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Negotiation Skills in M&A Transactions

A thorough overview of the negotiation process

Introduction to Letters of Credit Training Course

A one-day course

  • Live role plays on Mergers & Acquisitions
  • Experienced trainer, an M&A banker with years of negotiation experience in Europe and the Middle East
  • Delegates encouraged to bring their own scenarios to ‘solve’ during the session
  • Comprehensive material covering negotiation tactics and personalities
  • Practical advice on tackling negotiation issue, including deadlocks
  • Learning how to understand the other party’s point of view
  • Review of underlying price mechanisms, sale and purchase agreement’s key clauses, completion mechanisms, earn-outs and key other M&A issues

  • Get an overview of the negotiation process in multiple stages such as the preparation, planning and the bargain
  • Be introduced to the typical negotiation roles and the experienced negotiators know how to switch roles depending on the situation
  • Have explained to them the ten fundamentals principles to negotiation techniques in M&A and the six rules of influence: reciprocation, scarcity, authority, commitment, liking and consensus
  • Master the BATNA (Best Alternative to a Negotiated Agreement) and ZOPA (Zone of Possible Agreements)
  • Be taught about trading concessions to maximise the negotiation between the two parties

Negotiation Process

  • All negotiations, consciously or unconsciously, go through a number of logical steps
  • Stage 1: preparation and planning
    • Objective building and fact-finding
    • Collecting the evidence (organising the facts)
    • Stakeholder analysis (identifying the key decision-makers)
    • Position perception
  • Stage 2: enquire and test assumptions
    • Build rapport & create a positive environment
    • Avoid hostility under all circumstances
  • Stage 3: propose
    • Make the offer first or let the other party make the first proposal
    • Deliver your proposal with little emotion
    • Never offer your final position at the start
    • Aim high whilst being reasonable
  • Stage 4: bargain
    • Trade concessions rather than just make concessions
    • Avoid “irritators” and overly frequent counter-proposals
  • Stage 5: close
  • Summarise key elements agreed
  • Discuss next steps and tasks assignment
  • Case Study I: Initial negotiation role play. Participants will play the role of either a buyer or a seller to practise the five stages of negotiation. They will negotiate with each other in groups of two professionals. We will compare the results across the group and discuss the pros and cons of the different approaches used

Negotiation Personalities

  • Typical negotiation roles include:
  • The leader is generally the negotiator with the most experience
  • The good guy is the person with whom most of the members of the opposing team will identify
  • The bad guy attempts to make the opposition feel that the agreement could stall any minute
  • The hardliner takes a tough line on everything
  • The sweeper picks up and brings together all the points of view expressed and then puts them forward as a single coherent case
  • Experienced negotiators know how to switch roles depending on the situation
  • Case Study II: Participants reflect on their own personality and what role(s) they currently play or would like to play in M&A negotiations. They exchange with the other participants and hear different viewpoints

M&A Negotiation

  • The ten fundamental principles to negotiation techniques
    • Have a BATNA (Best Alternative to a Negotiated Agreement)
    • Master the ZOPA (Zone of Possible Agreements)
    • Set maximum and minimum objectives
    • Keep analysing the deal variables
    • Always aim high
    • Never give a concession – always trade it
    • Keep the whole relationship in mind
    • Know when to walk away from a deal
    • Know the negotiation process
    • Select an effective negotiation strategy
    • Change your strategy if necessary but never change your BATNA
  • The six rules of influence: reciprocation, scarcity, authority, commitment, liking and consensus
  • BATNA
    • Before the negotiation, decide what you will do if nothing comes of the negotiation
    • Unless you have a plan B, your anxiety may reach dangerous levels
    • BATNAs set the threshold in terms of the full set of interests that any acceptable agreement must exceed
    • Both parties doing better than their BATNAs is a necessary condition for an agreement
  • Zero-sum fallacy
    • The zero-sum fallacy is a situation in which a participants gain (or loss) is exactly balanced by the losses (or gains) of the utility of the other participant(s)
  • Resolving deadlocks
    • Difficulty in reaching an agreement due to valuation or risk allocation issues
    • Breaking deadlocks by finding a mutually agreeable solution
      • Understanding the causes of the deadlock
      • Identifying potential contingent consideration: earn-outs, clawbacks, escrow account, indemnities & warranties insurance

Reminder: Structuring the Offer to Enhance Value

  • Start with cash-free, debt-free transactions
  • Normalising working capital and CAPEX
  • Completion accounts vs. lockbox
  • Assessing the key value drivers
  • Bridging the value gap
    • Deferred compensation and earn-outs
  • Representations & warranties as a tool for limiting exposure
  • Valuing synergies
  • Indemnities and an escrow account
  • Warranties and indemnities insurance
  • Negotiating key terms between signing and closing

Final Case Study – Introduction

  • The participants split into two groups, a buyer (a multinational company) and a seller (a private equity firm)
  • The key focus will be on negotiating and executing deals smoothly and correctly in the best interest of the parties while arriving at an acceptable solution for both parties

Final Case Study – The M&A Role Play

  • The seller has been running a competitive process and has received non-binding offers from several parties
  • One of the buyers is trying to obtain exclusivity and has asked for a meeting with the seller to discuss their bid and the key clauses of the SPA including:
    • Pricing and timing of payment;
    • Closing mechanism: locked box vs. completion account;
    • Earn-out or deferred payment structures;
    • Representation & warranties and related indemnities;
    • An escrow account, bank guarantee, warranty & indemnity insurance;
    • Management retention through stock options;
    • MAC clause

The trainer has more than 20 years of experience in accounting and investment banking. He is an experienced financial trainer who has delivered courses for leading financial institutions and central banks in the City of London, Wall Street and around the world in the areas of Corporate Finance, Valuation (Industrials and Banks), Financial Modelling, M&A, LBO, Financial Accounting, Capital Markets, Bank Regulatory Capital and Financial Risks, both in English and French.

He began his career as a Credit Analyst at Banque Continentale in Luxembourg, where he conducted credit analyses for short and long-term credits and participation in loan syndications. He then worked as a Senior Auditor for Deloitte & Touche in Luxembourg companies, auditing and preparing financial statements for a variety of banks, insurance, investment funds, venture capital and commercial companies.

He continued his career in Investment Banking at Citigroup (ex-Salomon Smith Barney) in London and New York where he worked on a variety of M&A, LBO and debt offerings, mainly for financial services clients. He was involved in the EUR 20 billion public offer of Crédit Lyonnais by Crédit Agricole, one of the largest European banking transactions.

He then worked as a Vice-President in the internal M&A department of Barclays Bank in London where his experience included the acquisition of ABSA for US$ 5 billion, one of the leading South African banks, the purchase of ING Private Banking in France and the failed acquisition of Banco Atlantico in Spain.

Recently, he was a Director in the Investment Banking department of Commercial International Bank (CIB), the largest non-government bank in Egypt, where he has successfully completed several transactions including two sell-side M&A deals, one follow-on equity offering and a delisting. He worked extensively with leading sovereign wealth funds, private equity firms and prominent families in the UAE, Qatar, Kuwait and Saudi Arabia.

The trainer is currently a senior advisor to an M&A practice based in Paris and focuses on buy-side and sell-side transactions, mainly in the technology sector.

The trainer has an MBA in Finance from the Kellogg School of Management in Chicago and a Bachelor of Science in Finance from Groupe INSEEC (“International Management Institute of Paris”). He also holds « Series 7 » and « Series 63 » US licenses.

This course has been developed to provide principal investors, bankers, lawyers, consultants and other M&A professionals, with the key soft skills to negotiate and close a sell-side or buy-side transaction in a structured and uniformed approach.

The trainer will discuss the main negotiation techniques, including reciprocity, BATNA and trading concessions. The trainer will also cover key M&A mechanisms to structure the offer to enhance value including earn-outs, “lock-box” and “completion accounts”, synergies, representations & warranties, etc. The participants will then role-play in separate groups on an M&A case study with participants playing buyers and sellers.

The programme is aimed at participants with some experience of Sale and Purchase Agreements who are looking to acquire in-depth knowledge of these key financial issues.

The programme will refer to relevant cases drawn from both England and US jurisdictions. Participants will also be given cases to reinforce learning objectives.

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