When selling your business, create the right framework
Enrique Quemada
Chairman at ONEtoONE Corporate Finance Group (International M&A Advisory in 20+ Countries and Management of Private Equity Funds). YPO. OPM. Harvard Business School
#M&A #Mergers #Acquisitions #PrivateEquity #VentureCapital #Familybusiness #Businessowner #ACG #YPO #CorporateFinance #Valuation #ONEtoONE_CorporateFinance #Mergersandacquisitions #Mna #FinantialInvestors #harvardhbs #iesebschool #iebusiness #insead #mitsloan #hbsalumniIn order to have a good negotiation frame, you should have created the best conditions before getting to the negotiating table. This is achieved by making sure that the right people are at the table at the most favorable time for you and that you are in the best position. Obviously, this cannot be improvised- it needs preparation.
Preparation for sale, the search for sufficient alternatives, and planning the operation are elements that undoubtedly help to create a favourable negotiation frame for you.
Can your business be more valuable for another type of buyer? If you haven’t analyzed all possibilities properly, it means you won’t be setting a good framework for the negotiation. Maybe it will turn out well, but perhaps you could have got more.
Your ability to abandon the negotiations because you have good alternatives gives you a lot of power. The more real your threats to abandon negotiations seem the more negotiation power you have and the more believable you seem.
The key to success won’t be in how you negotiate in this moment, but whether you know how to create a frame for a satisfactory negotiation. You should try to frame the other party’s perceptions in your favour.
It’s also important to research all the parties that are going to participate in the negotiation and their interests. Is there someone who could ruin the deal because they have other interests? How can he be influenced to help? Don’t forget about these people or their personal interests. Think of the people from the other party who will value the deal most and try to make them participate in the negotiation.
Do you know the other party’s alternatives? During the negotiations you should monitor their perceptions of whether your demands enter or not into their operating zone, if you are in their ZOPA (zone of possible agreement).
Everything is relative. Because of that it’s key to create a negotiating frame. People aren’t going to think you’re unreasonable if you ask for more, they will think you’re unreasonable if you don’t know how to ask for it.
The key isn’t what you ask for but how you ask for it. As such, the dialogue frame you establish is fundamental.
Given that human beings need to be consistent, use the other party’s standards and the frame they have to make decisions and adapt your position to their way of doing things. That means analyzing their way of thinking.
Experienced negotiators know that the majority of transactions end in the middle area of two proposals. For that, we try to create a frame so that the other party’s offer is reasonable and ours is aggressive. This way, the middle area will fall in a favorable place for us.
@EnriqueQuemada