“Well, boys, if you are going to have a dog race, then you are going to need a rabbit. And Oracle will be one hell of a rabbit.” — Michael Ovitz to Ben Horowitz, from The Hard Thing about Hard Things.
You’re trying to make a significant transaction – the kind where they can only be one partner in the end.
Perhaps you’re selling part of your business (like Ben was), looking for a presenting sponsor for your consumer app or offering the exclusive rights to a channel that you control.
Maybe it’s not business related. You’re looking for a date for your matric dance.
It’s tempting to approach one potential partner, buyer or date, and hope that they come onboard.
This is the easiest way, but it’s also the laziest way, and it may not get you the best deal possible.
Sometimes you need to create a race. Approach more than target and – without lying – let them each know that you have options. This may get them to offer more and move faster.
If there is a desirable partner that probably doesn’t need you, you can use them as a rabbit to get the parties who are more desperate to bid higher.
The National Football League (NFL) used a similar approach in 1987 and 1990 with the sale of their TV rights. They used Rupert Murdoch’s FOX to drive up the price the incumbent broadcaster was willing to pay.
In the end, however, the rabbit won the race.
In 1993 FOX paid $1.6billion for the rights. Half a billion dollars more than CBS has paid under their old deal and 60% more than they were offering back then to retain the rights.