You are board member to a large company and in the final stages of negotiation c

Question

You are board member to a large company and in the final stages of negotiation closing a deal to purchase similar company and have submitted a letter of intent that includes a 2million dollar purchase price and a 30-day clause of cancellation if the counterparts change their mind or consider the terms unacceptable. What if your counterparts do not accept your proposal and provide you with a counteroffer? Will you renegotiate to make changes or will you walk away from the deal? Provide reasons for your decision 1,500 - 3,000 words

Explanation / Answer

The first thing you need to do is to resist the urge to let yourself get tied to their offer. Anchors only have an effect when one or both of the parties are uncertain about the value of the market price of the product or service. A piece of equipment can be researched to ascertain a fair market value. The more you know about the product being bought or sold, the more you can substantiate the price you are willing to pay. Your decision can be based squarely on the facts.

Either way, don't let the other side set the anchor bar. Essentially, if you believe their offer is unrealistic, the best thing to do is to ignore it. If they persist, you should ask them to justify their reasons for arriving at their offer. This information may serve as a valuable guide. Then, you could put forth your own counter offer or anchor, and present your reasons. as this will shore up and add strength to your position.

Anchoring

Just like the word suggests, you want to set a reference point around which the negotiation will revolve. Making the first offer can be to your advantage, as this offer might set the height of the negotiation bar. This anchor is the arena where the two parties will wrangle in a tug and pull negotiation scenario. Interestingly enough, many studies have shown that the first offer has a strong psychological pull, almost a magnetic lure. The resulting agreement is often strongly attracted towards the person who proposes the first offer.

Countermoves

In many situations, the other party may make a concessionary move, such as to lower their price. A large concessionary move, telegraphs the possibility there is some latitude to play with and negotiate further. Likewise, the same will apply if you give too large a concession. The ball goes back and forth, with each side trying to nudge the other into making further concessions. Small concessionary moves suggest that the other party may be moving close to their reservation price.

Before engaging in concessionary moves there are several things to consider.

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