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Remember the key to negotiations: what's your best alternative to a negotiated agreement? In this case it sounds like you don't need this deal at all -- you're

Remember the key to negotiations: what's your best alternative to a negotiated agreement? In this case it sounds like you don't need this deal at all -- you're highly profitable, right? Maybe there's some concern that if you walk away, this company could build their own whatever-it-is and beat you in the market, but it will take them some time and is not a sure thing for them. The other thing to be aware of is the anchoring principle in psychology. By lowballing you at the outset, they make the range of offers that will seem reasonable to you. I have not sold a company. But this sounds like a ridiculous deal to me. 3x revenues, in stock with a 4-year vesting schedule? For a profitable business?? There's a key number here you haven't provided: what's your revenue growth rate? If your revenues are growing slowly, then 3x revenues in cash might be a reasonable multiple. But if you've been growing at 40% annually, then 3x is way too low; 6x is more like it, and 8x may not be out of the question, depending on how large the ultimate market appears to be. The big question for you is how you would feel if the deal fell apart. While you chew on that, you might want to see if you can find any other potential acquirers. Involving bankers would change the tone of the discussion, eh? To what, I wonder? Really, this makes me angry -- it sounds like they're trying to take advantage of your inexperience. It's your call, of course. But reading this makes me hope you tell them that their offer isn't even worth discussion, and walk away.

gfodor 16y ago
The problem with asking "What is your BATNA" is that these things often evolve organically during discussions. It's good to have a baseline, but it's really dumb to go back to the BATNA for a thumbs up/thumbs down determined after the initial offer after discussions have gone on for some time. The different parameters of the deal that get tweaked along the way are often not considered in the beginning, and what was considered unfair at the beginning may, by the end, be considered fair when all the parameters are in place. The negotiation process is a discovery process for both parties and you're not in the same mindset at the beginning than you are at the end. It may turn out that you're willing to sell at the end for less than you thought, simply because the outlook at the new company looks so great that you think it's a fair deal. This isn't you being a sucker, this is you responding to new information. You being a sucker is when you know you're not happy but you cave anyway.. you'll know the difference between this and an academic difference between your expectations and the final negotiated deal that really doesn't matter.

gfodor 16y ago

The problem with asking "What is your BATNA" is that these things often evolve organically during discussions. It's good to have a baseline, but it's really dumb to go back to the BATNA for a thumbs up/thumbs down determined after the initial offer after discussions have gone on for some time. The different parameters of the deal that get tweaked along the way are often not considered in the beginning, and what was considered unfair at the beginning may, by the end, be considered fair when all the parameters are in place. The negotiation process is a discovery process for both parties and you're not in the same mindset at the beginning than you are at the end. It may turn out that you're willing to sell at the end for less than you thought, simply because the outlook at the new company looks so great that you think it's a fair deal. This isn't you being a sucker, this is you responding to new information. You being a sucker is when you know you're not happy but you cave anyway.. you'll know the difference between this and an academic difference between your expectations and the final negotiated deal that really doesn't matter.