For the first time, Professor Guhan Subramanian is teaching Advanced Negotiation: Deal Design and Implementation. “Many of the most interesting transactions never end in a legal opinion,” he said. “So in a class like this we look at the deal from the perspective of the corporate deal maker in the trenches, rather than from the perspective of a judge writing a legal opinion after the fact.”
Where students apply negotiation theory and critique real-world deals
Marc Graboff is a veteran of multimillion-dollar Hollywood contract negotiations, in which impressive people regularly line up on all sides of the bargaining table. But when Graboff, the executive vice president of NBC Universal Television Group, came to speak to a class of 54 Harvard law students about corporate deal making, he was the one who was impressed.
Graboff flew from California to Cambridge to explain the ins and outs of inking an agreement bywhich NBC would pay just over $5 million per episode for the hit TV sitcom “Frasier”–even though Paramount, the owner of the show, had initially demanded more than $8 million. After instructing the class on overcoming one obstacle after another, and responding to the students’ questions and observations, he came away thinking, “I learned as much from that group as they did from me.”
Graboff, who has been practicing entertainment law for more than two decades, had a further thought: “I wish I could have taken a class like that when I was in law school.”
Graboff was one of 15 guests in Guhan Subramanian’s new course, Advanced Negotiation: Deal Design and Implementation. Subramanian ’98, the Joseph Flom Professor of Law and Business, taught the class for the first time this past spring. It mixes rigorous analysis of corporate law with case study examination of recent business deals. To bring the deals to life for students, Subramanian brought in an array of high-powered deal makers, CEOs, senior partners and chairmen. But these boardroom veterans were not just there to lecture. Side by side with the students, they dissected the deals, examined tactical mistakes and players’ personalities, and even accepted some constructive criticism along the way.
If the approach sounds a bit like a class taught across the Charles River at Harvard Business School, that is no coincidence. In addition to his J.D., Subramanian holds an M.B.A. from HBS. After a stint as a consultant with McKinsey & Co., he taught at the business school for three years before joining the law school faculty in 2002. “Many of the most interesting transactions never end in a legal opinion,” he said. “So in a class like this we look at the deal from the perspective of the corporate deal maker in the trenches, rather than from the perspective of a judge writing a legal opinion after the fact.” His class combines an academic, legal approach with a business school-like examination of tactics. Subramanian stated: “I like to ask: ‘How can we use an academic lens to shed light on what transactional lawyers and other deal makers actually do, and should do, in practice?'”
Subramanian poses that question to his classes as well as in his own research, which involves empirical analysis of deal making and corporate law and corporate governance issues. He has collected data and written articles on topics such as “freeze-out” transactions (buyouts by controlling shareholders), hostile takeover bids and “lockup” arrangements in negotiated acquisitions. Combining theory and practice, he is writing a book demonstrating how an academic perspective can yield insights for real-world deal making. His co-author, Professor Richard Zeckhauser, an economist, teaches at Harvard’s John F. Kennedy School of Government.
“In the class we try to dissect deals to find the critical issues,” Subramanian said. “It’s the core teaching method at the business school, to look at 15 different situations and see the patterns and principles that arise. Then when you see something in the real world, it looks familiar, and you’re better prepared to deal with it.”
As high-minded, serious and academic as Subramanian is, it is clear he thinks corporate transactions are just plain fun. His eyes light up as he discusses the legal, tactical and structural elements involved. And he has designed his course to pass that enthusiasm on to his students. “I wasn’t sure exactly what to expect teaching this course for the first time,” he said. “But the students and practitioners really rose to the occasion, and I think it was a great experience all around.”
Subramanian and his deal-design class traded insights with Richard Hall LL.M. ’88, a Cravath, Swaine & Moore partner, who detailed the negotiations in a Newport News Shipbuilding deal. James Morphy ’79, head of mergers and acquisitions at Sullivan & Cromwell, offered students an insider’s view of Hershey’s failed merger with Wrigley. From Williams & Connolly, lawyer Robert Barnett discussed the publishing deals for the memoirs of Hillary Rodham Clinton and Bill Clinton.
Before each expert arrived, the students prepared meticulously. They pored over the “deal documents”–sometimes numbering into the hundreds of pages–and read the public news reports about the deal. They were divided into small teams, with one group taking the lead for preparing and presenting each case. After meeting with Subramanian to go over their basic approach, each team participated in a conference call with a practitioner. “I asked each practitioner to spend about 20 minutes on the phone with the students to guide them for the class discussion. But the average call was more like 40 minutes,” Subramanian said. “I shudder to think of the billable hours that our guests sacrificed for the benefit of our students.”
The student team then presented its analysis to the class, with the visiting practitioner present. Allen Terrell ’68, who represented Oracle during its contentious acquisition of PeopleSoft, was impressed with the student analysis of the case. “The students were extremely well-prepared and very involved,” he said. “They were very perceptive about the strategies of the two warring camps in the takeover battle.”
There was a clear understanding among the students that the discussions wouldn’t leave the classroom. “That gave me comfort,” said Terrell. “I had been intimately involved as the Delaware lead trial lawyer in the case. It was very fresh and still alive to a degree.”
Although the actual discussions were off-the-record, Subramanian is able to disseminate some of the case study learning from the course more broadly. Along with Professor Lynn Paine ’79 at HBS and David Millstone ’05, he has written a case study about the Oracle-PeopleSoft deal, which draws in part from his own involvement as an expert witness. The case will be used at HLS, HBS and other law and business schools around the country. In addition, the Harvard Negotiation Law Review is planning on publishing a symposium issue this spring with a series of deal-making case studies related to the course.
Contrary to Subramanian’s expectations, not a single lawyer or executive declined the invitation to come to class. “Harvard law students are a remarkable draw,” he said. The law schools at Yale, Columbia and Stanford have similar deal-making classes, he notes, but the HLS course attracts bigger players and deal makers. “Some of our class guests were on their cell phones until 10:29 a.m. working on multibillion-dollar deals that we would read about a week later,” said Subramanian. “But at 10:30 a.m. the cell phones went off and they were focused on the deal in our classroom. I’m really grateful for the effort and energy they put into our endeavor.”
The freshness of all the deals made the class particularly compelling for students. “All of these deals were done within the past three years, and most of them I had read about on the front page of The [Wall Street] Journal,” said Mark Veblen ’05, who is beginning his career as a corporate associate at Wachtell, Lipton, Rosen & Katz in New York City. Veblen said what he learned in the class is more than he could ever have gleaned from a book on corporate law: “We dealt with the theory. But when the practitioners came in, they talked about the friction at the margins and how you have to understand that to predict how these deals will come out. It was quite fascinating.”
The practitioners enjoyed the rare opportunity to view their business dealings through an academic lens. “The class gave me a chance to step back and look at a negotiation as more of an organic entity and to understand more about the gestalt of negotiation,” said NBC’s Graboff. “And I was surprised to hear that there are names for some of the things I did instinctively.”
Graboff says he was deeply impressed by the students’ sophistication and their grasp of the intricate points of negotiation. “They had a grounding in the real world,” he said. “I would try to pepper some of my talk with glamorous Hollywood stories, but they wanted to get to the meat. No one ever said, ‘Did you get to talk to Kelsey Grammer [the star of “Frasier”]?’ They wanted to know about the negotiation itself.”
Subramanian is already reworking the class for next spring’s incarnation. He envisions changing at least 30 percent of the content each year as new deals with cutting-edge legal and transactional issues come to the fore. He picks cases that he comes across in the course of his research, through his expert testimony or consulting, and some just because they pique his interest as he reads the newspapers. For example, he is contemplating inviting experts from the Toys “R” Us leveraged buyout and maybe even examining the legal issues that emerge in forming a partnership agreement for a new Back Bay restaurant.
“In each of these deals we try to bring the negotiation theory to bear, but we also try to grapple with the messiness that is inherent in any real-world situation.”