What Does Negotiated Sale Mean?
A negotiated sale is a process that includes only a limited number of potential buyers, and usually includes one interested party with a high probability to close the transaction. The benefits of a negotiated sale are confidentially, efficiency, and the speed of the sales process. Negotiated sales usually come about from unsolicited offers by logical buyers, or initiated by investment bankers who already have a relationship with potential buyers and see an immediate fit with a company for sale.
Divestopedia Explains Negotiated Sale
A negotiated sale is not as disruptive to operations as a controlled auction process because it is more discreet.
Here are some pros of a negotiated sale:
- If you have been approached by a logical buyer that will benefit from operational synergies, a negotiated sale shows good faith and trust while building a relationship with the soon to be acquirer.
- The offer could meet your purchase price expectations and terms without the need to entertain many other offers.
- Moving ahead with a negotiated sale does not preclude you from declining the offer if the deal doesn't make sense.
On the flip side, some of the cons of a negotiated sale are:
- You won't have any comparative offers to really assess if you are receiving fair market value. Will you be able to sleep at night not knowing for certain that you recieved the best price for your business?
- You will have less negotiating power because the buyer knows they are the only one at the table. The initial offer in the LOI might look great, but during due diligence the buyer might grind down the price given your lack of other alternatives.