Selling your business: play your "Trump" card in deal negotiations

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Selling your business:

Play your “Trump” card in deal negotiations

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Selling your business: Play your “Trump” card in deal negotiations Another intriguing episode in Donald Trump’s presidency arrived in early January, when President Trump abruptly walked out of a meeting with Democratic leaders held to try to break the impasse over the Federal Government shutdown and funding of the proposed border wall with Mexico. President Trump took to Twitter to brand the meeting “a total waste of time”, whilst Democrats labelled his behaviour a “temper tantrum”. In the era of “fake news” it is difficult to know whose version of events to believe.

However, even for the self-styled master of the “Art of the Deal”, storming out of a negotiation with one’s counterparts then publicly criticising them certainly marks a high-wire strategy. Whether this was a genuine withdrawal by the President, or brinksmanship designed to provoke a response remains to be seen, but it demonstrates the frustrations and difficulties which can affect even seasoned business people when negotiating a deal.

So, what should you consider to help you keep cool and secure the best possible deal when negotiating the sale of your business?

Barney Leaf

John McDermott

Partner barney.leaf@laytons.com +44 (0)161 214 1632

Associate Partner john.mcdermott@laytons.com +44 (0)161 214 1657

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Selling your business | Play your “Trump” card in deal negotiations

Valuation

instalments to follow) or an “earn-out” (similar to deferred

When selling a business that you have personally built up it

the performance of the business post-completion, and may

is perfectly understandable to be emotionally attached to it.

involve you remaining with the business as a consultant for a

Whilst this passion will have helped you to grow your business

certain period to ensure the performance of the business).

payments, but the further instalment amounts are linked to

to its present size, the downside is that it can potentially cloud judgement when assessing its value.

Providing that any such offers fall within your acceptable range financially, do not dismiss them automatically because

Instructing an experienced team of corporate finance advisers

they differ structurally from how you originally envisaged the

or accountants will allow you to take a step back, and for

deal. Take some time to reflect on them with a clear head,

them to produce a valuation which has been arrived at

and discuss them in depth with your professional advisers who

dispassionately, and which will stand up to bidders’ scrutiny.

will be able to provide you with their expertise on the merits

Having a fresh pair of eyes look at your business is invaluable

of any offers.

in assessing its true worth. The process is also key to identifying your bottom line, and assessing how reasonable an offer is.

Know your bottom line

Lean on your advisers There is no substitute for a high-quality team of legal and financial advisers during a business sale. Once instructed, make full use of them. Not only for their legal and financial

Before entering into any negotiations, identify the parameters

advice but also because they are experienced business sellers/

of what you would be prepared to accept: both your ideal

acquirers and so can assist you with forming your judgement

top-end outcome and your absolute minimum that would

of a buyer’s position. Certain aspects of the negotiation may

be prepared to accept. Also remember, whatever figure a

seem strange or concerning – however, a simple call with

potential buyer offers at the outset is likely to be reduced by

your advisers may be all that you need to reassure you that

the time you sign the sale agreement.

the deal is progressing as it should be. Letting your advisers handle the negotiations removes you from the process to an

Flexibility If you have correctly identified your top and bottom line, this should create a range of acceptability for you in terms of offers. Some may vary in structure from your original expectations – for instance, whilst you may prefer to receive the entire purchase price on the completion date then have a clean-break from the business, some bidders may offer alternatives such as a deferred or instalment payments (i.e. a certain amount being paid on day one, with further fixed

4 | laytons.com

extent, reducing the personal pressure on you, whilst allowing you to focus on the day-to-day running of your business whilst the deal progresses.

Selling your business | Play your “Trump” card in deal negotiations

Give clear instructions Different motivations drive people to sell their business. Some people want to simply cash out and walk away. Some owners may have a strong desire for assurances that employees’ jobs will be safe, or that a business will continue to have a presence in its current region after completion. Discuss these fully and in detail with your advisers. That way your advisers can help you select an offer that suits you and which satisfies considerations that you may have other than purchase price.

Know your bottom line and don’t panic In some deals, particularly where the buyer is a much larger or highly-resourced organisation, there is the potential for a buyer to try to pressurise a seller into accepting a less favourable deal. A typical example may be a buyer insisting that a deal has to happen by a certain date (perhaps within an unreasonably short time frame) or it will walk away, in the hope that the seller will cave in and accept terms in the sale contract which are stacked in the buyer’s favour.

This is a particular point where your professional advisors need to come in to negotiate on your behalf and fight your corner if necessary: whilst hopefully a life-changing amount of money may be on the table, at the same time, selling your business can involve a number of life-changing decisions which should not be made in a hurry; after all, you may have spent years or even your entire working life building your business. The old adage of “act in haste, repent at leisure” is never more appropriate than when it comes to selling your business. By leaning on your advisers’ expertise, they will be able to bear the brunt of any pressure in the negotiation process, and ensure that you get the best possible deal available.

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Selling your business | Play your “Trump” card in deal negotiations

Corporate We advise on every facet of our client’s corporate legal needs through the complete life-cycle of an enterprise, from its inception, through its growth and expansion to, perhaps, its sale or flotation on a public market.

Our teams focus on acquiring a deep understanding of the particular needs and objectives of our clients to deliver advice and outcomes that are tailored to those needs and objectives and which meet them swiftly and costeffectively. The approach to technical problems is informed, insightful and proportionate, and we take pride in viewing problems from a fresh perspective to provide innovative solutions.

Our Team Kathryn Beasley

Martin Donoghue

John Gavan

Solicitor kathryn.beasley@laytons.com +44 (0)20 7842 8061

Partner martin.donoghue@laytons.com +44 (0)20 7842 8016

Partner john.gavan@laytons.com +44 (0)161 214 1653

Dimitri Iesini

Barney Leaf

John McDermott

Partner dimitri.iesini@laytons.com +44 (0)20 7842 8081

Partner barney.leaf@laytons.com +44 (0)161 214 1632

Solicitor john.mcdermott@laytons.com +44 (0)161 214 1657

Daniel Oldfield

Jun Park

Christopher Sherliker

Partner daniel.oldfield@laytons.com +44 (0)20 7842 8037

Solicitor jun.park@laytons.com +44 (0)20 7842 8035

Partner christopher.sherliker@laytons.com +44 (0)20 7842 8015

John Skelly

Cameron Sunter

Liza Zucconi

Partner john.skelly@laytons.com +44 (0)20 7842 8025

Partner cameron.sunter@laytons.com +44 (0)20 7842 8036

Partner liza.zucconi@laytons.com +44 (0)20 7842 8092

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This information is offered on the basis that it is a general guide only and not a substitute for legal advice.

We cannot accept any responsibility for any liabilities of any kind incurred in reliance on this information.

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