Negotiation Genius by Max Bazerman & Deepak Malhotra

Author:Max Bazerman & Deepak Malhotra [Bazerman, Max]
Language: eng
Format: mobi
Published: 0101-01-01T00:00:00+00:00

CHAPTER 8

Blind Spots in Negotiation

On December 15, 2004, Johnson & Johnson (J&J) agreed to buy medical products manufacturer Guidant for $25.4 bilion.1 Initialy, this appeared to be good news for both Guidant stockholders and for J&J, as the market believed the acquisition had synergy—that is, Guidant appeared to be

worth more to J&J than as a stand-alone company.

On May 24, 2005, wel before J&J and Guidant could close the deal, a New York Times article disclosed that, for three years, Guidant had failed to tel doctors that its implantable defibril ator contained a flaw that had caused twenty-six of them to short-circuit and malfunction. The unit was implanted in 24,000 patients. The FDA opened an investigation into Guidant; a few weeks later, on June 17, Guidant announced a product recal of

its defibril ator.

On October 18, J&J indicated that it wanted to renegotiate the terms of its deal with Guidant, and on November 2, J&J released a statement saying that it believed the federal investigation and recal had affected Guidant’s “short-term results and long-term outlook.”2 On the same day, New York attorney general Eliot Spitzer announced a lawsuit against Guidant, and the FTC conditional y approved the J&J/Guidant merger. Under the

terms of the agreement, J&J had forty-eight hours to execute and finalize the deal after the FTC had approved it. If J&J were to let the deadline expire, possibly citing a “material adverse change” in Guidant’s business, Guidant could sue J&J to force completion of the acquisition. J&J chose not to execute the deal within forty-eight hours. On November 7, Guidant sued J&J.3 Nine days later, as negative press surrounding Guidant

continued to mount,4 J&J proposed a revised bid for Guidant of $21.5 bil ion.

Meanwhile, virtual y unmentioned throughout the initial reporting on the Guidant acquisition was another firm, Boston Scientific, which would be

put at a strategic disadvantage if J&J were to acquire Guidant. Boston Scientific was a key competitor of J&J in the medical-care industry, which was now being reshaped by J&J’s bid for Guidant. Between December 14, 2004 (the day before J&J’s offer), and April 28 (the day after Guidant shareholders approved the offer), the stock price of Boston Scientific had fal en from $35.88 to $29.46 per share.

By the time J&J proposed its revised bid of $21.5 bil ion, Boston Scientific’s stock price had fal en to $25 per share. On December 5, unable to stomach J&J’s acquisition of Guidant, Boston Scientific offered $24.7 bil ion for Guidant. Meanwhile, Guidant’s legal and public image problems continued to worsen; on December 27, the FDA made public a warning letter that it had sent to Guidant about problems with its products.5

Negotiations involving these three companies continued into 2006. Preferring the structure of J&J’s deal over Boston Scientific’s higher-priced deal, Guidant tentatively accepted J&J’s raised offer of $23.2 bil ion on January 11. The next day, Boston Scientific raised its bid to $25 bil ion. The fol owing day, Guidant tentatively accepted J&J’s newly revised bid of $24.2 bil ion. On the seventeenth,

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.