How to Negotiate in a Business Acquisition
There are many factors to consider when your company is ready to embark upon an acquisition. If you believe your business is valuable to somebody and you want to sell or get acquired by a larger organization there are a few steps you can take to increase your value and negotiate for favorable terms. Here are the top three tips for getting what you want out of your company:
1. Setting the Price
Setting the price of your business for a buyout will take some careful analysis of various data. First of all, market value, the value of assets, and cash flow are typically the most important statistics used to set the price for a deal. However, it is also helpful to consider long term reach and the strategic impact that the acquisition can have on business overall. For instance, the recent acquisition of Elastica by Blue Coat gave the security-based business a useful tool for detecting harmful uses of existing technology. This added to the value of Blue Coat System’s overall business model by allowing them to expand into software that works alongside their current hardware developments.
2. Have A Dedicated Team
One of the most challenging aspects of negotiating a merger or acquisition is when the various parties involved do not have a clear vision of what they are trying to accomplish. Anyone who has been through the process before will recommend that you appoint leaders from every major branch of your company including: financial, legal and development. Enlisting a team of your top employees along with skilled advisors will ensure that everyone is on the same page and trying to reach the same goal when it comes time to voice your needs. A team that is not fully informed or that does not agree on the terms that need to be met before acquisition will ultimately confuse the process and prevent you from reaching any deal at all.
Keep in mind that between 70 and 90 percent of merger attempts fail, and a large portion of that can be related to having unclear objectives from the outset. A good example of this eBay’s acquisition of Skype in 2005, which resulted in a loss just four years later because leadership failed to integrate the two companies effectively. A well planned acquisition should include a plan that allows the merging companies to work together successfully going forward.
3. Be Diplomatic
Making strong demands and undervaluing current employees and management will surely lead to a losing proposition. Employees who are fully trained and already doing good work are going to be weary any time an acquisition is happening. Make sure that you are taking the necessary steps to keep them at ease and clearly represent their interests in your company as well. If the proposed merger is going to have a drastic effect on employees, consider your options carefully before going ahead. Loyalties will be tested when relocations, new management and names are changed. It is important not to move slowly, and try to keep good will toward all involved parties so that you have the best chance of reaching positive resolutions. A breakdown in communication will only devalue your company and make it harder for everybody to adjust to the changes.
A business acquisition is always a complex matter that requires careful planning and consideration. When you are ready to sell your business, take some time to figure out what you believe your company is worth, and figure out how you can be strategically beneficial to interested buyers. Once you have a company willing to buy, build a team of trusted members of management to advise and structure the deal in a meaningful and effective way that will help you reach your goals. Lastly, make sure that you approach negotiations with an open mind and a willingness to stand up for employees as well as your own interests.
