Factors That Affect the Scope of Negotiations

Here is a list of the factors that can affect the scope of the negotiations.

  • Negotiating Skills and Posture
    • The negotiating skills of each party
    • The negotiating postures and bargaining strength of each party
  • Legal Structure
    • The structure of the transaction, as in an asset vs. a stock sale – reps and warranties in stock deals are more comprehensive than in asset deals
  • Financial Strength and Credibility of Seller
    • The financial strength of the seller to indemnify the buyer 
    • The buyer’s assessment and perception of the seller’s character
  • Industry
    • The buyer’s knowledge of the business and industry
    • The nature of the business and its industry – businesses with more risks will be subject to more stringent reps and warranties
    • The buyer’s perception of the business’s risks
  • Due Diligence
    • The extent of issues discovered during due diligence

The buyer’s ability to conduct thorough due diligence – the more thorough due diligence is, the weaker reps and warranties can be, in theory