Sales Contract Negotiations

MIT ran an International AI Negotiation competition and studied 120,000 negotiations between AI negotiators. The results are fascinating and inform the potential and optimal structures for Humans + AI negotiation. From the paper I would highlight three major points and three insights into configuring human-AI hybrid negotiation (below): 🤝 Warmth builds long-term value despite short-term trade-offs. AI agents with high warmth (friendliness, empathy, and cooperative communication) reached more agreements, making them more successful over multiple negotiations. While they claimed less value per deal compared to dominant agents, their ability to close more deals led to greater overall value accumulation. This mirrors human negotiation, where trust-building and relationship management create lasting advantages. 💪 Dominance increases value claimed but reduces collaboration. AI agents that displayed dominance—through assertiveness and competitive tactics—secured better individual outcomes but created less overall value. These agents were less likely to foster positive subjective experiences, indicating that aggressive negotiation styles may be effective for short-term gain but could hinder long-term relationships. 🎭 Prompt injection wins in the short term but undermines long-term success. One leading AI negotiator used prompt injection to extract counterpart strategies, maximizing value claims. However, it ranked poorly for counterpart subjective value, meaning agents found these interactions highly unfavorable. Since negotiation rankings balanced value claimed and relationship quality, the strategy failed to dominate in the long run. Emergent strategies for Humans + AI negotiation: 🧠 AI for deep preparation, humans for real-time adaptation. AI excels at structured reasoning, analyzing trade-offs, and predicting counterpart moves through chain-of-thought processing. Humans bring intuition and adaptability, interpreting social cues and adjusting strategies dynamically. A hybrid approach leverages AI for pre-negotiation analysis while allowing humans to refine tactics in real time. 🤝 Blending AI precision with human warmth for trust-building. AI can optimize negotiation strategies, but humans naturally build trust through empathy, humor, and rapport. AI-enhanced systems can recommend tone adjustments, use linguistic mirroring, and strategically deploy warmth versus assertiveness based on sentiment analysis, improving long-term negotiation outcomes. 🚀 Human oversight to counter AI vulnerabilities. AI negotiators are susceptible to manipulation tactics like prompt injection, where counterparts extract hidden strategies. Humans play a crucial role in monitoring AI-generated offers, preventing unintended disclosures, and leveraging AI-driven detection systems to flag potential deception, ensuring negotiation integrity. The future of negotiation will be Humans + AI.

M&A isn’t just math. It’s psychology. Sellers rarely walk away because of numbers. They walk because they don’t trust you. And trust doesn’t get built in a spreadsheet. It happens in conversations, real ones. The kind that take time. The kind that happen over dinners, site visits, late-night phone calls. When I talk to great buyers, they all say the same thing: the deal turns when the relationship turns. When the seller stops seeing you as “the other side of the table” and starts seeing you as someone who actually cares about what happens next. Legacy. Culture. People. Those matter as much as valuation. Sometimes more. In Buyer-Led M&A™, we teach teams to stop trying to “win” the negotiation and start trying to understand the person. When you do that — when you really invest the time to listen, to show up in person, to build that foundation of trust — you unlock a completely different kind of deal dynamic. You can have the best model in the world, but if the seller doesn’t believe in you, it won’t matter. You’ll lose the deal, not because of price, but because of disconnect. Trust isn’t a soft skill in M&A. It’s the hard edge that makes every other part of the process work. What are you doing to build trust? For me, dinner or drinks help you learn about their personal life (family, hobbies, etc.). You can unlock a real conversation. Let me know your tips in the comments.

In M&A, most sellers assume diligence begins 𝙖𝙛𝙩𝙚𝙧 the LOI is signed… But by that point, the clock is already ticking, exclusivity is locked in, and any surprises (real or perceived) can become deal-breakers or issues that chip away at price. The truth is, buyers walk in with a very specific checklist. They’re not just verifying financials, they’re looking for risks, for inconsistencies, and sometimes, for anything that gives them leverage, or even a reason to walk away. Here’s the good news: if you’re the seller, you can beat them to it. It starts with understanding what buyers are looking for: 🔎 HR and compliance gaps 🔎 Messy or incomplete contracts 🔎 Unclear financial adjustments or owner add-backs 🔎 Potential unresolved tax liabilities 🔎 Customer concentration risk 🔎 Unresolved litigation or contingent liabilities 🔎 Cap table confusion or unresolved equity promises These aren’t just technical details, they’re signals to the buyer, and in an M&A process, well-prepared diligence wins deals. What can sellers do? ✅ Assemble your own diligence checklist before buyers do. A good M&A advisor will help you do this during the preparation phase ✅ Have your financials reviewed or normalized by a third-party QofE provider ✅ Clean up contracts, org charts, cap tables, and compliance documentation ✅ Identify “gray area” risks early and prepare thoughtful explanations ✅ Think like a buyer, then remove any friction. Make it easy to buy your company. In diligence, the goal isn’t perfection, it’s being able to give the buyer confidence. When a buyer feels like you’ve done your homework, the dynamic shifts. You’re no longer defending surprises. You’re leading the deal with transparency and strengthening the value you’ve worked so hard to build. #mergersandacquisitions #Investmentbanking #MandA #exitplanning

Studying negotiations at University of Michigan - Stephen M. Ross School of Business has reinforced a counterintuitive truth: making the first offer typically advantages the offeror, regardless of whether you're buying or selling. Research consistently shows this "anchoring effect" creates a psychological baseline that influences the entire negotiation. This insight has transformed how I view auction mechanisms from my years in procurement. While English auctions dominate the market, I've noticed sophisticated buyers gravitate toward Dutch and Japanese formats when they understand the mechanics. The strategic difference is profound: In English auctions, bidders make the first move, ceding anchoring power. In Dutch and Japanese auctions, the auctioneer sets the opening price, potentially biasing outcomes in the buyer's favor through strategic anchor placement. The lesson extends beyond auctions to everyday business negotiations. Whether you're discussing budgets, timelines, or terms, the party who frames the initial position often shapes the conversation's trajectory. What's been your experience with first-mover dynamics in high-stakes negotiations?

Procurement: Treat suppliers as extensions of your enterprise, not transactions. Procurement Excellence | 23 NOV 2025 - In complex global markets, resilient supply chains demand partnerships built on shared destiny, not just contracts. Here are 9 Steps to Create Long-Term Supplier Partnerships: #1. Transparent Communication ↳ Co-develop comms protocols e.g. QBR ↳ Clearly share expectations, goals & challenges #2. Long-Term Contracts ↳ Replace short-term with multi year agreements. ↳ Share long-term roadmaps & cost-savings initiatives. #3. Shared Performance Metrics ↳ Jointly agree and track SMART KPIs. ↳ Define escalation paths & RCA templates #4. Early Supplier Involvement ↳ Involve and recognize vendor’s contributions. ↳ Include key suppliers in product development cycles. #5. Guarantee Timely Payments ↳ Automate payment & consider early payment discounts. ↳ Audit internal processes for bottlenecks. #6. Co-Create Innovation ↳ Create supplier ideation portals & protect IP collaboratively. ↳ Fund joint proof-of-concept projects. #7. Recognize & Reward Excellence ↳Formally acknowledge & reward outstanding suppliers. ↳Bronze (Operational Excellence), Silver (Innovation), Gold (Strategic Impact). #8. Uphold Fairness & Ethics ↳ Interactions & contractual terms are mutually beneficial. ↳ Ensure cost pressures don't force unethical labor. #9. Jointly Manage Risks ↳ Jointly identify risks & develop contingency plans. ↳ Map tier-2/3 suppliers collaboratively. In today's volatile market, Resilient supply chains are built on deep, strategic supplier partnerships. Achieving lasting, mutually beneficial supplier partnerships requires: ✅️ Deliberate strategy ✅️ Centered on trust ✅️ Shared objectives ✅️ Continuous collaboration ♻️ Repost if you find this helpful. ➕️ Follow Frederick for Procurement insights. #ProcurementExcellence #SupplierCollaboration

Would you marry someone after a few dates? No? So why sign a marketing contract without doing an audit or advisor scopes first? This is something we learned the hard way at Apex. Early on, we were so excited to land new clients that we'd jump straight in. A prospect would say, "We need Facebook ads help." We'd say, "Great, I got you, sign here." And off we went. No audit. No diagnostic work. No real understanding of whether they were actually ready for growth. It worked. Until it didn’t. Because sometimes, the problem wasn’t Facebook ads. Sometimes, it was their tracking. Or their creative. Or their offer. Over time, we realized: We needed a dating phase before the marriage. Now our process looks like this: - Audit: Get the full picture. Diagnose properly. [Dating] - Advisory Phase: A light consulting sprint to patch holes, fix tracking, clean up foundational issues. [Engagement] - Long-Term Partnership: Only after both sides agree it’s a good fit. [Marriage] Here's the thing about growth partnerships: If a company isn’t “Marketing Ready”, throwing money at ads doesn’t fix the problem. It just accelerates failure. That’s why we spend the time upfront, even if it feels slower - making sure they’re truly marketing ready. As my co-founder put it on a recent call: “It’d be like pouring gasoline into a car’s leaky tank if you skip these steps.” Rushing into long-term partnerships without auditing marketing readiness is like getting married after a few dates - might be exciting for a minute... until it’s not. When both partners take time to align, growth becomes a shared outcome- not a gamble.

𝐓𝐡𝐞 𝐇𝐢𝐝𝐝𝐞𝐧 𝐑𝐢𝐬𝐤𝐬 𝐢𝐧 𝐘𝐨𝐮𝐫 𝐈𝐧𝐭𝐞𝐫𝐧𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐂𝐨𝐧𝐭𝐫𝐚𝐜𝐭𝐬: 𝐀𝐫𝐞 𝐘𝐨𝐮 𝐏𝐫𝐞𝐩𝐚𝐫𝐞𝐝? A single clause buried deep in your international contract could dictate that legal disputes be resolved in a foreign court, under unfamiliar laws—leading to skyrocketing legal costs, unexpected liabilities, and a significant loss of leverage. Many businesses expanding internationally assume that cross-border agreements function like domestic contracts. They don’t. Without strategic negotiation, companies may find themselves entangled in complex legal systems, facing enforcement challenges, regulatory pitfalls, or unforeseen liabilities 🤷♀️ Unlike domestic contracts, international agreements introduce unique risks, including: ➡️ 𝐅𝐨𝐫𝐮𝐦 𝐒𝐡𝐨𝐩𝐩𝐢𝐧𝐠: The counterparty may push for a jurisdiction that favors them—often at your expense. ➡️ 𝐂𝐡𝐨𝐢𝐜𝐞 𝐨𝐟 𝐋𝐚𝐰 𝐂𝐥𝐚𝐮𝐬𝐞𝐬: Governing law impacts enforcement, damages, and even fundamental contract terms. ➡️ 𝐄𝐧𝐟𝐨𝐫𝐜𝐞𝐦𝐞𝐧𝐭 𝐂𝐡𝐚𝐥𝐥𝐞𝐧𝐠𝐞𝐬: Winning a case in one country does not guarantee enforcement in another. To safeguard your international agreements, consider these key strategies: ✅ 𝐍𝐞𝐠𝐨𝐭𝐢𝐚𝐭𝐞 𝐆𝐨𝐯𝐞𝐫𝐧𝐢𝐧𝐠 𝐋𝐚𝐰 & 𝐉𝐮𝐫𝐢𝐬𝐝𝐢𝐜𝐭𝐢𝐨𝐧 𝐂𝐚𝐫𝐞𝐟𝐮𝐥𝐥𝐲 – Avoid jurisdictions known for inefficiency or bias. ✅ 𝐄𝐧𝐬𝐮𝐫𝐞 𝐄𝐧𝐟𝐨𝐫𝐜𝐞𝐚𝐛𝐥𝐞 𝐃𝐢𝐬𝐩𝐮𝐭𝐞 𝐑𝐞𝐬𝐨𝐥𝐮𝐭𝐢𝐨𝐧 𝐌𝐞𝐜𝐡𝐚𝐧𝐢𝐬𝐦𝐬 – Arbitration under ICC, SIAC, LCIA, or HKIAC can enhance enforceability. ✅ 𝐈𝐦𝐩𝐥𝐞𝐦𝐞𝐧𝐭 𝐌𝐮𝐥𝐭𝐢-𝐓𝐢𝐞𝐫𝐞𝐝 𝐃𝐢𝐬𝐩𝐮𝐭𝐞 𝐑𝐞𝐬𝐨𝐥𝐮𝐭𝐢𝐨𝐧 – Structured mediation, arbitration, and litigation can prevent deadlocks. ✅ 𝐂𝐨𝐧𝐝𝐮𝐜𝐭 𝐑𝐢𝐠𝐨𝐫𝐨𝐮𝐬 𝐑𝐞𝐠𝐮𝐥𝐚𝐭𝐨𝐫𝐲 𝐃𝐮𝐞 𝐃𝐢𝐥𝐢𝐠𝐞𝐧𝐜𝐞 – Address tax, compliance, and industry-specific licensing requirements. ✅ 𝐄𝐧𝐠𝐚𝐠𝐞 𝐅𝐨𝐫𝐞𝐢𝐠𝐧 𝐂𝐨𝐮𝐧𝐬𝐞𝐥 𝐄𝐚𝐫𝐥𝐲 – Collaborate with local experts to understand how contractual obligations will be interpreted. International contracts are a 𝐜𝐡𝐞𝐬𝐬 𝐠𝐚𝐦𝐞, 𝐧𝐨𝐭 𝐜𝐡𝐞𝐜𝐤𝐞𝐫𝐬 —success depends on anticipating risks before they become costly battles. 𝐈𝐧 𝐠𝐥𝐨𝐛𝐚𝐥 𝐝𝐞𝐚𝐥𝐬, 𝐚𝐬𝐬𝐮𝐦𝐩𝐭𝐢𝐨𝐧𝐬 𝐚𝐫𝐞 𝐥𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬. How does your company or you as a lawyer approach international contract risk management? Let’s discuss in the comments.

Contract managers: Yearly indexation is not a “tick-the-box” exercise anymore. In times of rampant uncertainty, indexation and cost-of-living adjustments (COLA) can either: - Protect continuity and fairness, or - Quietly accelerate value leakage, disputes, and supplier risk. The right thing to do is neither “always accept” nor “always fight.” The right thing to do is to manage indexation as a governance decision. What good looks like (practical, Monday-ready) 1) Start with the contract, not the invoice. Before you react to a price increase letter, answer three questions: - What does the clause actually allow (index, cap, floor, timing, notice)? - What evidence is required (published index, calculation method, base year)? - What happens if you miss the window (automatic adjustment, deemed acceptance)? 2) Separate COLA from performance. Indexation is about macro conditions. Performance is about delivery, quality, and outcomes. If a supplier requests +8% COLA while service levels are slipping, don’t mix the debates. Run two tracks: - Track A: clause-based indexation (objective, auditable) - Track B: performance and value (commercial conversation) 3) Treat “index choice” as a risk decision. CPI, wage indices, sector indices; each tells a different story. Ask: Which index best reflects the supplier’s real cost drivers for this scope? If the index doesn’t match the cost base, you’re not “being tough” you’re being inaccurate. 4) Build a portfolio view (not one-off firefighting). Uncertainty punishes inconsistency. Segment your contracts: - Critical suppliers (continuity first) - Competitive categories (benchmark + negotiate) - Long-tail spend (standardize rules, reduce noise) 5) Document the rationale. The most underrated skill right now: creating an audit trail that a CFO, auditor, or regulator can understand in 2 minutes. Not just “what” you agreed, but “why” it was reasonable. A simple principle I use: Be fair, be consistent, and be fact/evidence-based. That’s how you protect relationships AND protect value.

Many M&A buyers, especially Family Offices and Independent Sponsors, care a lot about the Sellers helping to transition the business after an acquisition. With good reason. Sellers are always more involved than appears. The primary thing I hear from Buyers after closing: wow, the seller was really holding the business together. So, one of the major risks of an M&A deal is the Seller seeing millions of dollars hit their bank account and disappearing. Legally, Buyers require seller transition services through (1) a consulting agreement or (2) an employment agreement. However, in my agreements, I always insist that the transition services be listed in the purchase agreement as a covenant (in addition to further assurances). This way it seamlessly becomes an indemnifiable covenant, and we can use all the power of the purchase agreement indemnification section to enforce the transition services and, if available, offset against a note, earnout, escrow, or rollover. Covenants should not be subject to caps, baskets, or survival limitations While I know you can include a consulting agreement in the indemnification section as an ancillary document, it is more complex and leaves room for holes a good litigator can exploit. In practice, the way this should work is a covenant in the purchase agreement that Seller is required to work 10 hours a week to transition clients, suppliers, etc. If Seller does not do this, Buyer brings an indemnification claim for the losses (i.e., lost customer) and offsets against the escrow, note, or other post-closing consideration. One last bonus point, always make transition services at the discretion of the buyer. If you find you do not need the seller anymore and it is impacting the new work environment, a buyer has to be able to send the seller off into the sunset. I have seen many agreements that put the transition services in a consulting agreement, which is at-will with no enforcement mechanism.