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M&A Negotiation Tactics: Beware of a Bad Bluff

Bluffing may be a bit Machiavellian, but it can be a useful M&A negotiation tool. M&A negotiating often involves much of the same kind of bluffing (and knowing when the other side is bluffing) as is found in poker.

Bluffing most often happens when one side really wants to do a deal but feigns indifference in the hopes that the other side comes to the table with a better offer. If you need to do a deal, you’re better served if you’re open and honest with the other side.

An M&A participant should in no way lie to or deceive the other side in regards to material information. Saying you’re not interested in a deal when you really are is one thing; falsifying financial records is another.

If you’re going to bluff, keep the following points in mind:

  • Sell it! Speak confidently, get to the point, don’t oversell, and don’t appear rushed or in need. The idea is to come across as nonchalant.

  • Be prepared for someone to call your bluff. Know that if the other side reads your move correctly, you may be out of luck. Crawling back to the other side after a failed bluff may simply reduce your negotiating leverage.

If you suspect the other side is bluffing you on a subject, assess the strength of your position relative to the other side’s position before you decide whether to call the bluff.

If you’re in a strong position — if you can ultimately walk away from the deal and you know that the other side needs to do a deal — you’re in the driver’s seat. Call the bluff. But if you’re the one who needs to do a deal and the other side has a strong position, the bluff may not actually be a bluff. It may be the other side’s actual position.

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