How to Manage Final Offers in Mediation
by Nick Pearson
Generally, in commercial mediations, parties make several offers/counter-offers before settling on their “final” or near final position.
Reasons for this seem to include:
- Wanting to make sure that a better deal isn’t missed (FOMO)
- Innate enjoyment of the marketplace mentality – a desire to haggle
- Wanting to take the time to make sure that their own position stacks up
- Needing to be able to say and demonstrate that they have tried everything when reporting back to non-attendees at the mediation
- Wearing down the other side – attrition
Whatever the reason, the point is often reached when one party makes what they say is their “final” or sometimes, to add emphasis, their “best and final offer”.
When such an offer is made, is it true?
Surely the party making such an offer will decrease it by £1 if that is all that is needed to do the deal; but what about £100, £10,000, £100,000 or more?
What such an offer does do is to put negotiation credibility on the line.
If you say “final”, you should mean it, and the other side needs to understand it in this way.
If the prior negotiations have been logical and offers made were clearly explained, it is likely that the “final” offer will be seen to be serious and considered, rather than just an aggressive attempt to close the deal.
You need to make it clear that if it is not accepted you are off.
Your reputation as a negotiator is on the line and, for professional litigants (e.g. insurers, insolvency practitioners) at least, this is important and accordingly usually used by them deliberately to end the process one way or another.
As a mediator, my role is to provide a process through which parties to a dispute can safely, and in confidence, explore settlement options until they have reached a deal, or, if not, have tried everything they can to do so.
I encourage parties to make sure no stones are left unturned.
When parties are still a long way apart after a number of offers/counter-offers, the mediator needs to help them find out whether negotiations are really at an end for now, or is there more to come?
Although I am generally reluctant to ask parties for their “final offers”- because I do not want to create unnecessary difficulties if they continue to negotiate beyond what they have told me was their final position – nevertheless it is important to find out where they need to end up to see how far they really are apart.
If presented with a “final” offer I will pass it on as such to the other side and generally do not ask what the party making the final offer means by this.
If the party to whom such an offer is made asks what it means, I can say I do not know for sure, beyond the fact that it means what it says.
I may then also discuss possible responses to it— which may result in its acceptance or may result in the party to whom it is made rejecting it but making their own final offer. This can, of course, lead to an apparent standoff, and may lead to the parties leaving the mediation, but it often leads to further discussion if the parties are clearly close, and gives the mediator the chance to work with both sides a little more – for example by seeking to obtain from both sides, in confidence, their “best and final” offer.
Common commercial sense often prevails at this stage. The principal negotiators, if they haven’t already done so, often meet face to face to reach final terms.
- The mediation is never over until it is over – when the lights are turned off!
- Don’t make a “final” offer too early in the negotiations. Your negotiating credibility is an important part of the process.
- “Final” doesn’t always mean “final”, but if it does, the parties at least know where they stand.
- All sides should ensure they have tried everything to reach a deal. Generally, they should leave only when they have made their final/best and final offer and, if it is not accepted, leave feeling comfortable that they have done all they can. (I say ”generally” because there are times when, tactically, it will not be appropriate to make the final position known, but wait for another day.)
- No deal is generally better than a bad deal – heard this before?
- If you are met with a “final” offer but can’t meet it, you may still decide (after considering whether, tactically, this makes sense) to put your counter-proposal forward – if you don’t ask, you won’t get.