Hertz Global Holdings Inc. recently announced its plans to buy Dollar Thrifty for $1.2 billion, about $41 per share. Almost immediately, the standards dance began in the negotiation between Hertz and Dollar’s shareholders, which must approve the deal. Yesterday, a representative from Dollar Thrifty’s third-biggest shareholder described the deal as “a complete steal” based on its preferred standard – a valuation of only slightly more than three times earnings before interest, taxes, depreciation and amortization (EBITDA) based on Dollar Thrifty’s enterprise value. Hertz, by contrast, estimates the offer at the much richer level of its preferred standard – a valuation of 5.7 times Dollar’s anticipated 2011 EBITDA.
In sophisticated negotiations like this, everyone will find the standards that favor their side and will use their most favorable standards to independently justify the “fairness” of their positions. The parties will then negotiate over which standard represents the most fair and applicable justification.
So what should you do? Research the applicable standards before your negotiation. Then come prepared to use the most favorable ones and discredit the most unfavorable ones. Finally, negotiate over the most appropriate objective criteria.