Our company’s merged to avoid the bankruptcy, a Pareto Efficient outcome. Given we essentially had a negative bargaining zone (dispute context), as total resources I was owed and needed immediately, were less than Sandy could pay, integrative bargaining provided full disclosure and an optimal solution.

Power is evident from the ability to force bankruptcy based on my contract rights, however, in court this power would prove useless if Sandy went bankrupt. Sandy has the power to declare bankruptcy and the right to argue rights due to Fawn’s actions. It was necessary to put aside a heated power and rights debate, to achieve our interests.

We agreed bankruptcy was not an option, so became completely honest. A merger allowed us to maximize gains for both parties and even increase the ‘pie’. Together we can make profits from investments and carpeting. Furthermore, with combined resources, I can make all future investments and benefit from any carpeting work. This is a source of competitive advantage.

I was also pleased with the level of cooperation from Sandy, who did not complain about Fawn. This developed trust, which clearly did not exist, lending us to a merger. I invited criticism and advice on this to develop the solution and relationship. By doing a merger, trust became implied, thereby disclosing all relevant information (and knowing whether one of us lied prior) to reach the Pareto Efficient equilibrium. With such collaboration, I was pleased with the ability to smoothly address Sandy’s needs, desires, concerns and fears one-by-one, and share mine. This allowed us to think through and suggest outcomes. For example, Sandy was naturally concerned about living somewhere after selling the house. I could have not cared, but kindly offered one of the Condo’s as a unilateral concession to giving up the home.

I am also pleased that I did not exert my power and rights, and be dismissive. I did not attack their position; I looked behind it, as one possible option, and asked Sandy’s interests behind this. The dispute occurred because we didn’t recognise each others view of the power distribution or agreed on how the law is applied (rights). A court case would have been natural, given the belief of legal backing, pressure of additional investments and knowing of an emotional advantage associated with bankruptcy.

The main barrier in reaching an outcome is the lack of suitable BATNA’s that allow my investments to occur, and if no deal is done, we’re both worse off. To overcome this, creativity was required. For example, longer loan terms, time extension on investments, equity raisings etc. Such BATNA’s are often linked and provide a dimension to evaluate. However, due to limited time in assessing each option, merging seemed optimal.

Next time, I would have opened with slightly more power, to appear stronger and claim value. I would lay out the facts and identify areas of agreement and disagreement to better target the problem/solution. I would also learn each other’s interpretation of the contract by stating my rights, as I see them. I would do this very carefully to make sure it is not getting personal, no anger is forming and emotions don’t run high. As soon as this happened, or I realized even after a few minutes we will get no where, immediately change direction to an integrative process. I.e. I would reciprocate but add interest based proposals and learn of their interests. Although riskier, this approach (over immediate integrative bargaining) has the advantage of not immediately befriending and trusting the other person, rather, professionally understand what all the problems are and work towards a solution. By starting the way I did, I could have been very vulnerable to them lying and been subject to deliberate deception. Being “cautiously cooperative” is better. But I may have succeeded on this occasion, by emitting strong cooperative signals from the beginning.

Moreover, I would have spent more time understanding what is really motivating the other side and why they may say “no”, by researching their company, understanding their competitive advantage, etc. This would permit more informed decisions and potentially develop a negotiating advantage. Next, I would have lead with areas we have in common, yet probe for and try to meet objections with the lowest concessions. At this stage, conflicts would be large, but dispute resolution momentum created. In this case, if it resulted in a merger, more company share may have been gained. Finally, I would continue to insist on using objective criteria with precedent to be less vulnerable to attack. For instance, I may say that a loan extension or equity raising in these situations have worked, may be consider it and other objective standards.

The approaches above would have likely lead to a merger anyway. However, by going through the process it does, for example, frame interests based on rights and power and reduce trust vulnerabilities. It also doesn’t befriend the other party, which can lead to sub-optimal results. The potential problem with a merger is that we may not get along. However, in this scenario it was necessary to save the business, and given the level of collaboration between us to reach the agreement, it may work. Restructures occur too.

In the real world, I would have done research on the merger and other options before coming to the table. For example, value of the firms, value of all other alternatives, equity raising difficulty, etc. Only then identify what is in my best interests and develop arguments why it may be in theirs and understand why it may not. Setting the integrative scene by presenting various options that may be of equal value to me, have different preferences for the other party may lead to further understanding of their interests. This may lead to an even more efficient and optimal solution with lower risks of manipulation.