A short time ago I closed on selling my third business. When I posted about it, many people asked for more details.
While I can’t share terms or specifics regarding any of the transactions, as I’m bound by confidentiality clauses in the sale agreements, what I am sharing are lessons – many around mindset – that I’ve learned along the way.
(Quick background about me: I’ve founded three companies, all in the enterprise software space, two in California and one in Singapore. I’ve recently sold the last one. I also acquired one company, was involved in a few other acquisitions, participated in an industry roll-up, and coached many business owners through the process.)
If you are negotiating a large transaction, whether a merger, acquisition, or something else, this post should be valuable to you.
1. These things aren’t quick.
Transactions such as these aren’t sprints; they are marathons. Between agreeing on a price, due diligence, and negotiating the contract, you’re taking months at the very soonest. Set your expectations accordingly.
2. Time kills all deals.
Even though the process won’t be quick, ensure each step has a timeline and urgency. If not, you’ll lose momentum, and the deal may die.
I was going to sell a company to one buyer who was extremely slow getting back to me. What should have taken four to five months took a whole year. Just before we were going to sign, my company had their most profitable two months ever – by a long shot. I thought it would continue and so I pulled out of the deal.
(Then, the next month, we lost a whole load of money. True story.)
3. Know the other side’s motivation.
It’s important to know why they want to buy your company or why they want to sell theirs. Make sure you truly understand what’s important to them. Some want the best price, others want to ensure they are keeping the most employees (talent), and others want it for intellectual property. Knowing why will make negotiations go much quicker, and there’s more of a chance everyone walks away satisfied.
4. Know YOUR motivations.
Personally, while the end dollar amount is important, I also value speed and simplicity. And I have an emotional tie to my companies, employees, and products. I want them to all have a good home.
5. Know the other side’s personality.
Do the people or companies on the other side of the table have a track record of screwing people over or going to court? Some are very quick to get lawyers involved, and others hate to spend money on attorneys. Knowing their history and their tendencies should guide you on how specific and strict you need to be in the contract negotiations.
6. Get Creative.
In EVERY deal I’ve been in, there’s been creative thinking needed. Whether it’s payment structure, intellectual property issues, or one of the many contract clauses, what would initially seem like a big problem was solved by thinking outside the box.
7. Prepare for the Curveball.
At least once in each deal, something unexpected happened, and they seemed like they would fall apart, often at the last minute. I even read somewhere that 50% of all deals fail after everything’s been negotiated already. Be ready for this to happen on your deal, and when it does, calm yourself and everyone else so you can “get creative” without being derailed by emotions.
8. Have Another Set of Eyes.
It’s a good practice to have someone from your end attend all the calls and meetings with you to catch things you may have missed, and you can run things by. Sometimes your attorney can fill this role if they have the business acumen. (Mine does, drop a note for an intro.)
9. Pick your Spots.
If you haven’t been through a process like this before, it will be overwhelming when you see the first draft of the contract. Go through it with your attorney or advisors, then figure out what’s important to you in the negotiation because if you try to negotiate each clause, you’ll be there forever.
10. Always want it to happen, just “not that much…”
A good friend of mine, Ron Harrell, told me that in a negotiation, he wants the deal to go through…to a point. The moment you “have” to have the deal close, you lose your leverage and your edge. Always keep in the back of your mind that it may not go through, and be OK with that.
11. It’s not done until the money is in the bank
My wife kept asking, “can we celebrate yet”? Even after the contracts were agreed upon, and later signed, I told her no. Not yet. When my bank account increased by the right amount, then yes, we could celebrate. Don’t stop running before the finish line; see it through until the very end.
I like negotiating these deals. They are complex and require a steady, sharp mind while communicating with other parties who have their own priorities. They are emotional, with a lot of ups and downs, though getting to the end is very rewarding.
Hopefully, you’ve received a few tips on your next negotiation.
(The pic is of me holding a million dollars in cash – not related to the sale, nor was my money, though a fun memory!)