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Negotiating the price of a business transfer

Home > French Business Law | Published 2015-10-23

It is imperative to question both who could be the best negotiator for you and the process of negotiation. You need someone who can influence and persuade another party effectively. Business negotiating has become an essential capability for all businessmen. However, it is often better performed when left to the professionals because negotiation, as everyone knows, is more than just knowledge.

The secret to good negotiations is to depend predominantly on an adequate strategy capable of driving the other party to choose what you prefer by way of satisfying their expectations. This is even truer when one is to convince a buyer of the price of the transfer of the business as well. The transfer of business is in and of itself the art of negotiation. Again, one must realize it requires perfect argumentation.

Preparing the Negotiation

The first step in negotiation, can be taking the initiative to perform an audit. A good number of those taking over businesses complain over the imagined prices given by the seller. The seller may offer to do the audit themselves. However, it is better to find an equipped law firm from the beginning that can act to direct and/or control their party from the beginning.

Then, it is advised to ask the experts for advice. The sale of a company is a sort of legal and monetary puzzle; there is no other solution but to depend a good lawyer, meaning a specialist who can orchestrate the operation, advise his or her client, and negotiate for the client (in exchange for a flat fee and commission in times of success). It is necessary then to choose your playing field well; choose a room that is clear and air-conditioned, and never on the buyer’s territory.

Handling the negotiation

First off it is recommended to be accompanied by a professional. Sit yourself in front of the buyer’s team, accompanied by your lawyer. This presentation is more practical for whispering, pointing at passages in the contract, and for discretely exchanging information.

It is necessary then to make sure to understand everything: if another language is used as the working language, assure yourself that you understand all of the subtleties of the negotiation well.

One should understand the negotiation at every state. Once the target is decided upon, one must subtly try to drive up the price, without accepting the other parties most important under points or aspirations.

Never open fire. It is worth letting the buyer offer his own price. And what if the buyer is in discussion with another potential party? Make the buyer understand that there are other offers apart from theirs. Create a situation of overbidding, which should always raise the price some.

Finally, it is preferable not to give exclusivity over the sale of business at the last moment.

Of course, the margin to maneuver can be fragile, even more so when there are not many buyers. But there is always a solution. For example, the seller can relinquish the buyer’s guarantee of liabilities in the case of a significant decline in prices.

One should not lose sight of one’s interests during negotiations as each issue should maintain the importance one believe it deserves. The best negotiators are those that clearly know their party’s final interests and the final interests of the adverse party. The other party also already knows what concessions they can allow concerning their secondary interests and are often particularly creative in how they proceed.

Estimate all of the interests in the game, yours and the alternate parties. Negotiations are generally carried out on intangible factors such as the valuation of a particular asset or on the future productivity of the company.

Having unchangeable positions on opinions transforms the negotiation into a sort of risky ritual dance that cannot respond to the fundamental preoccupations of the stakeholders. Know all of the interests, look to reconcile the problems with patience, have a good knowledge of the alternative party, have many questions, and listen carefully. In any case, leave the session if the deliberations become difficult, and pass your message to the buyer through an intermediary, such as the lawyer.

Finally make sure of the mode(s) of payment. After having heard the price, a number of points are left to be negotiated, such as those concerning regulations, the guarantee of assets and liabilities, employment contracts attached to the company, and the non-competition clause.

In conclusion, when you consider negotiations, you know that in solving the problems of the alternate party, yours will already also be addressed. Once you have designed your plan and evaluated all of the serious interests and the best alternatives of the contract negotiation, your strategy should consist of modeling the way in which the other party will perceive your fundamental problem, so that they will make choices that play into your favor.

Any aspect of the operation has the potential to change the price. The difficulty is in not lowering one’s guard until the closing of the operation. And then, once all negotiations have taken place, you can let your lawyer “to take it to the net!”

This article is available online for public information purposes. It is updated regularly, as needed. Due to the constant evolution of the laws and the legal system, we cannot guarantee that the information in this article is still applicable. We invite you to contact us with any legal questions or concerns you have regarding this topic at +33 1 56 79 11 00. In no way can this firm be held liable for articles that contain inaccuracies or are now out of date.

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