Keys to Negotiating a Successful M&A Deal

Keys to Negotiating a Successful M&A Deal  Whether you’re buying or selling a business, a few guidelines can help you negotiate a deal more effectively and improve your chances for an advantageous outcome. While you’re probably already familiar with basic negotiation strategies, most parties to an M&A transaction can use a refresher course when it comes to what may be the biggest deal of their lives.

Know Yourself

Good negotiators start by knowing themselves. Before you enter into sale negotiations, take time to identify your goals and your tactics for achieving them. If you’re buying, what’s your “reservation price”-the most you’re willing to pay? Would you be able to walk away from the deal if the seller refuses to budge on price?

If you’re selling, similar questions apply:

  • What’s the lowest offer you’ll accept?
  • Are you in a hurry to sell?
  • What conditions will you require as part of the sale?

For example, the retention of certain employees may be a priority. Also be prepared to speak confidently about your business’ strengths and address any perceived weaknesses. Since the buyer’s negotiating leverage emphasizes your weaknesses, you need to be aware of them and ready to provide a solution that mitigates an adverse effect on the buyer’s offering price.

Know the Other Party

Knowing the other side is as important as understanding your own priorities. This knowledge allows you to map out the negotiation ahead of time. As a buyer, you should have a thorough understanding of the business-gained through extensive due diligence.

If you’re a seller, it’s essential to know that your buyer can afford to purchase the business and, if the deal will be seller-financed, how well the company will be run while the note is being paid off. It’s also helpful to learn if your buyer has looked at many other businesses. Buyers who know they have other options if your deal falls through will probably drive a harder bargain.

Gathering knowledge involves more than research; you also need to be a good listener.

If you’re talkative by nature, make an effort to speak less and listen more when meeting with the other party. The better you understand them, the greater chance you have of anticipating their moves and preparing counter offers.

Build a Relationship

There are plenty of opportunities for differences of opinion in any business transaction, and a business sale is no different. Establishing a cordial relationship can go a long way toward reducing misunderstandings or unintended offenses. Social occasions such as dinner or a golf outing can break the ice. Expressing interest in the other party’s opinion and a sense of humor also can help build a good working relationship.

Going back on your word, exaggerating points or misrepresenting facts in an attempt to strengthen your position, on the other hand, can damage goodwill. Finally, don’t try to box the other party into an untenable position-it’s a tactic that’s likely to misfire.

Flexible is Vital

Selling a business is a complicated process, of which price is only one component. When entering the negotiation stage, keep in mind other items that are subject to bargaining:

  • Down payment amount;
  • Interest rate on a seller loan;
  • Collateral;
  • Seller warranties;
  • Earn-out provisions;
  • Non-compete agreements.

Also consider the structure of the deal-whether the company’s stock is being acquired, or just its assets. In general, sellers prefer a stock sale and buyers prefer an asset transaction, which provides better cash flow after the deal.

Good negotiators take advantage of the multifaceted nature of the process by remaining flexible throughout. This may mean compromising on some elements to get the ones that are most important to you, such as those related to financing terms, the closing date, employee retention or seller warranties.

With so many moving parts to consider, flexibility can get you past obstacles. If you’re hung up on a tough issue-say, the price of a particular asset-try putting it aside temporarily, moving to less controversial points such as the price of other assets, and then circling back later.

Selling a Family Business Isn’t Business as Usual

selling family businessFamily businesses may resemble their non-family counterparts in most ways, but there’s one crucial difference. Whenever close relatives work together, deep emotions invariably become involved – emotions that can further complicate the already difficult decision whether to sell a family enterprise.

If you’re thinking about selling a family business, don’t overlook what your emotions are telling you about the potential sale. In some instances, of course, you’re better off listening to your head. But in this case, it’s just as important to consider what your heart is telling you too.

Why You Might Sell

Your decision to sell a family business may start with financial need. Maybe you’re looking ahead to retirement and want to feel more secure. Or maybe you see stiff challenges ahead for your company, with fewer growth prospects available or increased competition looming.

You might also look to sell a family business if you’re concerned that no one in the next generation has stepped up as an obvious management successor.

In addition, the stress of working together can be too much for some families to handle comfortably. Family strife is always unpleasant, but when family members who work together don’t get along and the tensions spill into the workplace, it can make for a destructive personal and professional environment.

Why You Might Not

Selling a family business can feel like selling a part of your family. If you sell, your decision will have a significant impact on the lives of people you care about – relatives, employees, and, especially if the business is in a close-knit community, local residents.

Your decision to sell may be especially stressful if you’re thinking of selling a business handed down to you over many years. You may wonder about what your forebears would do in your shoes.

With such factors to consider, you may decide to refuse an otherwise attractive offer and keep your business going – a decision that will allow you to maintain your independence, and pass on to future generations the same opportunities that you received.

Yet before you turn down an attractive offer, make sure you discuss your expectations with the members of the next generation. If your chosen successors aren’t interested or able to manage the business, you may be setting the stage for serious family conflict.

No Easy Answers

Sometimes, selling your business may be the best solution for everyone involved, providing you and your family with the assets you need to pursue your next dreams.

But because the decision to sell can be highly emotional, make sure you are comfortable with the idea of selling. Just because the numbers may add up doesn’t mean you’ll be happy when you no longer have the business that has been an important part of your family

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JoAnn Lombardi | How to Approach Selling Your Business

How to Approach Selling Your Business

Article by JoAnn Lombardi, Pres. VR Business Sales

When a business owner makes the decision to sell, the goal of selling a business remains the same, maximizing what you receive from the sale.

When the decision is made to sell the business, there are some pointers to follow in making sure the transaction is successful.

Standing by the Process

Deciding the Point Person for the Sale

Establishing Deadlines

Communicate with Your Landlord and Banker

Readying for Buyer Due Diligence

Determining what should be Included in Letter of Intent

For more details read full article here How to Approach Selling Your Business


JoAnn Lombardi | New Guidelines to Measure Your Business

Using New Yardsticks to Measure Your Business

By JoAnn Lombardi, President of VR Business Brokers


The Internet is an important tool for enhancing the value of any business and its owners. As a business owner, it allows you to develop new ways to measure your performance as well as market to qualified buyers if you are looking to sell.

Innovation and Flexibility

Customer Loyalty

Transactional Excellence

Customer Information

Infrastructure Reliability

Read full article at Using New Yardsticks to Measure Your Business


Preparing to Sell Your Business by VR Business Brokers


Preparing to sell your business will increase the value and marketability of your business when you are ready to sell. 

This is often called developing an Exit Strategy, which sounds complicated, however it actually can be fairly straightforward and easy to implement.  Some simple steps to increase the value of your business you can take right now are:

  1. Prepare your books and records: make sure your P&L and tax returns accurately reflect the financial performance of your business and all of your owner benefits (expenses) are well documented.
  2. Maximize your earnings and sales.
  3. Meet with a VR Professional Intermediary to plan your sale well in advance.
  4. Meet with your tax advisor to discuss advance tax planning to minimize your taxes from the sale.
  5. Prepare your business infrastructure for a future sale: train your staff, document procedures, etc.
  6. Customers: diversify your customer base, if possible, if you have any single customer representing more than 20% of your business.
  7. Suppliers: diversify your supplier base, if possible, if any single supplier represents more than 20% of your products or inventory.
  8. Marketing materials: clean up your marketing materials, develop new materials, this will be the buyers first look at your company’s products and services, it will help your business in the mean time as well.
  9. Inventory: clean up your inventory, eliminate obsolete and unsellable inventory.
  10. Spring cleaning: clean up your premises, make your business look sharp and professional.  This will increase the value, make it look more appealing to prospective buyers, and will help your business image in the mean time.

Contact your VR Intermediary to develop a plan to prepare your business for sale and maximize the value of your business.

Call 1.800.377.8722 for more information.

The VR Advantage | Buying a Business With VR


VR’s International Network of Professional Business Intermediaries offers over thirty years of successful experience to the buyer of a small or mid-size business around the world.

Our tradition of bringing qualified buyers and committed sellers together is the cornerstone of the VR organization.

VR boasts as being the only network of business intermediary’s that requires a fulltime commitment on behalf of its franchisees and associates.

VR has never allowed part-time offices and part-time associates to represent our clients, and makes the promise that it never will in the future.

Our responsibility and obligation to the general public is taken seriously, therefore, we do not allow part-time, work-at-home individuals help find the correct qualified business opportunity for you.

Our Intermediary’s are continually trained on market trends and conditions, financing options and techniques, and transaction structures, which allow the VR network to better serve its acquiring clients. Every highly trained and experienced VR Business Intermediary is dedicated to your needs, and eager to share their knowledge and expertise with you.

Choosing VR gives you the ability to search for qualified business opportunities on a local, regional, national, and international basis.

VR will aid you with your financing requirements, help package the transaction for the lender approval, and give you access to our national banking relationships. No transaction is too small or too large for VR to lend its expertise.

Call VR for more information at 1.800.377.8722


JoAnn Lombardi – Deciding to Position Your Business for Sale

Deciding to Position Your Business for Sale

By JoAnn Lombardi, Pres. VR Business Brokers
When a business owner decides that the time is right to sell the business, regardless of the reason (burnout, retirement, new aspirations), it is imperative to do so the right way so the optimal sales price can be obtained.

As a business owner, it is easy to have concerns when contemplating whether to sell your business; especially when you start to see that the process of selling your business doesn’t give that flexibility that you need to make the best deal.

It’s important to start planning early on toward the time when you decide to sell your business.

You want to look at building long-term value, not only making a profit in the short term.

Read full article here  Deciding to Position Your Business for Sale


Contact VR at 1.800.377.8722 for assistance toward planning to sell your business.