Adapted from “Matching Rights: A Boon to Both Sides” first published in the December 2005 issue of the Negotiation newsletter.
Not all matching rights are created equal.
As the prospective right holder, you should know precisely what a proposed matching right will give you. Many deals that seem to guarantee a matching right are, in fact, murky about the exact consequences that could arise.
For potential right holders, the most common mistake is to fail to specify what will happen if you choose to match a bid. Will your matching bid call off the contest with the third party or launch a bidding war?
Other details are equally important.
How long do you have to decide whether to match an offer? If the duration of the matching right is ambiguous, a third party could short-circuit your right by making an exploding offer, with a short fuse, forcing the grantor to give you only limited time to match the offer.
If you haven’t thought through this possibility in advance, you may fail to match the offer due to time pressure rather than to your unwillingness to pay. The end result is a matching right that is worth significantly less than you thought.
Another important detail is the matching-right “trigger.”
Suppose that a contract between a procurement officer and supplier specifies that a “more attractive offer” (from the buyer’s prospective) triggers the supplier’s matching right. If a “more attractive offer” simply concerns the price of a known commodity, this language may be sufficient. But what about a competing offer that provides not only a higher price but also a better-quality product?
In this case, a “more attractive offer” trigger doesn’t offer much guidance – and can harm the right holder. The lesson: when considering a matching right, figure out exactly what you’ll receive.
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Related Article: Matching Rights – The Fundamentals