Ken Collins, BridgeTower Media Newswires
Looking back over several hundred M&A transactions that I've managed, I think especially of the many deals where both parties were very satisfied with the result and both sides felt they had won on at least their most important points. It's the box called Win/Win, and it's the place we all should strive for not only in the business world, but in our private lives as well.
Then there are the lopsided deals where, although a transaction was completed, one party clearly won and the other party lost. Short-term victory if you're the winner, at the expense of the loser who will likely carry a grudge forever. This is the place called Win/Lose (or Lose/Win) that engenders feelings of elation and feelings of anger that often and ultimately turn the result into a disaster.
Of course, there's also a fourth box Lose/Lose. That's the place where it all breaks down, for a variety of reasons, real and perceived and often no one understands why. Nobody wants to end up there!
Getting to the Win/Win box is not simply a matter of luck, though I'll admit that luck helps.
There are at least six basic rules in my book that are essential to achieving success through negotiation.
-Set clear and realistic expectations
How much is my business really worth? Who are the best buyer prospects? Will they want me to stay on or leave? Will they be moving my business?
-Understand which of your objectives are most (and least) important to you; set priorities
Is it strictly price? What about my family? My employees?
-Know your opposition including their objectives and priorities
Why are they interested in buying my business? Their plans and strategies? Their financial wherewithal? How have they structured deals in the past?
-Do your homework and be prepared
This means understanding your own business from potential buyers' perspective where they see value and opportunities and risks.
-Prepare options rather than ultimatums
If you insist on Option A and the other side insists on Option B, then consider C, D and E which may offer ways around the impasse.
-Put it in writing as you go to avoid misunderstanding later
Nothing worse than getting to the proverbial, "He said; She said."
Final thought: Negotiations begin long before that very first email, phone call or meeting and negotiations last throughout the entire process through due diligence and legal documentation to closing, and even beyond.
Taking your business to market, with the help of an experienced M&A advisor/investment banker, is an ongoing process initially negotiating with the several interested prospects to craft the best offers, and then directly with the best prospect to craft a definitive offer, purchase agreement, and closing.
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Ken Collins is managing partner of KBC & Associates, an M&A advisory firm based in Huntington.
Published: Fri, Feb 28, 2020
