Negotiating Techniques

Reaching the negotiation stage when buying a business is not easy. For an initial approach to be accepted, you will need to have demonstrated a sound understanding of the company and a good financial proposition. Negotiations can be complex and time-consuming, and will often break down, sometimes at a very late stage. However, many pitfalls can be avoided by the right approach.

Set parameters and goals initially so that you know what you want to get out of the negotiation process. Having a clear idea of your goals prevents the other party from setting the tone and the pace of the negotiations, and enables you to quickly recognise and set right any deviations from your goals. Stick to your major objectives: a good negotiator wins the important issues and allows the other party to win the minor ones.

Thorough research will prove invaluable in the negotiation process. Not only does this demonstrate to the vendor that you have an accurate picture of their company, but it can also strengthen your bargaining position. Any weaknesses you have uncovered in the target company can be exploited, and this may enable you to reduce the price.

Use some basic psychology in the negotiation process: try to understand the aspirations of the vendor. He will obviously be interested in the amount of money he is likely to receive as a result of the sale but if he has built up the company himself, he will probably be emotionally attached to it. He will also be concerned with protecting his reputation, and may have strong loyalties towards his employees. Show understanding for these issues and demonstrate wherever you can how your aspirations for the company meet his own. Do not underestimate the importance of this - you may be competing against another purchaser who is offering a similar financial package.

Ensure that you have a strong, professional team around you who understand your objectives.

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