Elon Musk has a long history of creating spectacular product announcements with few details — a humanoid robot, a brain-computer interface, a supersonic transportation system — years before the innovations he touts are ready to hit the market, if they are at all. ever materialize.
It was this approach that he brought his campaign to buy Twitter, initially posting its $44 billion bid without funding or a plan to manage the San Francisco company. Wall Street called it another Musk hoax.
But just 11 days after Musk offered to buy Twitter, and three weeks after he became its largest shareholder, the social media platform announced that agreed to sell himself to the billionaire. The deal, priced at $54.20 per share in cash, is expected to close this year.
While Musk’s tactics this month seemed unconventional or even ill-conceived, M&A experts say his strategy included sound negotiating principles – tinged with his distinctive, unpredictable style.
“You’re going on a road trip with Elon Musk, and it’s not going to be a standard corporate trip,” said J. Richard Schell, professor at the University of Pennsylvania and director of the Wharton Executive Negotiation Seminar. “The mask is ready, fire, target. He’s not a private equity firm that has a bunch of very sober and methodical executives trying to beat market returns.”
Attempts to take over a company are often a tedious undertaking that can drag on for months. In contrast, Musk’s pursuit of Twitter began when he bought a 9.2% stake in the company on April 4, punctuating the news with the cheeky line “Oh hi lol“Tweet.
The next day, CEO Parag Agrawal announced that Twitter was appointing Musk to its board of directors, but that decision was reversed five days later after a tweet in which Musk questioned whether Twitter “dying“Due to low activity among popular users like Taylor Swift and Justin Bieber.
Then, on April 14, Musk tweeted, “I proposed,” along with a link to filing with the US Securities and Exchange Commission in which he outlined his plan to take the company private. The opening bet, he said, was his “best and last”.
“I don’t play the back and forth game. I went straight to the end,” he said in the application. “It’s a high price, and your shareholders will love it. If the deal does not go through, given that I do not trust management and do not believe that I can make the necessary changes in the public market, I will need to reconsider my position as a shareholder. It’s not a threat.”
An avid Twitter user, Musk used the platform to rally support for his proposal as the company took the poison pill, a defensive measure to prevent unwanted takeovers.
“Twitter privatization at $54.20 should be decided by shareholders, not the board of directors,” Musk wrote along with interview which received over 2.8 million votes (83.5% of respondents said “yes”).
“If our twitter bid succeeds, we’ll beat the spambots or die trying!” have tweeted one week later.
Whether it’s sideshow or strategy, “he negotiated according to his public persona,” said Danny Ertel, a founding partner at Vantage Partners, which helps companies negotiate. “He wants to do something flashy, a bit controversial, and he’s going to use the tools he has, which is his personal presence, 80+ million Twitter followers, and his balance sheet.”
Ultimately, money — Musk offered a 38 percent premium on Twitter’s stock price at the close of trading on April 1 — mattered more than public posturing. Some analysts also speculate that the company’s quarterly earnings, due on Thursday, are weak and that other market participants have shown no interest in them.
“Offering that much money to buy out a company like Twitter is unusual,” said Ed Broadow, negotiation expert and author of Negotiation Bootcamp. “But Musk has an unusual reputation for not being your run-of-the-mill business executive.”
Musk’s other unorthodox actions, such as including an explicit reference to marijuana in his $54.20 per share price, simply “fitted his personality,” Broadow said. “He’s outspoken, he’s idiosyncratic – you’d better take him seriously because he’s the richest man in the world.”
However, negative negotiation behavior can have unintended consequences, says Elizabeth Umphress, professor of management at the University of Washington’s Michael G. Foster School of Business. As Musk takes control of Twitter, he may have to contend with disgruntled employees and friction that otherwise wouldn’t exist had he approached his bid with more professionalism and restraint.
Umphress said the study showed that respectful negotiation was likely to lead to positive outcomes for both parties, though Musk’s power and influence may have given him a chance. “People who have billions of dollars can sometimes violate those assumptions,” she said.
However, “we really want our negotiations to not be worthy of a reality show,” she said.
Schell, a Wharton professor, said the antics and schedule for the turbo acquisition were Musk’s hallmark, reflecting his genuine excitement rather than fun for fun’s sake.
“It’s easy to think of him as quirky when he’s actually a genius,” he said. “When deals were made, it was fast, it was furious. This speed, and this change of direction, and the speed with which it all unfolded: very unusual. It was a left turn, a right turn, straight ahead, done.”
What’s less clear is what Musk will do with the company once he officially owns it.
“When Warren Buffett buys a company, we evaluate it in terms of ‘Did Warren Buffett get another good deal?'” Schell said. “With Elon Musk, we have a different set of metrics to judge his success: is it transformative in some way? Does it change the way we think about something? Does this open our imagination to some new way of doing business or innovation?”