We recently concluded a long battle that took us through trial, the court of appeals ... and all the way to the Texas Supreme Court and back ... before the parties finally agreed to settle the case.  Prior to getting heavily into preparations for another trial, the parties agreed to settle the case.  

First, we went to mediation.  Our efforts at negotiating a settlement did not result in a settlement there.  However, we kept talking; for more than two months after the mediation ended we were talking and negotiating a settlement.  Our mediator stayed involved in this process, which was a big help.  The whole process left me with some thoughts regarding negotiations. So, here goes: 

First, know your bottom line.  Decide where you want to go, how far you will/won't go, and then work towards it.  

Second, get help.  That is, if trying to settle a case, a good mediator can be invaluable.  Even if a case does not settle at mediation, then you will at least know how far apart the sides are to know what you are really fighting over.  That is, a good mediator will get the sides to their stopping points, at least.   If the lawyers on the case are good and all the parties are in the case, I like the idea of an early mediation. (Often, some amount of discovery will be needed to evaluate a case properly). Most mediators will tell you to wait to start negotiations until you get to the mediation, in order to allow the process to have the best chance of working, and I generally agree.  

Third, if it doesn't settle at mediation, then reevaluate your bottom line in comparison to the between gap the parties. 

Finally, save negotiations for people in an adversarial relationship.  For my part, I am fighting for my clients and want to avoid negotiating with them regarding fees and such.  People on the same side of the dispute should speak openly and honestly about what they want and then see if they can accommodate each other.  

In sum, know what you want. Work hard and early for that result, preferably with the help of a good mediator.  If the case does not settle, reevaluate your settlement position in light of what is learned at mediation. 

And always ... be ready, willing, and able to prepare to win the case.  The other side must know this. Such an approach provides the best opportunity and environment to avoid a trial.