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3 Negotiation Advantages of Competitive Tension

Thinking of selling your business? An exit strategy you cannot afford to ignore.

Competitive tension is a key factor that can increase the value and improve the outcome of a business sale. This occurs when multiple potential buyers are interested in acquiring a business and are competing with one another to secure the deal. In such situations, the seller is often in a stronger negotiating position and can leverage the competition to achieve better terms and conditions.

Here are some of the benefits of competitive tension when selling a business:

Increased Sale Price: When multiple buyers are bidding for the same business, the competition can drive up the sale price, as each buyer tries to outbid the others. This can result in a higher sale price for the seller, as the buyers are motivated to pay more to secure the deal.

Improved Deal Terms: Competitive tension can also lead to better terms for you the seller, such as increase completion payment, more favourable deferred or earn-out provisions, and a softer position regarding warranties. The seller will always be in a stronger position to negotiate these terms when multiple buyers are interested in acquiring the business.

Increased Certainty: When multiple buyers are bidding for the same business, the chances of the sale failing or falling through are reduced, as the seller is in a stronger position to choose a buyer that is most likely to complete the deal. This can increase the certainty of the sale and reduce the risk of the transaction not closing.

In conclusion, competitive tension can have a significant impact on the final terms of a business sale. By leveraging the competition among multiple buyers, sellers can achieve a higher sale price, improved deal terms and conditions, increased certainty, increased competition, and improved due diligence.

As such, competitive tension should be an important consideration for any seller when they are preparing to sell their business.

If you are considering an exit in 2023/4 and will be happy to discuss the market and your options in confidence. Please email tony@vexus.co.uk

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