You are a rock star investment banker having closed several M&A deals and known for your reputation in the market. Will you let your client negotiate directly with a buyer for a potential M&A deal? 99% of investment bankers will say no, and rightly so. It may not be the brightest idea and if a client can negotiate directly with a potential buyer. Why does he need an investment banker to begin with, not to mention the lack of M&A negotiation experience which could prove fatal to the deal.
Letting your client negotiate directly with buyer is often a non-traditional but sometimes successful negotiation technique under certain circumstances.
Your client wants to sell off his business, and he is eager to stay with business even after the sell-off or he is ready to let it go if the offer is good and the other party is as passionate about his business.
You, as an investment banker, have done everything you could. You have established a fair value, you have generated enormous interest from the potential buyers; have secured several letters of intent. Unfortunately nothing meets your client’s expectation and he is reluctant to go ahead with any of the buyers.
Now you have no idea, what else you should do to secure the deal; you do not know what else to do to bring the client and the buyer to a mutual understanding.
Under these circumstances; it may be best to let your client speak directly with the potential buyer. This way, both parties can work through their differences and come to a common understanding. Off course you will need to be present during the discussions, but just as an advisor to your client.
This will give your client an opportunity to clearly communicate his expectations and why he wants a specific deal structure. Your client will most likely speak directly from the heart with great passion about his business. This will also give a chance to prospective buyer to understand your client’s point of view.
Your client will be able to send a precise message across to the buyer without any barriers. This can even help strengthening the rapport with buyer and can lay the foundation for a future deal.
The trick here is not to let your client make a mistake or to get emotionally out of control, this can be controlled through extensive preparation before the meeting.
Letting your client speak directly to the buyer, helps open up both parties and gives each other a better insight into different perspectives. It gives your client a better sense of the buyer and at the same time the buyer gets a much better point of view of the business he is about to buy.
A direct talk with the client can even increase your buyer’s willingness to buy the business and to accommodate your client’s requirements and deal structure. This will be a win-win situation for you, your client and the buyer.
Just a word of caution, before letting your client speak directly to the buyer, you need to determine whether your client has right set of communication skills and articulation skills to talk through the deal and to discuss professionally about the business. You also need to get a sense whether your client is interested and is happy to do the talking. Under the right circumstances, letting the seller speak freely at the negotiation table may be helpful.
About the Author: Nathan Nead is an M&A advisor for DealCapital.com a middle-market mergers and acquisitions advisory firm.