BEA and Oracle (Part 2)

Carl C. Icahn goes over the BEA management team’s head. Hard on the heels of BEA’s rejection of Oracle’s $17/share buyout offer, BEA’s largest shareholder Carl C. Icahn has sued BEA to force a shareholders’ meeting to vote on the offer. The negotiations implications are interesting. BEA now has an internal conflict – Icahn arguably has similar (but not exactly aligned) motivations to those of BEA management. At the same time, his threat undercuts the strength of BEA’s position that a price of $21 per share is the right one, and supports Oracle’s position that $17 per share is fair. Interestingly, this would seem to work against Mr. Icahn. If $21 per share were possible, his benefit would be nearly 25% greater. What is BEA to do? Is this pressure (called Negotiations Leverage) real?

Threatening to go “over their head” is a common tactic. In the real world, these kinds of conflicting motivations within a single “team” are common, and have to be managed. If you don’t, it will be expensive to your side – it this case, it could cost up to $6 billion. This is a simple example of the power of negotiations. Ask us how to avoid losing 25% on your next deal.