Negotiation Becomes a High-Resolution Art
Designing the deal
Where students apply negotiation theory and critique real-world deals
Marc Graboff is a veteran of multimillion-dollar Hollywood contract negotiations, in which impressive people regularly line up on all sides of the bargaining table. But when Graboff, the executive vice president of NBC Universal Television Group, came to speak to a class of 54 Harvard law students about corporate deal making, he was the one who was impressed.
Graboff flew from California to Cambridge to explain the ins and outs of inking an agreement bywhich NBC would pay just over $5 million per episode for the hit TV sitcom "Frasier"--even though Paramount, the owner of the show, had initially demanded more than $8 million. After instructing the class on overcoming one obstacle after another, and responding to the students' questions and observations, he came away thinking, "I learned as much from that group as they did from me."
Graboff, who has been practicing entertainment law for more than two decades, had a further thought: "I wish I could have taken a class like that when I was in law school."
Graboff was one of 15 guests in Guhan Subramanian's new course, Advanced Negotiation: Deal Design and Implementation. Subramanian '98, the Joseph Flom Professor of Law and Business, taught the class for the first time this past spring. It mixes rigorous analysis of corporate law with case study examination of recent business deals. To bring the deals to life for students, Subramanian brought in an array of high-powered deal makers, CEOs, senior partners and chairmen. But these boardroom veterans were not just there to lecture. Side by side with the students, they dissected the deals, examined tactical mistakes and players' personalities, and even accepted some constructive criticism along the way.
If the approach sounds a bit like a class taught across the Charles River at Harvard Business School, that is no coincidence. In addition to his J.D., Subramanian holds an M.B.A. from HBS. After a stint as a consultant with McKinsey & Co., he taught at the business school for three years before joining the law school faculty in 2002. "Many of the most interesting transactions never end in a legal opinion," he said. "So in a class like this we look at the deal from the perspective of the corporate deal maker in the trenches, rather than from the perspective of a judge writing a legal opinion after the fact." His class combines an academic, legal approach with a business school-like examination of tactics. Subramanian stated: "I like to ask: 'How can we use an academic lens to shed light on what transactional lawyers and other deal makers actually do, and should do, in practice?'"
Subramanian poses that question to his classes as well as in his own research, which involves empirical analysis of deal making and corporate law and corporate governance issues. He has collected data and written articles on topics such as "freeze-out" transactions (buyouts by controlling shareholders), hostile takeover bids and "lockup" arrangements in negotiated acquisitions. Combining theory and practice, he is writing a book demonstrating how an academic perspective can yield insights for real-world deal making. His co-author, Professor Richard Zeckhauser, an economist, teaches at Harvard's John F. Kennedy School of Government.
"In the class we try to dissect deals to find the critical issues," Subramanian said. "It's the core teaching method at the business school, to look at 15 different situations and see the patterns and principles that arise. Then when you see something in the real world, it looks familiar, and you're better prepared to deal with it."
As high-minded, serious and academic as Subramanian is, it is clear he thinks corporate transactions are just plain fun. His eyes light up as he discusses the legal, tactical and structural elements involved. And he has designed his course to pass that enthusiasm on to his students. "I wasn't sure exactly what to expect teaching this course for the first time," he said. "But the students and practitioners really rose to the occasion, and I think it was a great experience all around."
Subramanian and his deal-design class traded insights with Richard Hall LL.M. '88, a Cravath, Swaine & Moore partner, who detailed the negotiations in a Newport News Shipbuilding deal. James Morphy '79, head of mergers and acquisitions at Sullivan & Cromwell, offered students an insider's view of Hershey's failed merger with Wrigley. From Williams & Connolly, lawyer Robert Barnett discussed the publishing deals for the memoirs of Hillary Rodham Clinton and Bill Clinton.
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