Negotiating and closing transaction, Financial Management

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.

 

Posted Date: 9/11/2012 5:49:40 AM | Location : United States







Related Discussions:- Negotiating and closing transaction, Assignment Help, Ask Question on Negotiating and closing transaction, Get Answer, Expert's Help, Negotiating and closing transaction Discussions

Write discussion on Negotiating and closing transaction
Your posts are moderated
Related Questions
Z works for HS Company and has been asked to undertake an assessment of any health and safety issues that might be potential hazards in the department which she manages. Z's respon

Mutual Fund Services: Financial Mutual Funds launch schemes to cater to the need of the different categories of investors. They provide special services in addition to the retu

2010 equity balance required: (600-20 - 25 - 15 - 20)= 520 employees eligible Total expected equivalent value = 520 x 500 options x $1.48 = $384,800 $384,800 x 3/4 years = $28

Q. Show the Advantages of adjusted discount rate? Advantages:- (1) It is simple to understand and simple to calculate. (2) The risk premium rate comprised in the risk adj

You have an investment capital of $1,000,000.  You plan to invest a portion of this money in Treasury bonds and the remainder in a stock portfolio.  Treasury bonds are expected to

E v aluation of  bids and determination of the lowest  evaluated responsive and qualified bidder You learnt how to receive and open bids in the previous sub section. Here you

Determine the Valuing Equity Securities Unlike debt and money market instruments, equity instruments represent ownership interest in the company. As owners should put in their

Add or Drop Analysis Lakespring Retirement Village is home to senior citizens who are fairly independent but need assistance with basic health care and occasional meals. Jill Thomp

I need this in the next 24 hours urgently. If you can accept this, you must be meeting the deadline with strictly no delays or full payment refund is needed

Keys Printing plans to issue a $1,000 par value, 10-year noncallable bond with a 5.00% coupon, paid semiannually. It should sell at par. The company''''s marginal tax rate is 40.00