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.
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.
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In a hot real estate market, sellers may find themselves determining the best way to engage in an early offer negotiation. We asked Leslie John, the Marvin Bower Professor of Business Administration at the Harvard Business School, to answer a question regarding this topic.
Q: I’m selling my house in a seller’s market. As is the … Read More
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
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
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
When transferring property, sellers sometimes insist on real estate rights of first refusal – the chance to be first in line to repurchase the property if their buyer later decides to sell.
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Looking for ways to get more value out of your sales negotiations? You may be able to do so by negotiating a right of first refusal.
A right of first refusal, also known as a matching right or right of first offer, is a contractual guarantee that one party to a business deal can match … Read More
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
Business negotiators seeking to resolve a dispute should foster a cooperative spirit, framing negotiations around gains rather than losses. And when negotiators are far apart, it may take a professional mediator or other independent party to help bridge the divide.
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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.
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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.
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
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
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
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
The Clearinghouse at PON offers hundreds of role simulations, from two-party, single-issue negotiations to complex multi-party exercises. The following role simulation explores client/attorney relationships and the complexity of information exchange.
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