3 questions to smart minds

Intercultural negotiation skills in German-Italian transactions

For this 3 questions to Sandra Bendler-Pepy

SLB LAW in Munich
Photo: Sandra Bendler-Pepy
28. June 2023

In contract nego­tia­ti­ons, much depends on the diffe­rent expec­ta­ti­ons and inte­rests of the parties invol­ved and the power struc­tures. The parties are often uncon­sciously stuck in their tradi­tio­nal, natio­nal beha­vi­oral patterns, which often poses obsta­cles in German-Italian negotiations.
Sandra Bend­­ler-Pepy, a lawyer admit­ted to prac­tice in Germany and Italy and a part­ner at SLB LAW in Munich, explains what is important in such cases and how to resolve conflicts that have arisen. She specia­li­zes in German-Italian tran­sac­tions of DAX-listed as well as medium-sized compa­nies and has many years of expe­ri­ence in advi­sing on cross-border transactions.

For this 3 ques­ti­ons to Sandra Bend­ler-Pepy, lawyer and part­ner at SLB LAW in Munich

1. How do you deal with tradi­tio­nal beha­vior patterns in cross-border nego­tia­ti­ons? They are specia­li­zed in German-Italian as well as inter­na­tio­nal transactions.

The “how” of initia­ting the talks between the parties is very important, as this is often where the course of mutual inter­ac­tion is set during the nego­tia­ti­ons. At this stage, the flexi­bi­lity of the respec­tive interlo­cu­tors and their nego­tia­ting power are tested in parti­cu­lar, which have a direct impact on the terms of the share purchase to be nego­tia­ted. Without mutual under­stan­ding and respect for the respec­tive other culture and the diffe­rent approa­ches to solving conflicts, a fail­ure of the nego­tia­ti­ons is quickly pre-programmed.
TIP‑1: First tune into each other with super­fi­cial topics to get to know each other and get a feel for the other person’s perso­na­lity. In Italy, this is also part of good manners and a sign of respect.
TIP‑2: Estab­lish eye level on content and a struc­tu­red plan when ente­ring nego­tia­ti­ons. The important thing here is to have clear goals and a strict time­line, and to pursue them in a well-struc­tu­red and objec­tive manner.
TIP‑3: When conflict arises, de-escala­tion is the top prio­rity. Buil­ding up further pres­sure and play­ing for power, as is still common in tradi­tio­nal M&A consul­ting, quickly has the oppo­site effect on Itali­ans. Under no circum­s­tances should the interlo­cu­tor be “talked down to” In order to assert one’s own posi­tion in a respectful manner, a profound know­ledge of both cultures and the neces­sary tact are required.

2. Where is the trend in German-Italian tran­sac­tions heading, or vice versa? There are many diffe­ren­ces in the contrac­tual design. Where are the trip hazards?

The contin­ued brisk cross-border busi­ness despite poli­ti­cal chan­ges and the Covid-19 pande­mic, as well as ever-impro­ving English language skills, belies the some­ti­mes very diffe­rent formal and legal requi­re­ments. Here, it is important to consciously take advan­tage of diffe­ren­ces within the frame­work of contrac­tual design in order to streng­then one’s own position.
For exam­ple, in Italy, shares in a limi­ted liabi­lity company can be effec­tively sold without nota­riza­tion in the inter­nal rela­ti­onship between the parties. This leads, among other things, to diffe­rent requi­re­ments for the struc­ture of the share purchase agree­ment, the invest­ments and the timing for signing and closing. The legal struc­ture of mana­ging direc­tor employ­ment contracts, espe­ci­ally in the context of incre­asingly popu­lar earn-out clau­ses in share purchase agree­ments, also func­tions quite differ­ently in the two count­ries. The same applies in the context of the requi­re­ments for the burden of proof in the case of claims for dama­ges and non-compe­ti­tion clauses.

3. How would you describe your inter­cul­tu­ral stra­tegy? How do you coach your clients?

Knowing the weak­ne­s­ses and strengths in the respec­tive legal systems and explai­ning them to my clients so that they can then consciously use them when draf­ting contracts is an essen­tial part of my substan­tive work.

The same applies to the cultu­ral and lingu­i­stic compon­ents of my work. This goes far beyond mere trans­la­tion or under­stan­ding. For this, one must be aware that there is a big diffe­rence in the way of commu­ni­ca­tion in both count­ries. The Germans’ very direct manner is percei­ved as posi­tive by them, since it is straight­for­ward, effi­ci­ent and open, and is thus often used quite consciously. Itali­ans, on the other hand, commu­ni­cate comple­tely differ­ently, on two diffe­rent levels. What is said and what is actually meant by this can vary greatly. This quickly leads to misun­derstan­dings. Also, too direct commu­ni­ca­tion often comes across as rude, arro­gant and clumsy to Itali­ans. This can quickly change power structures.

In addi­tion to provi­ding highly specia­li­zed and legally sound advice, I sensi­tize my clients to become aware of the diffe­rent effects of their commu­ni­ca­tion in order to then use them in a very targe­ted manner in contract nego­tia­ti­ons to streng­then their own posi­tion. Ulti­m­ately, conflict situa­tions are about consciously deal­ing with legal and cultu­ral diffe­ren­ces as well as diffe­rent inte­rests. The best way to deal with diffe­rence is through mutual respect and a culture of conver­sa­tion that embraces this.

About Sandra Bendler-Pepy

She joined SLB LAW in 2018 after working for 10 years in renow­ned inter­na­tio­nal commer­cial law firms in Milan and Munich and a stint as a part­ner in a Munich-based tran­sac­tional law firm. She became the firm’s youn­gest part­ner in July 2019 and joined the execu­tive team in June 2022. In addi­tion to gene­ral legal advice and contract draf­ting, she conti­nues to focus on M&A. She advi­ses on natio­nal and inter­na­tio­nal tran­sac­tions and also heads the firm’s steadily growing Italian Desk.

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