7 Negotiation Pitfalls That Kill M&A Deals (And How to Avoid Them)

When acquiring businesses, most believe negotiation is about getting the best price. They walk into meetings armed with spreadsheets, comparable valuations, and what they believe is an unbeatable offer.

But what if that’s completely wrong?

What if successful M&A negotiations have very little to do with numbers… and everything to do with understanding human psychology?

Recently, we reviewed the insights from Jonathan "JB" Brown—a veteran deal-maker who's closed hundreds of millions in transactions from every seat at the table: buyer, seller, and intermediary.

Here are the 7 critical mistakes that derail otherwise solid deals (and the strategies to avoid them):

Pitfall #1: The Fatal Assumption About Money

The Mistake: Believing the seller's first number reveals their true motivation.

Picture this scenario: You're deep into discussions with a business owner about acquiring their company. When you ask about their expectations, they immediately respond: "I want $10 million for this business."

Most buyers accept this at face value and structure their entire negotiation around price. This is a massive error.

Here's what experienced negotiators do instead: They ask a follow-up question that changes everything: "If we agreed on $10 million, what would you do with it?"

The response—or lack thereof—reveals the truth. Most sellers haven't thought beyond the number. They haven't considered tax implications, post-sale life plans, or what that money actually represents to them.

The Strategy: Use the power of silence after asking this question. Don't fill the awkward pause. Let them process what you're really asking. Often, you'll discover that the number was just a placeholder—and their real motivations run much deeper.

Pitfall #2: Negotiating Blind

The Mistake: Failing to understand your counterpart's true objectives and circumstances.

Before any negotiation, successful acquirers become investigative journalists. They research not just the business, but the person selling it.

This means diving deep into:

• Social media profiles going back years

• Their role in the organization (CEO but acting like a COO suggests operational mindset)

• Family situations and personal interests

• Industry involvement and reputation

• Previous statements about business goals

The Strategy: Spend time building genuine rapport before discussing deal terms. Ask about their journey building the business. Understand what they're most proud of accomplishing. This isn't manipulation—it's creating the foundation for a mutually beneficial agreement.

One seller I worked with initially demanded a premium price. After learning about his passion for sailing and dream of circumnavigating the globe, we structured a deal that gave him the freedom to pursue that dream immediately, even with a lower upfront payment. He was thrilled with the outcome.

Pitfall #3: The First Offer Trap

The Mistake: Underestimating the psychological impact of your initial proposal.

Your first offer carries disproportionate weight in any negotiation. For business owners who've poured their lives into building something, waiting for that initial offer is emotionally charged—like waiting for someone to evaluate your child.

If your first proposal significantly undervalues their perception of the business, you've damaged the relationship before negotiations truly begin. Even if your valuation is mathematically correct, the presentation matters enormously.

The Strategy: When presenting offers below their expectations, lead with empathy and explanation. Acknowledge the value they've created while clearly explaining your methodology. Show them how your structure might actually serve their interests better than their initial expectations.

For example: "I can see why you'd value the business at $10 million based on last year's performance. However, I'm concerned about the tax implications of a lump-sum payment. Have you considered how spreading the payments might actually increase your net proceeds?"

Pitfall #4: Ignoring Non-Financial Motivations

The Mistake: Focusing exclusively on financial terms while missing the emotional drivers behind the sale.

Most business sales aren't primarily about money. They're about:

• Burnout: Decades of 60-hour weeks taking their toll

• Legacy concerns: Ensuring employees and customers are protected

• Family priorities: Wanting to reconnect with neglected relationships

• Health issues: Age-related concerns about managing stress

• Succession problems: Children uninterested in the business

The Strategy: Discover these deeper motivations through careful questioning and active listening. Then structure your deal to address these concerns directly.

When presenting seller financing or earn-outs, frame them around their personal goals: "This structure eliminates the day-to-day operational stress you mentioned while ensuring you remain connected to the legacy you've built."

Pitfall #5: Poor Due Diligence Planning

The Mistake: Inadequate preparation leading to surprises that derail negotiations.

Nothing kills trust faster than major issues discovered during due diligence that should have been identified earlier. This includes:

• Unclear ownership structures and cap tables

• Hidden stakeholders with veto power

• Undisclosed liabilities or legal issues

• Overestimated financial performance

• Key person dependencies

The Strategy: Conduct thorough preliminary due diligence before making formal offers. Verify ownership percentages, understand all decision-makers involved, and identify potential red flags early.

I once discovered that a "51% owner" I was negotiating with actually owned zero percent due to incomplete documentation from years earlier. This revelation nearly killed the deal and severely damaged trust.

Pitfall #6: The Relationship Continuity Factor

The Mistake: Conducting aggressive negotiations with someone who'll remain post-acquisition.

If the seller will stay on as a key employee, consultant, or partner, your negotiation style must account for the ongoing relationship. Winning at all costs creates a pyrrhic victory—you get the business but lose the person you need for success.

The Strategy: When continuity is crucial, prioritize relationship preservation over negotiating every last dollar. Focus on creating win-win structures that make the seller excited about the future rather than resentful about the past.

Pitfall #7: Lacking BATNA and Walk-Away Power

The Mistake: Not having clear alternatives and being unwilling to walk away from bad deals.

BATNA (Best Alternative to Negotiated Agreement) isn't just business school theory—it's your negotiating superpower. If you must close this specific deal, you've already lost leverage.

The Strategy: Always enter negotiations with:

• Multiple opportunities in your pipeline

• Clear criteria for acceptable deal terms

• Predetermined walk-away points

• Genuine willingness to end discussions

The party most willing to walk away holds the power. I've seen deals resurface months or years later with more favorable terms simply because I was willing to walk away when the structure didn't work.

The Foundation: Zig Ziglar's Golden Rule

All successful negotiation strategy builds on this principle: "You can have anything in life you want if you will just help enough other people get what they want."

This isn't about being soft or giving away value. It's about understanding that the best deals create mutual benefit. When both parties walk away feeling they've won, you've built a foundation for successful integration and potentially future opportunities.

Your Negotiation Action Plan

Before your next deal negotiation:

1. Research extensively: Know the person, not just the business

2. Build genuine rapport: Invest time in understanding their journey

3. Identify deeper motivations: Look beyond the stated price expectations

4. Prepare multiple scenarios: Have your BATNA clearly defined

5. Practice patience: Use silence as a negotiating tool

6. Structure for mutual benefit: Address their personal goals, not just your financial ones

7. Maintain walk-away power: Never need any single deal

The Long Game

Remember that M&A is a relationship business. The way you conduct negotiations affects your reputation in the industry and your ability to source future deals. Treat every counterpart with respect, even when walking away from opportunities.

The acquisition entrepreneurs who build sustainable success understand that negotiation isn't about crushing the opposition—it's about creating value for everyone involved while securing the best possible outcome for your side.

Master these principles, and you'll find that deal negotiations become collaborative problem-solving sessions rather than adversarial battles. That shift in approach is often the difference between closing deals and watching opportunities slip away.

Thanks for reading.

JB’s original presentation about this topic premiered at the Business Acquisition Virtual Summit. Enjoy the recording for free on YouTube here.

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