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Publications > Deal Mediation
Deal Mediation

Is deal mediation the Next Big Thing?

by Abigail Pessen

 

·        Your client is negotiating the merger and acquisition of his company.

·        Your client is negotiating to sell her shares in a family-owned corporation.

·        Your client is negotiating the purchase of an easement on adjacent property.

·        Your client is negotiating with a local government agency for permission to open a chain of sidewalk cafes.

·        Your client is negotiating to acquire a patent from a foreign company.[1]

Your first reaction to using a mediator in any of these negotiations may be

“mediator shmediator.  I’ve read ‘Getting to Yes.’   Why add another layer of cost and complication to a transaction that may already involve finders, brokers, and lawyers?”

Indeed, although mediation of legal disputes is becoming widespread, using

mediators to get deals done is uncommon.   Except in collective bargaining, where mediators often are brought in to help hammer out contract terms, commercial transactions generally are negotiated without the aid of an intermediary.   After all, according to Economics 101, market forces will cause deals to be made on economically rational terms with no outside intervention needed.  

            Business lawyers know from bitter experience, however, that deals sometimes self-destruct, even when walking away is counter to their clients’ best interests. This can happen when large egos collide, when mistrust and suspicion cloud judgment, and when unfamiliar cultural norms drive negotiating techniques.   In all of these circumstances, mediators can be valuable.

            Mediators - -  unlike the finders, brokers, and lawyers working on the deal - -  are impartial.   That impartiality allows both sides to trust the mediator.   While parties often are unwilling to disclose their true priorities to their counterparts for fear that the disclosure will be exploited, they may safely tell the mediator, in confidence, what matters most to them.  With that knowledge, the mediator can help formulate proposals that satisfy both parties’ needs.    Moreover, the simple device of having proposals emanate from the mediator neutralizes the parties’ natural tendency to react suspiciously to terms proposed by the other side.   Awkward issues such as future enforcement of the deal terms, allocating risk for future liability, and reporting requirements - - all of which may lead to resentment - - may be raised and negotiated more easily through an intermediary.

             Negotiating multi-national transactions is often more challenging than domestic deal-making, given disparate customs, negotiating styles, and expectations. Mediators can help decipher cultural forces that are causing one side or the other to behave mystifyingly.[2]  As business lawyers find themselves increasingly doing business in the global village marketplace, deal mediation may be worth considering.

           



[1]  Most of these examples and a thorough and fascinating analysis of deal mediation are contained in Scott Peppet’s excellent article, “Contract Formation in Imperfect Markets: Should We Use Mediators in Deals?”, 38 Ohio St. J. on Disp. Resol. 283 (2004).

[2]  See, M. Hager and R. Pritchard, “Deal Mediation: How ADR techniques can help achieve durable agreements in the Global Markets,” www.gasandoil.com/ogel/samples/freearticles/article_53.htm, in which the authors describe the valuable role played by mediators in two international commercial transactions.




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