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Pricing Negotiation and Discount Fallacies in Private Equity
Pricing negotiation in private equity involves finding a balance between offering a discount without being insulting, considering the company's valuation and the persistence of that valuation over time. Companies with reasonable valuations and growth prospects are targeted for negotiation. There is a focus on underwriting and building relationships to achieve a pricing that works for both parties. In private equity buyouts, the discounting process is more efficient and metric-based, while in venture capital, it's based on the last round, growth prospects, and intrinsic value rather than a standardized discount rate.