Weitere ähnliche Inhalte Ähnlich wie Mand a toolkit negotiating (20) Mand a toolkit negotiating1. M&A TOOLKIT
Closing:
Negotiating
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2. If we are not the “Natural Owner” of a business, approaching it
risks a bidding war with a temptation for us to overpay
Bid above $90 and you
destroy value for your
BUSINESS VALUE 90 shareholders
($m)
30 Buyer overpaying
60 Risk of competing bid
Bid below $60 and
there is no reason
for target to sell
Value to old owner Value to us Value to another
company
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3. CLASS EXERCISE: Determining key price points
BUSINESS VALUE 90
($m)
You are the buyer
1)What is your “walk-away” price?
2)What is your target price?
3)What is your opening offer?
60
Value to old owner Value to us
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4. Negotiating Theory requires you to calculate your key price
points before starting the negotiation
NEGOTIATING THEORY
• Set a “Walk-away” price that leaves enough value creation
for you to make the deal worthwhile (remember
opportunity cost)
• Set a realistic “Target” price that will make you happy
• Set your “Opening Offer” at the lowest possible price that
will start the negotiation, and not cause the seller to walk
away, get insulted, think you are not serious
o Don’t leave $ on the table
o Use the “anchoring” value of the first offer
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5. The opening offer should start the negotiation without leaving
anything on the table
BUSINESS VALUE 90
($m)
80 Buyer “Walk away”
[Buyer BATNA*]
ZOPA
[Zone of 72 Target price
Possible
Agreement]
Seller “Walk away”
65 [Seller BATNA*]
60
60 Opening
Offer
Value to old owner Value to us
*BATNA – Best Alternative To a Negotiated Agreement All Rights Reserved
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6. There can be reasons a seller will not want the maximum price
REASONS A SELLER WOULD SELL TO YOU BELOW MAXIMUM PRICE
• Distressed seller – no time to generate alternative
bids
• Naïve seller
• Strategic seller – e.g. avoiding competitor
• They want something other than the highest
price (e.g prestige)
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7. Identify your deal-breakers up-front
POSSIBLE DEAL BREAKERS
•Price?
•Equity %?
•Deal structure – e.g. cash vs deferred compensation?
•Management/Board Control?
•Irrevocables?
•Choice of CEO?
•Post-merger plan?
•Integrity/Behaviour of other party?
What will cause you to walk away?
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8. You also need to identify who you are negotiating with and their
likely motivations
DIFFERENT SHAREHOLDER TYPES
The CEO/Chairman?
Management?
Government?
•Local? What motivations
•National? of these owners
(other than price)?
Institutions?
Private Equity?
Strategic Investors?
The Public?
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9. There are “win/win” and “win/lose” aspects to every
negotiation
TYPES OF RESULT IN A NEGOTIATION
“Win/Win” Creating joint value for both sides
“Win/Lose” Transfering value from one side to the other
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10. There is an opportunity to create “win/win” value in a
negotiation if the two sides put different values on different
items
EXAMPLE OF WIN/WIN VALUE IN A DEAL
The seller thinks their own shares are worth $45
The buyer thinks the seller’s shares are worth $35
Q: Should we structure the deal in cash or shares?
A: We can “maximise the size of the cake” (WIN/WIN) by maximising
the % of the deal in cash. This deal structure transfers value efficiently.
How many shares…………… still WIN/LOSE
Good negotiation: Probes the other sides rationales
and resistance levels to find out how to transfer
value efficiently to maximise Win/Win…….………
and also comes out ahead on Win/Lose
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11. A “win/win” negotiating approach tries to create the most
efficient deal possible
Our
Result WIN/LOSE
Efficient
Gain a bigger “slice of
frontier
the cake” through
effective negotiation
tactics
Possible WIN/WIN
results “Maximise the size of
the cake” by getting to
the Efficient Frontier
Our
“Walk away”
Their Their Result
“Walk away” © 2007-2013 IES Development Ltd. All Rights Reserved
12. There is equal skill in knowing how to sell a business to get the
best price
TIPS ON SELLING A BUSINESS
•Sell into a rising P&L and market trend
Make it easy for •Realise all short term opportunities; don’t invest in long
the buyer’s term opportunities
•Help the acquirer create a compelling strategic/synergy
valuation team story
•Robust data and complete documentation
Eliminate value •Close-out uncapped and uncertain liabilities
traps •Explain why are you selling
Create an •Establish a sense of urgency – what is the real or artificial
deadline?
advantaged •Create alternatives, find other bidders, set up an auction
negotiating •Know your “walk-away” price and terms, and stick to
process them
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13. Key Learnings from Negotiating
• Do your homework before walking in (what are you
negotiating on, what is each worth to you, what is your
walk-away point)
• Have a support team to run numbers while you negotiate
• Probe to understand what they want and value
• Full explore how to create win/win value through deal
structuring
• Use a process and tactics that match your negotiating
style. Is it a one-off negotiation or repeated?
• Be aware of ethical dilemmas
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