PA Consulting - If there’s a will, there’s a way

27 March 2000
Brian Shaw

PA Consulting says: “If there’s a will, there’s a way” in
dairy industry merger

The failure of the New Zealand dairy industry merger talks was predictable because the bargaining process was flawed, according to PA Consulting’s Brian Shaw, co-author of a recent study into the Australasian dairy industries.

However, according to Mr Shaw, the merger between Kiwi Dairies and the Dairy Group is still possible “if the will is there”.

Commenting on last week’s announcement that the merger talks were off, Mr Shaw said the result was only to be expected as the parties were bargaining over positions rather than focusing on the underlying interests.

“When negotiating parties take a position, as Kiwi and NZ Dairy Group did over valuation, the only way to reach agreement is to then make concessions,” Mr Shaw says.

“The problem is, the higher the stakes the more the position is defended and the harder it is to find concessions to make. The parties then become more and more locked into their positions rather than focusing on the underlying needs - and they miss the deadline for reaching agreement,” he says.

Mr Shaw said it was the process that was at fault, not the dairy industry. “This type of breakdown happens in negotiations in all industries when position bargaining is followed,” he said.

The most important thing the two companies could do now is decide if they believe a merger is the best option for the dairy industry in this country.

“If they do think so, then they need to get back together and follow a new process towards merger.”

Mr Shaw said the discussions should be managed by a facilitator and concentrate on four issues:
 Separate the people issues from the content and deal with them separately – “ otherwise the emotions, values, backgrounds and viewpoints become entangled with the problem”
 Focus on the best interests of the parties, not the bargaining positions
 Produce a number of options early on, rather than at the last minute
 Have an agreed independent fair standard by which to judge the valuation of the companies by

Mr Shaw said a successful negotiation process does three things: it produces a result that the parties want, it produces it efficiently within the time available and it improves, or at least does not damage, the relationship between the parties.

Independent facilitation of the process to reach agreement is the answer, not arbitration.

“Arbitration was rejected by the companies and would not help resolve the impasse. The companies themselves must agree and be happy with the result, not give the problem to someone else to decide.”

If the companies did not go ahead with the merger, Mr Shaw predicted that the New Zealand industry would need alternative partners or it would find it increasingly harder to compete. “Without real negotiating power, achieved by size, the companies will find it harder to be a global competitor and this is rapidly becoming a global industry.”

He added that it would see New Zealand’s place in the world stakes split from 12th position to two companies occupying 26th and 37th place. Merger with overseas companies was the only option but one that would not benefit the New Zealand economy to the same extent as a New Zealand merger.

“We firmly believe a successful merger is possible – and desirable. Many of the major dairy mergers around the world have stumbled initially. All the successful ones have had an expert facilitator and a process that negotiated on the merits.”

ends

For further information, contact:

Brian Shaw ---- Claudia Macdonald
Managing Consultant ---- Senior Consultant
PA Consulting ---- Beyond PR
Tel: 09 303 2743 ---- Tel: 09 306 1809
Mob: 021 980 654 ---- Mob: 025 932 418

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