Whether you’re selling or buying a business, you want to walk away with the best deal possible. The seller and buyer hope to make as few concessions as possible, and negotiations often stall when both parties can’t see eye to eye or are not empathetic to the other’s needs. For negotiations to be successful, both parties need to strive for a result where everyone wins just enough.
Know Where You Stand, Be Prepared
Don’t get bogged down with the terms that are less important to you because you are trying to “win” every point. Be prepared before negotiations start. Know what terms are most important to achieve your goals. If you’re selling, then not all of them are financial. You may wish to remain involved in the business or take care of your employees. If you’re buying, then you may want the owner to stay through a transition to ensure this process goes smoothly. Whatever they are, know in advance what you wish to accomplish and make sure you hold the line in negotiations to ensure they are addressed. Your M&A advisor, financial planner and attorney can assist you in formulating these goals.
Make Strategic Concessions
You may need to make concessions, so be prepared to do so, but make sure concessions are reciprocated and appreciated by the other party. When you make a concession, it should be clearly known that you are doing so with an expectation that you will receive something in return.
Understand the Other Person’s Objectives
Truly understanding the person sitting across the table is very helpful at maintaining reasonable negotiations, while giving you an edge. What are their objectives? What motivates them? What comes next for this person? Understanding what is most important to them can help you make appropriate strategic concessions.
There is no guarantee the deal will get done. It may seem like the perfect match before negotiations begin, but sometimes there is no “meeting of the minds” in which case it is OK to walk away.