Do You Want To Play A Game? EA & Take-Two’s Negotiating Failure

by drjim on September 23, 2008

EA Tried To Negotiate To Buy Take-Two Software

EA Tried To Negotiate To Buy Take-Two Software

At this blog, we firmly believe that the best negotiating learning comes from observing the real world – not from just reading yet-another-book-on-negotiating. Thankfully, there continue to be a number of fantastic stories in the news that provide key lessons on how companies negotiate with each other and, all too often, what goes wrong…

Set the scene. The players in this particular ongoing drama were Electronic Arts (EA) and Take-Two Interactive Software. EA is a well known developer of video games for a number of different platforms. EA has a number of very popular titles including the best selling “Madden Football“. Take-Two is a young upstart firm that sells the insanely popular “Grand Theft Auto” games. Our story really starts seven months ago when EA made an unsolicited bid of $2B for Take-Two.

So what happened? Take-Two basically said “Thanks, but no thanks.” They stated that they thought that the EA offer of $25.74/share was too low. One reason that they said this was because their most recent game, Grand Theft Auto iV, had already sold over 10M copies.

What happened next? EA ended up letting its hostile takeover bid expire. However, as recently as this August it still seemed as though a deal might be had. EA announced that they were entering into confidential discussions with Take-Two during which EA would have access to non-public info about Take-Two’s business plans.

Where do things stand now? EA has announced that they will not make another offer for Take-Two.

What happened here? Underneath all of the discussions of how to merge two large software firms was a ticking time-bomb: the 2008 Christmas season. From the beginning, EA had made it clear that in order for the deal to make sense for them, they would have had to have been able to integrate the Take-Two product catalog into the EA catalog in time for the Christmas season. What this meant is that a deal would have had to been inked by mid-September in order to allow enough time for this to happen.

What can we learn from this failed deal? If there is a schedule issue, then you need to stay aware of it during the entire negotiation. The other side of this coin is that if you don’t want a deal to happen (like Take-Two) then simply by dragging your feet you can cause the deal to go away.

How important have dates been in your negotiations? Have you ever had a chance to use a looming date to help move one of your negotiations along? Has a negotiation ever been derailed by an inability to wrap things up by a given date? Leave a comment and let me know what you think.

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