In selling a middle-market aerospace and defense company, talking only with financially strong buyers is important, but examining that buyer’s track record and negotiating style is equally important. A buyer’s aggressiveness in negotiations (post-Letter of Intent) is one of the most important variables in the outcome, and it is one sellers too often overlook.
It is worth being realistic about the limits here. A seller cannot guarantee a buyer’s true source of funds, cannot see the deals that quietly fell apart, and cannot know whether a buyer will complete an acquisition promptly. Most buyers will describe their behavior in M&A negotiations as reasonable and fair. But our 25 years of experience proves to us that few buyers are truly reasonable and fair. Most buyers seek to tip the scales of negotiations in their favor.
A few things are worth investigating before selecting a buyer. Gain an understanding of their recent behavior. Look at how many companies they have acquired in the recent past and how they conducted themselves during those negotiations. Just because a buyer has acquired a number of companies recently doesn’t necessarily mean they will be easy negotiators. An experienced middle market aerospace and defense M&A banker likely has dealt with the buyer you are considering, or knows those who have. Knowledge of how a specific buyer behaves, and which terms they are willing to negotiate, is one of the greatest value adds of an M&A banker. The takeaway is that the actions of a buyer in recent M&A negotiations are the best predictor of how they will treat you in your transaction.
Have a great day, everyone,
Troy Medeiros
Vice President
