Hard Line Negotiation Leverage Trumps Fair, Reasonable

From Marty Latz’s Expert Negotiator Blog

“We’re selling our company and trying really hard to be fair and reasonable, but the buyer with the most synergy is now being stubborn and taking a hard line on the tough financial issues. We’ve narrowed it down to them and have made excellent progress by exploring our mutual interests and generating creative options that add value for everyone.”

But when we request more money based on an independent, credible market value appraisal of our company and highlight how much they will profit from our technology and their distribution network ˆ pointing to the fairness of a higher sales price ˆ they just refuse to move.

Instead, when it comes to those tough zero-sum issues – where one dollar more for us is necessarily one dollar less for them ˆ they’re not reciprocating. I think we can get to a mutually beneficial agreement, but I feel like we’re constantly conceding. What should we do?‰

This situation reflects a classic negotiation battle between leverage and standards. The buyer appears to have strong leverage (probably a really good Plan B to the Plan A with the seller). And the seller has strong independent, objective standards ˆ powerful justifications for a higher sale price.

What would I recommend?

Leverage trumps standards

At the end of the day, I would rather be in the buyer’s situation here. Why? Because leverage and a good Plan B will beat fair and reasonable standards 9 times out of 10. In other words, if I’m a seller I would rather have three buyers bidding against each other than that expert appraisal. And if I’m a buyer, I would rather have three good targets than a cost-benefit analysis explaining the synergy with one.

So what should the seller do if they have good standards but relatively weak leverage ˆ and the buyer knows it and takes a hard line?

Strengthen its leverage by re-engaging with other potential buyers and consider letting the „hard line‰ buyer know it. In fact, the seller likely made a strategic mistake by narrowing the buyers down to one before fully negotiating all the significant zero-sum issues.

Plus, don’t constantly push the hard-line buyer by reemphasizing the fair standards. The more the seller pushes and focuses on fairness, the more the buyer will perceive it as desperate and this weakens its leverage. Express interest in the deal, but not too much.

Insist on reciprocal moves

When the buyer refuses to budge on the sale price, and the seller needs to acquiesce to it, it should use its concession as justification for requesting the buyer make a significant move on another issue or issues that do not seem as critical to the buyer.

Be creative, but don’t give in without getting something in return.

Of course, the buyer might refuse to agree to any additional concessions ˆ taking a super hard line. If this happens, and the seller’s Plan B is still worse than the buyer’s last offer, it may just need to accept it.

The seller may not think it’s fair, but that’s why leverage is the most powerful element in most negotiations.


Marty Latz

 Marty Latz, the Founder and Chairman of ExpertNegotiator and the Latz Negotiation Institute, is a nationally acclaimed expert on negotiation strategy and tactics.  An adjunct professor for negotiation at Arizona State University’s College of Law from 1995 to 2005, Latz has taught over 70,000 business professionals and lawyers how to more… MORE >

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