The most motivated party in an M&A deal is the one most likely to cede power to the other side to make sure the deal goes through. But what exactly provides this motivation? Several factors:
Interest: The side that has the most interest in doing a deal probably has the least power because that party will be most willing to compromise in order to get a deal done.
Although you don’t want to appear overly interested to do a deal, you don’t want to inadvertently appear blasé, either. Failure to show interest, respond to requests, and answer questions may cause the other side to call a halt to the process because it’s concluded you’re not interested.
Desperation: Nothing spells “weak negotiating position” like the smell of a desperate owner who is desperate to do a deal desperately quick! Desperation often indicates an impending business failure, thus greatly increasing the willingness of the owner to accept a deal, any deal.
Boredom: A business owner who is bored and wants to move on to something else can unwittingly become a highly motivated Seller. Broadcasting that boredom to potential Buyers puts those Buyers in a huge power position.
Time: Time is the wild card in the motivation game. A Seller who wants (or needs) to do a deal right now will likely cede power to Buyer. Conversely, the longer the process takes, the more the power may flow back to Seller because Buyer becomes the one who has invested time and money and increasingly needs to get the deal across the finish line.
Money: Deals don’t get done for free. Buyer and Seller have to retain advisers. The more money one side spends, the more that side (often Buyer) wants to get a deal done so as to not waste that money. Buyers are most often guilty of overspending.
The more money a side spends during the process, the greater the odds are that that side will want to get a deal, any deal, across the finish line. No one wants to spend money and have nothing to show for it.