When negotiating a term sheet or a biz dev deal, it’s important to keep in mind that the end goal of the negotiation is establishing a partnership. This is very different from, say, buying a house, where post-closing, you (hopefully) have nothing to do with the seller. For a partnership to get off to a good start, it helps for both parties to feel good about the process of the negotiation. I have found that an important ingredient is to set realistic expectations about how long it will take you to respond to a new draft or a set of questions.

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Yahoo’s search partnership with Google played a major role in allowing the company to fight off Microsoft. By offering the hope of immediately higher cash flow, it should also stop Yahoo’s stock price from falling back to the teens.

In his sayonara letter, Steve Ballmer urged Yahoo to kill the partnership, arguing that the engineers behind Panama were one of the main reasons Microsoft wanted to buy Yahoo and that, if Yahoo did the deal with Google, they would leave.

And he’s right: They will (or at least they’ll move on to other projects). That’s part of the reason the outsourcing deal makes sense: It allows Yahoo to focus on businesses it can win, instead of throwing money at a war it has already lost.

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