A Harvard Business Professor Unpacks the Pierce Acquisition in "Succession

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0:48Hi, everybody. I am Francesca Gina, professor at Harvard Business School. and we are going to talk about what Succession can teach us about negotiation.

1:04Today, we are breaking down what happened in the Pierce acquisition in episode one of season four of Succession. In this episode, Logan Roy, who's the owner of Waystar, is bidding for the acquisition of another business called Pierce. and he's bidding against his own children. At the outset, this might seem like an easy acquisition, but it's very dramatic, partly because of the difficult relationships among everybody involved. We have Nan Pierce, who's the owner of the Pierce business, with a very contentious relationship with Logan Roy. Thank you for your concern. Let's go. Hey, wait! We haven't finished!

1:46We haven't finished! Do you hear me? And we also know that Logan Roy has a difficult relationship with a lot of disagreements with his own kids. It's just a complicated private situation. Whereby we all hate him. Tell them to get their own f***ing idea. It's pathetic. So there is a lot at stake in these episodes and a lot of emotions that might explain some of what we see in the negotiations as they're happening.

2:16We anchor at 7? Seven, start at six, but like you're kidding around. Seven is what we soft-footed, right? Six, find something we've lost conviction on. Now, there are a couple of interesting lessons from this segment of the episode. First, the use of anchors. Often we put numbers in a conversation, whether we are negotiating over a business or whether we are negotiating over a job, and those numbers are sticky. There are anchors that we use in the conversations that are very hard to move from. But there is also another interesting lesson, and that is the use of framing. When Logan Roy asked Tom to think about ways to justify the offer, to find something that they're not that confident about, what he's trying to do is framing the$6 billion offer such that it's not left hanging on his own, but rather is justified.

3:11And what we know from research is that when we justify our offers, we make them more credible in the eyes of the other side. That might seem like a great strategy, but when we put offers on the table, we need to be careful not to be too aggressive. Because if we are too aggressive in a way that is not really that justifiable or the justification that we provide is not that credible, then we're off-putting to the point that we're not going to be able to win the mindset heart of the person we are negotiating with.

3:46The Roy siblings are starting off a point of weakness, since for the Pierce acquisition, the solid option that already is on the table is the offer from Logan Roy. I wanted to say thank you for coming, but I think it's just a little bit too late. we have a preferred bidder. The kids need to think very hard about how to come into the conversation. I'm confident that we can be competitive on price. Different people saying different numbers, eight, nine, what's next? And again, those are important numbers in the conversations because they serve as anchors. After hearing those numbers, the kids go out in the balcony and try to have a little conversations about what is the first offer that they want to make.

4:33Okay, so we're going to go in and say eight. Yeah, we're starting at eight. When the Roy siblings come up with the$8 billion offers, their initial offers, they're not sitting... Propel Fitness Water with Gatorade electrolytes, zero sugar, and vitamins. Propel hydrates better than water to help you get the most out of your workout and get back to your best self. What propels you? Propel with Gatorade electrolytes.

5:27Harvard Business Professor:This is a job for Indeed Sponsored Jobs. ...down thinking through the fundamentals. When we think about going into a negotiation prepared, whatever the negotiation is, I often tell my students to sit down and think about all of the alternatives that they could go for if the current deal were not to happen. We call them alternatives, and then among them, we need to identify the best one, the best alternative to negotiated agreement. So imagine you're on the market looking for a job and you have an offer in your hands. Fantastic. But what you also need to be doing before you negotiate that offer is thinking through what are the alternatives you have.

6:11Maybe you don't have another offer, but you can look for one, or maybe you can decide to go to Europe for a year. Those are alternatives that are possible. They might not be great ones. They might really suck as alternatives, but they exist. And once we identified our alternatives and the best among them, we need to try to quantify it in dollar values such that we identify what in negotiations we call the reservations value, the point at which you're indifferent with the current offer or walking away to the best alternative to negotiated agreement. Now, this is really important because it allows us to be thoughtful at the negotiation table.

6:52It allows us to make sure that we're taking offers that actually bring more value to us in comparisons to the other alternatives. In thinking about what their offers might be, their Roy siblings were not only considering the business value of what they were acquiring, but they were also thinking about the value of their emotions, how much it would feel good to them to win against their fathers. And so to the extent that they put a dollar value next to those emotions, next to the satisfaction of almost screwing over their fathers, then that can be part of the way we think about our fundamentals and in particular the point at which we're indifferent between this option and our alternatives.

7:45Logan Roy, on his part, also wants to win the business. And emotions are a factor for him, too. I don't want to lose this, Tommy. Sometimes we let those emotions take us too far. We might end up in a bidding war, or we might end up making offers that are really completely irrational, everything considered. As the negotiations are unfolding, Tom called up Shiv. All things being equal, the asset does have a price, and it would be crazy to add an emotional premium here. So should we be looking for a backdoor on this? And it's interesting that what he's trying to achieve is a really important aspect of any negotiation.

8:33I always say in my classes, and my colleagues do too, that information is king. The more information we have about what is going on the other side, the context, the better. But what we see in these scenes is that Shiv and also her brothers are not that interested in revealing to Tom and thus to their fathers what they're working with. Our ceiling is 12. Off. Yeah. Okay, sure. Ours too. Okay. And so what's interesting and the bigger lesson here is that we need to enter negotiations with an investigative mindset. I love that word because it allows us to treat any conversation as the potential for uncovering information that allows us to pivot during the negotiation or to make arguments that allow us to frame our offers in a much stronger.

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9:46Harvard Business Professor:When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a$75 sponsored job credit at Indeed.com slash podcast. That's Indeed.com slash podcast. Terms and conditions apply. Need a hiring hero? This is a job for Indeed sponsored jobs. The Roy siblings are back into thinking about what their next offer might be.

10:22So we think dad's at 8-5-9, so we go 9-5 to top them out. But 10? Just to show that we're really serious. So the half bill extra is just, that's just an extra half bill? Again, there isn't a lot of reflection or analysis about what the business is actually worth. They're just trying to figure out what might be the right number to end the conversation. My colleague, my HBS colleague Zdipa Mahotra, talks about the idea of competitive arousal. When we're in a situation where we're bidding against each other, the emotions can be so strong that we lose the sight of what the business is worth or what the job is worth or whatever assets we're talking about is worth.

11:09And we let the emotion and the potential for winning drive our conversations and our bids rather than letting the careful analysis and thoughtfulness drive our bids.

11:28In watching this episode, I came away with all sorts of lessons about what not to do in negotiations. But a careful look at what unfolding throughout the episode also gives us some ideas of some good things that did happen from a negotiation perspective. One of them is thinking about how the Roy siblings decided to enter conversations. In any negotiation, we have multiple channels. We can do things over email, we can call people on the phone, or we can have live conversations. And what they decided to do is to go on site, meet Nan Pierce, and actually talk to her about what they wanted to offer and why.

12:12They did that well. It was good for them to be present, especially in a context where their father joined the conversation via phone on a very different medium. By being in person, they had an opportunity to really interpret everything that was happening, including what non-peers was thinking about the deal. There is something else they did quite well in their negotiation. And that is what they said to justify their offers and talking about how they were not only interesting in buying the business, but they wanted to respect the brand. He loathes you and he wants to take your properties and roll them in the dirt.

12:53And we wouldn't do that. And I could, we would maintain your values. By doing what they did and bringing that into the conversation, they could make their deal and their offer sweeter because he addressed a concern that the other side had. And so to the extent that we can understand other people's concerns and interests, when we're trying to acquire something from them, we can present our offers and for the same dollar amount, make the offer much more interesting to the other side.

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