BEA and Oracle (Part 1)

In recent articles, it was reported that BEA “spurned” a $6.7 billion offer from Oracle to purchase the company.  It amounted to $17 per share.  BEA countered with a statement that $21 per share would be a more reasonable figure.  These actions established a “Negotiation Success Range™” (NSR™).  Negotiation skill will determine at which end of the range the deal closes (if it does).  Beyond skill issues, BEA also may feel pressure to answer to stockholders who may find the offer attractive as a share price.  So BEA’s counter-offer could have one of several meanings, including:

  1. A deal can be struck, probably at some intermediate price between $17 and $21.  The parties must find compelling arguments to make the other side move closer to closing.
  2. BEA may have no intention of accepting.  If a seller makes an offer that is too high, buyers often walk away, and BEA might want this.  It depends on BEA’s knowledge of their own value.
  3. BEA may need to convince their shareholders that BEA’s value is far above the offer.  In this case, the counteroffer may be more an argument to convince their shareholders than a real counteroffer.

In the same article, Oracle was reported to give BEA a deadline to decide, or Oracle would directly approach the shareholders.  This is an attempt, common enough in negotiations, to apply pressure by escalating to a “higher power” (shareholders, in this case).

These tactics are the same ones that are used in everyday commercial negotiations: escalation, creation of an NSR™ within which a deal can be struck, and appealing to people with different motivations than the ones you are presently dealing with.  You should be prepared to see them in your negotiations.  We can help.  We bring superior knowledge of negotiations to add to your superior knowledge of your negotiating counterpart at your client or supplier. (TD)