The first hour of Succession’s season 2 is all business. After the first season’s lethal finale, the show steps away from the human drama and takes us back to the world of high-powered executives and hostile takeovers.
Season 1’s parting gut punch to Logan Roy was a “bear hug” offer to buy Waystar Royco, led by his own son Kendall and a rival media executive. The idea behind a bear hug is that it’s an offer so good that the company being taken over has no choice but to sell. Season 2’s premiere is all about Logan trying to figure out his options, but with business buzzwords rushing by at the speed of light, it’s worth taking a second to figure out the real-world implications of Succession’s market mumbo-jumbo.
[Ed. note: This article contains spoilers for Succession season 2 episode 1.]
How to fend off a bear hug
Succession’s first season did quite a good job of convincing us that corporate bear hugs leave the defending company with little to no options — and that’s still true — but it doesn’t mean that Waystar Royco is leaving Roy hands just yet. Generally, the way a bear hug works is that the aggressors send a private letter to the company they’re trying to buy; a few days later, they take that letter public. In this episode, Sandy and Stewy going public with their intention to buy Waystar Royco is what opens the episode, causing Kendall to get pulled out of his rehab facility in ... Iceland?
Both in the real world and in the show, once the letter goes public, it’s a race to reach the board of directors — the group of people who supervise and govern a company’s activities in the interest of its shareholders. Ultimately, the decision to sell will lie with the board. Both the prospective buyers and the prospective sellers attempt to make contact with as many board members as possible, looking to get them to come their side.
In the case of the Roys, that means convincing the board that Waystar’s future value is higher than what the potential buyers are offering, and that the Roy family can help it reach that value. That’s why it’s vital for Kendall, who was previously allied with Sandy and Stewy, to go on TV and say he had more confidence in “Dad’s plan” — the board could get the idea that Logan staying at the helm would be better than the takeover option. It’s also the reason Logan needs to announce a successor: That way, the board’s confidence wouldn’t rest solely in Logan, who recently had a brain aneurysm.
The Yahoo parallel
Based on the facts we know so far about Succession’s Waystar Royco bear hug, there’s plenty we can learn about the show from the recent real-world history of Yahoo. In February 2008, Microsoft went public with a bear hug offering to buy Yahoo for $44.6 billion. The company informed Microsoft that it felt the bid significantly undervalued its assets, and rejected the offer. Yahoo had its sights set on becoming the biggest fish in the tech pond and one of the world’s biggest companies. In other words, Yahoo was going for exactly what Logan said he wants: to be the last man standing.
But things didn’t quite work out. About a year after Yahoo rejected Microsoft’s offer, in January 2009, Carol Bartz became the company’s new CEO. Three years later, Yahoo was valued at around $20 billion. After suffering another nine years of downturn since the initial bid, Yahoo was finally sold to Verizon in 2017 for $4.48 billion. The comparison isn’t exact (is there a Succession universe equivalent of Tumblr that Waystar Royco can buy?), but Yahoo’s recent past is a good reminder that things might not work out for the Roys even if they keep the company.
Logan himself acknowledges as much during the episode, when he brings up Kodak. As he says, Kodak’s stock price in 1997 was around $100 (technically it was around $80) and as of Aug. 12, it’s $2.25 — or, as Logan says, “around three bucks.” Bear-hug offers are tough to turn down for a reason: It’s better to sell high than go down with the ship.
A third option: the poison pill
There are plenty of ways around a hostile takeover, or the slightly-less-hostile bear hug, but this episode touches on one: the “poison pill.” The idea is mentioned early on in the episode by Karl, Waystar Royco’s chief financial officer, and Logan quickly shoots it down. But it’s worth exploring what exactly a poison pill is, in case it comes back around.
In business terms, a poison pill is a defensive move by a company, an attempt to make itself less attractive to potential buyers. The idea is to reduce the value of the company to the point where would-be buyers lose interest. This may sound like an unpleasant business move, and in the short term it can be, but there are examples of it working out.
Though it may seem hard to believe now, Netflix swallowed its own poison pill back in 2012. The company made the move in response to notorious “corporate raider” Carl Icahn buying up stock and mentioning that Netflix would be perfect to sell to a larger tech company that might want to expand its video business. Netflix’s poison pill of choice came in the form of what it called a new “stockholder rights plan.” The plan meant that if any investor acquired more than 10% of the company, the market would immediately be flooded with new stock, making any attempt at a takeover ludicrously expensive. (This would have made Netflix stock less enticing to legitimate investors as well.) At the time, Netflix was worth just under $5 billion. Now it’s worth closer to $150 billion, so the poison pill seems to have worked.
But Logan’s never one to step down from a fight, and if the first episode of season 2 is any indication, it doesn’t seem like he has much interest in any poison pill-type moves just yet.