The missing step

This post is part of my ongoing series about mergers and acquisitions. You can take a look at the rest of my m&a posts here. So – you have a term sheet/letter of intent/memorandum of understanding fresh off your e-mail from the other party (this could for be an acquisition, partnership,  join venture, financing, etc.). Now what? If you follow standard operating procedure you’l  call your lawyer, mark up the draft and send some kind of response back to the other side. Sounds logical, but you’re missing a key step. I wrote a post a few months back about the importance of listening when you are around the negotiating table.  The same is true before you even get to that step, however. Perhaps the most important step in any transaction is calling up the party you are dealing with and asking them to walk you through their term sheet. You’ll be tempted to start negotiating on this call, but don’t. Just listen to what they have to say. Sure they may position a little bit or try to get you to agree to certain terms (don’t do that, by the way – tell them you’re just here to listen so you fully understand the deal they are offering), but you’ll get lots of great information about what’s important to them and what is less important. Perhaps they’ll even give on some terms (a very common occurrence).

You will almost always be in a better position after this call to formulate your negotiating strategy. Remember – all information is power in a negotiation. And knowing where you are starting from serves as the framework for the entire process.