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  • Facilitating “Win – Win” Transactions in the Sale of a Business

    Dec 27, 2016

    It is common for parties negotiating a transaction involving the purchase & sale of a business to express a desire to complete a “Win – Win” transaction. A “Win – Win” transaction is a concept that is easily vocalized, but is often hard to conceptualize in a situation where the parties have distinctly divergent interests. At the most basic negotiating level in a business sale transaction the seller has a vested interest in obtaining the most favorable financial terms from their perspective and mitigating post transaction liability in negotiations. Conversely, the buyer has a vested interest in obtaining the most favorable financial terms from their perspective and obtaining the most comprehensive post transaction representations, warranties, and indemnification possible from the seller.

    Drawn as Venn diagrams the financial & legal positions held by the buyer & seller prior to commencing negotiations associated with the purchase & sale of a business probably do not intersect. It is the role of the professional business sale intermediary to find/create intersection points in the Venn diagram associated with the negotiations to establish a pathway forward to completion of a transaction. In a positive, “good faith” negotiation these intersection points are the basis for a “Win-Win” transaction.

    The philosophical concept employed at IBA by our merger & acquisitions professionals to facilitate “Win-Win” transactions is called the Law of Reciprocity or Golden Rule. Simply stated the Law of Reciprocity is the concept of treating other parties as you would desire to be treated yourself. This concept can be applied to almost every component of a business sale negotiation.

    A seller can be asked if they were growing by acquisition and had the opportunity to buy a competitor with all the characteristics of their company, what would they pay for the business.

    A buyer can be asked if they would be willing to provide a flat representation or one with a “to the best of their knowledge” legal modifier in reference to knowledge relating to the actions of employees outside of their direct observation if they were selling the company.

    It is very healthy to look at negotiations from the perspective of the other party when buying or selling a business. If the exercise is done in “good faith” reasonable, ethical parties can traditionally find common ground and complete a transaction. Extending the exercise to another circle, it is often beneficial for business sellers & buyers to ask their attorneys what they would advise if they were representing the other party. The positions articulated are often not far off from what opposing counsel is proposing, but has been vehemently rejected. IBA has a forty-two-year history of facilitating “Win-Win” transactions employing the Law of Reciprocity as a negotiation/education tool. It is the reason that the businesses we represent sell and parties years after the transaction is completed look back positively on the event.

    The Law of Reciprocity introduces a doctrine of fairness into business sale transactions. However, a second reason it is an effective tenet for creating an environment for “good faith” negotiations is that it is a universally held concept by ethical & honest people. Entrepreneurship is a “level playing field” that is blind to religion, ethnicity, gender, or sexual orientation. IBA has had the pleasure of facilitating over 4000 transactions involving people from virtually every demographic group and welcomes anyone wishing to sell or buy a business into our offices provided they are interested in completing a “Win-Win” transaction with transparency employing best practices.

    As we collectively start 2017, I, Gregory Kovsky as the President & CEO of IBA, encourage everyone to adhere to the following universal tenets. The world is a better place for all when that standard is achieved by society.

    Buddhism
    “Hurt not others in ways that you yourself would find hurtful”
    Udana-Varga 5:18

    Christianity
    “And as ye would that men should do to you, do ye also to them likewise”
    Luke 6:31

    Confucianism
    “What I do not wish men to do to me, I also wish not to do to men”
    Analects 15:23

    Hinduism
    “This is the sum of duty: do not do to others what would cause pain if done to you”
    Mahabharata 5:1517

    Islam
    “None of you (truly) believes until he wishes for his brother what he wishes for himself”
    Number 13 of Imam “Al-Nawawi’s Forty Hadiths”

    Judaism
    “What is hateful to you, do not to your fellow man. This is the law: All the rest is commentary.”
    Talmud, Shabbat 31a

    IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, and mergers & acquisitions community on subjects relevant to the purchase & sale of privately held companies and family owned businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.

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