Elon Musk has a long history of flashy product announcements that are light on the details — a humanoid robot, a brain-computer interface, a supersonic transportation system — years before the innovations he touts were ready for the market. market, if they ever materialize.
That’s the approach he’s taken in his campaign to buy Twitter, initially posting his $44 billion offer with no funding or plan to operate the San Francisco company. Wall Street dismissed it as another piece of Musk vaporware.
But just 11 days after Musk offered to buy Twitter, and three weeks after he became its biggest shareholder, the social media platform announced it had agreed to sell itself to the billionaire. The deal, for $54.20 per share in cash, is expected to close this year.
Even though Musk’s tactics this month seemed unconventional or even half-armed, M&A experts say his strategy incorporated sound negotiation principles — with a touch of his distinctive, unpredictable style.
“You’re with Elon Musk and this won’t be the standard corporate trip,” said G. Richard Shell, a professor at the University of Pennsylvania and director of Wharton’s Executive Negotiation Workshop. “Musk is ready, shoot, aim. It’s not a private equity firm that has a group of very sober and methodical executives trying to beat market performance.
Takeover attempts are often painstaking efforts that can drag on for months. By contrast, Musk’s pursuit of Twitter began when he bought a 9.2% stake in the company on April 4, punctuating the news with a “cheeky.”Oh hi lol” Tweeter.
The next day, Chief Executive Parag Agrawal announced that Twitter was appointing Musk to its board, a move that was reversed five days later, after a tweet in which Musk questioned whether Twitter was “dyingdue to low activity from top users such as Taylor Swift and Justin Bieber.
Then, on April 14, Musk tweeted, “I made an offer” with a link to the Filing with the SEC in which he outlines his plan to privatize the company. The opening bid, he said, was his “best and final”.
“I don’t play the back and forth game. I went straight to the end,” he said in the filing. “It’s a high price and your shareholders will love it. If the deal doesn’t work out, since I don’t trust management and don’t believe I can drive the necessary change in the public market, I will have to reconsider my position as a shareholder. It’s not a threat.”
A prolific Twitter user, Musk used the platform to drum up support for his bid as the company adopted a poison pill, a defensive measure to avoid unsolicited takeovers.
“Making Twitter private at $54.20 should be up to shareholders, not the board,” Musk tweeted, along with a survey which garnered more than 2.8 million votes (83.5% of respondents said yes).
“If our Twitter auction succeeds, we’ll beat the spambots or die trying!” he tweeted a week later.
Whether it was a sideshow or a strategy, “he negotiated in a way that matched his public persona,” said Danny Ertel, founding partner of Vantage Partners, which helps companies negotiate. “He wants to do something big, which is a bit controversial, and he’s going to leverage the tools he has, which is his personal presence, his 80 million+ Twitter followers and his track record.”
In the end, the money — Musk offered a 38% premium to Twitter’s April 1 closing stock price — more than public posturing was what mattered. Some analysts also speculated that the company’s quarterly results, which are expected to be released on Thursday, are weak and that no other bidders were interested.
“To offer so much money to buy a company like Twitter is unusual,” said Ed Brodow, negotiation expert and author of “Negotiation Boot Camp.” “But Musk has an unusual reputation – he’s not your ordinary business leader.”
Musk’s other unorthodox moves — such as including an apparent reference to marijuana in his $54.20 a share price — were simply “in line with his personality,” Brodow said. “He’s outspoken, he’s idiosyncratic – you better take him seriously because he’s the richest man in the world.”
That said, being negative during negotiations can have unintended consequences, said Elizabeth Umphress, professor of management at the University of Washington’s Michael G. Foster School of Business. As Musk takes over Twitter, he may have to deal with disgruntled employees and friction that otherwise wouldn’t exist had he approached his offer in a more professional and buttoned-up way.
Umphress said research has shown that being respectful in negotiations is most likely to yield positive results for both parties involved – although Musk’s power and influence may have given him a pass. “People with billions of dollars can sometimes violate those assumptions,” she said.
Still, “we really want our negotiations to be non-reality TV-worthy,” she said.
Shell, Wharton’s professor, said the antics and turbocharged acquisition timeline were Musk’s signature, reflecting his genuine enthusiasm rather than entertainment for entertainment’s sake.
“It’s easy to think he’s eccentric when he’s actually a genius,” he said. “As things went, it was fast, it was furious. This speed and this change of direction and the kind of speed with which everything happened: very unusual. It was turn left, turn right, go straight, done.
What’s less obvious is what Musk will do with the company once he officially owns it.
“When Warren Buffett buys a business, we evaluate it on the basis of ‘Has Warren Buffett had another good deal? “, Shell said. “With Elon Musk, we have a different set of parameters to judge success for him: is it transformational in any way? Does it change the way we think about anything? Does it open our imagination to a new way of doing business or innovating? »