The art of corporate finance negotiation (Part 4)

This is the fourth blog in a series of 5 that our Partner and Head of Corporate Finance, Paul Mason, has written, based on his experience of negotiating deals successfully over many years.

Part 1 (Every conversation is part of the negotiation) can be found here.

Part 2 (Negotiate the ‘Heads’) can be found here.

Part 3 (Don’t sweep it under the carpet) can be found here.

Be consistent and … be consistent (Part 4)

Swapping the art analogy for another: negotiating during mergers and acquisitions (M&A) can be likened to a card game… it’s not just about what hand you have, it’s also about how you play it.  Critically, it’s not really about how valuable your hand is to you – it’s about how valuable it is to the other party.

When everything is amicable and friendly, negotiation is fun and you might even be tempted to think of it as a bit of a game.  However, there will be times when you’re convinced you’re right and you just can’t seem to make the other party understand.  The goal in these situations is two-fold: to seek to understand their entrenched position better; and to convey precisely why you hold your own view so firmly.

The key to negotiation in such situations is communication and consistency.  If something is important, you need to make sure the other side know it is important to you and therefore they need to treat it as important.  Moreover, if it’s really important, then you have to communicate that and make sure there isn’t any conflicting messaging.  We advised on a transaction recently in which we had to be careful to repeat precisely the same message to the buyer over and over again during a critical phase of the deal – which took nearly a week of carefully consistent messaging.  The risk of varying what we were saying was a lack of consistency in what we were asking for and therefore a legitimate questioning of whether it was as important as we were asserting.

Consistency also applies to the seller’s own objectives.  While these can change over the course of a transaction, if they do, it will likely be because they weren’t interrogated sufficiently at the start.  We always ask clients, “why do you want this?” and typically follow that with a further series of, “but why?” questions.  Eventually we find out the real answer.

If you are not consistent from one stage of negotiation to the next then how can the other party truly believe what you are saying?

That wraps up this fourth blog article which has focused again on tactics and approach during negotiation.  The final part will be more of a general recommendation on how to be satisfied – during and after – the deal with the result.

If you are looking to purchase or sell a business, contact Paul today on 0131 558 5800 or email paul.mason@chiene.co.uk.