7. Negotiating the Final Terms

During the final negotiations of the price, conditions and final terms, which will be included in the sale-purchase contract, the buyer will most likely approach the closing day with an intention to arrive at the best possible deal, before signing the final agreement. Any buyer willing to make a massive investment in a business may consider that everything is negotiable and that in the end, the price will be determined by what the buyer is willing to pay and what the seller is willing to accept. Most likely, you intend to do the same.

With those thoughts in mind, acknowledge that the buyer has his own agenda. This section gives you tips about price negotiation and helps you through the back-and-forth, give-and-take that leads to the buyer’s final offer and your final acceptance.

Before starting the negotiations, make sure that:

• You have a signed letter of intent outlining the buyer’s proposal and, if necessary, your counter-proposal.
• Your business broker provided you with legal and accounting advice regarding the sale structure, price structure, and price allocation that offers you the greatest financial benefit at the lowest tax liability.
• You are clear about your own financial objectives, including the amount of money you want to receive at closing and whether or not you’re willing to accept deferred payments by offering a seller-financed loan.
• You are aware of the issues that absolutely must be addressed for the deal to go through. Some call these your “deal-breakers.” Others call them your “knock-out factors,” or your “walk-away points.” Perhaps you have a price figure you’re not willing to go below. Or an amount you absolutely must receive at closing. You don’t want to be unreasonable, but if you clarify limits before entering negotiations, you’ll know when to say yes and when not say no.

Start negotiations and keep moving forward

• Use your objectives as a steering device. If you need to concede on one point, negotiate an offsetting advantage on another point. This advice applies particularly to price negotiations. If you need to settle for a lower price, your sale advisers can help you balance the concession by structuring the price and by altering the payment terms to reduce collection risk.
• This isn’t the time to increase your asking price. You may begin to think your business is worth more than you asked, but don’t try to increase its price during negotiations.
• This definitely isn’t the time for ultimatums or one-sided victories. It’s safe to assume that if you’ve gotten this far, you both want to close the deal. So, aim for a win-win conclusion by offsetting each of your necessary demands with a compensating buyer’s advantage and by working together to address the issues necessary to meet both of your objectives.
• Keep things moving quickly. During negotiations, you’ll need to call a few timeouts in order to obtain input from your sale advisers regarding legalities and tax implications. When doing so, obtain the necessary information in the same day, if possible. Delays either dampen interest or heighten concern – neither of which supports the kind of healthy negotiations that lead to a victorious closing day, which is the subject of the upcoming section in this chapter.

Negotiations are never easy - it is not in vain to say that negotiating is a fine art. Prepare yourself thoroughly for this dance of egos, set clear goals and maintain a realistic view on the transaction. Following the above tips, the negotiation phase will end quickly, with a satisfactory agreement for both parties. Good luck!