It was crunch time. Both parties to the negotiation were in heated discussions to resolve several key sticking points. The seller was insisting on a higher price for certain assets that the buyer simply could not justify paying. Nonetheless, the buyer was a seasoned veteran and realized that as long as both parties were motivated a deal was still possible. To bridge the gap between what the seller was demanding and what the buyer was willing to pay, the buyer would have to be creative to meet the seller's needs. However, the proposed changes to the terms of the transaction clearly would have implications for the combined companies' taxes, leverage, compliance with loan covenants, and EPS.

The buyer turned to a financial model he had constructed of the combined firms to assess the impact of various changes in the terms of the transaction. After changing certain assumptions that had been used to generate the initial offer, the buyer was able to estimate the potential risk to the combined companies if the buyer made the changes demanded by the seller. The model's results were pleasantly surprising to the buyer. The impact of the changes on variables the buyer considered critical was much less than had been imagined. Armed with this information, the buyer returned to the negotiating table optimistic that an agreement could be reached.