Respect Malcolm Glazer.
Despite fierce resistance from Manchester United fans and key stakeholders of the club, the Glazers successfully acquired Manchester United on May 16, 2005. And by the following month, on June 22, 2005, turned the football club, a Public Limited Company (PLC), into family business. Shares in Manchester United were delisted from the London Stock Exchange, ending the club’s 14-year spell as a publicly traded company. The Athletic reports that they’ve since collected about £200 million from their investment in the club.
“So how did they negotiate their way to such a great investment?” Anna Faelten, Michel Driessen, and Scott Moeller, ask in their book, Why Deals Fail & How to Rescue Them: M & A Lessons for Business Success. “Good industry knowledge and target selection took them part of the way, but their negotiating tactics made the difference.”
Anna Faelten, et al., write that in 2003, Man United was one of the
most successful football teams in Europe with a history that gave the club a
uniquely popular global fan base. It was a time when a number of outside
investors saw the UK football market as an attractive investment for either
prestige or money.
However, United remained a no go for these investors. Rupert Murdoch,
the owner of Fox News and The Wall Street Journal, attempted to buy the club but
the regulators stamped on his bid as the fans launched a public campaign to
stop him. Others, such as Russian oligarch Roman Abramovich (who purchased
Chelsea Football Club), had already dismissed United as too difficult to buy
and too costly.
“But Glazer, who already owned the Tampa Buccaneers, relied on his
sports industry knowledge to identify extra value in Manchester United,” Anna
Faelten, et al., write.
Malcolm Glazer manoeuvred his acquisition of United by using the salami
tactic, also known as the salami-slice strategy or salami attack. The takeover
wasn’t done through a single bid, but piece by piece, spanning over a period of
two years, from 2003 to 2005.
The Athletic reports that the fans vehemently opposed the takeover. Ole
Gunnar Solskjaer, the current manager of the club, signed up to the resistance
movement in February 2005. The then CEO of the club, David Gill, sold £1.3
million of shares to a board member to try to prevent them from being bought by
Mr. Glazer and made a sizable donation to Shareholders United.
However, by the time Mr Glazer launched a formal bid for Man United, The Guardian reports that “United fans, who have
campaigned vigorously against Mr. Glazer over the past few months, have been
fighting a losing battle.”
“The ‘salami’ tactic has the object of presenting a demand bit by bit,”
Jacques Rojot explains in his book, Negotiation:
From Theory to Practice. “Once that
or a small part of an item’s agreement is won, the party will move its demands
to another small part of the item and build upon concession after concession to
try to reduce the other party’s resistance. As soon as a minor concession is
institutionalised as being past practice, the party asks for more on the same
item.”
In essence, the tactic involves dividing a big goal into smaller goals,
while conquering the smaller goals piece by piece until the big goal is
achieved.
Mr. Glazer’s big goal was to buy Man United. His smaller goals were to
purchase shares in the company with small incremental stakes.
According to Anna Faelten, et al., by March 2003, Mr. Glazer swept the
market for available shares of the company and started purchasing them. By the
end of the year, he had amassed over 14% of the shares from the market sweeps
and smaller shareholders. And by November 2004, he had acquired 28% of the
company’s shares. He then demanded and received three board seats. But at this
point, he was nowhere near being able to force through a deal.
Mr. Glazer, however, had a trump card in his negotiating strategy. The
club’s second-biggest shareholder with 29% was Cubic Expression, the investment
vehicle of two Irish financiers and horseracing buffs, J. P. McManus and John
Magnier. They also had a board seat. Combining his stake with Cubic’s would
give him more than 50% of the club – certainly enough for control and also
sizeable enough to try to force out small investors.
In May 2005, the Glazers finally secured Cubic’s stake, giving them a
majority of the company’s shares. Only at this point – though confident that
they could squeeze out the remaining shareholders as would be possible under UK
takeover regulations – did the Glazer family launch a formal bid for Man
United.
The Glazers bought United for £790 million in a highly leveraged deal
by putting in £270 million of their own cash (34% of the borrowed money).
Salami tactic is one of the best-known negotiation techniques used by
both the buy-side and the sell-side, and in different circumstances. Phrases
like “just one more thing”, “affordable weekly payments” and “payments in
instalment over a period of five years” are examples of salami tactic.
Assuming you are a newly recruited employee of a company in the process
of negotiating your employee benefits package, you can employ the salami tactic
by presenting each of your demands for discussion and pushing hard to reach an
agreement.
For instance, you may start by negotiating your salary from the initial
offer of $1,500 from the employer, to $1,650. Once an agreement is reached, you
can proceed to draw the employer’s attention to your health insurance. And
after a long discussion and some haggling, both of you agree that the employer
would pay all of the premium for the health insurance.
Just when the employer is thinking a final agreement has been reached,
you may pretend to go through your employment contract once again, and wonder,
“Oh! Just one more thing. We haven’t talked about the annual leave.”
You continue to table your demands “slice by slice” before the employer
while they’re potentially moved to grant more concessions than they would do if
all demands were presented at the same time. Using this tactic may take days,
weeks, months or years to achieve your goal. With this tactic, patience is a virtue.
Salami tactic is necessarily offensive. And like any form of attacks,
there are ways to defend against it.
One of the best defensive tactics is referring to an offer as your Best
and Final Offer (BAFO). Stefanie Jung and Peter Krebs note in their book, The Essentials of Contract Negotiation,
that referring to an offer as the last or very final offer, can therefore be a
tactical means to avoid making further concessions, or at least to signal that
from this point onwards, concessions will be considerably more expensive.
Another way is to label your concessions and/or demand reciprocity. By
labelling your concession, you’re bringing to the consciousness of your
negotiating partner what you’ve done for them. You may even go further to
explain what it costs you to concede to their demand. This helps to trigger an
obligation to reciprocate and weakens their plan to make demands “bit by bit”.
You may also demand reciprocity for your concession, where your counterpart
tends to ignore, overlook or downplay it.
Salami tactic is an effective way to overcome anticipated or exhibited
resistance in achieving your goal. The inconspicuousness of your individual
demand deludes your negotiating partner from seeing the bigger picture. And by
the time they realise what’s going on, they would be afraid to walk away as
they feel committed to reaching an agreement already. However, this offensive
tactic can be defended against so you don’t fall victim to it.
Malcolm Glazer had a dream. Came to the Theatre of Dreams. And watched
his dream become reality through effective use of the salami tactic. He died in
May 28, 2014, leaving behind his children, Avram, Joel, Kevin, Bryan, Darcie
and Edward Glazer, as executive co-chairmen of Man United. All six sit on the
club’s board of directors.
Special thanks to Oluwadunni Oni for taking the time out of her busy schedule to edit and review this article. Thank you.
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