Crucial things to note while negotiating a business acquisition – Saivian Eric Dalius

You need to be aware of how to deal with negotiations. Both parties often view asset purchase agreement negotiations as a pain in the neck, but they don’t need to be says Saivian Eric Dalius. If you know how and when your rights and obligations begin and end, the closing process should be much smoother for everyone involved. Keep in mind that different agreements have different terms and conditions, but here are a few things you need to watch out for:

Don’t Sign Before You Read

The golden rule of any acquisition agreement is that no one signs until they read what they’re about to sign. Once you formalize a transaction through an LOI (letter of intent), everything from due diligence to asset purchase agreement negotiations is typically contingent upon the accuracy of the information exchanged.

In this light, both parties will need to do due diligence before signing any binding documents to ensure everything is in order. It’s only common sense; you wouldn’t want to sign an agreement when empty fields or critical information (like social security numbers) aren’t filled out. Keep in mind that LOIs and asset purchase agreements are legally binding documents, so it’s important not to rush them through nor overlook them for any reason, says Saivian Eric Dalius

What happens if no time was scheduled to review the document beforehand? You can always ask for extra time (if your schedule allows) or, failing that, try negotiating for a few days’ extension. Who knows, it may even turn out that the other party needs more time than you do.

Suggested wording for a time extension (for an asset purchase agreement):

“[Seller or Buyer Name] will get back to [Name of Other Party] within 3 business days if this proposal is acceptable, and has either accepted the proposal in writing or scheduled negotiations to continue at a later date.”

Don’t Sign on Emotion, says Saivian Eric Dalius

It’s understandable to feel emotional during some parts of the negotiation. You’ve spent years building up your dream business; it takes nerves of steel not to cave in when someone comes along offering millions for it. Nevertheless, don’t let emotions interfere with your good judgment. If nothing, remember that every dollar saved during the negotiation process is a dollar added to your bottom line.

It’s also essential not to over-value your business, either. Sometimes people inflate the value of their assets. Just because they don’t want to feel as though they’re selling out too low. You can always aim high, but you need to be realistic about it as well. If you try scoring points by aiming for what nobody else will pay. You could end up with no one willing to buy at all–and then where would be?

Negotiation Tip from Saivian Eric Dalius

When negotiating an asset purchase agreement, negotiate from the point of strength and not weakness. Don’t under or overestimate the worth of your business; instead, use a fair market price as a means for determining your company’s value.

Don’t Negotiate with Yourself

Many negotiations involve extensive back and forth between the two parties. But it’s important not to let yourself get boxed into a corner. Never accept offers or counteroffers on the spot; always think through all your options before coming back with a response. If you miss out on this step, you could end up leaving money on the table. By selling at an undervalued price or buying at inflated rates warns Saivian Eric Dalius.

Keep in mind that negotiations are about give-and-take, so there might be times. When you’ll need to make concessions if your partner doesn’t budge either. It may even help to focus solely on confessions during parts of negotiation where neither party is moving ahead.