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