Cram Down . . .
refers to a negotiation where one party has so much
leverage over the other that it is able to dictate deal terms that are
extremely favorable to dictating party. Although often civil, the
negotiation sessions in a cram down are characterized by the lack of
meaningful give-and-take on the substantive issues. They occur most
often in situations where one party knows that the other party has no
viable alternative to accepting the offered deal. In a fundraising
situation, growing companies can subject themselves to an unwanted
cram down by waiting too long to begin raising capital and by having
no viable alternative to raising capital (often because of acute cash
shortages) from the investor who is dictating his terms. See:
Bridge Loans,
Leverage,
Negotiation.