Negotiating a Deal

Negotiating a Deal

Be firm but flexible

Negotiation is one of the biggest stumbling blocks for any potential business sale. Why? Well, in the beginning, both parties tend to have differing opinions on the value of a business. The owner will likely believe it’s worth more than the buyer, and that can cause issues.

As the owner and prospective seller, you can mitigate this issue somewhat by understanding that you need to be flexible with your valuation. As we discussed earlier in this article, make sure you have an ideal figure that you’d like to sell for, have a figure you’d be happy with, and have a walk away figure.

Knowing what these figures are and being firm both in your mind and throughout the negotiating process, will make your life, and your potential buyer’s life, much easier.

You must be prepared to be flexible with some of your goals, understanding that you won’t get exactly the deal you want if you’re unwilling to negotiate properly. Here’s where a good broker earns their money, helping sellers deal with the finer details of a sale, and advising them when to be more flexible, and when to stand their ground.

Understanding where the value is in your business is also key. Knowing what that value is worth will help when it comes to arguing your case for a specific price, and help your potential buyer understand why they should pay it.

Concessions will often have to be made in negotiation, but they can yield positive results. Take some time to consider what you’d be willing to concede, make sure you let the buyer know you have given up something of value when you do, and let them know how the favour can be returned to get something back from them.

Work with your buyer, not against

Successful negotiation happens when both parties work together, rather than against each other. It can be easy to see a potential buyer as an opponent over the negotiation table, but the simple fact is, both of you want the same outcome.

You want to sell your business to the other person, and they want to buy your business from you.

Both parties want the sale to happen. So get to know the potential buyer of your business. Why are they interested in your business? What are their long-term plans? Will you be able to share any wisdom or advice to help them? Really get to know and understand who it is you’re dealing with.


Completing the deal

Reaching heads of terms – i.e. an agreement in principle subject to due diligence and drawing up of contracts – is normally the fun part of the process. Signing Heads of Terms gives the potential buyer exclusivity whilst they conduct due diligence and draw up contracts. At this point, everyone is keen to get the deal over the line.

So keeping the momentum going is absolutely key.

If you have not instructed a lawyer already then now is the time to do so. The order of events is then,

  1. to provide answers to the buyer’s due diligence questionnaire (or if you have pre-prepared dataroom, share this with the buyer and their advisors),
  2. for the buyer’s lawyer to draw up the first draft Share Purchase Agreement (SPA) for your lawyers comments and amends – this is an iterative process which needs to be handled carefully. As when negotiating the headline deal value and structure in the heads of terms, you will need to be firm but flexible in agreeing the finer points of the SPA; warranties and indemnities are often a sticking point.
  3. To draw up ancillary agreements such as consultancy agreements for your handover period, transfers of leasehold and a disclosure letter to ensure you formally informed the buyer of the current status of the business.

Choosing an experienced commercial lawyer is very important. Whilst there to make you aware of the risks, they also need to understand the benefits of getting the deal done in a timely manner.


Luke Rees from Langleys Solicitors LLP explains here what to look for when selecting a corporate lawyer:

"Many business owners may have worked with a trusted solicitor on private or business matters for a very long time. However, it may well be the case that this trusted advisor is not able to handle the sale of the business effectively, because these matters are complicated and so engaging a specialist corporate lawyer who has experience in such matters is absolutely crucial.  

When choosing a lawyer do not be afraid to ask what experience they have in business sales and acquisitions. Ask them for recent examples of deals that they have worked on and get them to talk you through the process of the transaction and how it works, as it will give you a sense of their experience level.  

It is always a good idea to get your lawyer involved at an early stage. Good corporate lawyers will add value during the negotiation stage and provide useful input to assist in the negotiation of the deal and the Heads of Terms if necessary. They can also assist in putting in place valuable protections in the form of confidentiality or exclusivity agreements to protect important information about your business and its use during the sale process.  

Most corporate lawyers should have the appropriate level of technical expertise to deal with the legal issues in a business sale transaction. The good ones also have a high level of commercial awareness. This is valuable as it means that they are able to think logically in the heat of a deal to come up with solutions to issues that may arise as the matter progresses. 

The last thing that a seller needs is a dogmatic lawyer who sticks stubbornly to black and white legal principles, as it may cause a deal to stall unnecessarily. This leads on to another important factor. A good corporate lawyer should be an approachable person who you can get on well with. Selling your business is a huge thing for any owner- it is a complicated matter and it is essential that your solicitor is approachable and that they can communicate things to you effectively and free of legal jargon.  

There should also be a fair amount of transparency from your solicitor about what your legal costs are going to be. Business sales are complicated and so they may attract some pretty chunky legal costs. 

Most solicitors will provide you with an estimated range of fees, but this does not really give you a clear idea of exactly how much your legal fees will be. Whilst it is of course tempting to go with the solicitor who quotes the lowest fee, you should evaluate this carefully and take into account how much lower their quote is. 

If it is the lowest by far- why is this? It may well be an early sign that they are not a specialist in business sales and that they haven’t grasped what is involved. Business sales are complicated and if the legal side of things is not dealt with properly it could leave the sellers with considerable potential liability in the future. 

Bear this in mind and don’t just go for the lowest quote.  Look for an experienced, personable, and responsive person to act on your behalf and if they are the right person then they will add value during the process."


This article originally appeared as part of the Ultimate Guide on in August 2020. Other articles from the guide can be found via the links below:

Has this article been helpful? Would you like to find out more?

    Has this article been helpful? Would you like to find out more?

    Contact us