Negotiation is very important when you are buying or selling a business. In this article we take a look at some of the most used strategies in negotiation.
The Direct Approach
This approach is often referred to the “take it or leave it” strategy. In this approach the buyer makes an offer, and the seller then counters that offer. Little negotiation work is necessary. Both parties are direct and simple about the numbers and terms they propose. The problem with this approach is that when it doesn’t work, there is little to no recourse. There is little opportunity for flexibility on either side when the direct approach offer isn’t accepted by one of the parties. Because of this, the direct approach can be somewhat of a risk.
Focusing on Influential Details
There are certain aspects of a deal where a buyer or seller is unwilling to compromise. Often times this aspect is not financial in nature. For example, the buyer might want to move the business to a new site. Maybe the buyer wants to employ a friend or relative. Once the negotiations include these non-negotiable items, it can help expedite a successful deal.
Splitting the Difference
A common approach seen when buying or selling a business is that one side offers to split the difference. There is a good deal of flexibility here. It is seen as a way to keep negotiations going when one party shows that they are open to split the difference. Another favorable point in this approach is that communication continues. When one or both sides stop talking, the deal has not been successful.
Third Party Involvement
Having a third party involved is extremely beneficial when it comes to finding solutions and resolutions. An M&A advisor can help facilitate the negotiated solutions. This third party is seen as an impartial party. An M&A advisor has years of experience encouraging buyers and sellers to understand and work with one another.
A brokerage professional can help both parties agree to a fair price while handling the aspects of all the small details involved in buying and selling businesses. A professional brings a different, and much needed, perspective to the table. The team at EBIT can help you negotiate the perfect deal.