In last week’s installments of your favorite legal blog, we reviewed the importance of the seller’s tax returns and how they are the starting points of a transaction.
We established that a seller who won’t reveal the tax return is likely not someone you want to do business with and someone who shouldn’t come to the negotiating table to begin with. But if they are revealed, and we know that both sides expect the other to embellish and low-ball, then we have reached the heart of the matter: Conflict.
Conflict can be a good sign that M&A is progressing properly because a quick turnaround could leave some stones unturned. According to a recent eweek.com article:
Although the median sale price of small businesses has increased over the last six quarters, businesses are taking longer to sell, according to BizBuySell’s second quarter report. A total of 1,935 closed transactions were reported in the second quarter of 2016, bringing the year-to-date total to 3,775, a slight improvement from the 3,743 reported in the first half of 2015.
I’ve been involved with sales that have taken anywhere from six months to well over a year. It’s to be expected — and with the new laws that have sprouted, not to mention the new financial thresholds that now qualify small businesses, there are more transactions that can take longer than both parties likely want.
How you manage the conflict is what ultimately will lead to the best possible outcome. Here are some theories and common techniques your advisor should implement to help you resolve conflict and see the transaction to completion:
Compromise. If time is of the essence, this is the way to go. It generally favors one side over another just a bit — think of it as losing the battle but winning the war. It can build a foundation of trust among both parties, too, if you ever want to do business again.
Win-Win. This is the least stressful agreement and is like a compromise only it’s mostly an even swap. Here, we approach the problem as an opportunity to resolve the conflict. Most outsiders would see this as the ultimate goal, but we lawyers always want the best for our clients, which means there could be some….
Forcing. Think of it as “being pushy,” “playing hard ball,” or whatever cliche you’d like to call it. I like taking people to the wall. This is how we stand up for ourselves and protect our interests in what will be a binding agreement. I expect pushback from the other side when this happens. If it doesn’t, then oh, happy day for you and me; we’ll get the deal we wanted or even better. This approach can expedite things or at the very least, demonstrate some strength.
There are other conflict management and resolution approaches we may explore. Feel free to contact Brinen & Associates when you are ready to consider buying or selling a business.