Key Stages in the Business Sale Process – Stage 4 – Negotiation (Part 1)

An article by Peter Watson, Prism Corporate Broking

How often have you ‘played’ Old Mother Hubbard? Who, as the nursery rhyme goes, went to the cupboard to find it bare. In negotiating parlance this is the “I’d love to pay more but we only have £X” ploy.

This can work but the minute you concede, all credibility is lost. It is therefore a somewhat crude approach. Just because you have more money there is no reason why you should part with it – and the art of negotiation is to make the other party believe it.

Negotiation takes place in many aspects of business life, but never is it played for higher stakes than in a purchase or sale of a business.

Just as with buyers keen to conclude a deal and suddenly finding more in the proverbial ‘cupboard’, the prospect of that golden retirement can encourage owners to make concessions too. Yet poorly communicated and structured concessions actually gives succour to the other side, and instead of satisfying them, it leads to further demands, often placing the whole deal in doubt. Knowing when to yield and when to resist is therefore critical.

Yet for each owner who has given away value without need, we have sat commiserating with another who hung on for a higher price (thinking there was more to be had) and in fact subsequently realised that an opportunity had been missed. Judgement is the key.

Imagine two people standing opposite each other with their palms pushing against each other. If one person pushes hard, the tendency is to push back. But imagine that instead of pushing back, you step back? The other person comes toward you – and so it can be with negotiation.

The fascinating thing about negotiation is that each time it is different. That is not to say that you cannot learn from each encounter, but every negotiation depends upon the circumstances and relationship between the parties and upon the people involved.

It is a dance where each misstep can cost dear, and the trouble is what is right with one party might be wrong with another. In part two of this article I will explore some of tactics than may be used.