April 01, 2010
During his 3L year at Harvard Law School, Guhan Subramanian J.D./M.B.A. ’98 was writing his third-year paper on game-theoretic approaches to corporate acquisitions, and wanted to use the Conrail-CSX-Norfolk Southern deal, which was then under way, as a case study. The legendary deal-maker Bruce Wasserstein J.D. ’70/M.B.A. ’71, then chairman of Wasserstein Perella, was advising CSX. He agreed to meet with the law student, and their 90-minute conversation has fueled Subramanian’s interest in corporate deal-making ever since.
His book, “Negotiauctions: New Dealmaking Strategies for a Competitive Marketplace” draws on his academic research and his teaching—he is a professor at both Harvard Law School and Harvard Business School and the first person to hold tenured appointments at both institutions. It also has its genesis in that 1997 conversation with Wasserstein, who died this fall. “He was so clearly playing the game at a different level than anyone else,” says Subramanian. “I’m trying to capture and disseminate that kind of strategic thinking.”
Traditionally, academics have looked at deals through one of two lenses, says Subramanian. One branch of research examines auction theory, with roots in game theory and microeconomics. Another looks at negotiations, combining microeconomics with experimental economics, social psychology, behavior economics and law. In real-world situations, however, Subramanian finds that complex deals combine elements of both negotiations and auctions. In his book he explores that “messy middle ground.”
A “negotiauction,” he writes, “is the commonplace situation in which negotiators are fighting on two fronts—across the table for sure, but also on the same side of the table, with known, unknown, or possible competitors.”
Subramanian provides examples from a wide range of transactions, including high-profile mergers and acquisitions, which he has been studying for the past 10 years. He also uses high-stakes examples from everyday life, such as buying a new car or selling a house.
Subramanian says that he originally imagined negotiauctions as a subset of negotiations. However, he writes, “I came to realize that the negotiauction concept resonates with deal-makers because it captures the way most high-stakes assets are actually transferred.”
Released in February 2010, the book draws not only on Subramanian’s interest in the academic studies of law and business, but also on his long-standing interest in studying real deals and learning from real deal-makers. It’s an approach he has brought to his class Advanced Negotiation: Deal Design and Implementation, offered jointly at the law school and the business school. Mark Veblen ’05, a former student in the course and now a corporate associate at Wachtell, Lipton, Rosen & Katz in New York City, found that what he learned in the class was more than he could ever have gleaned from a book on corporate law: “We dealt with the theory,” said Veblen in a 2005 Bulletin story about the course. “But when the practitioners came in, they talked about the friction at the margins and how you have to understand that to predict how these deals will come out. It was quite fascinating.”
For each session, Subramanian invited high-powered deal-makers, CEOs and senior partners from law firms. With the class, they dissected the nuances of complex negotiations, such as NBC’s bidding for the sitcom “Frasier,” Oracle’s acquisition of PeopleSoft, and publishing deals for the memoirs of Hillary Rodham Clinton and Bill Clinton. The experience was enlightening for the students, who learned lessons about corporate deals that are not reflected in case law. And Subramanian found that the conversations enhanced his research and helped create his new book.
“Negotiauctions,” he says, is targeted to sophisticated law and business practitioners. “My hope is that even a sophisticated person who has 20 years’ experience negotiating deals could read it and gain tools that help them take their game to the next level.”