Negotiating in good faith is a term that you may hear bandied about during the M&A process. Negotiating in good faith is a code of honor. It means you follow through on what you say you’ll do, and that after you agree on an issue, you don’t go back and try to renegotiate that point again.
When someone fails to negotiate in good faith, that person is poisoning the well. Backtracking on a settled issue only serves to throw all the other settled issues into question. That’s akin to trying to reason with a child who agrees to one thing and then capriciously changes her mind if she senses she has a weak position somewhere else.
Thwarting backtrackers is why you should bundle negotiating points and use conditional concessions. The conditional concession allows you to withdraw the concession if the other side refuses to accept their part of the bargain.
Of course, sometimes events occur during a negotiation that require one side or the other to go back on part of the deal. For a Seller, these events are typically called material changes. Material changes include losing a major client, being sued, coming under a federal investigation, and other changes that materially affect the business.
If Seller’s business takes a turn for the worse, especially if the change renders Buyer unable to close a deal, Buyer should let Seller know. In fact, both sides should immediately disclose any major bad news that may affect the closing of the deal.
All negotiators should hold themselves to a higher standard. Barring adverse material changes, you shouldn’t ask for a change in a negotiated term after you’ve already agreed to it. Honor your commitments and don’t allow the other side to renegotiate previously settled terms.