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Reader's Review, September 2011


By John Baker



DEALMAKING: The New Strategy of Negotiauctions

By Guhan Subramanian
256 pp. New York: W.W. Norton & Company, Inc. 2011
Paperback (USA) $ 16.95


Guhan Subramanian is the Joseph Flom Professor of Law and Business at the Harvard Law School and the H. Douglas Weaver Professor of Business Law at the Harvard Business School. He is also the faculty chair of the Harvard University JD/MBA program and a member of the Harvard Program on Negotiation. Professor Subramanian has written widely on negotiations and participated in a number of public-company deals, including Oracle, Cox Enterprises, and Toy's "R" Us. He holds degrees in Economics, Law, and Business from Harvard University.

The author begins his book with the statement that "negotiauctions," a term which is likely to be new and foreign to most readers, "... captures the way most high stakes assets are actually transferred" (page xii). It is an arresting start to the consideration of the broader topic of deal-making. The reader is about to begin a different and carefully crafted journey through an emerging strategy by a skilled expert.

In essence, Professor Subramanian argues that the traditional views of asset transfers as relying upon either negotiation or auctions are inadequate to explain the methods required and used to accomplish complex deals. In fact, the author contends, complex deal-making today uses elements of each method and therefore is accomplished through a blending of the two methods into "negotiauctions."

Importantly, the author acknowledges the term "negotiauctions" is trade-marked by another scholar and therefore not his invention. Also, refreshingly, Professor Subramanian states clearly that he does not mean that "negotiauctions" strategy or this book is "... a comprehensive guide on how to negotiate everything" (Page xvii).

The book is divided into two distinct parts. The first section explores traditional negotiation methods and auction methods, the roots for negotiauction strategy, and set the stage for what is to come on complex deal-making.

The negotiation discussion is a brief overview of some of the elements used in preparation such as Best Alternative To A Negotiated Agreement (BATNA), Reservation values, and the Zone of Possible Agreement (ZOPA). Readers of this magazine will move knowledgeably through this section, I am sure.

From exploring negotiation strategy with its focus on competition across the table between buyer and seller, the author turns to auction strategy in which the seller is a passive participant and potential buyers compete with one another on one side of the table. Auction strategy is also covered through a brief overview of the topic.

Part II concentrates upon negotiauction strategy in which competition across the table (negotiation) and competition on one side of the table (auction) are combined to accomplish complex business deals. It is here that the book comes to life as the author leads his readers through the strategic moves that control that process. Using a variety of illustrative cases, the author introduces his readers to the three key moves that determine the course of the "negotiauction" process:

  • Set-up moves establishing the entry process
  • Rearranging moves designed to change the assets, the parties, and/or create added-value in the deal.
  • Shut-down moves intended to cut-off same side of the table competition.

The result is that Professor Subramanian creates a fascinating presentation of the "negotiauction" complex deal making process. "In fact", Professor Subramanian asserts, "negotiauctions have become the most common mechanism for buying and selling assets in our increasingly competitive global marketplace" (Pages 196-197).

Whether or not this strategy is as prevalent as the author contends, you need to understand this strategy. This book is an excellent means to accomplish that goal.

DEALMAKING includes a detailed Notes section enriched with a wide range of valuable bibliographical citations and a thorough and helpful index.
Highly recommended.



John D. Baker, Ph.D.
Editor


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