before they could fully get the hang of relevant skills. We indeed needed to pay extra money on their training. So we could only promise to give 0.5 million for the work force. Finally, the other party had to make a comprise again. So on the whole, we would pay 16.5 million for buying Seltek’s plant, facilities, and work force.
Finally, the other party tried to persuade us to buy their patent on Petrochek, the compound that was a genetically engineered bacterium which could break down oil into water-soluble compounds( and was sold for use in treating oil spillover. But as it was not in our line and we did not have relevant manager and sales force, we rejected their request.
On the whole, I felt quite satisfied with our performance in the negotiation. When the other party tended to ask for a high price, we would use research results and figures to persuade them. Also we claimed again and again that we also had other choices that cost less than their plant and that the reason why we chose them was because they had well-trained force and ongoing facilities at hand. But we had already agreed to pay for the work force and facilities. So they had to agree with our proposed number at last. During the whole process, we did not try to oppress the price as low as possible. Instead, we adopted an objective and fair win-win strategy. We would not put the other party into a loss, nor would we pay a higher price than the market value. Maybe that is the fundamental reason we could close the deal satisfactorily. |
