Negotiation Time Discount

A framework for evaluating and comparing acquisition offers based on their likelihood to close and time invested in negotiations.

Core Principle: Time Scale Matters

• Not all offers are equal - the best deal is the one that will actually close
• Must apply a "discount factor" to newer offers when comparing them to more mature deals
• Longer negotiation periods and deeper diligence increase likelihood of closing

Discount Factor Considerations

• Length of negotiations
  • Longer discussions = lower discount
  • Fresh deals need higher discount (up to 50%)
• Depth of due diligence completed
  • More diligence = lower discount
  • Less diligence = higher risk of changes/failure
• Relationship development
  • More time spent building relationship = lower discount
  • New relationships need higher discount factor

Key Rules for Negotiations

• The side that cares the least wins
• Must be genuinely okay if no deal happens
• In-person meetings are critical for closing
  • Get on a plane to meet people
  • Don't rely solely on Zoom calls
  • Face-to-face builds trust and clarity

Common Mistakes to Avoid

• Taking highest offer without considering closing probability
• Overvaluing new offers vs mature negotiations
• Not meeting in person
• Being desperate or emotionally attached to closing
• Not having multiple options to maintain leverage

Best Practices

• Always have "no deal" as an acceptable option
• Maintain multiple potential deals when possible
• Build relationships through in-person meetings
• Stay organized with clean books and documentation
• Don't run company as personal piggy bank - maintain clean financials