Ten principles - successfully negotiating mergers & acquisitions
First principle:
It is important to make a good impression right from the start. The negotiation starts with the first contact and not with the negotiation of a Letter of Intent or a Sales and Purchase Agreement (SPA)!
Second principle:
Every single step and every meeting already lays the foundation for a strong negotiating position.
Third principle:
No successful negotiation will take place without professional preparation. This includes, for example, the preparation of documents, the preparation for the first meeting (management presentation!), in the case of a company sale the preparation of a professional information memorandum and the preparation for the due diligence.
Fourth principle:
Without the involvement of an M&A team consisting of an experienced M&A advisor, a lawyer experienced in M&A issues and an auditor, successful negotiations or a successful closing will rarely occur.
Fifth principle:
Before any negotiation, all options should be played through and in the negotiation a proposal from the other side should not be agreed to immediately. It is better to interrupt the negotiation and consult with each other in another room and weigh up the options. Determine the margins and limits before the start of the negotiation and define bandwidths and priorities.
Sixth principle:
Right at the beginning, list all the deal breakers that exist for you and summarise points of a contract that you would like to negotiate together.
Seventh principle:
Define the roles of each person in the M&A team for the contract negotiations (e.g. good guy/bad guy; moderator; etc.).
Eighth principle:
Act professionally and do not interpret the other party's approach as a personal attack against you or your company. The other party is usually testing the negotiating leeway and playing for time.
Ninth principle:
In the M&A process, as a seller, talk to other interested parties to organise a bidding competition. As a buyer, talk to several companies. Alternatives mean a significant improvement in your negotiating position!
Tenth Principle:
Present your own draft contract so that the other side has to negotiate new points into the contract. Negotiation results are recorded in writing by your M&A team and incorporated into the contract. Keep control and an overview of the different contract variants or contract statuses.
KP Tech Corporate Finance Advisory
As an owner-managed and independent top management consultancy, we specialise in M&A and corporate finance advisory. Our clients benefit from more than 20 years of experience in international corporate finance advisory. The focal points of our consulting are the topics: Company sale, Company acquisition, Company valuation, Company succession, Private equity advisory. Our focus countries: Germany, Austria and Switzerland & Western Europe.
Content of this article: Ten principles - how to successfully conduct mergers & acquisitions negotiations
