Dynamics of Negotiations: Failed GE-Honeywell Merger Deal

Conceptually, the goal of every negotiation is to attain an contract and realize the required outcome, through successful and amicable resolutions. The easy principle is to split up the get-togethers from the issue, and give attention to their interests alternatively than positions. But in reality, the procedure is not necessarily so-especially in multiparty negotiations, that involves multiple parties with varying pursuits and differences. The aim of this article therefore, is to critically review the complex character of multiparty negotiations; with specific mention of a failed GE-Honeywell merger deal. The ultimate purpose is to focus on the dynamics of the negotiations from standpoint of the parties' pursuits and positions in the overall outcome.

Keywords: multiparty discussions, desired outcome, needs & positions, failed merger.

1. Introduction

Multiparty negotiation is defined in this context, as interactions concerning multiple parties with varying pursuits and dissimilarities. Multiparty negotiation can be a complex and messy process, often with non-obvious effects. A number of elements make multiparty connections significantly more sophisticated and awkward than two-party negotiations. A notable difference is all of the decision rules that may occur. For example, in a two-party agreement, failure of both celebrations to reach contract contributes to impasse; whereas, in multiparty discussions, different decision rules could apply.

In this information, analysis is targeted on interests, differences and positions of all parties involved with negotiating the (2001-2005), proposed business merger between Standard Electric Company and Honeywell International Inc. The explanation is to examine the interplay between your parties, in conditions of strategies and practices adopted during negotiations; degree of awareness of the celebrations' BATNA and magnitude to which they used competitive or cooperative strategies. The statement also attempts to identify framing/anchoring techniques in the negotiations, and evenly consider the role of trust, reputation and skills in the overall decision/results of the discussions.

2. Main Parties Involved

'The bid by General Electric (GE) to take over Honeywell International Inc. in 2001 was placed to become the biggest merger in professional history, when the Western Payment barred it from taking place'1. This transatlantic negotiations for a business merger involved tactical get-togethers such as: GE Manufacturing Company, GE Capital Services, USA Office of Justice, the US Military, European Percentage and the Western Judge of First Example (CFI). Well known among individual personalities who also participated actively and performed tactical assignments in the discussions are: Western competition commissioner- Mario Monti and the GE Spokesperson-Jonathan Todd.

3. Institutional and Historical Context

In 2001, one of the biggest companies on the planet, General Electric-American large manufacturer of aircraft engines; was drawn by Honeywell International's aerospace businesses1-avionics technology, which easily fit into properly with GE's business pursuits; creating exceptional synergies for these two American companies. GE Developing Company was responsible for operational aspect, while all obligations for the merger were the duty of GE Capital Services-the financial arm of Standard Electric. AMERICA Office of Justice as a critical get together in the negotiations, had earlier exceeded the merger, on condition that 'GE divest itself of Honeywell's armed forces helicopter unit, to safeguard the US government'1. However, agreement from European Payment was not easy to obtain and the offer dropped through.

4. Hobbies/Positions of the Parties

According to GE-Honeywell, their involvement in the merger was to capitalize on core business competencies and create synergies. Other portrayed reasons included, increasing market electric power and sharing infrastructure. The US-Department of Justice was happy with the proposed-merger and consented to it. However, it had taken cognizance of the concerns of US-Military above the security of their armed service helicopters; whose produce/servicing was vested with Honeywell. Because of the, the Department agreed with all the terms of the discussions, but advised that 'GE divest itself of Honeywell's armed service helicopter unit; to safeguard the US military services'1.

Conversely, the Western Commission-EC was unsatisfied with the offer and prohibited its introduction. Their interest was to protect European markets from 'perceived monopoly'. EC argued that a merger between GE and Honeywell 'would create too powerful an entity that could adversely have an effect on the competitive position in the aerospace industry'1. They managed that the merger would supply the two companies 'huge mixed market talk about in the normal markets in which they operated'1. This, they noticed would 'harm competitors as well as customers, by building a close to monopoly situation'1.

5. Strategies and Techniques Adopted

All the people involved with this negotiation failed to invent options for shared gain. While GE-Honeywell was more of contending and unwilling to concede to any of the demands; the EC on the part seemed to have had bottom-line in the discussions, as they never considered other choices outside their interests. Each of them exhibited clear circumstance of high-concern for self and low-concern for others. For example, The EC demanded that 'substantive chunks (amounting to about $ 7 billion) be divested by both companies, and constraints be imposed on the operations of the highly profitable GE Capital Services'1. The requirements GE said were far more than what it was prepared to concede. The American companies and the regulatory government bodies resorted to dangers and gradual/low commitment techniques; while the EC stood on take-it-or-leave-it option.

6. Awareness of BATNA and Usage of Competitive/Cooperative Strategy

It is apparent that the overall flexibility of Best OPTION TO a Negotiated Agreement-BATNA, that was likely to show all the get-togethers what alternatives to negotiated agreements would be, and equally serve as standard against which contracts be assessed; was neglected in favor of predetermined bottom-line. GE and its allies for example, identified court litigation as their only BATNA, while EC predetermined analysis without further options.

As it were numerous multiparty negotiations, the variations in pursuits/positions of the transatlantic regulatory regulators; gave go up to competitiveness instead of cooperative strategy, that was unfortunately not resolved. Having used much of delay techniques, their incapability to cooperate and explore other choices to resolve their differences triggered the deal fell through.

7. Usage of Framing and Anchoring Techniques

Anchoring and Framing are two subconscious techniques that negotiators use to impact the negotiation process and its final result. While casings give alternative explanations that help negotiators seem sensible of intricate information and concentrate on the main concern; Anchors as 'bobby traps' are set by negotiators to win their opponents, by defining the mental guidelines within which the process operates. These two techniques included prominently in this negotiation.

For example, the EC being completely aware of its predetermined bottom-line established anchors for GE, by causing outrageous demand for huge divestment of $ 7 Billion and other heavy sanctions it understood GE will be unwilling to concede. These high boasts indeed misled GE. The US Department of Justice also used Framing technique to quickly self-guard US Army, by recommending a divestment from its helicopter arm from the merger. The Division focused on the primary concern and disregarded any feature beyond your frame of the primary issue. Also, the resorted name-calling by the merging companies and their allies on EC to be 'dubious and anti-American business'; was part of the anchoring to provoke favorable decision and skew the ultimate outcome.

8. Role of Trust/Reputation/Know-how and the Non-obvious Solution

It is glaring that reputation/know-how of the merging companies remained the focal concern upon which the negotiating authorities centered their arguments-of which many commentators recognized wouldn't normally produce an clear solution. GE has a reputation of being arguably, the richest and best airplane engines manufacturer on earth; and Honeywell was ranked world's number one in make of airplane avionics. The believed capital worth of their merger was about $42 Billion2, which indeed performed an intimidating role in the negotiation.

Lack of trust became a critical factor that decided the final results of the negotiations. While EC questioned the integrity of the merger, and looked at it as a storyline by the American companies to generate monopoly and injury challengers/customers; the American companies and their followers identified EC's position as 'anti- North american business attitude'2. This undercurrent of tension/distrust ran so deep across the ranks that some called it 'transatlantic trade war'2. With grandstanding positions by the get-togethers from starting point, many opined individuals/categories pointed previously that there was probability of non-obvious solution, which indeed became the final outcome

9. Lessons Learnt and Conclusions

The important lessons learnt here, which is altogether agreement with the idea of negotiation, as can be deduced from above cases is the fact that making multi-party negotiations work effectively is a complicated and intricate process. As can be inferred from above examination, the negotiation dropped through because of varying interests, gatherings' distinctions and lack of trust.

Strategically, the merger made good business sense, but contrasting positions hindered its realization hence, a failed merger. This special-type multiparty negotiations, marked the first time in negotiation history that transatlantic regulatory authorities differed significantly in their decisions.

Conclusively, it is worth noting here that careful consultations with effective use of individual BATNAs, Framing and Cooperative strategies during the interactions; may likely have paved just how for successful discussions that might be of shared (win-win) benefits.

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