In an M&A negotiation, the highest offer is not always the best deal. The real value a seller receives depends on the structure of the transaction — cash at closing, earn-outs, escrow, rollover equity — the certainty of payment, the control given up and the risk carried after closing. A €100 million offer can be worth less than a €95 million one.
Key takeaways
- Headline price and real value are not the same thing.
- €100M in cash is not equivalent to €80M in cash plus a €20M earn-out.
- Price, structure, certainty and control should be negotiated together, not one by one.
- Ego is one of the biggest hidden risks in any negotiation.
- Your strongest position is having a credible alternative: the ability to walk away.
When people talk about negotiating an M&A transaction, they usually talk about one thing: price.
Who offered the most. Who negotiated the highest valuation. Who managed to push the multiple higher.
But after more than 25 years and 300+ transactions, I have learned that the headline price is only one part of the negotiation.
Sometimes, the highest offer is not the best offer. And sometimes, accepting a slightly lower price can create significantly more value for the seller.
An M&A negotiation is not simply about how much you receive. It is about what you receive, when you receive it, how certain it is, and what you are giving up in return.
Price vs control: is the highest valuation always the best offer?
One of the most important trade-offs in an M&A negotiation is between price and control.
A buyer may offer a higher valuation but require the seller to retain a minority stake, accept an earn-out, remain involved in the business, or give the buyer significant governance rights.
Another buyer may offer slightly less but provide a clean exit, full liquidity and greater certainty.
Which is the better deal? There is no universal answer. It depends on what the seller is actually trying to achieve.
For some sellers, maximising price is the priority. For others, certainty, liquidity or control may be worth more than another turn of EBITDA.
The highest price is not necessarily the highest value.
Certainty vs upside: cash at closing or earn-out?
This matters most when you compare different forms of consideration.
| Offer A | Offer B | |
|---|---|---|
| Headline price | €100M | €100M |
| Cash at closing | €100M | €80M |
| Earn-out | — | €20M, subject to targets |
| Seller's risk after closing | None | Depends on performance and buyer decisions |
The headline number is the same. The risk is not.
Earn-outs, deferred consideration and rollover equity can create additional upside. They also introduce uncertainty:
- Will the targets be achieved?
- Who controls the business after closing?
- What happens if the buyer changes the strategy?
- How will performance be measured?
- What happens if the seller no longer controls the variables driving the outcome?
Certainty has a value. That value should be explicitly considered when comparing offers.
Structure vs headline: where the real economics of a deal are hidden
One of the biggest mistakes in M&A negotiations is focusing too heavily on the headline valuation. The real economics of a transaction are often hidden elsewhere:
- Cash at closing
- Deferred consideration
- Earn-outs
- Rollover equity
- Escrow
- Working capital adjustments
- Debt-like items
- Management incentives
- Warranties and indemnities
Each of these can materially change the value the seller ultimately receives. That is why I often say:
Don't negotiate the headline. Negotiate the deal.
A €100 million offer can end up being worth less than a €95 million offer if the structure, certainty and risk allocation are significantly different.
The psychology of M&A negotiation
M&A negotiations are not purely rational exercises. People are involved.
Sellers are emotionally attached to businesses they may have spent decades building. Buyers are emotionally invested in acquisitions they believe can transform their business.
Egos get involved. Expectations rise. Fear of losing the deal appears. And sometimes, negotiations stop being about economics and start being about winning an argument.
This is where a good negotiator makes a difference: knowing when to push, knowing when to stop, knowing which issues really matter and, above all, knowing when a negotiation is becoming about ego rather than economics.
Winning a point is not the same as winning the deal.
Don't negotiate in isolation: think in trades, not battles
Negotiation should never be viewed as a series of independent battles. Price, structure, certainty, control, timing and risk allocation are all interconnected.
- If the buyer will not move on price, perhaps they can move on structure.
- If the seller wants greater certainty, perhaps the earn-out can be reduced.
- If the buyer wants additional protection, perhaps another commercial point can be traded in return.
Good negotiators do not simply ask "What can I get?" They ask "What can I trade?"
The best negotiations create value by identifying differences in what each party actually values.
Buyer psychology: what is really driving the acquisition?
Understanding the seller is only half of the equation. You also need to understand the buyer. Their motivation may be growth, market consolidation, geographic expansion, technology, customers, talent, synergies, speed or strategic positioning.
The same company can have very different value to different buyers. The better you understand what the buyer is trying to achieve, the better you can identify where additional value may exist. This is one of the reasons why choosing the right buyer is so important.
Valuation is not only about what the company is worth. It is also about what the company is worth to a particular buyer.
The best M&A negotiation is not zero-sum
M&A negotiations are often presented as if one side has to win and the other has to lose. The best deals are rarely like that.
Sometimes the right structure allows both parties to achieve more of what matters to them:
- The seller may value certainty. The buyer may value future performance protection.
- The seller may want liquidity. The buyer may want management continuity.
- The seller may want a clean exit. The buyer may want the founder to stay for two years.
These differences create opportunities.
Negotiation is not always about dividing the pie. Sometimes it is about making the pie bigger.
Know your BATNA: the power of credible alternatives
One of the strongest sources of negotiating power is having alternatives — what negotiators call your BATNA (Best Alternative to a Negotiated Agreement).
If the seller has another credible buyer, the negotiating position changes. If the buyer has other acquisition opportunities, their position changes too.
This is why competitive tension matters. But competitive tension is not simply about having multiple bidders. It is about having credible alternatives.
The strongest negotiating position is often the ability to walk away. Not because you want to. Because you can.
What are you actually optimising?
Before entering a negotiation, buyers and sellers should both ask themselves a simple question: what are we actually trying to optimise?
- Headline valuation
- Cash at closing
- Total proceeds
- Certainty
- Control
- Future upside
- Speed
- A clean exit
- The future of the business
- The future of the management team
Different priorities lead to different answers. That is why there is no such thing as the "best deal" in isolation. There is only the best deal for the objectives you are trying to achieve.
Final thought
The best negotiators are not necessarily the most aggressive ones. They are the ones who understand more: their own priorities, what matters to the other side, where they have an advantage, what they can trade, and when the negotiation is becoming about ego rather than economics.
Roger Fisher, co-author of Getting to Yes, put it very well:
"The ability to see the situation as the other side sees it… is one of the most important skills a negotiator can possess."
In M&A, this is particularly relevant. Once you understand what the other side really wants, you can move beyond positions and find solutions that work for both sides. That is often where the real value is created.
The objective of a negotiation is not to win every battle. It is to achieve the best possible deal.
And sometimes, the smartest concession you make is the one that allows you to win the deal.
Frequently asked questions about M&A negotiation
Is the highest offer always the best offer in an M&A deal?
No. The highest headline price can deliver less real value if it depends on earn-outs, deferred payments or rollover equity, or if it requires the seller to give up control. Certainty, liquidity and risk allocation should be weighed alongside price.
What is the difference between cash at closing and an earn-out?
Cash at closing is paid when the deal completes and carries no further risk for the seller. An earn-out is paid later only if agreed performance targets are met, so the seller takes on risk, often in a business they no longer control.
What deal terms affect the real value a seller receives?
The main ones are cash at closing, deferred consideration, earn-outs, rollover equity, escrow, working capital adjustments, debt-like items, management incentives, and warranties and indemnities.
What is a BATNA in M&A?
BATNA stands for Best Alternative to a Negotiated Agreement. In M&A, it is the credible option a buyer or seller has if the current deal fails, such as another serious bidder. A strong BATNA increases negotiating power.
Why does buyer motivation matter when selling a company?
Because the same company can be worth more to one buyer than another. Understanding whether a buyer is driven by growth, synergies, technology, talent or market position helps the seller identify where extra value can be negotiated.
