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Dealmaking: The New Strategy of Negotiauctions
Informed by meticulous research, field experience, and classroom-tested strategies, Dealmaking offers essential insights for anyone involved in buying or selling everything from cars to corporations. Leading business scholar Guhan Subramanian provides a lively tour of both negotiation and auction theory, then takes an in-depth look at his own hybrid theory, outlining three specific strategies readers can use in complex dealmaking situations. Along the way, he examines case studies as diverse as buying a house, haggling over the rights to a TV show, and participating in the auction of a multimillion-dollar company. Based on broad research and detailed case studies, Dealmaking brings together negotiation and auction strategies for the first time, providing the jargon-free, empirically sound advice professionals need to close the deal. Originally published in hardcover under the title Negotiauctions.
274 pages, Kindle Edition
First published January 1, 2010
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Displaying 1 - 6 of 6 reviews
February 2, 2022
A relatively decent book on dealmaking. The thesis is that many transactions are actually a mix of both negotiations and auctions instead of a pure negotiation or auction. That interplay allows some creative transactional structures, and depending on the situation, the seller should structure it more like a negotiation (when there are few bidders, valuations vary, and many value creation opportunities) or like an auction (many bidders, asset is clearly defined/commodified). By putting same side table pressure (auction), the seller can encourage bidding that could return a better price (sometimes even pretending like there are more bidders than there are), or across the table tactics the seller can exact more value. There is a basic discussion of different types of auctions (sealed bid, open outcry) and the theoretical predictions (second bid sealed auctions encourage no shading of the bid, winner's curse where one end up holding the bag, not realizing that everyone else's valuation was much lower, the tendency for experts to snipe to avoid freeriding). The book also goes through the basics of negotiation including the colorfully named BATNA, ZOPA, reservation price, all pay outcomes. A key idea is the "negotiator's dilemma" where revealing one's information could lead to better value deals, but at the same time gives the other side a weapon to extract value (a classic prisoner's dilemma that is resolved if the chances of the deal closing rise as the value of the deal rises).
The book then argues that pure theories of auction and negotiations don't work because deals are often dynamic and can change between the two forms at different times. Then the author suggests that in light of that reality there are three major themes to consider. The first is that from the process taker's perspective, it often offers value to the seller that the buyer is participating at all, so often the buyer can extract concessions as the price of participating (either in process forms etc). The second is that buyers can often increase the value by combining or splitting parts of the deal amongst themselves (mostly because they have different valuations). From the process setter's perspective that sometimes means encouraging buyers to consult with each other if the valuations are uncertain so that they can find value and pay more as a result or to keep buyers separate to prevent buyer power. The final point the book makes is that often by making a credible threat of leaving the table, the buyer can extract value by pre-maturely shutting down bidding.
The book has a few examples of deals that illustrates the points nicely. I really enjoyed two stories in particular, one where the seller created the impression of strong buyer interest by restricting the times a buyer could visit the data room for due diligence (and then leaving empty take out boxes before their arrival) or a buyer telling the sole bidder that their bid was the lowest. The author includes a chapter discussing some of the legal implications (most of those tactics are not illegal because there was no lying, strictly speaking, and combining buyer power is mostly legal if the purpose is to efficiently allocate assets to higher valued uses).
The book then argues that pure theories of auction and negotiations don't work because deals are often dynamic and can change between the two forms at different times. Then the author suggests that in light of that reality there are three major themes to consider. The first is that from the process taker's perspective, it often offers value to the seller that the buyer is participating at all, so often the buyer can extract concessions as the price of participating (either in process forms etc). The second is that buyers can often increase the value by combining or splitting parts of the deal amongst themselves (mostly because they have different valuations). From the process setter's perspective that sometimes means encouraging buyers to consult with each other if the valuations are uncertain so that they can find value and pay more as a result or to keep buyers separate to prevent buyer power. The final point the book makes is that often by making a credible threat of leaving the table, the buyer can extract value by pre-maturely shutting down bidding.
The book has a few examples of deals that illustrates the points nicely. I really enjoyed two stories in particular, one where the seller created the impression of strong buyer interest by restricting the times a buyer could visit the data room for due diligence (and then leaving empty take out boxes before their arrival) or a buyer telling the sole bidder that their bid was the lowest. The author includes a chapter discussing some of the legal implications (most of those tactics are not illegal because there was no lying, strictly speaking, and combining buyer power is mostly legal if the purpose is to efficiently allocate assets to higher valued uses).
June 3, 2017
As someone who is not interested in finance or business, this book was very dry. I liked the anecdotes and real life examples, but I found this hard to get through.
July 21, 2021
This book covers both the theoretical and practical applications of negotiauctions and ties it together in an easily readable format.
September 2, 2010
This is an excellent book, and I think it brings an important new perspective to the negotiation literature. As with his oral lectures, Subramanian packs in a lot of information into a small amount of text. You have to read it slowly at times, and page back to other sections. But he provides some excellent examples and illustrations of the concepts.
July 22, 2015
Excellent book on auctions, negotiations, and combing the2. Draws on the "theoretical" side, the reality of how these scenarios play out, and touches on legal implications of certain moves. Strongly recommended.
Displaying 1 - 6 of 6 reviews