Lessons from Chess for Winning in M&A

The game of chess has many parallels to the world of mergers and acquisitions (M&A). Both require strategic thinking, calculated planning, and the ability to anticipate multiple moves ahead. Dealmakers can learn much from chess grandmasters about executing deals successfully. In this post, we’ll explore key checkmating strategies from chess that can give you a competitive edge at the negotiating table.

The Fork Tactic

One of the most common chess tactics used to apply pressure and gain advantage is the fork, whereby a piece attacks two or more opponent pieces simultaneously. In doing so, your opponent is forced to address the more valuable threatened piece, enabling you to capture the other one and improve your position.

In M&A, dealmakers can employ a version of forking by putting an opposing negotiating team on the defensive. This may involve structuring a bid with contingent clauses for certain assets or making an offer contingent upon other key terms. By applying pressure to multiple deal points, you limit your opponent’s options and ability to counter, increasing the chances they’ll fold on an aspect important to you. Mastering the art of deal structuring with forking tactics can enable you to shape negotiations favorably. Don’t overdo it because the other party will walk away if the attack is too aggressive.

The Sacrifice Play

Chess players will occasionally sacrifice a valuable piece to set up a sequence of events that ultimately put their opponent in checkmate. Though counterintuitive, losing a powerful piece is strategically appropriate if it sufficiently weakens your opponent’s position.

Similarly, in M&A, experienced dealmakers know there are moments where giving up something valuable leads to longer-term gains. Whether offering concessions on pricing, terms, or deal structure, sacrifices should always have a clear strategic rationale and enable you to capture value through other means. Keep the end goal in sight, and don’t hesitate to give up points that may win you the entire deal. I always develop a list of items I am willing to give up in negotiations to gain other advantages.

Zugzwang Positioning

In chess, zugzwang refers to a position where any move deteriorates a player’s position. The player is cornered with no promising options, ultimately leading to defeat.

Using a series of calculated moves, dealmakers can metaphorically put opposing negotiators in zugzwang by systematically eliminating their options. This may involve deal structuring, well-timed bids, contingencies, or even media communications to signal your commitment. The key is maneuvering the dialogue such that the opposing side has no choice but to make concessions or accept your offer. Master negotiators are positioning counterparts in zugzwang without them realizing it’s happening. This is especially valuable when you know that the other party wants or has to make a deal.

The Double Attack

A double attack in chess involves using one piece to threaten two of an opponent’s pieces simultaneously. Putting two pieces in peril creates a diversion tactic that masks the full scope of your aggression.

In negotiating M&A deals, double attacks can create a positional advantage by overloading counterparts with multiple priorities. This may involve deal terms, pricing clauses, regulatory issues, or transaction uncertainties that strain the opposing team’s ability to respond effectively. Launching a double attack diverts attention and intensifies pressure to accept concessions.

Castling for Flexibility

In chess, castling involves a coordinated move between the king and the rook to increase positional flexibility while keeping the king protected. By castling early in a chess match, players open up opportunities to control more key squares and initiate attacks.

Similarly, maintaining flexibility in dealmaking enables you to shift negotiation strategies while actively reducing risk. Build contingent clauses into initial deal terms to retain castling abilities rather than getting boxed into rigid deal structures too early. Structuring initial bids and terms loosely translates into more degrees of freedom to change tack at critical junctures. Like castling in chess, early flexibility sets the stage for mid-game power plays.

The Poisoned Pawn Gambit

This high-risk, high-reward chess opening got its name from a strategically placed but trap-laden pawn meant to tempt opponents. On its surface, taking the poisoned pawn looks alluring. But doing so allows your opponent to gain superior positioning and attack opportunities. Unless perfectly countered, taking the bait can ultimately lead a player into checkmate.

In M&A, dangling a poisoned pawn could involve floating a public trial bid likely to stir shareholder opposition or regulatory scrutiny. While the primary target may view it as an attractive offer they can’t refuse, doing so puts them on unstable footing. Dealmakers leverage the target’s compromised position following a poisoned bid to structure a deal more favorably aligned to their interests ultimately.

Attacking in Waves

The best chess players don’t initiate all-out attacks immediately. Rather, they first employ strategic probing moves to gather information and seize incremental advantages. Each successive wave increases pressure while advancing toward checkmate.

Negotiating deals involves methodically gaining leverage through deal structure mechanics, pricing thresholds, and contingency planning. Savvy dealmakers incrementally call bluffs around deal price points, terms, and asset valuations, pressing for more concessions without overplaying their hand too early.

Building Negotiation Momentum

The famous chess grandmaster Bobby Fischer emphasized winning games through sustained momentum rather than seeking single favorable exchanges. Once Fischer gained even a slight advantage, he ruthlessly pursued it without distraction until his opponent was beaten.

In M&A, similarly sustaining offensive momentum is critical once you gain the upper hand in dealmaking discourse. As the famous saying from Napoleon Bonaparte goes: “Never interrupt your enemy when he is making a mistake,” keep applying pressure once counterparts begin making concessions until you checkmate their negotiating position and close the deal on favorable terms.

Conclusion

From forking attacks to zugzwang positioning, chess and dealmaking are strategic and psychological battles with much overlap. Master negotiators borrow from the checkmating playbook of chess legends, leveraging tactics around sacrifice, tempo control, ambushes, and sustained aggression.

Both chess and M&A dealmaking involve deep preparation, pattern recognition, contingency planning, and killer instincts during high-pressure exchanges. Parallels between chess and dealmaking inspired the “Great Game” moniker used in merger contexts. Truly mastering competitive dynamics enables you to dictate outcomes at the negotiating table and consistently capture more value.