Once we start a sale process, many of our clients ask us, “When do negotiations start?” The simple answer is that the entire process is a negotiation. Negotiations start with the NDA and usually do not end at closing because there is a post-closing True-Up in almost every deal (as discussed in Deal Note® 22, published in June of 2022). Not only are key documents, like NDAs and LOIs, formal negotiations, but every interaction can be viewed through the lens of a min-negotiation, which we call “signaling.”
Signaling is important and can change the tone of the sale process. We encourage our clients to deliver clear and firm signals to the buyers, to facilitate a successful sale process, and we advise our clients to carefully interpret the signals of the buyers. If a potential buyer attends a due diligence session unprepared, this signals their interest is not sincere. If a buyer submits an IOI after the deadline, this signals that their interest is not sincere. Accordingly, we help our clients interpret these “buyer signals,” and we encourage our clients to focus their efforts on buyers who are well prepared for due diligence meetings and submit IOIs on time.
Over the past 23 years, we’ve seen how important “signaling” is to a sale process and we have learned how to send the right signals to the buyers and how to interpret the signals being sent from the buyers.
Have a great day everyone,
Ryan Kirby
Junior Partner
