Lessons from decades around the negotiating table.
Imagine sitting across the table from someone who has spent 30 years building a business. They know every customer, remember every difficult year and can probably tell you the story behind every significant employee.
You’ve spent three months evaluating the company. You’ve examined the financial performance, studied the market, challenged the growth forecasts and developed a view of what the business might be worth under your ownership.
You are both discussing the same company, but you are not necessarily seeing the same thing.
And that is where acquisition negotiations become interesting.
Over the years, I’ve negotiated acquisitions and disposals, alongside agreements with unions, venture capitalists and other stakeholders. Different circumstances, different personalities, different amounts of money at stake. But many of the same lessons apply.
One of the most important is that negotiation begins long before anyone mentions price.
The Best Negotiators Are Not the Loudest
I have always believed that the person who controls the pace of a negotiation has a significant advantage. That doesn’t mean dominating the conversation. Quite the opposite.
Think of the accelerator pedal in your car. Start with your foot to the floor and you quickly lose control. The same thing happens when you enter a negotiation determined to make every point, challenge every assumption and win every argument.
I prefer to start slowly, establish the latest facts and let the conversation develop. There are moments when you need to move up through the gears and make a firm point. But once you’ve made it, come back down again.
And learn to be comfortable with silence.
I’ve watched negotiations where someone makes an important statement and then immediately starts talking again, seemingly uncomfortable with the quiet. Often, the best thing to do is say nothing and allow the other party to respond.
Of course, this requires discipline from your own team. Agree who is leading the discussion. Everyone should know their role. Few things weaken a negotiating position faster than colleagues contradicting one another or volunteering concessions that nobody intended to offer.
A professional team can make silence look natural.
Sometimes Price Isn’t Really About Price
One of the mistakes acquirers make is assuming that the seller’s stated position tells them what the seller actually wants.
A business owner may insist on a particular valuation, but the number may represent much more than a financial calculation. It might reflect 30 years of personal sacrifice, expectations within the family, concern for employees or anxiety about what life looks like after the sale.
I have found that asking why is often much more productive than explaining why the seller is wrong.
Indeed, one of the most useful words in negotiation is help.
“Perhaps you could help me understand why that is particularly important to you.”
It’s a very different approach from immediately challenging the seller’s position.
Listen carefully to the answer, but also watch the reactions of others around the table. Someone who isn’t speaking may reveal more about an issue than the person doing all the talking.
When you understand what really matters to the seller, you may discover solutions that neither party had previously considered.
That doesn’t mean agreeing to an unjustifiable price. It means understanding the problem before attempting to solve it.
Don’t Confuse Momentum With Progress
There is a dangerous moment in many acquisition negotiations when everyone begins to believe the deal is going to happen.
The meetings are cordial. Advisers are increasingly busy. Draft documents are circulating. Both sides have invested considerable time and money.
And nobody wants to be the person who disrupts the momentum.
But the business doesn’t become more valuable simply because discussions are progressing.
This is why I like to begin each substantive meeting by establishing what has changed since the last one. Has trading improved? Has the promised new customer contract actually materialized? Has a key manager resigned? Has the investment required after acquisition increased?
If the facts have changed, our valuation and negotiating position may need to change too.
There is also little value in bluffing. I’ve never found it necessary, and it is a remarkably effective way to damage credibility when discovered.
Nor do you gain much by trying to demonstrate how clever you are. Pointing out an error in a seller’s numbers may be necessary, but humiliating someone across the table rarely helps you reach an agreement.
Rudeness and sarcasm don’t work, even if you’re British!
The same discipline applies when negotiations become difficult. Sometimes a contentious issue is best set aside while progress is made elsewhere. A short time-out can allow your team to reconsider its position without the pressure of responding immediately.
And on particularly important matters, I’ve often found that a conversation between the principals, away from a room full of advisers, can unlock an issue that seemed impossible to resolve.
The advisers remain essential, of course. Their job is to help turn the commercial understanding into a properly structured and documented agreement.
Remember Who Has to Deliver the Deal
There is another discipline I believe acquirers frequently underestimate.
Negotiations are often led by corporate development professionals, investment bankers, lawyers and financial advisers. All have important contributions to make.
But they won’t be running the acquired business.
Your operators will.
When discussions turn to sales growth, operating capacity, management capability, customer retention or integration synergies, make sure the people who will eventually deliver those outcomes are involved.
A financial model may assume that two businesses can be combined efficiently. An experienced operations leader may know that the proposed integration requires significant investment, more time or a completely different approach.
That’s information you want before committing to the transaction, not after completion.
I’ve always believed that the purpose of acquisition negotiations is not simply to agree a price. It is to establish a transaction that the acquirer can successfully execute.
And that requires commercial judgment informed by operating reality.
The Conversation Must Eventually Become a Decision
At the end of each meeting, establish what has actually been agreed, what remains unresolved and who is responsible for the next steps.
Make the progress visible. There is considerable value in reminding both parties how much common ground has been established.
But never mistake a pleasant meeting for a successful negotiation.
You still need to know whether the seller’s expectations are realistic, whether the investment case remains credible and whether the proposed terms will allow the acquirer to create value after completion.
Negotiation is part art and part science. It requires preparation, patience, curiosity and the confidence to make difficult decisions.
It also requires the discipline to walk away when the evidence no longer supports the acquisition.
After all, the objective isn’t to win the argument across the negotiating table.
It’s to own a business that you’re still delighted you bought five years later.
Ian@TPPBoston.com
