Are You “Friends and Family”?
It has been said that when you’re negotiating to buy something, you’re also selling. The negotiated acquisition involves trust and risk for the seller. As a buyer you are selling yourself to the seller as a party that the seller should do business with.
Over the years I have encountered many types of styles and strategies from buyers and their counsel. A common buyer strategy is to criticize and disparage the asset trying to be acquired in order to obtain a lower price. This may work on the first deal, but that may be the ONLY deal you ever do with that seller.
Take for example a developer who is launching a hot new condo project. Often the initial launch event will offer discounted pricing and be by invitation only to “friends and family”. Who do you think is on the invite list – the buyers who have devalued and demeaned the developer’s previous project to get the best deal possible, or the steady buyers who value the developer’s vision and consistently purchase the developer’s offerings? What about lenders? Every year they have a mandate to lend certain amounts.
Do you think they are actively trying to place these funds with customers which negotiated every basis point and legal provision of the loan documentation, or with their customers which value access to their debt and have used them as a preferred source year after year on the same terms?
We had a client a few years ago selling bare land subdivided lots subject to a building scheme. He asked me how he could ensure as cheaply and efficiently as possible that purchasers would comply with the building scheme requirements. There were complex legal options which I discussed with him, such as registering an option to purchase in the client’s favour against each sold lot exercisable upon a default by the purchaser in failing to comply with the building scheme. However, I told him that the CHEAPEST AND MOST EFFICIENT thing to do was to choose his buyers very carefully and that in his experience he must have come across a number of buyers that would be interested in the product and that he could trust. Who do you think was on this list? A number of our clients look to the same parties to partner with on new deals every year because of their experience on the very first deal they did.
When negotiating to acquire something, keep in mind that assets that are truly valuable will typically be offered to those that acknowledge their value. How many short lists are you on? How many would you like to be on?
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