NEGOTIATE TO CLOSE: 4 Successful Negotiating Strategies for M&A and Capital Transactions
Closing an M&A or capital transaction is a complex process that requires success at multiple steps. These steps can be divided into “soft steps” which include successful negotiations and “hard steps” such as providing relevant and useful information.
“Hard steps” are generally easy to define and are helped by having a robust, well-conceived data room as well as by obtaining third party verifications such as a Quality of Earnings Report for important information.
“Soft Steps” are more difficult to categorize since there is often more than one definition of a path to a successful outcome and the outcomes can be open to interpretation.
A successful negotiation creates a framework and pathway to a common understanding of a successful outcome such that each party feels that they have found an acceptable solution given the constraints under which they are operating.
Successful negotiations take judgement, art, time and patience. Some people are closers!
| Negotiation Strategy | Description |
| Understand Zone of Possible Agreement (ZOPA) | The overlap between possible outcomes that all parties would find acceptable. This can be broad so there are many possible ways to come to agreement or narrow so there is a narrow path to agreement. |
| Understand Next Best Alternative Strategy (NBAS) | To truly understand the ZOPA, its important to understand each party’s NBAS. When one party has few alternative strategies and another party has many alternative strategies, the party with many alternative strategies often has a better negotiating position. |
| Actively Ask Question that Challenge the Sticking Points | Often a stated objection is not a “real” objection. Fully understanding the core reason for negotiation sticking points, can lead to a better process for alignment perceived differences and can lead to a successful closing. |
| Use Bridges for Creative Solutions | When parties have different expectations of future events, it can be hard to come to a closing agreement. In these cases, bridges can be built where different outcomes create different transaction outcomes over specified timeframes. |
Sometimes, there is no way to create alignment and a successful closing. In these cases, it’s best to understand this eventuality as soon as possible so that money and time is not spent to chase hopes and dreams.
If you would like to discuss this further – Contact us! Or, if you or one of your clients is thinking about or has a capital opportunity – we advise creating successful outcomes.
