When one company acquires or merges with another, negotiation must first take

place. In a 2014 negotiation research article, Akseli Paavola of University of

Jyväskylä defined negotiation as “a unique interaction process that emerges in the
process of mergers and acquisitions, where interdependent transaction parties, a
buyer and a seller, who have mixed motives compete and cooperate simultaneously
while attempting to create a contract (a share purchase agreement or an agreement
to purchase assets) and maximize their payoffs trough collaborative joint decision
making.”1

During the negotiation process, parties use creative negotiation strategies in

resolving their conflict. There are two main strategies adopted by negotiating
parties – distributive and integrative. Distributive negotiation is often called as
win-lose negotiation where one party's gain is the other party's loss. In Distributive
Bargaining, a fixed assets or resources are to be divided between the parties in a
negotiation. Parties are holding on to the idea that they cannot “expand the pie” of
benefits. Distributive bargaining has been criticized because it often leads to the
failure of the negotiation. Both Parties insists on their positions and disregards their
respective interest. However, according to Fisher and Ury, distributive bargaining
tactics may be very useful in cases where the "negotiator wants to maximize the
value obtained in a single deal and when the relationship with the other party is not
important”2.

Integrative negotiation is also called interest-based negotiation. It is a form of

negotiation in which “each party attempts to understand the other's interests, on the
expectation that it will achieve a better result by helping the opponent create a
solution it sees as responsive to its own concerns”.3 In integrative negotiation,
parties aims to “enlarge the pie” in order to have mutual gains.

According to Spangler, “integrative solutions are generally more gratifying for all
involved in negotiation, as the true needs and concerns of both sides will be met to
some degree. It is a collaborative process and therefore the parties actually end up

1
Paavola, A. (2014). Negotiation Strategies and Offers - Perceptions of Mergers and
Acquisitions Advisors. Retrieved from
https://jyx.jyu.fi/dspace/bitstream/handle/123456789/42942/URN%3ANBN%3Afi%3Ajyu-
201402121226.pdf?sequence=1
2
Fisher, R., Ur, W. (2011). Getting to Yes: Negotiating Agreement Without Giving In, 3rd ed.
.New York: Penguin Books.
3
Honeyman, C. (2013, April). Integrative Bargaining .Retrieved from
http://www.beyondintractability.org/coreknowledge/integrative-bargaining
helping each other. This prevents ongoing ill will after the negotiation concludes.
Instead, interest-based bargaining facilitates constructive, positive relationships
between previous adversaries.”4

Integrative bargaining involves two steps namely identification of interest and

creation of options. At the negotiating table, both parties makes inquiries on the
what would the other party would like to achieve at the end of the negotiation. The
parties should “know who wants what by the time they split the pie” 5 Once the
interests are identified, parties generates options on how to meet those interests.

In the Disney-Pixar Merger, integrative bargaining was used. The two companies
focus on their interest rather on their positions. Disney wanted to acquire Pixar
since Pixar had creative and technological resources that Disney lacked. It needed
to revive its hand-drawn animation department which was shockingly closed down.
On the Other hand, Pixar’s main interest was to protect their creative culture.
Pixar created a list of things that would not be changed so as to preserve its culture
like Pixar employees didn’t sign employment contracts as it believed “We’ve never
had to go back and look at it. Everything they’ve said they would do they have
lived up to”6.

4
Spangler, B. (2003, June). Integrative or Interest-Based Bargaining. Retrieved from
http://www.beyondintractability.org/essay/interest-based_bargaining
5
Lax, D., Sebenius, J. (1986). The Manager as Negotiator: Bargaining for Cooperation and
Competitive Gain [E-reader version]. Retrieved from
http://books.google.com/books?id=FN_OIG0-alEC
6
Barnes, B. (2008, June 1). Disney and Pixar: The Power of the Prenup. New York Times.
Retrieved from http://www.nytimes.com/2008/06/01/business/media/01pixar.html