6 Negotiation Tips When Selling Your Company

Selling a business is transformational. So it’s worth doing it properly. Below are six important negotiation tips specifically relating to sell-side M&A, based on the combined deal experience of the Venero team.

Let’s start with the basics:

• Control the Process
  The timing of the sale can work for you or against you. It is always better to exit while the business is still at the on-ramp, you have options and can negotiate from a position of strength, rather than at the off-ramp. I explain here the importance of controlling the timing of your M&A exit. But even if you received an unsolicited approach, you can create competitive tension by expanding the buyer universe, establishing a timeline and introducing a phased approach to buyer interactions.
• Know Your Weaknesses
  Virtually all businesses have weaknesses that an acquirer can use to gain leverage and lower your confidence in your negotiating position. It is important to not be blind-sighted if and when these weaknesses surface. Identify them early on and try to eliminate them, reframe them as strengths, or at least limit their relevance.
• Consider All Your Stakeholders
  When negotiating the sale of a business there are several stakeholders involved (early-stage investors, later-stage investors, employees, lenders, etc.), each of whom is likely to have differing priorities: valuation, consideration received, tax implications, employment aspects, retainment incentives, earn-outs, etc. Determining a well thought-out, collective stance upfront will enable you to make the appropriate trade-offs with an end-goal in mind and will lower the chances of making suboptimal decisions under pressure.

During the negotiations:

• Don’t Flip-Flop
  Unless you are a highly skilled negotiator, sending mixed signals or backtracking is likely a sign of unpreparedness. If a proposed term is unattractive or unclear, it is better to express caution early on rather than imply agreement only to raise concerns after negotiations have advanced. The acquirer could use your implied assent to their advantage or get frustrated by the perceived backtracking and walk away.
• Beware of Sequential Negotiations
  A ploy often used by experienced negotiators is to bring up an issue individually, push for agreement, then bring up a new issue. Two important considerations here: Firstly, not knowing in advance all the issues prevents you from applying an optimal and consistent tradeoff strategy. Secondly, the order in which issues are negotiated is a key determinant of the outcome. As the seller, you should therefore ask that all issues be put on the table at the outset, then approach them in a way that optimises your outcome.
• Concede With Caution
  Aim high while leaving room for concessions. Ideally these should be small and infrequent, and always reciprocated. Large concessions should only be made after significant effort by the acquirer. Just ensure your aims are not unreasonable… This applies particularly to valuation — the most common deal breaker.

There is no cookie-cutter approach to M&A and value-maximisation stems from executing a thorough process tailored to your company’s specific circumstances. Yet negotiation is a learned skill, and there is plenty to be gained by understanding its principles.

“In Business, As In Life, You Don’t Get What You Deserve… You Get What You Negotiate.” — Chester Karrass

What are some of the negotiating tips that you would highlight based on your experience?

About the author: Georgios Markakis is Managing Partner at Venero Capital Advisors (www.venerocapital.com), an independent corporate finance boutique providing mergers & acquisitions, strategic and ​capital raising advice to high growth companies in the UK and continental Europe.