How you negotiate can make a huge difference in the final deal when selling a business.
Here are some of the ways an experienced M&A intermediary will negotiate:
- Spread the net wide
It is always important to look into the different interested parties before finally deciding to go into exclusive negotiations. Someone may have put in what looks like a great offer, but there may be a catch. It isn’t all about the final price, there are many different ways a deal can be made. You need to be careful that you don’t get caught in hurried negotiations that don’t end up to your advantage. There may be intangible issues that you need to be aware of.
- Prepare thoroughly
However experienced someone is in negotiations, there is still a necessity to prepare. Every business is different, with different strengths and weaknesses. It is important to know what these are and how to utilize these. It is also important to know about the buyer, their reason for buying and how the business can be advantageous to them. Different deal structures can enable a win-win situation.
Another area to prepare is to work out alternatives to coming to a deal with this counterparty. At what point do you decide that you don’t want to make a deal because you have alternatives that are better. It gives you a much stronger negotiating power if you have alternatives already worked out. It is also good to be able to work out the other party’s alternatives and the point they would walk away at. You then have something tangible to work with.
The best way to negotiate is to build up trust between the two parties. Don’t think of the other party as an enemy you are fighting to get every penny you can from. Think of making the best value for the business. With trust there is more likelihood of a sharing of concerns and interests. This in turn can lead to a win-win type of deal.
- Negotiate through obstacles
Sometimes it seems that there is no agreement on something that is critical to both parties. Neither party is willing to stand down. An experienced negotiator will not give up easily. Often in these situations there is still room for negotiating through it. Maybe there can be trades that can be made. This is where knowing the other side well can be of great benefit.
- Avoid taking unethical shortcuts
A bit of cheating, tampering with the figures or lack of transparency can be devastating on negotiations. It may seem something unimportant and merely done to get negotiations more swiftly through. However, once there is an inkling of something unethical, trust will be broken. Even if it seems more long winded to be accurate and scrupulously honest in all your dealings, it is worth it.
- Keep control of emotions
Emotions can be an indicator of how things are going, but strong emotions hinder a cool logical outcome. If emotions get high, it is time to take a breather. Make sure everyone has a chance to share their concerns, before moving on. Don’t let the deal get lost because of overheated discussions.
Being a good negotiator takes experience. A professional intermediary will know the mistakes to avoid. They will also not be as emotionally involved in the business and be able to negotiate with a level head. In addition, time and energy put into negotiations are time and energy taken out of running the business. It would get very easy to lose focus on running the business and thus cause it to devalue at the very time you want it to be at its best. For all these reasons if you are selling your own business it is best to get professional help.