Setting The Table: Preparing for Licensing Negotiations

John Buckingham MaRS Best Practices Series April 14, 2010

What to do before…

Today’s Objectives

 Understand what `good’ preparation for negotiations looks like

 Consider approaches to enhance effectiveness and efficiency of your efforts to prepare

 Identify resources for additional information

Negotiation Perspectives

Group Input

What should you do, before starting formal negotiations?

Key Elements of Thorough Preparation

  Conduct `Due Diligence’ Investigation of Potential Partner   Prepare Negotiation `Playbook’   Shape Negotiating Environment   Select and Prepare Negotiation Team

Due Diligence Playbook Environment Negotiation Team

Key Elements of Thorough Preparation

  What is their strategic focus?   Are they financially sound?   Check conduct/outcomes of current and past partnerships:

  Reference sources: Press releases, SEC filings, ReCAP, Windhover, etc.

  Personal networking (adhering to confidentiality requirements)

  Use technical due diligence activities collect relevant information from prospective partner staff

Due Diligence Playbook Environment Negotiation Team

Key Elements of Thorough Preparation

Prepare Negotiation `Playbook’:

Some Key Principles:   Focus on interests, not positions (of both parties)   Identify/create options likely to satisfy both parties

Due Diligence Playbook Environment Negotiation Team

Reference: `Getting to Yes’, R. Fisher, W. Ury & B. Patton,

2nd Ed. (1991), Houghton Mifflin Co.

Key Elements of Thorough Preparation

Seven Key Elements :   Interests   Options   Alternatives   Legitimacy   Communication   Relationship   Commitment

Due Diligence Playbook Environment Negotiation Team

Key Elements of Thorough Preparation

Interests   Determine what you need or care about

  Strive for alignment with company stakeholders regarding `what’ and `to what degree’, for key interests

  Anticipate the business interests of the potential partner and the personal interests, relevant to the negotiation, of their negotiating team

Due Diligence Playbook Environment Negotiation Team

Strategic Importance Potential Partner

Stra

tegi

c Im

porta

nce

to Y

our C

ompa

ny

Low High

Low

High

Imbalance Balance

Balance Imbalance

Alliance Structure and Management Considerations

Vulnerable Enthusiast

Potential Bully

Dynamic Duo

Simple Pairing

Key Elements of Thorough Preparation

Options   Identify potential ways in which greater value could

be created, i.e. `increasing the size of the pie’   Develop alternative ways to satisfy your interests

and to solve anticipated problems in the negotiation

Due Diligence Playbook Environment Negotiation Team

Key Elements of Thorough Preparation

Alternatives

Due Diligence Playbook Environment Negotiation Team

Key Elements of Thorough Preparation

Alternatives

Due Diligence Playbook Environment Negotiation Team

Key Elements of Thorough Preparation

Alternatives   BATNA

  Best Alternative To Negotiated Agreement   May include:

  Other potential partner(s)   Continuing independent development   Merger or partnership alternatives   Other creative options

Due Diligence Playbook Environment Negotiation Team

Key Elements of Thorough Preparation

Legitimacy   Prepare supporting rationales for your key goals:

  Industry benchmarks   Precedents   Accepted Principles

  Supports `fairness’ of your view   Provides other team with `fairness’ arguments for their

stakeholders

Due Diligence Playbook Environment Negotiation Team

Key Elements of Thorough Preparation

Communication   Plan for effective communication of your key

interests (to ensure these are heard properly by partner)

  Anticipate what you expect to hear from partner regarding their key interests (so you can be more alert to new information)

Due Diligence Playbook Environment Negotiation Team

Key Elements of Thorough Preparation

Relationship   Keep in mind that the relationship tone during

negotiations carries forward into a future relationship

  Plan for a constructive, joint problem-solving approach, rather than a win/lose mindset

Due Diligence Playbook Environment Negotiation Team

Key Elements of Thorough Preparation

Commitment   Think through what `done’ means

  Identify the activities and/or level of performance you will need from your potential partner, to properly address your interests

  What `consequences’ are appropriate to negotiate, to better ensure your partner will perform as planned?

Due Diligence Playbook Environment Negotiation Team

Key Elements of Thorough Preparation

Shaping Environment   Creating positive `buzz’ about your offering   Use of public statements to reinforce key interests   Recruiting/developing influential champions   Identifying and developing `back channels’

Due Diligence Playbook Environment Negotiation Team

Key Elements of Thorough Preparation

Selecting and Preparing the Negotiation Team   Determine who will represent potential partner   Designate negotiation leader   Define roles of other team members   Review key elements of Playbook with team   Establish guidelines for confidentiality

Due Diligence Playbook Environment Negotiation Team

`Emergency` Preparation

Focus On:   Interests   Options   Alternatives   Legitimacy

Resources

Professional Associations:   Licensing Executives Society (USA & Canada) – Toronto Chapter

  www.lesusacanada.org   Canadian Healthcare Licensing Association

  www.chlassoc.ca

Courses:   Harvard Business School:`The Program on Negotiation for Senior

Executives’   www.pon.harvard.edu/category/courses-and-training/

  Stitt Feld Handy Group: Negotiation Workshops (Canada)   www.sfhgroup.com/ca/training/negotiation/

Today’s Objectives

 Understand what `good’ preparation for negotiations looks like

 Consider approaches to enhance effectiveness and efficiency of your efforts to prepare

 Identify resources for additional information

Questions?

Setting The Table: Preparing for Licensing Negotiations

John Buckingham MaRS Best Practices Series April 14, 2010