Here is an example of counterparts in a negotiation beginning the “standards dance” – when the parties identify the most favorable independent standards justifying their position and then negotiate over which is the most fair and reasonable.
Community Health Systems recently announced a $3.3 billion unsolicited bid to acquire a smaller rival, Tenet Healthcare. Community offered to pay $6 a share for Tenet and emphasized it represented a more than 40% premium over Tenet’s stock price (its preferred standard), which at the time of the announcement was trading around $4.30 per share.
Tenet’s board responded that it had rejected a similar private offer because it wasn’t “even remotely fair value.” They argued the offer ignored expected profit improvements at Tenet and didn’t account for certain tax benefits (these latter two elements – profit improvements and tax benefits – being its preferred standards).
So research the applicable standards before you begin negotiating. Then come prepared to emphasize the best and discredit the worst as you negotiate over which is most appropriate.