Negotiation culture DD
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The ability to properly negotiate internally and externally should be part of the value of a company. Your thoughts?
I completely agree. A company that negotiates well with suppliers, customers, and employees gets better deals and lower costs – which directly improves its value. During due diligence, this can be assessed by reviewing contract terms and comparing supplier pricing to industry benchmarks. If a company consistently gets favorable terms, that is a competitive advantage worth recognizing in the valuation.
I agree there should be some consideration but I do have some reservations about increasing the value based on negotiation skills. My first question is shouldn’t the ability to negotiate show up in the profits and cash flows? My next question is what if the success from negotiation is mostly due to long term relationships built over say, twenty or thirty years. Would we expect those relationships to automatically be transferred to a new owner?
I think negotiation capability can contribute to a company’s value, but it should be assessed carefully. Strong negotiation skills can lead to better supplier terms, stronger customer contracts, improved working capital, and ultimately higher profitability. However, I agree that the key question is whether those benefits are sustainable after a transaction.
From a due diligence perspective, it is important to understand whether favorable outcomes are driven by institutional capabilities, established processes, and a strong commercial culture, or whether they depend heavily on a few individuals and personal relationships. If the value is tied to specific people who may leave after the acquisition, there is a higher risk that the advantage will not transfer to the buyer.
Therefore, I would view negotiation capability as an intangible asset that can enhance value, but only when there is evidence that it is embedded within the organization rather than dependent on individual relationships alone.
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