URSABLOG: The Art Of The Deal?

Let’s just say I’m not that impressed by President Trump’s negotiating skills, but it’s not like he cares what I, or indeed most other people on the planet, think. Threatening various countries with tariffs and other tools of coercion only to back off, or worse, delay their imposition to a further point in time, or indefinitely, does not seem like the best strategy to get what you want. Sidelining your allies to negotiate directly with your common opponent and expecting them to not only buy in to what you agree, but live with it even if the terms carry their own existential threat, seems counterproductive to say the least.

But what do I know? I’m just a humble shipbroker, paid a commission, i.e. a success fee, on completion of a contract that I have helped create, negotiate and execute. I negotiate terms that are not only favourable to my clients, but that also lead to an agreement, otherwise there is no contract to perform, and therefore no commission to be paid. The end game is to make unwilling buyers and unwilling sellers become willing, willing enough to agree to buy on sellers terms, and vice versa. Simple? No, otherwise it would have been done by computers a long time ago.

Over a long career of ship sale and purchase shipbroking I have developed a few tried and tested tactics and strategies that sometimes work, and sometimes don’t. That they don’t are usually due to various different reasons, such as:

-?????????? Market conditions change, and therefore the willingness to sell or to buy decreases

-?????????? The willingness to sell or buy has limits that have not been made clear, or have not revealed themselves until a crunch moment arrives

-?????????? I have underestimated the stubbornness of either – or both – parties to meet somewhere in the middle

-?????????? I have overestimated the willingness of either – or both – parties to listen to logic or reason

-?????????? I have let the negotiations reach a point where there is one last term, usually the price, to be agreed, and without other leverage it becomes a battle of wills, vanities or at worst it descends into a cock fight with neither party willing to compromise; the broker, i.e. me, has to make compromises, usually in the form of reducing commission to get the deal done

-?????????? I have made a mistake on how important a seemingly trivial point is to one, or both of the parties

-?????????? I have just simply messed up, by presenting the wrong argument at a crucial time, or worse, not listening to one party’s genuine concern, or dismissed it as something that can be cleared up at a later stage

-?????????? One of the parties is not willing to buy or sell a ship at that time after all. They’ve bottled it, as the English expression goes

?

I am sure there are more, and I have many war stories – sometimes too painful to revisit unless I have the solace of a glass or red wine to hand – that probably contain some valuable truths on examination. But in essence, all negotiations go differently, and the counterparties – usually different combinations every time, repeat deals being very rare in ship sale and purchase, and especially in secondhand sales – bring their own experience, knowledge and prejudices (cultural or otherwise) to the table. These are sometimes impossible to overcome.

At URSA Shipbrokers, where I am director of ship sale and purchase, we also have a large dry cargo chartering department. That the rhythm of chartering is different from S&P should be self-evident: negotiations for voyage or time charters are shorter, quick-fire affairs with little lead time prior to the commencement of negotiations, i.e. before offers and counteroffers start flying about. In S&P there is usually a longer period whilst the ship is being marketed and the buyers inspect (if they want and need to) and do otherwise necessary due diligence before offers are made and negotiations can begin. Therefore chartering brokers and S&P brokers use the same words to talk about different things, adding to the misunderstandings that often crop up.

I am often asked by my students, whether at the Institute of Chartered Shipbrokers or at the Universities where I lecture, whether they could become shipbrokers, and whether they should try chartering or S&P. Usually knowing very little of their character before being asked to give my opinion, if they are men (and they live in Greece) I ask them whether they like basketball or football. If they choose basketball I suggest that maybe they look into chartering (lots more action and lots more points being scored), S&P if they prefer football. In the UK this is not so easy: do I compare football with rugby? Test cricket with 20/20? (I imagine a devotee of test cricket would be an ideal candidate for newbuildings – days of slow action leading to a draw.) I must admit that when women ask me the same question – and they do not follow sports – I haven’t yet found a suitable easy framework to discuss this. This is my fault, and probably says more about my inability to think out of that particular box than anything else.

But there is another big difference between chartering and S&P, which perhaps is more fundamental. In our markets, i.e. the tramp shipping markets of tankers and dry bulk carriers, ships have to be fixed: it is their raison d'être to be employed by charterers in exchange for payment. There will always be new business coming up as the employment comes to an end and the ship redelivers and becomes open for employment again. With the exception of judicial sales, i.e. the auctions of ships under arrest, there is no fundamental reason that a ship has to be bought and sold at any given time. There are many good reasons why owners would consider selling a ship, and where potential owners would consider buying, but sadly – for ship sale and purchase brokers at least – they don’t have to sell, or have to buy if the terms and conditions – whatever they encompass – are not favourable, or become unfavourable, at that particular time.

I am not for one minute suggesting that being a chartering broker is easier than being an S&P broker: they both face different challenges and different stresses, not to mention the different size and frequency of commission payments. Success is success, and commission is commission. But the style of negotiations is different. As S&P brokers, we get into firm negotiations far less frequently than chartering brokers, and due to the amounts of money involved they require different strategies and tactics, and carry unique stresses, at different times.

But where both disciplines are the same is that we both want the same end game: deliveries, a point where the owners deliver the ship to charterers, or where sellers deliver the ship to buyers, both in exchange for payment. And of course with that passage of money we get paid our commission.

Which is why I can have no real right to question President Trumps’s negotiation style, let alone his tactics or strategy. I have no idea what his end game is, what success looks like for him. I am not entirely clear he does either. The art of the deal has a beauty of its own, and many people live for the thrill of negotiations in themselves. They like the confrontation, the action, the manoeuvring for advantage, the mind games. They like the power negotiations confer on them, even if the negotiations are fruitless in the end.

I must admit that I am not immune to that thrill, the rush of adrenaline, the feeling of doing something important and significant, but the best feeling I can get from such negotiations is not only a successful conclusion of a negotiation, but one where the reaching of agreement carries intellectual as well as emotional satisfaction. I do not really trust brokers when they say they are so jaded and cynical that closing a deal means little to them. If it doesn’t matter to them, why do they do it? If it’s just for the money, then it follows that they cannot really be trusted to act in their clients’ best interests either.

A good friend of mine – and a mentor over the years for S&P, and for life for that matter – once said (over a bottle of good red wine it has to be said) that you knew a deal would stick if both parties were unhappy at conclusion of an agreement, where both sides had come out of their comfort zones to reach a deal. If both parties were very happy, then either one party, or both ?had missed something that would change their opinion over the performance of the contract, or a change in market conditions – however slight – would alter their satisfaction very soon. And if one party was far happier than the other, then the resentment in the counterparty would fester and come back and threaten the successful conclusion of the deal. Therefore we should not be afraid if negotiations between serious counterparties are tough; it leads to easier deliveries if all the details have been thrashed out properly. My friend, needless to say, represents a principal, and is not a competitive broker, but nevertheless there is a lot of wisdom there. ?

President Trump’s negotiation style goes to the root of who he is. He wants the action, the power, the confrontation, the mind games. The end game? More negotiations, or renegotiations. The problem is – in my humble opinion at least – that sooner or later the counterparties to these negotiations will wake up to this style, learn the pattern and engage with him so that their endgame is satisfied, even at some loss to themselves. He will look like he has won, and call tell people he has won, but the evidence at a later stage will prove otherwise. Or worse – for him certainly – that countries will simply cease to engage with the USA, and turn their attention elsewhere for what they need.

So if the end game is eternal negotiations, and appearing to win them at all costs – as opposed to actually reaching agreement – then nothing much will get done, especially if those looking to gain advantage from this way of doing business cotton on. I suspect that Russia, China and others have already understood this. But what do I know? I’m just a humble shipbroker, trying hard to create opportunities, negotiate the terms of successful contracts that then deliver what they say they will do. However it seems a more productive and satisfactory way to live my life than trying to second guess what the so-called artists of the deal really want, when a deal, any deal, will always be secondary to the action.

Simon Ward

www.ursashipbrokers.gr