Negotiating with Founders
Cofounder and Former Commercial Director at The Access Group
inpractise.com/articles/software-negotiation
Why is this interview interesting?
- How to navigage negotiations with founders of target companies
Chris Tossell
Cofounder and Former Commercial Director at The Access Group
Interview Transcript
I’m really curious about your experience and learnings in negotiation. You mentioned one tip earlier, where you gave a bit of logic around that. You said, this is the multiple we got for our business; it’s much larger than yours, therefore, these are the boundaries. What other techniques do you have, in negotiating with founders, to sell their baby?
They might say, I want X for my business and you’re talking about less. The way to get value for your business is by earn-out. You talk them through the earn-out. The immediate reaction on an earn-out is that it is there to not be paid. The job gets easier, the more companies that you buy. We can say, we bought this business, please talk to them. And this one, please talk to them. The guys are still there; he’s just made his earn-out. We are genuine about that. Establishing the fact that you are genuine about what you say is important.
What you say and how you choose your words is very, very important. We were going to buy a business, where the choice of one word practically ruined the deal. I had met with the founder and his wife. We got on very well and we had breakfast. We’d got an offer in place. It was a very, very nervous seller and very strong wife, who wasn’t part of the business. But he wasn’t going to do anything unless she did something. They got a little bit tetchy about the whole process. We decided to have a meeting, there was a very difficult lawyer; the whole thing was very difficult. We sat either side of the table, to have a chat.
At some point in this meeting, she said, we thought you were a really nice guy and really clever and we wanted to do the deal. I said, we thought Andy was a clever guy. She took that really badly, as if I had said, we thought he was clever, but he isn’t. If I’d said, we think Andy is a clever guy, it’s a completely different story. She went off like a rocket. He did do the deal, but I didn’t do it. I had to step away. I apologized about four times, by email and by phone and said I had misspoken, which I had. But it just shows how one word can trigger a reaction from a target.
The difference between thought and think, I learnt a big lesson there.
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