When selling your company, you need to be prepared for more than just due diligence – you also need to be well prepared to negotiate. Sophisticated buyers, whether financial or strategic, who regularly acquire businesses, are good at this. They know what they are doing and have well-thought-out plans and tactics to seek advantages in negotiations. Sellers who recognize these tactics for what they are can avoid unnecessary stress, push back when needed, and maintain negotiating leverage when most important.
One of the most common tactics to gain negotiating leverage in a competitive sale process occurs during bidding. Buyers will try to acquire as much information about the sale process – mainly price and competition level. One of the most common tactics in this regard is for a buyer to give notice, on the date that indications of interest are due, that they need more time to finalize their bid. Unprepared sellers can’t see the harm in saying yes, but prepared sellers know that this is a classic M&A trap. Any seller who says yes is showing that they hold a weak hand of cards. Buyers love sellers who say yes, and they will often ask for multiple extensions to further test the weakness of the seller’s hand.
Based on our comments here, you can see that from 24 years of experience, we have learned that the only response in this case must be to say “no.” To ensure that all buyers know exactly when bids are, and will receive substantial advance notice, we always give buyers at least 30 days’ notice of when bids are due, and we remind them 14 days prior, and again 7 days prior, and again 3 days prior. Accordingly, when a buyer tries the “we need more time” tactic, we politely say “no.” Know to say no.
Have a great day,
Max McFarland
Associate
