The M&A Negotiations: Do it Like a Golden Eagle (Part 1)

Mergers and Acquisition is one of the most popular expansion types that entrepreneurs use nowadays. M&A is a process that encompasses set of activities such as writing the letter of intent, receiving and reviewing the teaser, due diligence, negotiations, post-agreement transition, etc. Among these steps, the negotiations process is inevitably dominant.
M&A negotiation process should be highly respected; hence, a wise manager comprehends the significance of the negotiations throughout the whole process. The negotiation steps mostly commence after signing NDA and receiving the teaser from the seller and ends with either a final deal or a walk-away. I have previously mentioned the importance of the intelligence collection during any negotiations process and at this point the process of M&A negotiations is being discussed.

The Panoramic View of M&A Negotiations

The concept of panoramic view in the M&A process is beyond just an intelligence collection process. The panoramic view helps you better plan and make your strategies during the process by not over-focusing on one particular criterion and leapfrogging your own biases.
One of the most popular mistakes and biases during M&A negotiation is focusing too much on the price and underestimating the value of all other factors in the deal. I have been consulting entrepreneurs and CEOs from Europe to Middle East and one of their most popular mistakes I have found was converting the M&A negotiations into a bargain shopping session by focusing too much on the price. This approach changes from one culture to another though. In every M&A deal there are other facts to be considered, as well. The criteria for negotiations depend on the companies and the main aim and strategy of the buyer and seller from the deal. For instance, the seller might want to exit from the industry, expand the company, might be into financial crisis, while the buyer might be willing to enter a new industry, invest in a profitable company, etc. In any of the cases there are possible outcomes from the deal that both parties can benefit from.
Furthermore, the personal biases can also negatively affect the M&A process. The lack of objectivity in the negotiations process should be solved by having a negotiation team and use the professional consultants (e.g. financial advisers, technical experts, negotiation experts, etc.) in the whole process.

The golden eagle negotiator soars high into the sky of negotiation game and uses its sharp eyesight to scrutinize any aspect of business in the M&A process. He/she makes circle movements that allows him/her better monitor the playground. He/she contemplates any single movement that is influencing the deal. The golden eagle negotiator has multiple focal points from the intelligence collection to the end of the deal.

Prey Focus in M&A Negotiations

The golden eagle negotiator has an outside-in approach. The aim of the negotiations should be defined and the goals should be set before you start the process and begin to collect information. Both panoramic view and prey focus steps should be consistent with each other.
Regardless of the side table at which you are going to sit during M&A process, you should always have goals and outcomes from the deal. Just because you have enough money to invest does not mean you have to acquire a company, and just because there are people who are willing to buy your firm does not mean you have to sell. Both sides should contemplate their own interests and goals from the M&A deal. These goals in the deal give enough insights to the negotiators to align the panoramic view of M&A deal.

The golden eagle negotiator has a prey focus approach. He/she sets goals, knows what he/she is looking for, has objectives, plans strategically for each case, and uses the panoramic view simultaneously throughout his/her prey focus step. The golden eagle negotiator strategically prepares unique plan for each step and each prey before venturing into the deal.

Before getting involved in the M&A negotiations, double check your plan and goal. What is the value proposition of the deal for you? Why should you step in any M&A deal? Why this deal? … and other questions that can cover the prey focus approach should be answered. Then create your blue print for the whole process. Remember to consider your constrains in the plan such as your highest/lowest price, highest/lowest percentage of shares, the duration of time, costs etc.