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first refusal

What is a First Refusal?

A first refusal, or as it’s more commonly known, the right of first refusal, typically gives the right holder the power to buy an asset on the same terms that the grantor would receive from any other legitimate, prospective bidder.

The right of first refusal is a contractual guarantee that one party to a business deal can match any offer that the other side later receives for the item or issue being negotiated. It can be a useful negotiating tool for both buyers and sellers.

Here’s how a right of first refusal might work. Suppose you’re a landlord negotiating an apartment lease with a prospective tenant. You want to maintain the ability to sell the apartment in the future. Your prospective tenant, meanwhile, wants a commitment to rent the apartment for as long as she wants. The solution might be to offer the tenant a right of first refusal—the right to match any legitimate third-party offer for the apartment. In this manner, the tenant gains the opportunity to avoid the disruption of a move, and you preserve your flexibility to sell to the highest bidder.

While this negotiation tactic can help create win-win situations, it’s important to understand that it can also backfire if a deal isn’t strategically negotiated.

As the prospective right holder, you should know precisely what a proposed right of first refusal will give you. Many deals that seem to guarantee a right of first refusal are, in fact, murky about the consequences that could arise.

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The following items are tagged first refusal:

Compensation Negotiation Tips: Lessons from Broadway

Posted by PON Staff & filed under Salary Negotiations.

Compensation negotiation tips often revolve around encouraging job candidates to ask for a higher salary and teaching them how to frame their salary requests. But negotiators who take a broader approach to evaluating a job offer may be able to set themselves up for much greater long-term earnings. A negotiation initiated by the original cast … Read More 

Right of First Refusal: A Tool to Negotiate with Care

Posted by PON Staff & filed under Negotiation Skills.

Among many useful negotiation skills and strategies, a right of first refusal can often benefit negotiators. In a right of first refusal, the right holder is typically given the power to buy an asset on the same terms that the grantor would receive from any other legitimate, prospective bidder, according to Harvard Business School and … Read More 

How to Create Win-Win Situations

Posted by Katie Shonk & filed under Win-Win Negotiations.

In business negotiation, a win-win agreement may be the ultimate goal, but it can sometimes prove elusive. Here, we offer four strategies from experts at the Program on Negotiation at Harvard Law School on how to create win-win situations in even the trickiest negotiations. … Read More 

Right of First Refusal for Real Estate

Posted by Katie Shonk & filed under Negotiation Skills.

If you are interested in buying the property you’re renting, but aren’t able to do so immediately, you may benefit by negotiating a right of first refusal from the property owner. A right of first refusal for real estate can create value for buyers and sellers alike. But what is “right of first refusal” in … Read More 

10 Popular Business Negotiation Articles

Posted by PON Staff & filed under Business Negotiations.

Here are ten popular business negotiation articles on the Program on Negotiation website. Drawn from a variety of negotiation case studies as well as negotiation research, the following articles offer strategies for engaging in integrative negotiations aimed at creating win-win scenarios for each party at the negotiation table. 1. What is the Right of First Refusal? Rights … Read More 

Dear Negotiation Coach: Dealing with Early-Bird Bidders

Posted by PON Staff & filed under Dealmaking.

Q: I’m selling my house in a seller’s market. As is the convention in this market, I listed the house at the higher end of its value and specified a deadline for prospective buyers to submit their offers. I was attempting to induce a bidding war. Typically, in this situation, offers come in very close … Read More 

A Second Look at Rights of First Refusal

Posted by PON Staff & filed under Negotiation Skills.

When transferring property, sellers sometimes insist on rights of first refusal—the chance to be first in line to repurchase the property if their buyer later decides to sell. A right of first refusal can be an obvious advantage if your financial circumstances later change. … Read More 

In Business Negotiations, Capitalize on a Right of First Refusal

Posted by Katie Shonk & filed under Business Negotiations.

As dealmakers look for more sophisticated ways to reduce risks and increase returns, a right of first refusal—a contractual guarantee that one side can match any offer that the other side later receives—has become a common and useful tool to add to your business negotiation skills.

Claim your FREE copy: Negotiation Skills

Build powerful negotiation skills and become a better dealmaker and leader. Download our FREE special report, Negotiation Skills: Negotiation Strategies and Negotiation Techniques to Help You Become a Better Negotiator, from the Program on Negotiation at Harvard Law School.

When the mergers-and-acquisitions (M&A) boom began in 1993, many deals … Read More 

How to avoid a bidding war

Posted by PON Staff & filed under Business Negotiations.

In the National Basketball Association (NBA), signing an endorsement deal with footwear giant Nike has become a rite of passage for newly anointed superstars. Save for a few notable deals by Adidas, Nike has dominated the practice of paying top talent millions for the right to sell lines of collectible shoes in their names. This past … Read More 

A Tale of Two Matching Rights

Posted by PON Staff & filed under Business Negotiations.

In March 2005, German powerhouse SAP agreed to buy Retek, a small company that offered information management software, for $8.50 a share. The deal included a matching right in which Retek committed to negotiate exclusively with SAP for five days if it received a “superior offer.” The matching right didn’t scare away Oracle, SAP’s archrival, … Read More 

Expand the Pie with Matching Rights

Posted by PON Staff & filed under Daily, Negotiation Skills.

Adapted from “Create Value with Matching Rights,” first published in the Negotiation newsletter. The problem: You and your counterpart have different ideas about how much freedom you should have to negotiate with others and/or how long your agreement should last. The tool: Matching rights (sometimes known as rights of first refusal) are a contractual guarantee between negotiators … Read More 

Know your rights!

Posted by PON Staff & filed under Business Negotiations, Daily.

Adapted from “Matching Rights: A Boon to Both Sides,” by Guhan Subramanian (professor, Harvard Business School and Harvard Law School), first published in the Negotiation newsletter. As dealmakers look for more sophisticated ways to reduce risks and increase returns, a matching right—a contractual guarantee that one side can match any offer that the other side … Read More