Yesterday, we learned that Facebook’s bid for Israeli startup Waze has ended. According to reports, negotiations broke down over disagreements on moving the Waze team from Israel to Facebook’s headquarters in Menlo Park, California. Facebook was rumored to be in talks to buy Waze for $1 billion.
This is a great example of why it’s important to understand the seller before even entering into negotiations. You don’t want to be far into negotiations only to have the deal fall apart.
Understanding the “seller’s equation,” or what will prompt the owner to sell his or her company, can save time and energy during the acquisition process. Often the seller’s equation goes beyond price and can include timing, reputation, and other factors related to the owner’s aspirations and values.
Pay attention to details like the number of family members working at the company or the owner’s involvement in the community. In my experience the seller’s equation has included everything from dental insurance for the owner’s son to donations to local civic causes. Understanding what the owner truly wants early on in the process will make for smoother negotiations.
In some cases, you may discover the owner wants something you are not willing to compromise on. In the case of Facebook and Waze, it seems that neither buyer nor seller was willing to compromise on location. It is much better to find this out early in the acquisition process so you don’t waste valuable time and resources chasing a prospect who you will never reach an agreement with.