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

Read part 5 – Be true to yourself

The art of corporate finance negotiation (Part 2)

This is the second 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.

Negotiate the ‘Heads’ (Part 2)

Irrespective of how amicable the transaction might be at the outset, make sure you agree a comprehensive set of Heads of Terms, which both buyer and seller understand and believe represent all the pertinent aspects of the deal.

The purpose of ‘Heads’ (a.k.a. a ‘letter of intent’, an ‘expression of interest’ or a ‘non-binding offer’) are three-fold:

1. They explain the key features of the deal;

2. They seek to flush out potentially contentious points early; and

3. They serve as a future reference point in the event of any subsequent dispute.

It is the same process as sketching out a picture, before lifting up the paintbrush: you want to position the elements of the scene correctly, without getting bogged down in intricate detail at this stage.

What are the consequences of failing to negotiate Heads, or missing out items that are important to you?   At best, you might be able to include or refine the points later in the process, but probably at the cost of goodwill, or a necessary “horse trade” for something the other side wants in exchange.  At worst, you might find that a missing item is an immovable “red line” for the other party – something that is beyond their ability to offer and becomes a reason why the deal falls over later in the process, having incurred more expense to get to the point of failure.

I have advised on some transactions where it was felt that Heads weren’t necessary.  The parties knew each other and trusted each other implicitly.  But still, having that reference point proved useful when everyone inevitably “couldn’t see the wood for the trees”.  Being able to remind ourselves of what was fundamental at the outset can help us all accelerate through those periods when we would otherwise become bogged down.

In the next, third part of this blog series I will look at how to manage (and how to mismanage) bad news during a deal.

If you are looking to purchase or sell a business, contact Paul today on 0131 558 5800 or email

Read part 3 – Don’t Sweep it Under the Carpet

The art of corporate finance negotiation (Part 1)

Turning a blank canvas into a masterpiece (Part 1)

This is the first 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.

As corporate financiers, we advise companies, owners and directors on acquisitions and disposals day-in, day-out.  The great thing about working on so many different types of transactions with so many different counterparties is the opportunity to build  our experience.

Every transaction is different, like every masterpiece in the art world. Buyers and sellers can have completely different motivations for entering into a transaction, and oftentimes these motivations evolve over the course of a transaction.  The different approaches across geographies, between sectors and from larger corporates to smaller owner-managed businesses, can be stark.

Working as an adviser, we have the perfect opportunity to be painter-turned-critic-turned-painter again.  The teachings we offer when selling companies are those lessons we’ve learned while helping buy one – and vice-versa.  Understanding how the other side will  view your transaction is critical to maximise the chance of a successful outcome and, critically, protecting the client’s interests.

Having this insight into both sides of any deal has taught me 5 key lessons which apply to most, if not all, M&A transactions, whether you are a buyer or seller. This is the first part of a 5-part blog series that covers each.

Every conversation is part of the negotiation

This is about making sure your blank canvas is really, truly blank.  It is especially true for companies that start off having discussions of a commercial nature, but which then evolve into merger and acquisition (M&A) discussions.

At every point of negotiation and discussion you need to think about what quantitative information are you providing, intentionally and unintentionally?  Also, how much soft or subjective information are you providing, especially in relation to how you act and how you conduct yourselves?  How reliable are you proving to be? The latter has a bearing on a buyer’s view of the achievability of your budgets, for example.

The important point here is, it’s not just about the “what” that you say, it’s also about the “how”.  Effective transactions usually build a strong sense of trust between the parties and form a positive relationship between buyer and seller.  Conduct yourself in the way you would wish to continue negotiations, because you’re setting a precedent in how you act.

In the next part of this blog series I will look at one of the most critical parts of negotiating: agreeing the fundamentals of the deal, or ‘Heads’.

If you are looking to purchase or sell a business, contact Paul today on 0131 558 5800 or email


Read part 2  – Negotiate the Heads

Heading for the exit door

Paul Mason, Corporate Finance Partner, has analysed the market and identified key trends. Here he reports on the exit market post-financial crisis, and the implications for business owners.

Pre-2008, there was a bull run. Businesses were being bought and sold at a fast pace. There was significant liquidity available from debt and equity investors; this resulted in a wealth of transactions across all business sizes from big to small. Post-2008, you won’t be surprised to hear that there has been a shift. But you might be surprised to hear that it hasn’t shifted too much, and that there are still plenty of investors and acquirers with capital to invest.

The state of the market

We have analysed the Scottish and UK exit market pre- and post-financial crisis and, whilst the number of transactions completed per annum has fallen, the average earnings multiple paid remains broadly in line with pre-financial crisis averages. In short, this means that there are fewer, but higher quality deals completing. There remains plenty of capital available for investment; the challenge for exiting these days is to demonstrate that your business is the one worthy of investment: that it’s a sound opportunity and that the risks are well-managed.

54% – The number of UK exits is now at 54% of the 2007 peak pre-financial crisis average.

Get ready early

Preparation for an exit will mean different things for different businesses. But one common positive step is to create optionality to deliver multiple exit scenarios – that is, have a series of sound plans (not just a Plan B, but a Plan C, D, E and F if necessary) to help maximise business value on exit. And all of your options should involve having a good, robust business with valuable assets (including staff and customers) and traits.

In advance of an exit, it is valuable to get your business into shape early. Think of it like selling a home. If you’re thinking of moving, you might give your house a lick of paint and a tidy in advance of prospective buyers coming round to view. But to add real value, to make your house really attractive, there are better, longer-term structural issues you can address. Get planning permission for that extension, or have the place re-wired. The same principles apply to a business. We call it ‘exit readiness’: identifying and sorting the big key issues that buyers will want in advance of a transaction, and making your business a more attractive investment. Completed disposals which have been through our exit readiness process demonstrate the significant value that is added by what we help you do.

Get in touch with us for a discussion on your business, what your plans are, and what kind of things you can do to prepare.