A move towards a ‘partnership trend’ – to help deliver successful transactions at a challenging time.


Having bought, or sold, over 40 hotels over the past few decades, it is fair to say that although the relationship with my buyers (and sellers) has been overall successful, there are very few instances where I could say that the relationship has been one of ‘partnership towards a common goal.’

This has been partly due to the role played by the agents who have traditionally acted more as guardians of the seller’s position, rather than midwife.

Sellers need protection from buyers with either hazy funding plans or who have a downright disingenuous approach to stringing the seller along, often looking to chip the price, once a stage has been reached where the seller has become desperate to conclude the transaction – sometimes through deal fatigue.

Neither of these situations will go away, but in recent times, seller’s agents have become ever more punctilious to see a clear means to fund the purchase, from buyers. This is a lot harder to achieve than might be thought and there are very few buyers who have the full purchase price sitting in their bank account.

In fact, it could well be in the sellers’ best interests to explore a sale, to a buyer who has not yet finally tied up all their funding. ‘Cash’ buyers recognise the power of their position and often want to negotiate a more predatory price, because of it.

Today is, largely speaking a buyer’s market. So how can sellers take steps to encourage a sense of partnership, with the aim of concluding a mutually successful transaction?

Vendor DD

All buyers hate a big surprise, especially anything that will cause the deal to potentially abort. Ideally they want the easiest transaction possible and vendors can help enormously with the process by:

  1. Property DD. Make sure that the property and MEP etc credentials are in great shape. Maintenance contracts are up to date and all warranties and consents etc are available and valid.
  2. Legals. The vendors lawyers need to prepare a pack with all the standard replies to enquiries answered and make sure there are no title glitches still to be cleared up – this to be done well ahead of the transaction moving into the legal process stage.

Transparency

…better called ‘communication’. A 100% clear channel between buyer and seller needs to be set up, with agents in the loop, if necessary. Quite often buyers and sellers feel awkward talking to each other during the legal process, partly due to the role some lawyers play. This is a mistake and I have always found picking up the telephone (or a face-to-face meeting) to my buyer, or seller, as soon as problem occurs, saves time and keeps both parties on the same side of the fence ie both want the transaction to proceed to success.

Bank Finance – working together with the lawyers

It seems to have got progressively harder to move transactions across the line and with senior debt funding now increasingly pricey and (where involved) the bank lawyers appearing to be over-protective of their client’s interest, this part of the transaction, where bank funding is needed to help fund the acquisition, can get very fraught. There is absolutely no doubt that the bank relationship manager and broker (if there is one) have a massive part to play in shepherding this part of the funding package to a successful conclusion. 

Again, seeking to engender a spirit of partnership, is the object here. Lawyers have to protect their clients – but they must also get on, and get the deal done!