M&A Deal Structure Negotiations

After all letters of intent have been received, the M&A advisor will review your client’s objectives and views about the buyers’ objectives. The advisor may recommend getting a tax expert do a tax review to determine the after-tax proceeds of the various LOIs. The advisor will then begin the negotiation process to try to get one or more of the buyers to improve their offers.

Based on the number of buyers at the table and the quality of the offers, the M&A advisor may attempt to improve a buyer’s offer by mentioning the multiples used by other buyers, or by merely indicating the existence of other buyers. Most buyers will want to know how many others are interested. However, they will not be told the names of other buyers or specifics of other offers, such as price.

When it comes to negotiating an M&A deal structure, it is important to work with an M&A advisor who is skilled at negotiating to keep the deal from falling apart. It’s extremely important that buyers don’t feel like the seller is playing games. All communications should be done professionally and tactfully. A skilled negotiator knows when and how much to push, and when to back off to continue to maintain a positive and collaborative relationship.

A skilled negotiator:

  • Stays in touch with seller and buyer, and returns phone calls and emails in a timely manner.
  • Is open and honest with the buyer.
  • Always offers an if-then when the buyer wants the seller to give something up (and the seller would rather not but is willing). If you’re going to give up something important, get something out of it.
  • Sticks to the primary issues and avoids focusing on insignificant details.
  • Acts calmly and remains aware that the deal must work for both parties.

Choosing And Negotiating With A Preferred Buyer

The M&A advisor works with your client to understand the value each buyer is offering and to choose which buyer to work with. This decision must be made carefully. While it is always possible for a deal to fall through at any stage of the negotiation and due diligence processes, ideally you want to be able to come to an agreement with your chosen buyer rather than take the business back to the other buyers who submitted letters of intent.

Once a buyer is chosen, the buyer will insist on exclusivity for a period of time. During this time, the business will effectively be taken off the market and discussions with other buyers will cease.

If the sale process has been handled properly, little M&A deal structure negotiation will be required. At this stage, the seller has chosen to work with a specific buyer based on the price and terms detailed in the letter of intent and agrees with them—at least for the most part.

There may be some back and forth to try to meet as many of the seller’s objectives as possible, or the M&A advisor may recognize that the buyer has made the best offer and advise against making additional requests. More negotiation may be required throughout due diligence.