Never Name First Price
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A critical lesson in M&A negotiations around price anchoring and how naming the first price can significantly impact deal outcomes.
Key Negotiation Mistakes
- Naming the first price creates a damaging anchor point
- Sam gave a range first: "these companies typically sell for blank to blank"
- Buyer immediately anchored to the lower number
- Cost "many millions of dollars" according to Sam
- First offer came in at the bottom of the stated range
Better Negotiation Approaches
- Never name the first price
- Wait for buyers to make offers
- Use indirect anchoring techniques
- Leave hints about value
- Signal other interested parties
- Create competitive tension
- Use multiple offers to negotiate up
- Get initial offer to establish ballpark
- Use that to negotiate with other interested parties
- Create urgency with time pressure
Negotiation Position Matters
- Best negotiating position is being willing to walk away
- Shaan was "totally okay if nobody bought it"
- Gave freedom in negotiations
- Less pressure to take suboptimal deals
- Having alternatives creates leverage
- Multiple interested buyers
- Ability to continue running the business
- Not being desperate for a deal
Post-Deal Learning
- Important to debrief after deals close
- Talk to the other side once aligned
- Ask what mistakes were made
- Understand their maximum price
- Learn negotiation tactics for future deals
Deal Size Considerations
- Investment bankers typically only involved in larger deals
- $50-100M minimum deal size
- Smaller deals often negotiated directly
- Less formal process for smaller acquisitions
Sam Parr
Host of MFM and fitness influencer
Sam Parr is a serial entrepreneur and business media pioneer.
In 2016, he founded The Hustle, a business news media company that started in his kitchen with just $12 and grew to eight figures in revenue.
Sam led the charge in making newsletters popular when few believed in their potential.
After four successful years, he sold The Hustle to HubSpot, a publicly traded company. Now operating as HubSpot Media, The Hustle reaches 3 million readers daily, employs a team of nearly 100, and has been the launchpad for dozens of its staff to found their own media companies and newsletters.
Sam remains the host of the popular business podcast, My First Million, and continues to start and sell companies. He also co-founded Hampton, a highly vetted community for entrepreneurs, founders, and CEOs, and teaches people to write better through his platform, Copy That.