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

Compare potential liability of owners of proprietorships, Compare and contr...

Compare and contrast the potential liability of owners of proprietorships, partnerships (general partners), and corporations. The sole proprietor has infinite liability for mat

Contingency planning, Contingency Planning:   Once the events are eval...

Contingency Planning:   Once the events are evaluated and categorised, and the levels of risk attaching to them have established.  The organisation should then commence pla

Emerging market bonds, Emerging market bonds are the bonds offe...

Emerging market bonds are the bonds offered by less developed countries. The government normally issues them. These exclude borrowings from gove

Show the working capital forecasting techniques, Q. Show the Working Capita...

Q. Show the Working Capital Forecasting Techniques? Working Capital Forecasting Techniques or else Computation Of Working Capital: - A number of processes are used to determine

Define discounting the cash flows in the apv model, What is the intuition o...

What is the intuition of discounting the several cash flows in the APV model at fixed discount rates? The APV model is a value-additivity method where total value is defined by t

Explain factoring and term loan financing, A factoring company has offered ...

A factoring company has offered a one-year agreement with Glub Ltd to both manage its debtors and advanced 80 per cent of the value of all its invoices immediately a sale is invoi

Explain the random walk model for exchange rate forecasting, Explain the ra...

Explain the random walk model for exchange rate forecasting. Can it be consistent along with the technical analysis? Answer:  The random walk model assumes that the current excha

Explain due date and due diligence, Q. Explain Due Date and Due Diligence? ...

Q. Explain Due Date and Due Diligence? Due Date -Every governing agency and its forms scheduled reporting and most significantly payments have a required due date. It's this

Review of career plans, Review of career plans: career plans, emerging out ...

Review of career plans: career plans, emerging out of career planning exercise, have long term orientation. A career plan is developed based on assumptions about how the environmen

Contrast a benefit and a defined contribution pension plan, Compare and con...

Compare and contrast a defined benefit and a defined contribution pension plan. In defined benefit plan retirement remuneration are determined by a formula that typically

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