5 Ways to Balance Being Tough with Playing Nice in M&A Negotiations

Negotiating for an acquisition is unlike most other negotiations where once the deal is finalized, you and the other party will part ways never to see each other again. With strategic acquisitions, often you will continue working with the seller once the transaction closes so protecting your relationship throughout the acquisition process, including during negotiations, is critical.

In a privately, held not-for-sale acquisition, often before completely exiting the company, the seller stays on during a transition period of a few years in order to transfer knowledge to the new management team. In other cases, the seller may remain employed at the company long-term after the acquisition. With a minority investment, joint venture, strategic alliance, or any deal structure that is less than 100% acquisition, both parties will of course, continue working together.

Even in the cases where you cease all communication with the seller once the agreement is signed, you’ll probably still want to play nice. Industries are smaller than you think and people talk so it’s best not to burn any bridges.

Maintaining your positive relationship with the seller while achieving the goals of the acquisition can be a tricky task. Here are five secrets to successful negotiation in acquisition.

  1. Keep the big picture in mind – Don’t get so fixated on small unimportant details that you miss out on the overall goal. Pick and choose your battles wisely and realize that you will have to compromise on some areas and stand your ground on others.
  2. Determine what you want before entering negotiations – Determine what is most important to you before you begin negotiating with the seller. If you enter negotiations with and idea of your desired outcome you’ll be more likely to accomplish your goal.
  3. Understand the seller’s perspective – For many sellers, their company is like their baby so selling is an emotional process. Sellers can only sell their company once, while buyers can acquire as many times as they want. Take the time to understand the human perspective and underlying motivators before jumping into negotiations. A little bit of empathy can generate a lot of good will.
  4. Write everything down – Once you agree to something, write it down. This simple tactic will prevent you and the seller from re-negotiating or negotiating in circles.
  5. Have a plan B – If your negotiations are at an impasse, it may be time to walk away from the deal. You should never close an acquisition simply because of all the time and effort that has already been invested in the deal. If you and the seller do not see eye-to-eye on major points of the deal, agreeing to disagree and going your separate ways may be the best option for both parties. As a buyer, you’ll be more willing to make this touch call without feeling bitter if you have another option available to you.

Learn more about negotiating in mergers and acquisitions in our upcoming webinar: Successful Negotiation Tactics.

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