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

Calculate the changes in the margin account, Suppose today's settlement pri...

Suppose today's settlement price on a CME DM futures contract is $0.6080/DM. You comprise a short position in one contract. Your margin account at present has a balance of $1,700.

Define the meaning of objective - financial management, Define the meaning ...

Define the meaning of objective - financial management The term objectives offers a normative framework. That is the focus in financial literature is on what a firm must try to

What is the debt security in the financial term, What is the debt security ...

What is the debt security in the financial term? Debt instruments are instruments which promise the payment of specified sums to the investor. Illustrations of debt instruments

Standard deviation for every project, AOT limited is considering two mutual...

AOT limited is considering two mutually exclusive projects - cable and satellite.  The possible NPVs for every project and their associated probabilities are as follows: Cable:

Advantages of private mutual funds, Advantages of Private Mutual Funds ...

Advantages of Private Mutual Funds It is felt that the entry of private Mutual Funds would encourage competitiveness in the financial sector and promote the existing investment

Short terms working capital, Q. Short terms working capital? 1) Indige...

Q. Short terms working capital? 1) Indigenous bankers: private money leased and other country banking used to be the only source of finance prior to the establishment of the

Steps, how control the steps

how control the steps

Quantitative or mixed-methods study, Application: Critiquing a Qualitative,...

Application: Critiquing a Qualitative, Quantitative, or Mixed-Methods Study Over the last several weeks you have explored many qualitative, quantitative, and mixed-methods rese

Importance of the cost of capital, Q. Importance of the cost of capital? ...

Q. Importance of the cost of capital? 1. Evaluating financial performance: the actual profitability of the project is compared to the projected overall cost of capital and th

NET INCOME APPROACH.., You are required to compute the value of both the fi...

You are required to compute the value of both the firms using Net Income approach.

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