9. Negotiations Between Seller and Buyer

Even if the outcome of the first meeting with the prospective buyer was positive, this is by no means a guarantee of a final agreement and subsequent signing of a purchase contract. This is due to the very object of the sale, about which all facts have not yet been fully disclosed, as well as the uncertainty about the person of the future buyer, who may unexpectedly abandon their purchase intention or simply because a better company becomes available for purchase in the future. Better in this context does not necessarily mean better, but rather closer to their expectations, e.g., geographically without the need to relocate. It is therefore more than advisable to have several candidates in reserve, so that a suitable competitive position can eventually be created and a final buyer can be selected. And most importantly, you do not have to start the entire process from the very beginning if the sole buyer decides to withdraw from the purchase.

In practice, there are frequently buyers who, after the first meeting, already want to schedule additional meetings. Subsequent meetings are usually related to topics clarifying often misunderstood or more detailed facts, but sometimes the buyer tries to obtain new concessions from the seller through this behavior (salami tactics). This can be very unpleasant for the seller and costs them time. When it comes to the second meeting, this behavior is often a sign of a missing decision or a manifestation of tactical maneuvering.

For small and medium-sized enterprises (SMEs), it is possible to assess the activity and understand the company's operations after two, maximum three meetings -- this assuming the buyer prepares intensively for the negotiations and is seriously considering the purchase. If further meetings are needed, it is necessary to set a reasonable deadline for the buyer to respond to the submitted offer and make their decision, whether positive or negative.

In all discussions and negotiations, the question of whether it would be conceivable to pay the purchase price in installments over several years almost invariably arises. This question is entirely legitimate from the buyer's side. However, sellers often reject this request, and buyers somewhat expect that their proposal will not be positively received. There are, however, companies that can only be sold subject to installment payment of the purchase price. The following rule applies: If the company has been creating added value for years and the purchase price is based on consistently achieved profits, it should be the rule that the full purchase price is paid at the time of contract signing. If there have been or will be significant fluctuations in earnings (profits) in recent years or in the plans for the coming years, then payment of the purchase price in installments is customary, whether as a fixed amount or dependent on achieved and agreed-upon results. In addition, lending institutions that often finance company purchases frequently push for a seller loan, as this reassures them that the seller also expresses confidence in the business development of their, now former, company.

Of course, it is customary and often necessary to involve experts in the entire process, such as lawyers, tax advisors or accountants, as well as business consultants. The corresponding interest is predominantly on the buyer's side -- this often involves a life-changing decision -- and the seller is advised to be sufficiently equipped to respond appropriately. However, the seller should always maintain the upper hand and manage the entire process. The first two professional groups mentioned have a tendency to get entangled in detailed questions and want every small point maximally answered, as if the entire deal depended on that very point. In most cases, this is actually not the case.

Experts can enter the negotiations before or after the contract signing, and it does not necessarily have to be only about the price, but also about the seller's role after the actual sale, the employee situation, supplier-customer relationships and their structure, acquisition of existing assets including real estate, tax and legal issues and transaction structure, assumed ownership, the company's balance sheet status at the date of transfer (e.g., what minimum working capital will be available at handover), etc.

If an ad hoc agreement on a single negotiation point is not possible, it is advisable to set this point aside, similarly to what coalition parties do in politics, with the aim of achieving a pleasant discussion climate so that progress can be made on other negotiation points. If agreement cannot be reached later either, it is recommended to involve a neutral, and in any case qualified and experienced negotiator as a mediator. In the case of controversial issues, the question is whether such demands or rejections are exaggerated or customary in the market, and this is precisely where the perspective of a professional is very useful and valuable.

After clarification of all points, the offer is submitted. Given that this is not yet the final purchase agreement, this offer is legally non-binding. It is usually concluded in the form of an LOI -- Letter of Intent. This can be perceived as an acceptance of the seller's declaration. Or it can be a counteroffer. In this case, the seller should reserve a reasonable amount of time to respond to the counterparty's offer in order to provide sufficiently substantiated arguments in favor of a better offer. Usually, a compromise is reached in this manner.

Finally, one trivial recommendation. After each meeting and conversation, prepare meeting minutes and share them with the other party. They should be recorded with details of the discussion content and contain a task list (To-do list): Who does what and by when. It should also be noted on which points agreement was reached and on which points agreement still needs to be found. Due to the phenomenon of selective perception, the problem frequently arises that one party believes an agreement has already been reached, because certain statements were correspondingly misinterpreted. The seller's perception differs from the buyer's perception and vice versa.