Twitter vs Elon Musk – 3 lessons for critical negotiations
Failed takeover or a ploy – what is the mystery surrounding Twitter about?
Anyone involved in the world of M&A knows that in many cases in which investors are interested in an acquisition, they change their minds. Sometimes this happens before due diligence, sometimes afterwards. Only in a few cases does the deal actually close.
For several possible reasons, let us take a closer look at three of them.
- The investors themselves – change their priorities or their interests or postpone the acquisition until a later date. That is not uncommon in M&A business. The situation is different if the investor has made a concrete offer – in this case there is a certain commitment. But even then, investors have the right to be informed precisely about internal issues (see point 3 below).
- The relevant third parties – the investorsʼ financiers set their own conditions which are not always 100% compatible with the interests of the investors. Banks are and remain a less visible but an important element in the decision chain.
- The facts – the due diligence reveals issues to investors which were previously unknown. This is the crux of the matter – if the issues are unacceptable, the deal is questionable.
An example – you invest in a Porsche
Just imagine, you have been eyeing a Porsche and have been working your way towards buying it for 5 years. And now you are finally ready to pay the high price.
Everything has come together, you have got the financing, the salesman promises you that the car is in perfect condition, the test drive excited you. All this moves you to make an offer so that your dream car will soon be yours.
The only thing missing is the last step. To be on the safe side you want to have the car checked by a mechanic (due diligence) to make sure that the object of your desire is free from flaws.
Then the surprise – the seller refuses your request.
You ask yourself why he is doing that. Is he hiding something? Has my dream car got a technical defect? The seller’s lack of transparency gnaws away at your trust and therefore at your willingness to buy this Porsche.
When the purchase decision wobbles
Your purchase decision is put to the test – you have 3 options:
1. stick to the agreement and take the risk that the car might have a flaw,
2. negotiate a lower purchase price or
3. withdraw the purchase offer.
Elon Musk had exactly these options as far as the announced takeover of Twitter was concerned. As he chose option 3 he obvious justification was that the other party had breached the agreement, namely that Twitter had not disclosed the number of fake accounts on the platform.
In other words, there was a lack of transparency and a risk that the purchase object had serious shortcomings.
As a person Elon Musk polarizes, as always.
He is accused of making Twitter shares plummet in order to buy them much more cheaply.
Or that he did not really want to buy at all, just draw attention to himself.
Or that the financier did not approve of the downgrading of the Twitter shares and put pressure on him.
Or that he had taken a big risk as far as the price was concerned.
This is all speculation. In fact, he is an investor like everyone else and the same options are open to him as to anyone else.
Value and trust as decision factors
In my Porsche example, no matter which of the first two options you choose, questions and considerations hang in the air:
If the car has technical defects how much exactly will it cost to repair and how long will it take? Can you be sure that the defects can be repaired? Will you end up paying more than planned and more than it is worth (to you)?
And more importantly:
Is the value of the purchase object really correct?
Can you still trust this seller?
Without knowing exactly what his motives were/are, one thing I can imagine (and yes, even that is just a guess) is that Elon Musk was not spared these questions and thoughts in relation to Twitter and the reasons for his withdrawing the offer could be the actual value of the object of purchase and the trust during the process.
3 lessons for critical negotiations
Twitter went on the offensive by suing Elon Musk. Both parties are accusing each other of breaching the agreement. As this case has gone public, we will hopefully get to see who is actually in the right and what the real issue is – if there will be a court case.
Therefore, I would like to give your 3 lessons to take with you on the road to negotiation:
Be careful under which conditions you make offers – even in the exploratory phase! Not only agreements that have been concluded are binding, verbal commitments and promises can also have financial consequences.
Transparency builds bridges of trust between negotiation partners. Or vice versa – those who conceal things arouse and reap mistrust. Mistrust is poison in negotiations and will not lead to a win but, at best, to a compromise. Read here about why compromises are toxic to success.
Trust is a valuable asset in negotiations. And if you lose the trust of your business partners or negotiation partners, you lose a lot in the end.
In negotiations you do not always play with your cards on the table – that is part of the game. But there comes a point when you have to show your cards. If you refuse, you must expect that your honesty and correctness will be questioned. That is counterproductive in negotiations.
Unless Elon Musk vs Twitter reach an out-of-court settlement, a situation like this is certainly not a win-win one.
How important is it to you that your counterpart behaves transparently in negotiations? And vice versa – to what extent are you prepared to meet them with transparency?You can reach me at: email@example.com or +436602400135.
Your Raluca Ionescu