The Naked Negotiator

In a South Park sketch, the gnomes steal underpants as part of a three-phase business plan. The business plan reads:

1. Collect underpants
2. ?
3. Profits

Pixieland dealmakers buy companies or assets with no proven profits or business models in the vain hope that they can make money where no one has before, and big dealmakers are not exempt from this madness.

Meg Whitman, CEO of eBay, bought Skype from it’s inventors for $2.6 billion in the illusory hope it could find a way to turn Skype clients who were attracted by Skype’s free services into profitable fee-paying customers.

eBay hasn’t succeeded so it has written down the Skype purchase by over 50%.

Forbe’s software columnist, Daniel Lyons writes Sun Microsystem’s purchase of MySQL for $1 billion looks to be another Pixieland deal.

MySQL has sales of only $70 million and doesn’t according to Lyons seem to be making much money from selling its open source software.

The MySQL Chief Executive Marten Mickos believes Sun’s ownership will leverage it’s sales to $1 billion.

I suspect it won’t be long before the purchase is written off as a moment of madness.

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At the turn of the century, American steel magnate Andrew Carnegie sold his steel interests for $300 million to fellow financial titan, J.P. Morgan.

There was no negotiation.

Carnegie, who never bargained, simply jotted his price on a piece of paper, handed it to an intermediary, who in turn passed it on to Morgan. Glancing at the paper, Morgan mumbled, “I accept.”

Years later, legend has it that the two millionaires bumped into each other on the promenade deck of an Atlantic liner.

“I have been thinking,” said Carnegie, “that I should have asked you for $500 million.”

“I would have paid it,” replied Morgan — and walked away.

Before you start bargaining, you need to calculate what you are initially going to offer. More than any other single factor, your first offer will shape the outcome of the final deal, so it’s vital to plan it carefully.

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My daughter Amy, posted this joke about Bill Gates, that was circulating around the net.

This is how business is done!

Father: “I want you to marry a girl of my choice.”
Son: “I will choose my own bride!”
Father: “But the girl is Bill Gates’ daughter.”
Son: “Well in that case…ok”

Next — Father approaches Bill Gates

Father: “I have a husband for your daughter.”
Bill Gates: “But my daughter is too young to marry!”
Father: “But this young man is a vice-president of the World Bank.”
Bill Gates: “Ah, in that case…ok”

Finally Father goes to see the President of the World Bank.

Father: “I have a young man to be recommended as a vice-president.”
President: “But I already have more vice-presidents than I need!”
Father: “But this young man is Bill Gates’ son-in-law.”
President: “Ah, in that case…ok”

The father in this tale is clearly a seasoned deal-maker.

He knows that sequencing agreements is a key factor in deal success.

Sequencing involves lining up deals so that each agreement raises the odds of knocking over the next one.

Popularity: 10% [?]