Advice for Entrepreneurs, Fund Raising, Mergers and Acquisitions, Mirus Capital Advisors
Time is on whose side?
The refrain of the song popularized by the Rolling Stones goes “time is on my side, yes it is.” How time is used in a negotiation, who manages the timetable and who benefits from a faster conclusion to the negotiation can be influential factors in the outcome. Time is usually on someone’s side in a negotiation. So here are a few questions to consider: Is it on your side, or the other party’s? Who is managing the process? Have things changed since the discussion started?
One recent transaction involved an acquirer who was under pressure to close a transaction on a short timetable. The terms with the sellers had been fully negotiated, but the acquirer needed outside capital (bank debt and equity) to finance the deal. Timing was driven by exclusivity – it was running out and the buyer’s team was incentivized to close before it did. While the team had time to bring a few possible financing partners in, time was not on the the acquiring team’s side. They lost on most points in the final week before close.
Another unfortunately common situation arises with companies that are cash flow negative. While the company may be creating value while losing money, the “shortening runway” effect of running low on cash can negatively affect how decisions are made, what the company’s options are, and how negotiations proceed while that runway grows shorter.
On the flip side, companies considering M&A and financing options can take steps to actively manage the process, controlling the timetable to the extent feasible and driving better terms for themselves. Putting time on your side of the table can have a dramatic effect on the outcome of a negotiation. Through better management of decision makers’ time and energy, and managing competing offers and the sequence of negotiations, negotiating teams can drive better deals for their companies.
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Alan Fullerton is a partner with Mirus Capital Advisors. He works with owners of middle market businesses and can be reached at fullerton@merger.com.
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