Close

Choose your country

Or view all businesses for sale

Worldwide

Negotiating a Business in Argentina

The time has come to negotiate your business. It’s a complex process, so where do you start? What documents do you need? What strategies should you implement? This guide will answer any questions you might have, including tips, examples, and other useful information.

Negotiating a Business

Why Is the Negotiation Stage Important?

Why is negotiation important

Negotiating is part of daily life. It happens amongst our families and friends, at local markets or in professional transactions. In the world of business, negotiating is just as common. Due to the complicated nature of business transactions, commercial and corporate negotiations require far more meticulous research, and legal and financial support. It takes years of practice to perfect, as well as a strategic and target-orientated approach.

A seller will always want the highest value for their company, and a buyer will want the lowest price with the least number of risks and liabilities. Although this is a professional transaction, it also requires concessions, flexibility, and integrity.

The bargaining journey requires a give and take approach, and the end goal should benefit both parties. The negotiation stage is your final hurdle. Your preparation, strategies, and understanding of agreements will determine the outcome, and your execution will have an influence on the outcome. Negotiating is truly an art, and there is an abundance of how-to advice out there.

Every selling or buying experience is different. Each will have its own circumstances, methods, and specificities, so each negotiation process will be unique. If you feel you may need to retrace some steps, look at our guide on selling a business or our guide on valuing a business. To assist you in the negotiating process, this guide will offer helpful advice, strategies, and examples for sellers and buyers.

Negotiating a Business as a Seller

Negotiating as a Seller

At this point, we will assume that you have completed some prerequisite checklists needed for the negotiation stage. This includes reaching a realistic asking price based on the businesses performance, future development, assets, and industry conditions. This asking price will most likely derive from specific sections of your business. Some examples can include:

  • The value of your assets
  • A value based on fair market value
  • The value of buildings and land you may own
  • The value of your shares

We will also assume that you have already formed some form of communication with potential buyers. Having professional assistance like a business broker and a legal adviser specializing in acquisitions is strongly recommended, as they can help you prepare for and navigate the sale.

You can never be too prepared

A business owner looking to sell will likely be familiar with every corner of their business. But to ensure a successful deal, you’ll need to take your preparation and research to a new level. You’ll need to conduct preliminary research on your buyers, including their goals, requests, and preferred outcomes. Think about potential questions they may ask you, and how you’ll answer these in a way that is convincing and reflects positively on your business. Do they have the necessary ethics, values, and finances to support your business post-sale? Anticipating possible questions and concerns will put you at an advantage. Familiarizing yourself with the buyer’s goals and internal strategies will help the negotiation journey run smoothly.

Before your first face-to-face meeting, formulate a clear agenda that will structure the meeting. This should include:

  • Answers to possible questions the buyer will ask
  • Questions you will ask the buyer
  • The location your meeting will take place
  • Discussion of contracts (this checklist is at the end of the guide)
  • Clear intentions, managing expectations and goals, including what you are willing to divulge at specific stages
  • Clear milestones and targets

Maintain a transparent arrangement

The negotiation process is a structured and professional endeavor with multiple dynamics at play. Ensuring you get the right price for your business is an integral part of this journey but maintaining a collaborative relationship with your buyer is just as crucial. Value is placed on communicating truthfully, even if that communication is something the buyer may not like. Remember that trust will not necessarily establish itself in relationships, but rather the contracts and signatures.

How you deal with people will depend on a specific country and their cross-cultural environment. Depending on specific countries and their cross-cultural environment. Regardless of this, you should never be aggressive and confrontational in your approach. Both parties want to get a rewarding outcome and will have bargaining strategies in place to do so. This may include tactics that can potentially annoy or frustrate counterparts, but they should never offend or insult someone.

Miscommunication and frustration are common during negotiations, so take steps to mitigate any conflict. Listen carefully and remain focused, and always summarize meetings to clarify any misunderstandings. The negotiations will either be agenda-bound, flexible or a synergy of both. It will be your responsibility to decide which one it will be.

When it comes to compromise, not be a push-over. If you feel that the buyer is biting off more than they can chew, stand your ground. Be assertive, but not aggressive. Be convincing, but always remain honest. If you compromise, ensure you get something back in return. Reciprocity will establish clear, professional boundaries.

Cooperate with due diligence

Once you have agreed on a deal, the buyer will begin to conduct due diligence. This is when the buyer and their team investigate your business before purchasing it. Essentially, this is an opportunity for the buyer to understand and evaluate the assets, rights and risks involved in the purchase, identifying any deal-breakers that can decrease their offer. This process will progress efficiently if you cooperate with the buyer. Have all the necessary information ready on request, both positive and negative. This can include:

  • Financial records
  • Legal and regulatory details
  • A list of stakeholders
  • Asset inventory and property lease
  • Reasons you are selling your business
  • Research into your market condition

The buyer will want to talk to your employees, so keep your team up to date with this process.

You have a realistic asking price in mind, and you would like to achieve it. However, this price is based on multiple variables, so it is likely to fluctuate throughout the negotiations. Nonetheless, if you have conducted detailed research regarding the value of your business, its market activity and comparable sales, your asking price should be a true reflection of its value.

If you are confident that your asking price reflects the value of your business accurately, stick to your bottom line and know when to walk away from a deal. If you don’t feel comfortable, or you feel that counteroffers are far too low, and your counterpart is making no concessions whatsoever, consider walking away from the deal.

Find a deal structure that works for you

While the right price is a crucial factor, it should not cause a tunnel vision approach. The buyer should share similar visions, values, cultural understandings, and motivation to keep your business running. Finding the right deal structure will take a lot of creative problem-solving and back-and-forth discussions.

To find a sale agreement that suits you both, be clear about your expectations, the buyer’s financing options and payment terms, agreements and warranties, and transition issues. Remember to summarize these issues for clarification. Inspecting and signing completion documents will be your last step. You can find details of the completion documents further on in the guide.

Sometimes, agreements can collapse. If you experience this, consider a BATNA (Best Alternative to a Negotiated Agreement). Weigh up the most suitable, alternative option to the initial proposed agreement, and determine how they measure against one another.

Negotiating a Business as a Buyer

As a Buyer

The process for negotiating a business for sale as a buyer and seller share considerable differences. From a buyer’s perspective, this will likely be a once-in-a-lifetime decision, so having a team that specializes in acquisitions is essential. This will be a major purchase, so delegate all legal and financial tasks to a professional team. You will always take on risks when purchasing a commercial entity, so seeking advice will not only prepare you for the risks, but also protect you from them.

While an advisory team is crucial, having your own comprehensive insight into the business will give you an advantage and demonstrate that you are serious about the purchase. Most importantly, it would be best to show the seller that you are ready to conduct an equitable negotiation. The negotiation process will be defined by the type of business you want to buy, including what part of the business you wish to acquire.

Research and preparation are crucial

To pave the way for a successful purchase, an understanding of the process and required skills are essential. Educate yourself on the business’s industry, the intricacies of buying a business, how to value a business accurately, and of course, the history and details surrounding the business you are interested in.

How much will you offer for the business? This answer should be based on credible research, and it will differ based on the industry you are buying into. Assess the marketplace and use this knowledge of economic conditions to your advantage. Economic conditions are different for each country, so it is vital that you update yourself on this knowledge. Know your financial limitations, including your down payment and any loan agreements you may need to sustain the business post-sale. Always avoid situations of future debt.

Through this research, develop your lowest offer and your best offer, ensuring that both are fair, do not undermine the seller, and allow some room for bargaining. When making your offer, consider the following elements:

  • Will you require seller financing?
  • Will the final sale be subject to the business’s performance?
  • Is the existing inventory modern or outdated?
  • Will you require the seller to stay on board post-sale? If so, what will their compensation be?

There are multiple parts to consider here, and that is why a solid advisory team is valuable. Remember that unique circumstances will define the negotiation process but try and stick to your milestones and targets.

Maintain a mutually beneficial relationship

A buyer and a seller are equally responsible for maintaining a trustworthy relationship based on truthful and direct communication. While a win-win negotiation is an ideal outcome, it is not always possible. You may need to pick your battles and remain grounded if a negotiation does not work in your favor.

Putting yourself in the seller’s shoes can help you understand their perspective, and it can help generate sincerity in your interest in the business. Negotiations can be tiring and lengthy, so expressing your intentions for the negotiation upfront will help manage boundaries and expectations. Remember that the seller has probably put a lot of energy, time, and resources into building their business, so treating them with respect will build a solid foundation and create motivation to complete the deal.

However, a buyer usually assumes more risk during a deal, so this respect should be mutual. Stand firm against your decisions and requests, primarily if you identify any deal-breakers. While compromise is important, finding a balance between being accommodating and assertive will be challenging. If you become submissive, the seller and their team can exploit this.

Due diligence: your chance to identify risks and opportunities

Devils and angels are in the details. This is a critical step for a buyer, as it will uncover the risks and opportunities of the acquisition. This process should only start once a purchase offer has been made and signed. Due diligence aims to investigate the legal, financial, and commercial position of the business you want to purchase. It should be highly detailed to provide protection and granular insights into the acquisition.

This is your opportunity to identify any problems that need attention, and to assess the overall environment of the company. Some information your advisory team should inspect is:

  • Financial records (profits, losses, balance sheets, cash-flows, income tax returns, at least three years of annual reports)
  • Assets (premises, equipment, machinery, intellectual property)
  • Inventory of assets (quantity and value, depreciation)
  • Insurance contracts and lease agreements
  • Permits and licenses
  • Health and safety practices, adherence to government regulations and industry conditions
  • Relationship with clients, vendors, and business partners
  • Conditions surrounding the sale (reasons for selling, how long the sale has been on the market)
  • Threats, future profitability, and survival
  • Industry conditions, trends, and possibilities

Find a deal structure that works for you

There is no clear-cut answer for the best deal structure, as the original circumstances of your acquisition will define it. As a buyer, you will want the lowest price possible, calculated from credible research. While you want the negotiation process to be fair, you also want the scales to tip in your favor. A suitable deal structure will take time to evolve, and it will require experience and a clear understanding of your and the seller’s goals and limitations. If you find that your deal collapses, you may need to consider a BATNA (Best Alternative to a Negotiated Agreement). This will require you to weigh up the most suitable, alternative option to the initial proposed agreement, and see how they measure against one another.

Documents and contracts to consider when negotiating a business

Documents and contracts to consider

All professional transactions will involve a lot of legal and financial documentation. The first step is to clarify some purchase offer details – is it an asset purchase or a shares purchase? You should also discuss the offer price and payment terms. This will ultimately dictate future documentation and contracts. Your legal and financial advisors should scrutinize these documents and provide advice before beginning the negotiation process or signing any documentation. You’ll need to clearly define the legal, financial, and commercial structures of the deal. While every transaction will be unique and defined by certain variables, these are typical documentation you should consider:

Confidentiality agreement

Your legal team should construct a legally binding confidentiality agreement that should be signed and dated by all parties involved. Of course, you’d want to keep the details and intentions of your sale private and protected.

Sales memorandum

This document will not be legally binding. It usually outlines the main terms of your deal, covering as many details as possible. This can include your business sector, how long it has been running, all your financial information, details of your staff and their employment contracts, specifications of your premises and building, and other conditions. This agreement should include a comprehensive outline of all the deal terms and is not limited to the examples mentioned above. Your financial and legal team should be closely involved in drawing up this document.

Heads of Terms

To avoid any disputes in the negotiation, your advisory team should draw up a contract that summarizes the deal. This document is subject to contract (unless there are confidential issues) and should include price and payment structures, IP, warranties, indemnities, earn-outs, conditions for completion and more. Once again, your advisory team should be involved in this.

Completion Documents

Once due diligence has been carried out, and both parties are ready to proceed, ensure all agreements are documented and every detail of the sale is set out in the sale agreement. Your final documents will include everything ranging from tax deeds, indemnity agreements, minutes, transfer documents, service agreements, finance details, warranties, seller and buyer protection, and covenants. Organizing and processing these details can be overwhelming and confusing without professional support, so a dedicated financial and legal team will be your guardian angel.

Business Negotiation Tactics

Tactics and Strategies

Practice (and research) makes perfect

Every piece of advice you read on negotiating will exemplify the need for preparation and research. Whether you’re bargaining a discount at a local market or bargaining for a million-dollar corporation, take every opportunity you can to practice. Part of this practice includes research concerning your financial requirements and limitations, similar deals, and social profile checks. Preparation is the best negotiation tactic.

Study market trends

A business’s value will always fluctuate according to its industry. This type of knowledge is a valuable negotiation tactic because it can be used as a rebuttal if a seller, for example, is too opportunistic about the future profitability of their business. Your familiarity with market conditions can be used as justification for an offer.

Always summarize to clarify

In a negotiation, you will be required to digest a lot of information, and some might slip through the cracks. After every meeting, summarize the information, send it in an email, file it, and clarify it. This strategy will ensure that both parties are on the same page, literally and figuratively. Although your advisory team will be responsible for all the paperwork, updating yourself on specificities is wise.

Be creative

Who should issue their proposal first, the seller or the buyer? Should your first offer be strong and assertive, or should it reflect a desire for a mutually beneficial outcome? While this may sound contradictory, this type of binary thinking can be limiting. It can be a useful tactic to shape your decisions creatively. This can illuminate alternative ways to move forward in the negotiation and reduce anxiety and risk.

It’s okay to walk away

Both parties have likely spent a lot of time and energy on this process, which can become tedious and demotivating. However, fatigue and frustration are not as bad as the wrong decision. If you have a bottom line, stick to it. Walking away from a deal that makes you feel uncomfortable, demonstrates too many red flags, or doesn’t align with your goals is more strategic than committing to a decision you will regret.

There are multiple strategies for negotiating a business. Depending on your experience and circumstance, you and your team will assess which tactics will work in your favor.

Business Negotiation Examples

To illustrate the negotiation process very simply, here are some industry-specific examples:

Manufacturing Business

Manufacturing Negotiation examples
  • The seller will start by getting an accurate value of the manufacturing company.
  • The seller will vet buyers based on professional and financial conditions
  • Initial communication between buyer and seller
  • Both parties indicate that they are interested and provide a potential value (this will change)
  • The buyer will visit the location, and questions are likely to follow post-visit
  • Letter of intent (LOI) is submitted
  • Due diligence
  • Purchase and Sale Agreement (PSA) will commence
  • Closing deals and transition

Retail Business (lease focused)

Retail example

When negotiating a retail business, the location and lease will significantly impact its value and define the negotiation process. After all, you cannot have a retail business without the space. Ensure that you have a set budget and non-negotiable requirements. Then:

  • Hire someone who specializes in retail mergers and acquisitions, including a lawyer
  • Always have a counteroffer to the landlord’s base rent
  • Investigate the premises yourself, including its size (the square footage space can often be inflated)
  • Negotiate a minimum lease length with as many benefits as possible
  • Discuss a time period you can rectify mistakes – in case you breach the lease, for example
  • Negotiate on penalty fees (like early termination)
  • Consider clauses that will protect you, like a sublease clause or a clause preventing your landlord from allowing competitors to rent in the same area as you
  • Negotiate small perks and possible discounts (especially if it is a corporate lease), like free parking, a rent-free fixing period or free employee Wi-Fi

Summary

It’s clear that negotiating a business is not a straightforward process. It is a challenge that you will only overcome through granular research, industry knowledge and preparation. It can be an exhausting process, but a meticulous approach will guarantee a successful outcome for both parties. Be smart with your tactics but be respectful and calm in your approach. Seeking support and advise from entities that specialize in industry-specific acquisitions is highly recommended, considering the legal and financial nature of buying or selling a business.

Bargaining is a skill that needs to be mastered. Sometimes things won’t go as planned – you might bump into unforeseen problems, deal fatigue, and frustration. While this is common, you can take steps to try mitigate unwanted outcomes. For further support and advice, contact our team.

Now, go and achieve your goals!

personalised tool personalised tool

Are you a Business Owner?

Set up your Private Seller Account and create your listing today

Get Started Here

Are you a Business Broker?

Set up your BrokerWeb Account and list multiple businesses

Get Started Here