Title: Dealmaking: The New Strategy of Negotiauctions
Author: Guhan Subramanian
Publication Year: 2011
Category: Mergers and Acquisitions

Introduction:
“Dealmaking: The New Strategy of Negotiauctions” by Guhan Subramanian explores the blended concept of negotiations and auctions, termed as ‘negotiauctions’. The author, a renowned expert in negotiations, mergers, and acquisitions, provides practical strategies and real-world examples to help business professionals navigate complex deal-making scenarios. This summary aims to encapsulate the essence of the book, breaking down major points supported by concrete examples and actionable advice.

Chapter 1: Understanding Negotiauctions

1.1 Key Concept:

Negotiauctions combine the dynamics of negotiations and auctions. Subramanian argues that traditional deal-making processes are evolving into hybrid forms due to the increasing complexity and competitive nature of the business environment.

Example:
Subramanian discusses the acquisition of YouTube by Google, illustrating how an initial negotiation phase transitioned into a competitive auction-like scenario once other bidders were involved.

Actionable Advice:
When entering a deal, be prepared for transitions between negotiation and auction dynamics. Develop strategies for both competitive bidding and one-on-one negotiations to stay versatile in changing situations.

Chapter 2: Strategic Planning in Negotiauctions

2.1 Key Concept:

Preparation is crucial in negotiauctions. Effective due diligence, understanding market dynamics, and assessing all possible outcomes will enhance your strategic positioning.

Example:
Subramanian highlights IBM’s acquisition strategy, where extensive market research and competitor analysis allowed IBM to anticipate and counter competitors’ moves effectively.

Actionable Advice:
Before entering any deal, conduct a thorough market analysis and evaluate the strengths and weaknesses of all potential competitors. Plan for multiple scenarios to remain agile and informed.

Chapter 3: The Role of Information

3.1 Key Concept:

In negotiauctions, the asymmetry of information plays a critical role. Subramanian emphasizes the importance of gathering and controlling information to leverage it during negotiations.

Example:
The book details the case of Hilton Hotels acquiring Hilton International. By strategically controlling the flow of information, Hilton was able to secure more favorable terms.

Actionable Advice:
Collect as much relevant information as possible about the other party and the deal environment. Use this information strategically, releasing or withholding details to influence the negotiations positively.

Chapter 4: Shaping the Process

4.1 Key Concept:

Being proactive in shaping the process of negotiauctions can yield significant advantages. Subramanian advises deal-makers to set the rules and design the process to their benefit.

Example:
Subramanian discusses Microsoft’s acquisition tactics, where they often played a key role in setting the terms of the negotiation process to align with their strategic goals.

Actionable Advice:
Take an active role in designing the negotiation or auction process. Propose terms, suggest timelines, and shape the structure in ways that play to your strengths and mitigate your weaknesses.

Chapter 5: Building and Utilizing Leverage

5.1 Key Concept:

Leverage is paramount in any deal-making scenario. Subramanian elaborates on how to build leverage by creating alternatives and increasing the perceived value of your offer.

Example:
The book recounts the acquisition of Pixar by Disney, where Pixar increased its leverage by entertaining other potential buyers, resulting in a more favorable deal with Disney.

Actionable Advice:
Identify and cultivate attractive alternatives to strengthen your bargaining position. Ensure that other parties are aware of these alternatives to enhance your leverage during negotiations.

Chapter 6: Psychological Tactics in Negotiauctions

6.1 Key Concept:

Understanding and employing psychological tactics can significantly influence the outcome of negotiauctions. Subramanian highlights the importance of consistency, authority, and social proof.

Example:
In the merger of Bank of America and Merrill Lynch, psychological tactics such as invoking authority and establishing social proof helped align stakeholders and smoothen the negotiation process.

Actionable Advice:
Use psychological principles strategically. Establish authority by showcasing expertise, ensure consistency in your messaging, and leverage social proof by highlighting endorsements or successes.

Chapter 7: Timing and Sequencing

7.1 Key Concept:

The timing and sequencing of steps in negotiauctions can be the difference between a successful deal and a missed opportunity. Subramanian discusses how strategic timing can enhance negotiation outcomes.

Example:
The sequential rollout of offers in GE’s acquisition of RCA allowed GE to maximize value by strategically timing their negotiations to manage competition and market reactions.

Actionable Advice:
Plan the sequence and timing of your offers and counteroffers. Be patient and deliberate, knowing when to push forward and when to hold back to optimize the deal’s outcome.

Chapter 8: Closing the Deal

8.1 Key Concept:

Closing a deal requires a balance of assertiveness and flexibility. Subramanian underlines the importance of finalizing terms decisively while being open to last-minute adjustments.

Example:
The book references Oracle’s acquisition strategy, where assertive closing tactics were paired with flexibility on key points, ultimately securing successful acquisitions.

Actionable Advice:
When closing a deal, be firm about your critical terms but stay open to reasonable, last-minute changes that can appeal to the other party. This balance can facilitate a smooth closure.

Chapter 9: Learning from Mistakes

9.1 Key Concept:

Analyzing past negotiauctions to understand mistakes and successes is essential for continuous improvement in deal-making strategies.

Example:
Subramanian examines failed M&A attempts, such as AOL and Time Warner, to highlight common pitfalls like cultural misalignment and overvaluation.

Actionable Advice:
Regularly review past deals to identify what worked and what didn’t. Use these insights to refine your approach in future negotiations and auctions.

Chapter 10: Ethical Considerations

10.1 Key Concept:

Maintaining ethical standards in negotiauctions builds long-term credibility and trust. Subramanian emphasizes the impact of ethical behavior on reputation and future deals.

Example:
The book describes Johnson & Johnson’s ethical approach in M&As, which helped sustain their reputation and improve stakeholder relationships.

Actionable Advice:
Commit to ethical practices in all deal-making activities. Transparency, fairness, and honesty should be core guidelines to establish and maintain a strong professional reputation.

Conclusion:

“Dealmaking: The New Strategy of Negotiauctions” provides a comprehensive and strategic approach to blending negotiation and auction tactics in mergers and acquisitions. Subramanian’s insights are supported by real-world examples and actionable advice, making the book a valuable resource for deal-makers aiming to enhance their strategies in an increasingly complex and competitive environment. By understanding and applying the principles of negotiauctions, business professionals can navigate negotiations and auctions with greater agility, leverage, and success.