New Star and Blue Bio Negotiation: Merger and Acquisition Scenario

Abstract

This merger and acquisition scenario explores negotiation through several lenses: preparation, negotiation as an art, valuation, tribal marketing and the freak factor. Preparation, especially with a best alternative to negotiated outcome is critical in setting the stage for negotiation. Negotiation as art presumes a need for practice and personal understanding of the situation. Valuations are never perfect, with each party having a bias. Tribal Marketing looks at the organizational dynamics and considers how firms can create support by letting stakeholders integrate themselves into the company. The Freak Factor assesses that a firm's strength is found in its weaknesses, success is found in magnifying strengths rather than balancing outs a weakness. The working paper uses fictional corporations to simulate and apply real situations. New Star Technologies is a venture capital backed biotechnology firm specializing in developing antigens for vaccines. The firm is loosing five million Euros a month, internally valued at 200 million Euros, and is developing a promising antigen for use in an AIDS Vaccine. New Star must become cash flow positive. Blue Bio is a publicly traded firm with a market capitalization of fifteen billion Euros; its research and development projects span many aspects of biotechnology. Blue Bio is expanding through acquisitions of smaller firms to develop research synergies and to build and international brand.Based on a student trail of this scenario, Piratical Suggestions include: Preparation is critical in negotiations; management should include diversity in negotiation planning. Valuations are never perfect; management should include brand valuation and consider the cost of cultural integration with the new firm. Tribes create value to the firm; management can promote the tribe by releasing control to stakeholders. Tribes are smart; management builds trust with the tribe by fostering open communication. Building on strengths maximizes value; management should recognize that weaknesses are keys to strengths.