The art of corporate finance negotiation (Part 5)

This is the fifth and final blog of the series 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.

Part 4 (Be consistent and … be consistent) can be found here.

Be true to yourself (Part 5)

The worst deal you will ever do is the deal that is simply “wrong”.  This situation is far, far worse than failing to do a deal at all, except in very specific (usually distressed) situations.

In most cases if this transaction falls over, there will be another deal, another day.  However, if you strike the wrong deal then you and the other party are stuck with it.  You can’t rub your name away in the signature block and pretend it never happened.

In the week leading up to a deal completion, we often sit down with our client and ask them if they really want to do this.  We ask them to think about what it’ll feel like after they’ve signed and they either do – or don’t – go into work the following day.  What will they be thinking in 6 months or a year’s time?

If we’ve properly identified the real reason for a transaction at the beginning, then such a session is usually comforting for the client: it might allow them to vent their frustrations over how certain parts of the process were more painful than they expected, but usually there is a solid re-affirmation of their original intentions.

The only times we’ve had clients who have wobbled is when they’ve been unsure why they want to do the deal.  They might have been swayed initially by the prospect of a financial windfall, but as they progress through the deal, the prospect of staff redundancies and the simple realisation of the current owner manager that he or she will no longer have their usual daily routine after their consultancy “transition” finishes can make them re-assess whether this is the right deal.

There’s no upside from not being honest with yourself about what you really want.

The final brush strokes

Making sure the seller and the buyer understand and express what they want from the deal is vital.  Honesty and integrity helps lessen the burden of what will be a brutal process, from Heads through to completion.  There aren’t any shortcuts to a good deal – the right deal – but there are plenty of ways to shortcut to the wrong one.

And, if you are considering embarking on an M&A process, chances are it has probably already begun.  Those initial commercial discussions that have taken place… they’re the first few strokes on your otherwise blank canvas.  Now it’s time to turn it into a masterpiece.

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