Anyone negotiating to buy a company, a car, a house, making an initial offer – don’t bid with a round number like $15 per share, $10,000 or $1 million. Rather, bid with a more precise number, like $14.80 per share, $9,800 or $1.03 million.
Investors in mergers/acquisitions who offer “precise” bids for company shares yield better market outcomes than those who offer round-numbered bids.
If you make a precise bid, the targets are more likely to accept it, and more likely to accept it at a cheaper price. And with cash bids, they’ll generate a more positive market reaction.
People place more value on precise numbers than on relatively round numbers. People tend to assume, that someone must have crunched lots of data to come up with an amount so specific. A round number, on the other hand, suggests that a person is just ballparking it—offering an approximate valuation based on vague knowledge.
In a TV show The Price is Right, participants played an online game guessing the market price of three consumer products. Before making their guesses, they received “audience suggestions” for what they should bid…Continue Reading >>