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

Collecting information and forecasting in budget, Collecting Information an...

Collecting Information and Forecasting: All budgets must be based on accurate and reasonable information. A budget derived from information which is irrelevant to the actual or

Resource acquisition and resource planning, 1. List five different types of...

1. List five different types of resource that a company might consider hiring or leasing. Explain why the might choose these option instead of outright purchase 2. List three di

Types of treasury bills, Types of Treasury Bills Treasury bills are iss...

Types of Treasury Bills Treasury bills are issued at various maturities, generally up to one year. Thus, they are useful in managing short-term liquidity. At present, the GOI (

International bonds, International bonds are divided into two c...

International bonds are divided into two categories namely, foreign bonds and euro bonds. Foreign bonds are issued by a borrowing company in another

Operating cycle, applicability of an operating cycle in vegetable growing b...

applicability of an operating cycle in vegetable growing business

Hedging strategy, Crown Co. is expecting to receive 100,000 British pounds ...

Crown Co. is expecting to receive 100,000 British pounds in one year. Crown expects the spot rate of British pound to be $1.49 in a year, so it decides to avoid exchange rate risk

Explain about the audit risk, Audit risk Obtain understanding of ac...

Audit risk Obtain understanding of accounting and internal control systems. Sufficient to plan audit and develop effective audit approach. Professional judgement to

Long-term debt, Long- T er m Debt Long-term debt is a deb...

Long- T er m Debt Long-term debt is a debt obligation that has a maturity from the date the obligation was incurred of more than one year. The debt obligation com

Credit enhancement, To obtain an investment credit rating and make th...

To obtain an investment credit rating and make the transaction attractive to the investors, some type of credit enhancement procedure is usually necessary. In ord

The us pension fund system, The US Pension Fund System The US corporate...

The US Pension Fund System The US corporate pension system has matured along with the country's demographic cycle. It consists of both defined benefit plans and defined contrib

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