Selling a Privately Owned Business – Briefing 12 – Negotiations and Offers
your sale proceeds, your contact with buyers will progress from exploratory
discussions, through serious interest to negotiating a deal and agreeing an
potential buyer will have differing circumstances, will take differing views
on, and will make individual offers for your business.
assessing any offer its crucial to determine the true value of each element of
the offer, making adequate allowance for risk.
This process will gradually whittle down offers to the one which
ultimately meets your prime objectives as vendor.
important, price is not your only concern.
Other terms of an offer, such as the structure, your ongoing
involvement, and other elements will also be important in ultimately choosing the
best offer for you.
are ten tips about discussing a sale with buyers and negotiating offers for
- It’s vital for you
as vendor to understand each buyer’s perspective and what they are seeking to
achieve from the deal. Acquisitions are
often driven by emotional as well as strategic or financial reasons, and
understanding these is key to negotiating the best deal.
- The manner in
which you discuss any points with buyers is also important to progressing
serious interest. You need to be open,
but firm, and be prepared for key questions so that you present your business
positively. Experience shows that buyers are often driven by the “feel” of a
deal as well as factual matters.
- Ultimately what’s
important to each buyer are the benefits they will derive from acquiring your
business, so it is important to identify these when discussing with buyers. Operational and financial benefits from cost
savings or revenue enhancements can be factored into the value of a
business. Buyers will generally insist
that future synergies are their reward for the risk in acquiring, but in a
competitive situation buyers may need to share a proportion of that future
value to secure the deal.
- Frequent and open communication
between you and all buyers is always important, and efficiency in providing
information to potential buyers is also crucial, and generates a good feel for
- Once a deal is on
the table, it should be progressed as quickly as possible and proactively to
agreement. Lengthy negotiation periods and
endless too-ing and froo-ing are unhelpful in concluding successfully.
- For you as vendor,
deliverability of an offer is of paramount importance. By this stage you and your advisors will have
thoroughly vetted each buyer and should have received confirmation of their
financial ability to complete. Undue reliance
on funding for the acquisition can be a key factor in selecting the eventual buyer.
- Negotiating is
about “give and take”. Be willing to
make concessions but always try to barter these for something in return. Don’t give them away cheaply, and try to
trade small concessions rather than one large one.
- There will always
be differences in price expectations and value.
These are not necessarily terminal and can often be bridged in a number
of ways, often through deal structure.
The structure of a deal is limited only by your flexibility as vendor,
and the more you can exercise the greater the chance of success.
- The ability to
listen properly and assess what a buyer is saying is crucial to good
negotiating, as is observing body language.
This is precisely where working with an advisor can be important, not
least because two pairs of ears are better than one. Focusing on hearing exactly what the buyer is
saying, what this actually means and what really lies behind the discussion is
- In summary, be
prepared, be professional, be positive and engender a really good feel about
your business. Always consider the other
side’s viewpoint but never lose sight of your original objectives.
you have successfully negotiated to an acceptable deal with that right buyer,
to ensure full clarity and no misunderstandings, that agreement should
immediately be confirmed in writing, usually in a Heads of Agreement (Heads of
Terms). This next stage will be covered
in a following Blog.
18 November 2019