2. Free agents
Supposedly a negotiator who works faithfully on behalf of his principal’s real interests, a free agent has incentives and control over the process that effectively lead him to act independently. Investment bankers or other deal makers with a powerful interest in closing a deal can function as free agents. For example, when Matsushita Electric Industrial Co. paid $6.59 billion in 1990 for MCA, the owner of Universal Pictures and several record companies and theme parks, its rationale was to ensure a steady flow of “creative software” for its global hardware businesses. Senior MCA management agreed to the acquisition largely with the expectation that its new, cash-rich Japanese parent could provide capital for entertainment businesses needed to make MCA competitive with rivals such as Disney and Cap Cities/ABC.
Matsuchita chose Mike Ovitz, a former Hollywood talent agent with a burning ambition to become a corporate matchmaker, to represent it at the bargaining table. Ovitz masterminded an intricate set of maneuvers that kept the two parties mostly apart during the process, managing the information flow and both sides’ expectations until the deal was virtually closed.
Both Matsushita and MCA developed a distorted perception of the other’s real intentions, leading to postdeal friction and the sale of MCA five years later to Seagram, at a substantial loss to Matsushita both in terms of face and money Yen 165 billion, or about $1.6 billion. In part due to the cultural chasms dividing old-line industrial Japan, creative Hollywood, and the New York financial community, neither side truly probed the other’s underlying expectations until it was too late. But even more than culture, a free agent with a dominant interest in forging a deal, almost any deal, was a key factor, as was the substantial freedom he was given to act on that interest.