What have you found effective when negotiating a deal?
A It helps to have someone with you, but don't leave the negotiation to a professional advisor; you are the best person to judge the right deal.
The right price isn't just about price/earnings ratios or valuing the balance sheet; all that matters is what it's worth to you. If you plan to buy a business, before starting any discussions, get to know as much as you can about your acquisition target.
Don't just sit at a desk pouring over their figures. Experience the business first-hand. In my case, that has always meant visiting lots of the target's shops. You want to know more about the business than the person who's selling it.
Don't be too greedy; people who try to drive a hard bargain don't always finish up doing the deal. There's nothing wrong with being friendly with the opposite side; you're much more likely to reach an agreement with someone whom you like. Get to know the person you're negotiating with and work out what they really want out of the deal. If possible, try to achieve the right result for both sides, so that everyone is a winner.
Be wary when bidding for a business that's doing well. You will probably pay a fancy price and will have to work hard to get any return on your investment. As long as you have a turnaround plan, it's almost always better to buy poor-performing companies. It can be tough bargaining with the owner of a private business; people negotiating on behalf of public companies aren't dealing with their own money.
Once you finally agree the heads of terms, keep an eagle eye on your lawyers, who are apt to start a totally new round of negotiations, supposedly on your behalf, with the law firm acting for the other side. Keep close contact with your opposite number – the new best friend who has agreed the deal – to make sure that this legal bickering doesn't drive a wedge between you.
With luck you will sign a contract that follows your original agreement, but be warned: most lawyers will make sure that the exchange of contracts takes place in the middle of the night.
