Sell-Side Negotiation Tips from M&A Advisors
Skillful negotiations can make or break M&A transactions. No matter how well things appear to be going, it can all fall apart at the negotiation table. But, skilled negotiators can ensure that both parties get the most out of the transaction and minimize potential pitfalls or risks. For negotiations to end successfully, the buyer and seller must be committed to specific, clear, and productive discussions, not allowing emotions to jeopardize their hard work.
For those new to selling a business as an exit strategy, navigating negotiations can be challenging, and the negotiation table may seem to have potential pitfalls lurking at every turn. The key? If you’re selling your business, be prepared to meet possible challenges and embrace the art of compromise.
Drawing on our years of negotiation experience, we’ve pulled together a roadmap with practical steps to help you get the most out of the deal.
Pre-Negotiation Prep Work
Preparing for negotiations is essential. Use this time to think about the deal, what you want to get out of it, how you see the business continuing after the sale, and getting clear on your position. Some things to think about include:
- Establish your non-negotiables: Well before you sit down at the negotiation table, work with your team of M&A advisors to establish the areas that are non-negotiable in a successful deal. The list might include preserving your business’s positive brand image and values, job security for employees, maintaining service levels for customers, and any post-sale involvement consultancy or other role you wish to have.
- Research your buyer: Though due diligence is typically the buyer’s job, you should also be well-prepared. Do your homework so you can understand your buyer’s likely concerns, giving you a chance to acknowledge and address them early in the process. Ensure they have a good reputation by talking to previously acquired businesses’ owners. Investigate the integrations’ success and whether the buyer keeps their promises. Above all, make sure the buyer can finance the deal and complete the sale. Otherwise, you can end up wasting a lot of time on a deal that will inevitably fail.
- Establish a clear negotiation calendar: Set a viable, realistic timeline for key negotiations and transaction goals. Decide on key discussion topics ahead of time to keep your negotiations, and the transaction they support, on track.
- Draw up some ground rules: It’s also wise to draw up some ground rules before you reach an impasse. Then, when there’s a disagreement, you can lean on the guidelines you’ve already agreed on.
- Get your staff on your side: It’s taken you years to build your business, and your staff may feel like part of the family. This means there may be a lot at stake. While you can’t discuss confidential details, it’s best to share what you can with your staff as soon as you’re able to help them adjust and support the business through negotiations and sale.
Strategies for Negotiation Game Day
When you finally sit down at the negotiation table, some simple strategies can help you make the most of your time:
- Don’t sacrifice anything for nothing. You can’t win every battle, but don’t make concessions for no reason. You should never give something up without getting something in return. Even if it’s a small matter, a this-for-that approach is always best.
- Move strategically. Each round of negotiations should move your interests forward—not serve as a dumping ground for emotions or disputes. Reviewing the items you have agreed to gets you on the same page and keeps the negotiations positive.
- Know when to walk away. Negotiations that drag on for weeks and go nowhere benefit no one. Don’t waste time. You don’t have to complete the deal simply because you’ve already invested time and energy. This impulse to complete the deal at all costs can catapult you to failure.
Experience and Objectivity Win
M&A negotiations can be intense. Seller and buyer emotions often color the process, causing it to drag on and be less productive than it could otherwise be. You should be prepared for some emotional turmoil, so work hard to maintain your objectivity. An M&A advisor can help keep the negotiations moving forward by focusing on the pros and cons of each negotiated point, looking at the overall deal picture, and acting as. a buffer for emotional reactions. Experience plays a pivotal role in negotiation success, and a skilled M&A advisor is worth their weight in gold. They can keep you focused on the ultimate goal, let you know what’s reasonable and what’s not, and take much of the burden of negotiations off your shoulders.
Preparation for a Successful Transaction
Before the team at NuVescor Group brings a company to market, we work with them to identify synergistic market opportunities. We then take that information and survey the market to find buyers who can take advantage of those opportunities. This meticulous process allows clients to achieve multiples higher than the standard valuation methods suggest. Our process minimizes the risk of bringing a business to market when value expectations cannot be met and enhances the chances of finding the right buyer, ultimately facilitating a successful deal.
This article was originally published on April 24, 2021 and newly updated on December 19, 2023.