The most important tools when negotiating a business merger are compromise, persistence, and a well-formed team. Perspective must also be maintained throughout any negotiation.
The most obvious and bitter fighting in a business merger always occurs over money. Concessions must frequently be made in order to satisfy both sides. But in a merger both sides also want a larger degree of control, especially when money is distributed according to business profits.
Compromise is critical because it helps you accumulate bargaining chips and prevent negotiations from breaking down. Unless the issue is very obvious and silly to dispute, never allow a party to gain a concession without them owing you something in return. Giving away too many concessions may end up haunting you later. On the other hand, not every minor dispute should be made into a battle. Don’t create unnecessary bitterness by driving a hard bargain; many times it is better to give up a "free" concession only to negotiate for a free concession of your own later on.
A human impulse is to complete negotiations over seemingly minor details quickly, so in many cases a persistent business owner will get a very good deal over a flashy but tired owner by gaining many small concessions late in negotiations. Don’t drag out issues that are not necessary to your agreement but choose your battles wisely. Fight your own fatigue and take a break or bring in extra experts if necessary.
Also, although the purchaser traditionally gets to draft the contract, you should seek to draft as much of the contract as possible. This gives you control over the agreements that are written down, the time of presentation, and the pace of negotiations. If you are not the purchasing party, don’t be overbearing in providing the opposite party with contracts that they are in the process of drafting.
Ideally a merger team has all of the following individuals:
- the business person capable of making final decisions
- a financial person capable of understanding the consequences to profits or stock prices
- an accountant who can calculate whether the company can afford those consequences
- a tax person who will look into what tax consequences will exist
- a lawyer for any legal aspects.
Only the business person and lawyer are critical to the actual negotiations, but more experts should be brought in if you feel you are in over your head or certain aspects of negotiations confuse you.
A business attorney is very necessary to prevent legal problems which may cripple your business or cause a deal to sour. A good attorney can make your merger negotiations move smoothly and efficiently.