Thought Leadership - Pari Passu M&A Mediation

Avoiding WYSIATI Traps in M&A Negotiations

In his seminal book, “Thinking, Fast and Slow”, Nobel Prize winning psychologist Dr. Daniel Kahneman explained how the wiring of the human mind often impels us to reaching conclusions quickly on the basis of mental shortcuts and intuitive impressions rather than thoughtful fact finding and analysis. One of the most powerful engines of intuitive thinking is WYSIATI – an acronym that Dr. Kahneman coined standing for “what you see is all there is”. WYSIATI refers to the tendency to form conclusions quickly from a tiny subset of a larger body of potentially available information. Although WYSIATI can be useful in certain situations, it can often lead to sub-optimal results, particularly when trying to negotiate a new M&A deal or to resolve an M&A-related dispute.

How Standing Mediators Can Add Value in M&A Deals

The popular conception of a professional mediator is that of an individual parachuting into the midst of a hot dispute on short notice to facilitate a resolution that the parties view as a better net result than they are likely to obtain from further combat. The idea of a “standing mediator”, a neutral engaged by parties to a business transaction before a dispute has arisen to be available to assist in solving problems as they may from time to time arise, has far less currency. This article discusses how a standing mediator can add significant value, particularly in the context of an M&A transaction.

Case Study: Using Mediation to Maximize Value in M&A Disputes

Anyone who has spent meaningful time in the world of mergers and acquisitions knows that professionals in this arena are hardly shrinking violets. Individuals who effectively act on behalf of companies and investors in M&A transactions are almost to a person proactive, assertive and outcome-driven. It is therefore quite surprising that when an M&A transaction leads to a dispute, many parties who would never consider allowing an outsider to make their initial deal readily turn the task of deciding the outcome of their dispute over to a stranger – sometimes an arbitrator, but more often a judge.