Written by Simón R. Barth, Partner at ONEtoONE Corporate Finance Colombia.
In the world of corporate finance, investment bankers regularly find themselves engaged in an international negotiation. These negotiations often involve intricate financial dealings, mergers, and acquisitions that can shape the future of businesses and economies. While mastering the financial aspects of a negotiation is important, there’s another critical element that should not be overlooked: understanding and respecting the culture of the parties involved.
In this article, we will explore the importance of studying culture before embarking on international negotiations. Investment bankers and dealmakers, need to recognize that cultural differences can make or break a deal.
Here are eight key tips for a successful international negotiation:
Immerse yourself in cultural research before an international negotiation
Before stepping into the negotiation room, it’s imperative to immerse yourself in the culture of your counterparts. Read several blogs, research papers, or articles that offer insights into the cultural norms, values, and business etiquette of the country you’ll be dealing with. Understanding cultural contexts will help you navigate the negotiation process with sensitivity.
You may be interested in reading our article: Selling a business: negotiation techniques
Language barriers are common in international negotiations
Different cultures may have words with double meanings or phrases that could be misinterpreted. Take the time to study these and avoid using any words that could be deemed offensive or confusing. ´Thinking twice´ before speaking can help you avoid of potential misunderstandings.
Gift giving and social etiquette
A thoughtful gesture can go a long way in building rapport. Consider bringing a gift from your own country, but be cautious about the choice. Avoid alcohol if you are uncertain about your counterparts’ beliefs or religion. Certainly never make comments that could clash with their religious or cultural beliefs, such as those related to sensitive topics.
You may be interested in reading our article: Negotiaton is power when selling a business
Build trust through personal connections
Trust is the foundation of any successful international negotiation. Put effort into building a more personal relationship with your counterparts before diving into the deal. Remember their names and details about their family or pets. These small gestures can help further establish trust for the basis of a strong business relationship.
Breaking bread together
Research from Harvard suggests that people are more inclined to make deals when they share a meal. Whenever possible, invite your counterparts to a lunch or dinner. Sharing a meal can encourage a sense of camaraderie and make the negotiation process smoother. However, be cautious about alcohol consumption to avoid compromising your professionalism.
If the deal holds significant importance, consider travelling to meet your counterparts in person. Face-to-face interactions help build rapport that can be challenging to establish solely through virtual meetings. Every aspect of your presentation, including your choice of accommodation, also contributes to your professional image.
Don´t forget to study the culture of everyone involved
In the role of an investment banker, especially when handling transactions for international clients in foreign territories, meticulous preparation includes studying the cultural intricacies of all involved parties. Furthermore, understanding your client’s mindset, behavioral patterns, and cultural sensitivities is not an additional step; it’s essential to a successful international negotiation. It is important to realise, prioritizing an understanding of your client’s culture could be the foundation to achieving this.
Protecting youself in an international negotiation: legal safeguards
Additionaly, before finalizing any deal, ensure that you have the legal groundwork covered. Engage a local lawyer who understands the intricacies of local contract enforcement. However, be cautious about opting for the cheapest legal counsel, as the consequences of inadequate legal advice can be far worse than a higher cost.
Conclusion: why is understanding culture so important in an international negotiation?
In the world of investment banking, mastering the art of international negotiation goes beyond numbers and financial models. Understanding and respecting different cultures can be the key to unlocking successful deals.
As Deepak Malhotra and Max H. Bazerman brilliantly put it in their book “Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond”: Successful negotiation is not about just getting to ‘yes.’ It’s about mastering the art of ‘no’ and understanding what the path to an agreement really looks like. It involves careful preparation, active listening, adaptability, and a deep appreciation for the subtle nuances that can make or break a deal. Studying the culture before negotiating is not a mere suggestion; it’s a strategic imperative for anyone seeking to achieve brilliant results in negotiations that span the boundaries of language, geography, and tradition.”
This quote further highlights the significance of thorough preparation and cultural understanding in the negotiation process, emphasising the points outlined in this article.
In summary, in the world of international finance, an appreciation for cultural diversity can be the catalyst for building lasting and mutually beneficial partnerships.
I highly recommend the reference book. “Negotiating International Business: The Negotiator’s Reference Guide to 50 Countries Around the World” by Lothar Katz as a useful resource to delve deeper into cross-cultural negotiations in various global contexts. The book’s coverage of 50 countries offers valuable insights and practical guidance for successful negotiations in diverse cultural settings. Whether you are a seasoned negotiator or a novice in the field of international business, this book is valuable in enhancing your understanding and efficiency in global negotiations.
About the author:
Simón Restrepo Barth, Professor of Finance, Board Member, Investment Banker. Partner of ONEtoONE Corporate Finance. Master in Finance from Universidad de los Andes. Certificate in Advanced Valuation with high honors at NYU | STERN, a certification in negotiation from Harvard University and a certification in Real Estate Investment Strategies at Columbia Business School.
Simón R. Barth speaking at the ONEtoONE international conference:
ONEtoONE Corporate Finance is a global advisory firm specialising in the sale and purchase of companies in all sectors. Our successful experience with more than 1,700 mandates supports us in advising on any issue related to the details of transaction closings.
If you are interested in considering the sale of your business and need professional advice, please do not hesitate to contact us. The window of opportunity is open – we’ll help you get through it!