Negotiation: When Does it End?

In the continuum of an investment banking deal process, there are numerous points in time when negotiations occur. Critical times are at least the following:

1. At the outset, when the prospect (buyer or seller) and/or prospect's attorney (often someone we have recommended) reviews our contractual terms. Typical deal points are the retainer amount and payment period; the transaction fee (as a %) and what is part of the purchase price calculation; the tail period; and, what constitutes a viable party introduced by us into the deal.
2. For an M&A deal, the purchase price is set based on an agreed upon multiple and adjusted EBITDA. We usually lock down the multiple with the two or three possible buyers or sellers. The adjusted EBITDA is an ongoing discussion, usually not settled until the final agreement is signed.
3. Working capital and CapEx can be contentions issues, as the final amounts are difficult to quantify.
4. Taxes owed and contingent liabilities (e.g. lawsuits) are often part of "give and take" discussions.