Negotiating and closing transaction, Financial Management

Assignment Help:

Negotiating and Closing Transaction:

A diverse set of skills and very thorough preparation is required for negotiating and closing a divestiture transaction. Facts and information alone are not sufficient for the purpose. A good negotiator knows when to be tough and when to be flexible on a specific point. The objective of good negotiators is to maximize price and optimize the deal structure:

Preparing for Negotiations: Prior to initiating negotiations, the negotiating team should identify all the major points that are to be discussed and should evaluate these in the context of the overall objective of the divestiture. The team should prepare the opening position, preferred position, fallback position and the deal breakers for each point in the negotiation.

Before beginning the negotiations, a role-play of the forthcoming negotiations will facilitate identifying the weaknesses in the positions established for each point and enable the members of the negotiating team to polish their roles.

Conducting the Negotiations: There are several steps involved in actual negotiations. The first step deals with reaching an agreement in principle. This process may result in a term sheet, which is used as a basis for negotiation and preparation of the definitive purchase agreement or may simply result in the parties agreeing to sign a formal agreement in principle once all major points pertaining to the negotiation are believed to be resolved.

Due Diligence Examinations: After having reached a consensus and documenting an agreement on the major points of the transaction, the purchaser expects to conduct a due diligence examination of appropriate books, records, and facilities of the business to verify the financial statement and other information. Any kind of misrepresentation, if discovered by the purchaser, can void the agreement or cause renegotiations of the price and deal structure.

The Purchase Agreement: The next step involves the preparation of the definitive purchase agreement and any supplementary agreements that may be required. The process involves numerous drafts and revisions prior to the closing. Preparation of agreements and the closing documents is greatly facilitated if the divestiture is planned well by the selling corporation and both the parties in good faith negotiate the business issues.

Closing the Transaction: Usually, closing of a transaction involves signing of agreements, exchanging of the proceeds of the transaction, and may be a glass of champagne to celebrate the success of the deal. It is however essential to observe caution. To quote Yogi Berra, "It ain't over ‘till it's over." Simply speaking, a seller can never relax until the documents are signed and proceeds change hands. A high level of confidence after reaching an agreement in principle is a sure signal for disaster. A feeling of comfort about the last draft of the purchase agreement can result in great disappointment, and if there is insufficient attention to detail while preparing the closing documents, it can lead to deferred closing of the deal, or worse, no closing at all.

 


Related Discussions:- Negotiating and closing transaction

Budget, Details on budgetary control process

Details on budgetary control process

Rate of the growth of the business, Q. Rate of the growth of the business? ...

Q. Rate of the growth of the business? The working capital requirement of the a concern increase with the growth and expansion of the business activity although it is difficu

Market versus capital market, For what kinds of needs do you think a firm w...

For what kinds of needs do you think a firm would issue securities in the money market versus the capital market?

Discounted free cash flow model as valuation of commonequity, Explain the d...

Explain the difference between the discounted free cash flow model as it is applied to the valuation of common equity and as it is applied to the valuation of complete businesses.

Define the primary reasons that companies hold cash, What are the primary r...

What are the primary reasons that companies hold cash? Companies hold cash to make essential payments, to take benefit of opportunities as they arise, and to cover unforeseen eme

Define which proposed capital budgeting projects to accept, For a specified...

For a specified IOS and MCC, how do financial managers decide that which proposed capital budgeting projects to accept, and which to reject? For a specified IOS and MCC, all inde

Managing risk and contingency plan, Managing Risk and Contingency Plan: ...

Managing Risk and Contingency Plan: An essential component of any financial management framework is the validation and protection of the information contained in the system. In

Yield to call, Yield to call is the yield that would be realized on a...

Yield to call is the yield that would be realized on a callable bond assuming the issuer of the bond redeems it before maturity. A bond's call provision is detail

No title, discuss the steps in the controlling process

discuss the steps in the controlling process

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd