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Merger Negotiations

It has been said that the most money you will ever make or lose happens during the negotiation and bidding process. It is with this in mind that you will certainly need to be or have someone who comes ready to play with their “a-game” for negotiating the sale of your business and its assets. It doesn’t necessary mean you need to have a “heavy hitter” like many attorney advertisements promote, but it does mean that a knowledgeable professional should be there by your side guiding you along the way.

Finding a trusted financial advisor as well as a good negotiator may take time in the searching as well as time in the trenches working through the sales process itself, but in the end, it will certainly be worth it. Here are a couple of simple thoughts on negotiations for selling your business.

Price vs. Term Structure

There are many in the business brokerage industry who feel the need to leverage every single business to the maximum. I personally like the quote from Warren Buffet wherein he said, “price is what you pay, value is what you get.” This is true for the sale of any business, large or small. You will certainly see that at times individuals and organizations will ask for the seller to put up the price, but the buyer would like to negotiate the terms. This generally puts more power in the hands of the buyer. While each side of the coin must be willing secede some of its power to the other, it doesn’t mean the weights should be distributed unequally.

The structure of the deal is almost as important as the price itself, especially depending on the type of financing which you are using to fund the purchase and/or sale. Low to no down payments and other financially unsound methods of getting into the deal often put the buyer in a better position, especially if the seller is helping to finance. The term structure also has a high tendency to change and affect the final selling price which goes to the buyer.

A Note to Negotiators

If you already run a business where high-stakes negotiation is what you have been known for accomplishing over your career, then feel free to bring it to the table as you prepare to sell your business. Certainly an M&A advisor can help with the final sale, including putting together a prospectus, valuation and marketing reports.

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Nate Nead
Nate Nead is a licensed investment banker and Principal at Deal Capital Partners, LLC which includes InvestmentBank.com and Crowdfund.co. Nate works works with middle-market corporate clients looking to acquire, sell, divest or raise growth capital from qualified buyers and institutional investors. He is the chief evangelist of the company's growing digital investment banking platform. Reliance Worldwide Investments, LLC a member of FINRA and SIPC and registered with the SEC and MSRB. Nate resides in Seattle, Washington.