Negotiation - learn how it works from these case studies

Avoid common negotiation pitfalls and understand the tactics

Negotiation case studies -  how a professional negotiator adds value

Negotiating in a partnership dispute

This 4 partner professional firm reached a point where one partner was seriously minded to retire as tensions had built in the boardroom. The other 3 were happy for him to go but were unwilling to pay him what his capital account was worth, he reckoned that they thought he was so frustrated he would walk at the earliest opportunity.

He engaged our services but on our advice did not disclose that he had a professional negotiator advising him. We helped him to understand what his options were and suggested how he counter-offer his partners without disclosing to them that he was not hellbent on leaving.

The result was that he did not leave and was happy enough to  continue  enjoying his remuneration package much to the surprise of  his colleagues, strengthening his position and making it more likely they would come back with an improved deal and reopen negotiations.


Negotiating for a shopkeeper under pressure

This small business had a niche position on his local high street but could never really take it to the next level due to lack of finance and business nous. His landlord got in touch with an offer to increase the size of the shop on condition that his son would be parachuted in as a partner.

The offer was tempting as the retailer was frustrated with continued lack of success and overbearing debts due to sub-optimal financing and stock selection over several years. The landlord was much older and had a lot of business experience as well as access to funding.

We attended a meeting between the parties in order  that the shopkeeper felt under less pressure from his landlord, who we felt was flexing too much muscle and dangling an offer that looked very good but only in the short term, in essence bulldozing the hapless tenant aside and creating a position for his son.

Our presence and questioning of the landlord during the negotiation gave the younger businessman the courage to decide that he was not going to be pressurised and he chose to remain solo and seek an alternative solution.


Negotiating to standing firm for a premium

The seller of a niche business with a good moat around its products had met around a dozen potential buyers and received a couple of offers but they fell short of his reasonable  expectation and the likely true market value.

During negotiations it became clear that buyers felt they could take advantage of the time the business had been for sale and the age of the seller, coupled with a few balance sheet matters requiring addressing.

We advised the seller that while the offers were not completely unfair he could do much better and having done  our homework on the eventual buyer we reckoned they would go higher as they were keen to do a deal of some sort.

The eventual purchaser paid 20% more than the previous best offer, although the due diligence and legals took double the expected time with their team of professional nit picking and trying to score points.

Working in tandem with the seller’s accountant and solicitor we ensured that almost all the objections were knocked back and secured the deal on very favourable terms while managing to address the balance sheet matters requiring attention.


Negotiating with balance sheet problems

The sellers had what appeared to be a successful business and demanded a high asking price on the expectation that their history and commanding market position would achieve a hefty premium.

Due diligence by the chosen buyer unearthed potential issues looming on the horizon that may well have precipitated a sale within the next couple of years under cover of retirement of the founders.

The acquirers felt that the business was still worth purchasing but at a much reduced price and with consideration to include a sizable earn-out portion, neither of which the vendors would countenance.

Discussions with the buyer allowed them to make the decision that they would call the vendor’s bluff and   we felt from their body language and responses to questions that they would blink.  The suitors were prepared to walk away and await another buyer getting their fingers burnt and remarketing  the company in a fire sale or buying and being distracted by the problems, allowing our buyer to gain market share.

We explained to the seller during negotiations that whoever was going to purchase would likely find the same problem and that unless the buyer’s demands could be accommodated they would walk away in spite of the time and money spent so far, which achieved all the buyer requested.


Negotiating with an overzealous seller

The selling firm’s directors had exerted enormous pressure on the shareholders to divest a division by selling to a  particular buyer for what was both a commercial and a political reason in a very complex situation that had been rumbling on for years and was generating tremendous adverse publicity.

We explained to the buyer that the deal, while attractive on paper, should not be done unless certain warranties and indemnities were put in place to prevent potential financial catastrophe in the following years. These should not be negotiable – we were adamant about that.

The vendor was unwilling to do so and we analysed their situation based on our experience, showing the buyer that they would be able to stand firm on most of their demands but would have to give ground on a few points that in reality were not game changers for them but meant a lot to the sellers.

The seller wanted to make a press release as they had assumed it was a done deal but failed to reckon on the advice of our negotiators to the expected buyer. We took this as a signal that they were desperate to finalise the deal at almost any cost and we were correct.

Negotiating with a buyer who “talks the talk but doesn’t walk the walk”

The buyer had shown interest in the purchase of the factory and stated early on that he does not pay more than a multiple of 3.25x earnings. This business was successful and consistently delivering steady profits for both directors and shareholders and was worth paying good money for.

We knew that the vendor would not sell for less than a figure that would have pushed the buyer beyond his red line by around 15%.

Our meeting with him gave as a better insight into his comfort zone because his body language spoke volumes about how keen he was to acquire this business.

He was not the only buyer in the room so we could afford to play hard ball.

As we stood firm and appeared to be going nowhere we broke off for a few days but lo and behold our phone rang pretty quickly to re-engage.

We told him quite clearly that there was no point in continuing unless the price had a “2” in front of it, leading him to reiterate his position on the multiple. Our response was that it was up to him to justify to himself how he gets to an offer starting with “2”, and that our client would go elsewhere if this was not possible.

Unsurprisingly he managed to convince himself that his “red line” or “golden rule” could be met due to certain aspects of the structuring of the deal, which our client was happy to meet.