You are on same team as your buyer

I've seen many sellers fall into the same trap, and learn a painful lesson.

This isn't an error in how they pitch their business, or a technical error in the M&A process. It's more subtle than that.

It's their mindset in negotiations with buyers in their exit process.

They see M&A as a fight between buyer and seller. One wins, so one must lose.

An arm wrestle to see who can 'win' to get the best price and the best terms. The seller is the enemy, and for you to win – they have to lose.

They believe that the smart sellers play hardball. They take every chance to get one over on the buyer, fighting on every point to the bitter end.

This is totally wrong.

Founders that think like this get bad outcomes. Most often, their deal will fall through entirely.

The exit process is already fragile enough, with plenty of reasons a deal can fall through. Being overly combative, aggressive and stubborn makes it so much harder to get a deal done.

Instead, you should see M&A as a team effort.

Controversially, you are actually on the same team as your buyer. You are working together, trying to get a deal done that works for both of you.

You should be collaborative, transparent and helpful, building trust and helping them to get the deal over the line.

If you do put your foot down hard and make a fuss, they are more likely to listen if you haven't done it on every small point.

Let's not be naive. There are obviously areas – like price – where your interests conflict directly with the buyer's. Negotiations will be direct and sometimes get hostile. And some buyers can be outright unreasonable and deserve heavy push back.

But you shouldn't see it as war that you have to win and they have to lose.

Where does this attitude come from?

In my experience, this attitude comes from fear.

There are many well-known stories of sellers getting screwed over.

When you deal with a sophisticated buyer, it's clear that they are experts. They march in with their full team of expensive advisors, overwhelming you with jargon. They do this for a living and make you feel like an amateur. And some can be downright aggressive too.

So it's no surprise sellers often enter negotiations fearful that they are about to get screwed over, and that drives the behaviours that can derail a deal.

The wrong way

Let's discuss examples of the 'wrong way' of handling yourself here:

• Fighting back on every point in a negotiation, regardless of how small, just because you feel you should and that you look weak if you don't.
• Assuming every data request in due diligence must be an attempt to trick you and so you refuse to share data, or only share partial information.
• If they change their stance on a point of negotiation that was previously agreed, thinking you can ‘get them back’ by changing your stance on another point.

When a buyer is evaluating a business, they are looking at many things: financial performance, market position, legal risk and so forth. But the most important factor may actually be you and how you conduct yourself.

Can they trust what you've told them already and what's in your forecasts? Might there be conflict within your team and with customers? Will you fit into their culture post-deal? Are they going to enjoy working with you?

The more unreasonable and aggressive you become, the less they want to work with you. If you really push it, they might walk away for this reason alone.

This matters more in a smaller business where your role is more critical, and if you are staying on acquisition.

The right way

Getting this right is more about mindset than any specific actions.

Try to empathise with the people working on your buyer’s team. See them as just people trying to do their jobs.

Their job is to buy only at the right price, and so they must negotiate firmly on price and other key terms. They are obliged to do exhaustive due diligence before spending millions on an acquisition. And they are likely part of a large organisation with lots of process and structure, and so there will be delays. If things change at the last minute, that might be because their CEO has changed their mind and pushed that down onto them – not because they are trying to screw you over.

It's a simple reframing that will help you be more collaborative in negotiations. For example, instead of viewing due diligence as unnecessary scrutiny, frame it as an opportunity for both parties to understand each other better before committing to a life-changing deal.

Here are some other tips:

• I advise buyers to focus on their Three Big Things in a deal, and let other points slide. Focus your energy and attention there.
• Make sure your team (internal and experts) are on the same page on how to conduct themselves in negotiations. There is nothing worse than a lawyer going off-script and destroying trust.
• Beware of letting yourself down when things get tough. That might be if they have tried to Price Chip (see The dreaded price chip), or later in due diligence when you are snowed under a never ending list of requests.

Get these points right, and you will have a collaborative exit process that helps each side get what they want, and most importantly – get the deal done!