The first hour of Succession’s season 2 is all enterprise. After the primary season’s deadly finale, the present steps away from the human drama and takes us again to the world of high-powered executives and hostile takeovers.
Season 1’s parting intestine punch to Logan Roy was a “bear hug” supply to purchase Waystar Royco, led by his personal son Kendall and a rival media government. The concept behind a bear hug is that it’s a proposal so good that the corporate being taken over has no selection however to promote. Season 2’s premiere is all about Logan attempting to determine his choices, however with enterprise buzzwords dashing by on the pace of sunshine, it’s value taking a second to determine the real-world implications of Succession’s market mumbo-jumbo.
[Ed. observe: This text incorporates spoilers for Succession season 2 episode 1.]
The way to fend off a bear hug
Succession’s first season did fairly a superb job of convincing us that company bear hugs depart the defending firm with little to no choices — and that’s nonetheless true — however it doesn’t imply that Waystar Royco is leaving Roy fingers simply but. Generally, the way a bear hug works is that the aggressors ship a non-public letter to the corporate they’re attempting to purchase; a number of days later, they take that letter public. On this episode, Sandy and Stewy going public with their intention to purchase Waystar Royco is what opens the episode, inflicting Kendall to get pulled out of his rehab facility in … Iceland?
Each in the true world and within the present, as soon as the letter goes public, it’s a race to succeed in the board of administrators — the group of people that supervise and govern an organization’s actions within the curiosity of its shareholders. In the end, the choice to promote will lie with the board. Each the possible consumers and the possible sellers try to make contact with as many board members as potential, trying to get them to return their aspect.
Within the case of the Roys, meaning convincing the board that Waystar’s future worth is increased than what the potential consumers are providing, and that the Roy household might help it attain that worth. That’s why it’s very important for Kendall, who was beforehand allied with Sandy and Stewy, to go on TV and say he had extra confidence in “Dad’s plan” — the board may get the concept that Logan staying on the helm could be higher than the takeover possibility. It’s additionally the explanation Logan must announce a successor: That manner, the board’s confidence wouldn’t relaxation solely in Logan, who lately had a mind aneurysm.
The Yahoo parallel
Primarily based on the information we all know thus far about Succession’s Waystar Royco bear hug, there’s loads we will study in regards to the present from the current real-world historical past of Yahoo. In February 2008, Microsoft went public with a bear hug providing to buy Yahoo for $44.6 billion. The corporate knowledgeable Microsoft that it felt the bid considerably undervalued its property, and rejected the supply. Yahoo had its sights set on changing into the largest fish within the tech pond and one of many world’s largest corporations. In different phrases, Yahoo was going for precisely what Logan mentioned he needs: to be the final man standing.
However issues didn’t fairly work out. A couple of yr after Yahoo rejected Microsoft’s supply, in January 2009, Carol Bartz turned the corporate’s new CEO. Three years later, Yahoo was valued at round $20 billion. After struggling one other nine years of downturn because the preliminary bid, Yahoo was lastly offered to Verizon in 2017 for $4.48 billion. The comparability isn’t actual (is there a Succession universe equal of Tumblr that Waystar Royco can buy?), however Yahoo’s current previous is an efficient reminder that issues may not work out for the Roys even when they maintain the corporate.
Logan himself acknowledges as a lot in the course of the episode, when he brings up Kodak. As he says, Kodak’s inventory worth in 1997 was round $100 (technically it was around $80) and as of Aug. 12, it’s $2.25 — or, as Logan says, “round three bucks.” Bear-hug provides are powerful to show down for a cause: It’s higher to promote excessive than go down with the ship.
A 3rd possibility: the poison tablet
There are many methods round a hostile takeover, or the slightly-less-hostile bear hug, however this episode touches on one: the “poison tablet.” The concept is talked about early on within the episode by Karl, Waystar Royco’s chief monetary officer, and Logan shortly shoots it down. But it surely’s value exploring what precisely a poison tablet is, in case it comes again round.
In enterprise phrases, a poison tablet is a defensive transfer by an organization, an try to make itself much less engaging to potential consumers. The concept is to scale back the worth of the corporate to the purpose the place would-be consumers lose curiosity. This will sound like an disagreeable enterprise transfer, and within the quick time period it may be, however there are examples of it figuring out.
Although it might appear laborious to imagine now, Netflix swallowed its own poison pill back in 2012. The corporate made the transfer in response to notorious “corporate raider” Carl Icahn shopping for up inventory and mentioning that Netflix would be perfect to sell to a larger tech company that may wish to increase its video enterprise. Netflix’s poison tablet of selection got here within the type of what it known as a brand new “stockholder rights plan.” The plan meant that if any investor acquired greater than 10% of the corporate, the market would instantly be flooded with new inventory, making any try at a takeover ludicrously costly. (This could have made Netflix inventory much less engaging to reliable traders as nicely.) On the time, Netflix was worth slightly below $5 billion. Now it’s value nearer to $150 billion, so the poison tablet appears to have labored.
However Logan’s by no means one to step down from a battle, and if the primary episode of season 2 is any indication, it doesn’t appear to be he has a lot curiosity in any poison pill-type strikes simply but.