'Art Of The Deal' Complex In Corporate Negotiations

Since April, rumors have circulated that IBM and the microchip maker GlobalFoundries are in talks over the sale of Big Blue manufacturing plants, including the one Essex Junction.

Neither company has commented, and the most recent rumor has it that the negotiations have broken down.

IBM’s quarterly earnings report Thursday did little to clarify the company’s plans for its chip manufacturing division. In a conference call an IBM senior vice-president skirted a question about the rumors.

As a founder of the consulting firm Vantage Partners, Jeff Weiss has been involved in many negotiations between large global corporations. Weiss is also an adjunct professor at Dartmouth’s Tuck School of Business.

He has no specific knowledge of any discussions between IBM and GlobalFoundries, but says generally companies place a premium on secrecy.

Weiss says companies also create a firewall around people within their organization who are familiar with certain aspects of negotiations.

“Normally in the diligence process, you have a ‘clean team’ of sorts, especially in technology, where only a certain number of people in each company are exposed to the intimacy of the other company,” he says.

Weiss says typically a dozen or so individuals from each company would be at the table during negotiations, but there might be 100 or more people involved on each side, carefully evaluating the terms of any agreement.

He says negotiations over the value of a division or business, especially where technology is involved, can be contentious and complex.

“They certainly are when you are taking something which has people and know-how and intellectual property and customer relationships, supplier relationships, etc. and selling it to someone else or purchasing it from someone else,”says Weiss.

He says even after long and intense discussions, surprises crop up that can threaten a deal.

“A surprise in what you find out about the other company, a surprise because suddenly one of your customers or supplies who is key has found out about it and has some things to say about it,” he explains.

Weiss adds that government may also have a say in a proposed agreement.

“Maybe you’re a company that is working very, very closely with the U.S. government and you find that the government isn’t so excited about selling a piece of your company to a company based in another country because of national security reasons,” he says.

It’s not known if an IBM-GlobalFoundries deal raises security concerns, but the chips manufactured at IBM’s Essex Plant are used in the defense industry and GlobalFoundries is owned by the United Arab Emirate of Abu Dhabi.

Weiss says a potential deal can fall through for lots of reasons but business and financial considerations are often not what scuttle the negotiations.

“Many, many, many more of these deals fall apart because trust got eroded, people stopped communicating, perceptions got in the way, differences were not able to be managed, rather than that the deal actually didn’t make sense,” he says.

Weiss says most complex transactions take at least six months and at times, up to two years to complete.

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