Step 1: Be sure you and your fellow founders are on the same page. United we stand, divided we... Key areas for agreement are (a) decision to sell, and (b) mini

Step 1: Be sure you and your fellow founders are on the same page. United we stand, divided we... Key areas for agreement are (a) decision to sell, and (b) minimum price you'd accept. Nothing will expose cracks in your team's facade like M&A discussions. Step 2: Tell the buyer the price they've offered is too low, and offer to explain why. The first offer is just the beginning of the negotiation process. A buyer who is not willing to discuss an offer is not the sort of partner you want to work with. At it's best the negotiation process is a mutual education process, with you explaining your value and them explaining why your value isn't what you thought it was. At the end you'll either agree to disagree or you'll agree. If you agree, you'll do so for the right reasons (i.e., you are both roughly on the same page). While outside advisors can help here, the real work must be done by you, as no one will understand your business and its prospects better than you. Step 3: Ensure that the deal you've struck is a real deal. If the deal pushes a lot of the pay into the back-end, it is not a real deal. It is an option. Earn-outs and other back-end payment structures can help bridge a disagreement in valuation, so they have their use, but a seller who isn't desperate to sell should ensure that he is happy with the deal even if none of the back-end targets are satisfied. Otherwise he's traded his business for a dodgy option. Rarely a good trade. Here again advisors can be helpful, particularly for tax issues, but usually a good deal is clear enough that you can understand it without the help of advisors. A good lawyer is essential. A banker less so. Fred Wilson's blog has had some good posts on M&A recently.