M&A transactions are complex, and it’s natural that buyers and sellers will have some competing interests. When both parties come to the table in good faith, with a commitment to finding a workable agreement, these negotiations don’t have to be overly contentious.
But when buyers are out to do their worst, negotiations can devolve into a hostile power play. Worse yet, some sellers don’t know enough to push back. They get steamrolled and taken advantage of by specialists who wake up every morning intent on getting the best possible deal for their investors.
As a business owner, you need to determine who in your organization is critical to your operation. If you lost that person tomorrow, how would that impact the business? Most importantly, who has the relationships with your customers?
Most business owners will downplay the importance of key employees. They believe that if they push that narrative, a prospective buyer won’t be concerned. But the truth is that experienced buyers will flush that out during initial meetings or at the very least during due diligence. You should never let a buyer discover additional risk in the sales process, especially something that you could have mitigated prior to going to market.
These buyers know what they’re doing and they’re willing to play dirty to get what they want. Here are some of the tactics they might use:
In every industry, there are good and bad actors. Unfortunately, the bad ones are perfectly willing to engage in psychological warfare. The less interaction the buyer and seller will have after a sale – i.e., the less future success hinges on the seller’s continued cooperation – the less incentive a buyer will have to treat the seller fairly. Unsuspecting sellers can find themselves at the losing end of a winner-take-all kind of game.
Think of this as a boxing match. You’re going into the ring at 0-0 and they’re at 40-2. They’ve been playing the game for two decades. I don’t care how strong you are, you’re not going to win that fight. That is why it’s important to have professional, specialized advisors by your side before you enter the game. Touchstone Advisors is a lower middle market M&A Advisory firm, and we represent business owners and family businesses in all industries.