They Set the Ask, You Set the Anchor

By Kevin Goodwin | Scaling Business Architects

In an intermediated deal, the seller names the first number. The mistake is letting it become yours.

Every negotiator learns the same rule early: whoever names the number first, loses. Say it out loud and you've shown your hand. Stay silent and the other side fills the space, usually by bidding against themselves.

It's good advice. Across a table, in a private sale, it holds.

It just doesn't describe the deal you're in.

By the time a target reaches you, the seller has already named a number. It's sitting in the CIM — the adjusted EBITDA, the multiple the banker calls market, the growth the model runs three years out. That's the first number, and it landed before you opened the book. Someone spoke first. It wasn't you.

But that number was never the anchor. It's an ask.

An ask is an opening position: the number the seller would like to be true, the one you're meant to talk down from. An anchor is something else. It's what the negotiation settles around, and it isn't set in the CIM. You set it, at the LOI, the moment you put a number on paper.

That's the pen. It's yours. There's no version of this deal where it isn't.

Which is easy to forget, because the ask is right there. It's professionally prepared, it has a bank's name on it, and everyone in the room is already treating it as the basis for discussion. Adopting it feels like reading the market. It isn't. You're just letting the seller set your anchor and writing it down in your own hand.

So the danger was never speaking first. You have to speak. The quieter danger is naming their number instead of yours.

The Sequence Runs Backwards

The ask and the anchor become the same number only when you don't test the ask before you write it down. And in a standard process, you can't. Not yet.

Look at what you actually have when the LOI is due. You have the CIM. You have a management presentation, maybe two. You have whatever the banker chose to release. What you don't have is the thing that would tell you whether the ask is true: the general ledger, the customer-level revenue, the detail behind the add-backs. That lives in the data room. And the data room opens after you sign, in exclusivity, on the far side of the number.

So the sequence is fixed, and it runs backwards. You commit to the anchor first. You get the information that tests it second.

Which means the anchor you write is guaranteed to rest on the one version of the business nobody has checked yet. The seller's. You're not being careless. You're being asked to price something before you're allowed to inspect it, and then to live with the price.

By The Time You Can Check, Checking Costs You

This is where the trap closes. The LOI isn't binding on price. You can retrade; everyone knows you can retrade. But look at where you're standing when you'd have to.

You're in exclusivity. You've spent real money on diligence. You've taken the deal off the market for the seller, who has now spent weeks telling themselves this is done at your number. And now you want to move that number down.

You can. It costs more than you think, because you're no longer negotiating toward a number. You're negotiating away from one. Yours. The seller isn't reacting to a fresh figure; they're defending the one you already gave them. Every dollar you pull back reads as a taking. That's not a market adjustment anymore. That's a fight, and you started it against your own opening position.

You'll object that none of this is news. Nobody underwrites a CIM at face value. You discount the add-backs, you haircut the growth case, you price in some skepticism before you ever write the LOI. True.

But discounting an ask is not the same as validating it. A haircut is a guess about how much the seller's number is inflated. It's a better guess than adopting the number whole. It's still a guess, made before the data that would replace it with a fact. You're adjusting the ask by instinct and calling the result an anchor. It's a more careful version of the same move.

And the cost of that move is measurable.

Axial's 2025 Dead Deal Report examined 75 lower-middle-market LOIs ($2.5M to $250M in enterprise value, the same market these deals live in) that were signed and then died before closing. The reasons cluster where you'd expect if the anchor is the problem.

The single largest killer was non-QoE diligence findings: 25.3% of broken deals. That category is broad. It includes legal and compliance exposure, which isn't what we're talking about here and isn't something a pre-LOI operational review would catch. But it also includes customer concentration and contract problems — operational conditions that were true before the LOI and simply weren't surfaced until after it.

QoE discrepancies, the earnings not holding up under examination, accounted for another 21.3%. That's the financial dimension, and it isn't our lane either. But the operations underneath the numbers often tell you where the numbers are soft, before the QoE does.

Renegotiation accounted for 14.7%. That's the retrade. Deals that didn't die from a discovery so much as from the fight over what it meant for price.

None of these are getting rarer. Non-QoE diligence findings have climbed three years running: 19.1%, then 21.5%, then 25.3%. QoE discrepancies doubled over the same window, from 10.6% to 21.3%. And these deals didn't fail fast. Private equity buyers averaged 106 days in exclusivity before the deal broke. Three and a half months of spend and attention, then nothing.

One thing the data can't show you, and it's the part that matters most: these are only the deals that died. A dead-deal report can't count the deals that closed at a number that was too high. Those don't break. They underperform quietly, for years, and never show up in anyone's statistics. The failures you can measure are the visible edge of a problem whose center you can't see.

So the question isn't whether the ask gets tested. It always gets tested. The question is whether it gets tested before you anchor or after, when testing it costs you exclusivity, diligence spend, and the leverage you traded away to get there.

What a Business Has & What It Is

This next part I know from the inside, not from a report.

I've spent a large part of my career on the operations side of transactions: integration, transfer of operations, the work of making the thing run under new ownership after the deal closes. From that seat you learn something that doesn't show up in a CIM or a QoE — the difference between what a business has and what a business is.

What a business has is the transferable inventory: the contracts, the equipment, the customer list, the documented process. That conveys. It's what the deal is nominally buying. What a business is runs on something else. The relationships held by one person. The vendor terms that exist because of a handshake and not a document. The judgment living in the head of someone whose name isn't on any org chart. That's what produces the earnings, and a good share of it doesn't survive the transaction meant to acquire it. (I wrote about this at length in What You Bought vs. What You Acquired.)

This bears on the anchor directly. QoE is built to test the numbers, and it does that well, after the LOI, complementary, where it belongs. What QoE is not built to test is whether the business is solvent as an operation under a new owner, where the real risk concentrations sit, and how much of what you're buying transfers. No standard instrument is pointed at that before the LOI. There's just the assumption that it holds.

That assumption is the soft spot in the anchor. And unlike the financials, it doesn't need the data room to examine. Operational solvency, the real risk concentrations, transferability. You can look at those before you sign, because they don't live in the general ledger. They live in the operation, and the operation is visible to anyone who knows where to look.

That's the whole idea behind what I do now. Not to price the deal. I don't produce a valuation, and I'd be wary of anyone who says they can hand you the "true" number. Only to test the operating assumptions your number already rests on, while you can still act on what you find.

The Source Is What Makes It Hold

Every finding has a source. In a negotiation, the source is worth more than the finding.

When a buyer surfaces a problem in exclusivity, it's the buyer's problem. The buyer found it, the buyer is using it to move the price, and the seller gets to treat it as exactly that: a buyer hunting for leverage, getting cold feet, moving the goalposts. With the deal off the market and the buyer's money already spent, the seller has the standing to make that read stick. And when the buyer is the source, the finding carries the buyer's motive with it.

Surface the same problem before the LOI, and its source changes completely.

Because the operational reality doesn't come from you. It comes from them: their operators, their answers, their account of how the business runs, given freely before anyone has named a number to fight over. When the review shows a relationship that walks out the door with one person, or a margin that depends on a vendor accommodation nobody wrote down, that isn't your allegation. That's the seller describing their own business, on the record, next to a CIM that says something rosier.

Two accounts. Both the seller's. They don't agree.

(This is the same event the seller sees from the other chair. I've written about it as The Maintenance Is the Multiple. The repricing an owner experiences as a hard negotiation is usually an appraisal catching up to a condition that was already there. The only variable that matters is whether it happens before the anchor or after.)

Set the anchor on the seller's own account, and you've done something the maxim never imagined. The goalposts are placed up front, out of the seller's own testimony. Holding the price to that standard isn't moving the goalposts. It's keeping them exactly where the seller put them. You can't accuse a buyer of moving a post the seller planted.

That's the inversion. The old retrade is a buyer fighting their own inflated number, late, from weak ground. This is the opposite. The concessions that justify the real number were volunteered by the seller, before the anchor. There's nothing to claw back, because you never wrote down a number that needed clawing back. The 14.7% of deals that die in renegotiation are deals where the gap between the anchor and the truth showed up too late to close cleanly. Set the anchor on the truth, and the gap was never there.

You're not negotiating harder. You're negotiating from a number that doesn't need defending.

Whoever names the number first, loses. It was never about speaking. It was about speaking blind.

You can't stay silent. The LOI is due, the number is yours to write, the pen was always in your hand. What you can decide is what the number rests on. The seller's ask, dressed up as a market. Or the seller's own account of the business, tested while you still have the leverage to act on it.

One of those anchors holds. The other is a number built on sand.