Mergers and acquisitions are typically major business decisions that impact the future of companies. However, they often end with disappointing results and generate far less value than expected. That’s because these kinds of deals are often made by simply agreeing on a price, rather than figuring out the science behind negotiating a successful M&A deal. Here we will take a look at some of the ways companies can better prepare and execute M&A deals to maximize their chances of success.
Conduct Pre-Sale Due Diligence
It is always important to find and resolve any issues before a buyer has a chance to discover them. That’s why you should assess your business early on in the sale process by performing due diligence on your business. This includes reviewing your financial statements, legal documents, sales reports, and any other important information relating to your business. Many businesses fall apart during due diligence if issues are discovered that have not been disclosed or resolved. If a buyer discovers issues, you could end up losing your negotiating position. Remember, your goal is not only to sell your business but also to do so for top dollar.
Consider Your Negotiating Position
One of the most important things to remember when negotiating a business deal is what your position looks like. For example, is it easier to negotiate the price of a new car when you are desperate for a car or when you are shopping for fun and could care less if you actually drive off the lot in a new car? The key to successful negotiations is understanding your position. Here are a few things to consider regarding negotiating position:
- Avoid desperation at all costs, as this makes you vulnerable.
- Negotiate with as many buyers as possible, as the more buyers are interested in your company, the stronger your position will be.
- The better your business is performing, the less inclined you will be to sell and the stronger your position will be.
Keep Emotions Out of Negotiations
It’s easy to let your emotions get the best of you, especially when you are negotiating a business that you have poured your heart and soul into. However, it is always better to keep your emotions out of the negotiation process. Stay calm and collected throughout the process and do your best to remain objective. If the exchange starts to become heated, take a break and resume talks at a later date. It is also a good idea to work with a third party that can act as a buffer between you and the buyer.
Keep Running Your Business
One of the most common mistakes made by sellers is losing focus of running their business. It’s so easy to get caught up in the excitement of selling a business that you forget that you need to keep running your business until the deal closes. Unfortunately, many deals don’t make it across the closing table so the last thing you want is for revenues to decrease if you end up needing to put the business back on the market.
Don’t Let Fatigue Get the Best of You
Sometimes M&A deals take a lot of time to complete so do your best to avoid deal fatigue. Sophisticated negotiators are aware of the natural fatigue people experience as the process wears on and they may take advantage of this by drawing things out even longer. The best way to avoid fatigue is to be well prepared in the beginning and minimizing the chances of a potential buyer or seller finding out anything against your business.