The power of clear communication in contractual negotiations and what to do if things go from hot to cold?

In recent months you may have seen the headlines about Tesla boss, Elon Musk's potential takeover of social media platform, Twitter. The site is known for allowing users 280 characters for their posts so I will try and keep this short and 'tweet'.

At one moment the $44 billion deal struck in April 2022 was on the table. In July 2022 it looked as though the deal was reportedly off due to some of Mr Musk's 'due diligence' concerns that related to the number of fake accounts on the social media platform.

Twitter then chose to sue Mr Musk through the American court system in the state of Delaware. The trial is due to take place in mid-October 2022. Despite this, Mr Musk had the option to pay a $1billion 'exit' fee to cut his ties from the Twitter takeover.

Just this week, there have been reports that Mr Musk's team wrote to Twitter stating the deal was back on. He wished to proceed with the takeover at the original purchase price. Given Mr Musk's links to the car industry, this can only be described as a 'U-turn.' (Pun intended). Meantime, the court action is still set to go ahead in mid-October. Whether or not there will be settlement before or on the court steps is yet to unfold.

There are some key takeaways from this saga that businesses and individuals should consider if they are thinking about purchasing another business or in contractual negotiations.

  1. Think twice before going 'hot and cold' during contractual negotiations. Read our blog 'When it comes to negotiation - silence really is golden'. This does not foster good working relationships and can alienate those on the other side of the deal. Good working relationships are built on clear communication and mutual respect.
  2. Iron out any misunderstanding or points of contention at an early stage. If you suspect that a deal may fall through or if you are in the middle of a takeover deal and have concerns, consider asking your solicitor to draft a formal letter either addressed directly from them or a ghost-written letter (a letter with wording from your solicitor but on your letter head). This can be a useful tool to iron out any misunderstandings or points of contention between the parties so that everyone is on the same page.
  3. Before changing your mind, speak to a solicitor who can advise you on the implications of exiting a deal and point out any key clauses in the contract. A holistic approach could involve advice from a contract dispute resolution specialist.
  4. Never underestimate the leverage and responsibility that comes with 'suing' or being sued. We call it raising an action in Scotland or being cited when you are the one being served with court papers. Often, the threat of legal action can make parties think differently about proceeding with a takeover deal.
  5. Seek advice from a solicitor who can advise you on the chances of success if you are involved in a court action.There are expenses and fees associated with taking a matter to court that businesses may want to mitigate. Expenses can be used to leverage a settlement and is something a solicitor can assist you with.

Time will tell if Mr Musk's takeover of Twitter reaches its final destination.

Our dispute resolution team are on hand to help you with a variety of services. We can help you as your business grows and negotiate any hurdles that may arise along the way.

Contributors

Naomi Davies

Senior Solicitor