Contrary to popular belief, many large financial transactions are based on verbal agreements. In a world where reputation is everything, your word is your bond because, as Lloyd Blankfein says, if you break it, "you'll never eat lunch in this town again."

Merchant bankers operate on the belief that "lawyers like to complicate matters; we like to simplify them." Echoing Charlie Munger's advice to "not let lawyers kill deals," they prioritize trust and verbal agreements. This allows them to execute transactions with a speed and simplicity that would be impossible under a more legalistic, risk-averse framework.

A truly successful negotiation requires both a great outcome and a positive experience for the other side. A key tactic is to strategically concede something you don't have to. This builds goodwill and ensures the relationship survives, which is crucial for long-term partnerships.

Ken Langone's negotiation principle is to let the other party feel they won more than they deserved. This isn't about getting less but about prioritizing long-term trust over maximizing a single transaction. This approach builds a reputation that attracts future opportunities and creates loyal partners.

A merchant banker secured a £200,000 credit line for a ship owner in three minutes over the phone, without any contracts. This highlights their core advantage: leveraging long-term trust and reputation to provide rapid, personal service that large, bureaucratic banks cannot match. Their business runs on confidence, not collateral.

Counterintuitively, the more complex a deal—spanning multiple countries and legal systems—the more suitable it is for a relational contract. Instead of attempting to codify every eventuality, this approach establishes a shared corporate culture and flexible principles that can adapt to unforeseen challenges, effectively trumping national or legal differences.

Instead of being unenforceable concepts, guiding principles like fairness and loyalty become a formal part of the contract. During a disagreement, parties can explicitly reference these agreed-upon norms ('you agreed to be equitable'). This reframes the conflict, reminds partners of their commitments, and provides a shared language to resolve issues without litigation.

The cattle business relies heavily on reputation and relationships. The vast majority of transactions, even those worth millions, are finalized over the phone or with a handshake. Formal legal contracts are rare, as bad actors are quickly pushed out of the industry.

Ditch hostage negotiation tactics. Instead, transparently state the four levers that earn discounts: volume commitments, faster payment, longer contracts, and predictable deal timing. This transforms negotiation from a battle into a collaborative trade, building trust and creating more valuable, predictable deals.