Negotiating a business sale

You have made initial contact with a buyer. Now it is time for the next step in the business selling process: the journey from contact to contract. It starts with negotiations. Negotiating is a tactical and strategic process in which there is something at stake for both parties, and from which both parties hope to gain.

Decide in time who will be negotiating on the business sale: you, your consultant, or both of you. 

Strategic process 

Before you enter into negotiations, you need to determine your strategy. Carefully plan your strategy and put yourself in the buyer’s shoes. While the price is important, you and the buyer also need to come to an agreement together on the strategic benefits of the transfer; only then will there be time to enter into more in-depth negotiations. You should hand over the exclusive right in the negotiations to the potential buyer at the latest possible stage, as you want to make certain you are on the same page as to price and other sales objectives. 

Who is involved in the negotiations? 

The negotiation process can be tough going, and you are often the only party who has an emotional stake in the process. It is therefore recommended that you hire the services of an experienced, knowledgeable consultant to conduct the negotiations on your behalf. If you are personally conducting the negotiations, you should be open and honest rather than choosing an outright attack strategy. You should also inform the buyer of any areas for improvement in your business at an early stage, taking care not to put off the buyer. If they find out about these areas later, without being told, the selling price may fall – or the transaction might be called off altogether. 

Division of duties 

Ensure that there is a clear division of duties between you, your consultant, and any other parties involved on the sales end. Discuss the strategy and tactics with each other. Conduct the negotiations at a location and a time that suit you. One of the first items of discussion should be the principles applied by you and the buyer; for example, the valuation method to be used. 

Finalising negotiations with a sales contract 

While the negotiations between you and the potential buyer are ongoing, a key component is recording the terms of your agreement in a

letter of intent. The next step is for the buyer to conduct a due diligence investigation. The outcome of this due diligence investigation determines whether you need to continue the negotiations. If all goes well, the negotiations should lead to an agreement. The buyer is responsible for drafting the sales contract. As the seller, you should hire the services of a legal adviser to review and assess the sales contract. The buyer will subsequently pay the acquisition price. If the business you are selling is a Dutch besloten vennootschap (private limited company), the shares are transferred by means of a notarial deed. The final step is reporting the transfer to KVK.