Opinion
Why transparency is a negotiation strategy, not just a principle
According to Yael Chayu and Guy Milhalter, as long as humans, not algorithms, sit at the table, deal success depends less on contracts and more on how negotiations are framed and managed
A year before a planned exit, a company made a decision that seemed both rational and necessary at the time. Twelve months later, that same decision became the reason a potential acquisition deal collapsed.
Facing short-term cash-flow pressure, the company agreed to a revenue-share arrangement with a partner that included the creation of jointly owned intellectual property. The arrangement increased the company’s cash flow and from a business standpoint, it worked.
A year later, the company sought to sell its assets to a potential buyer in what seemed like a straightforward deal. Then, due diligence began. Almost immediately, the joint IP arrangement emerged as a serious concern that necessitated an intricate and increasingly fraught negotiation between the parties. This negotiation failed and the deal collapsed. The explanation for this failure can be found not just in the specifics of the deal terms, but in how negotiators responded when pressure, uncertainty, and fear walked into the room.
The IP issue was real, but it could have been overcome. Often, when issues surface late in due diligence, the issue itself might be something that the parties could resolve, but other non-legal questions may enter the fray. In this case, did the late discovery of the joint IP issue erode trust? Did it lead the buyer to second guess and get cold fee? While it’s impossible to know, it is certainly possible.
From the buyer’s side, it may be that the problem was not so much the IP structure, but rather that it introduced itself very late in the cycle with little time to find a fix. The element of surprise (Why are we finding out about this now?) raised concerns. When doubt is introduced into a negotiation, every move after that is read defensively.
This is an important reality in high-stakes deals that is often overlooked: the timing and manner of disclosure or discovery of an issue is, in fact, a signal of trust.
Could it have made a difference if the seller had proactively brought up the joint IP issue, rationalized it, and addressed its consequences early? It’s impossible to say, but perhaps the tenor of the negotiation would have looked very different. Proactively raising an issue to the surface (not by a simple upload to the data room) early could actually strengthen the discloser’s position. In many cases, it helps level-set the relationship in a positive way. It lets parties judge risk with a cool head earlier in the process and it avoids the transformation of technical problems into existential threats to a deal.
Instead, the problem surfaced at one of the worst possible times: Towards the end of the due diligence process, when time is short and everyone expects things to move fast. At that point, even risks that seem manageable start to feel unbearable. Ultimately, the issues surfacing too late in the game and the loss of control and trust killed the deal.
There is a larger lesson here for founders, executives, and boards. One of the ways to navigate a tough negotiation is to put the hard issues on the table early and find a way to resolve them before pressure has built to an unsustainable level. Full transparency is not simply a legal formality, it can also be part of a negotiation strategy.
So long as human beings, not algorithms, are sitting at the negotiation table, deal success will have less to do with what is written in a contract and more with how negotiations are framed and led.
In practice, this means addressing the riskiest issues early, before pressure, timing, and uncertainty turn manageable concerns into deal-breaking obstacles, and before trust with the other side is put at risk.
Yael Chayu is a global business negotiation expert and an Academic Director of the Business Negotiation Program at Reichman University.
Adv. Guy Milhalter is a partner in the New York office of Pearl Cohen Zedek Latzer Baratz LLP.
