When negotiating the divestment or acquisition of a business, if done well, all parties involved should reap the rewards and leave with long term benefits.
The types of negotiators you will encounter when negotiating a business sale or purchase will vary significantly from deal to deal, making it necessary for a good negotiator to be able to read dynamic situations and to be highly adaptable to ensure the best outcome is achieved for the transaction. Negotiation styles and perceptions can be broken down into many broad spectrums, but most can generally be classified along the spectrum from highly competitive to highly cooperative.
Understanding Negotiation Styles
In general if all negotiators were highly cooperative, each team would be able to deeply understand each others needs and wants and be able to create the greatest synergistic outcome. Unfortunately this is usually unrealistic and more of a utopian dream, hence an understanding of negotiation is needed.
Cooperative negotiators are generally significantly more flexible, consider the ‘opposing’ parties as equals, and seek to make solutions through mutual problem solving, which can only be done if everyone is on the same page.
Apart from being easier to get along with, a cooperative negotiator can create a better outcome for a number of reasons.
- They are less likely to make emotional, irrational decisions, as the process shouldn’t be as stressful and as they build a trusting relationship with both sides, avoiding dilemmas generated from stress;
- The process can be faster and more cost effective as nobody is trying to harm, or dominate the other side and string proceedings along;
- Complex problems are more easily resolved as both sides are working together, and;
- A better outcome for everyone can be made. For example in negotiating the sale price of a business, if terms are agreed where payment is staggered, but closer to the sellers expectation, both sides can benefit. The acquirer can be satisfied they have a smaller upfront payment, and the seller will ultimately receive greater compensation for their business.
As mentioned, whilst cooperative negotiation is generally best, not all negotiators take this style of approach and in some cases taking a more adversarial approach is necessary.
If a negotiator is being overly competitive they will often try to dominate discussions, make unreasonable demands, focus on the short-term and often be evasive with information. Being cooperative in this situation would be significantly detrimental to your own agenda.
Going into a negotiation, it is difficult to know if the other side will be taking a more cooperative or competitive style. From a business divestment and acquisition perspective there are a few ways you can be prepared for a party taking an adversarial approach.
- The most important aspect is to have a deep understanding of the business’ value, and a strong knowledge of why this is the value. By doing this you wont be able to be coerced into making a detrimental decision and agreeing to terms that don’t go close to meeting the terms you or the business warrant;
- Be prepared to make a peace offering. If the other side of a negotiation is competitive, it is generally better to understand why they are this way and to completely understand their agenda. By doing this it may lead to clearer negotiations;
- Be forgiving. If your tactics of trying to change their competitive negotiation works, be open to understanding and solving their problems, as this should ultimately also favour you, and;
- If all else fails, be prepared to walk away from the negotiation.
Ultimately negotiating the acquisition or divestment of a business can be a difficult and timely process. Value can be perceived very differently, but ultimately, clear well structured negotiations should lead to a good outcome for all involved.
Find Out More
Quinn M&A’s expert team of business transaction advisors can assist you to with all negotiation requirements. Contact Quinn M&A today on +612 9223 9166 or submit an Express Enquiry to arrange a confidential no cost consultation with one of our Senior Advisors.
