In the high-stakes world of mergers and acquisitions (M&A), small negotiation missteps can snowball into costly setbacks, while unexpected developments can produce remarkable wins. For this reason, business negotiators have much to learn from real-world M&A negotiation strategies reported in the news.
One frequently cited example is the 2015–2016 bidding war between Marriott International and China’s Anbang Insurance Group for Starwood Hotels and Resorts Worldwide. As described in a Wall Street Journal article by Craig Karmin, Dana Mattioli, and Rick Carew, the episode offers a vivid lesson on the risks—and hidden costs—of secrecy and unpredictability in negotiation.
Early Offers
On April 15, 2015, Starwood Hotels and Resorts Worldwide—the owner of Westin, Sheraton, W Hotels, and other major hospitality brands—announced it was exploring a sale. Among the interested parties was Anbang Insurance Group, a 12-year-old Chinese firm owned through a complex web of shareholders and holding companies across China.
Starwood, however, was skeptical of Anbang’s ability to secure financing, according to the Journal. Although the Beijing-based company had been acquiring insurers and hotels worldwide, its broader strategic goals were unclear.
Throughout the fall, Anbang chairman Wu Xiaohui floated several potential deal structures as part of the firm’s M&A negotiation strategy. But in November, Anbang backed away when Starwood insisted on detailed financing plans. That same month, Starwood accepted a $12.2 billion bid from Marriott International. The proposed deal promised clear synergies and relatively straightforward financing—and would create the world’s largest hotel company.
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On Again, Off Again
Anbang soon reemerged. On March 10, just two weeks before Starwood shareholders were scheduled to vote on the Marriott deal, Anbang submitted a $76-per-share all-cash offer.
“Our friends in China have resurfaced,” Starwood CEO Thomas Mangas told Marriott CEO Arne Sorenson, according to the Journal. Proceeding cautiously, Starwood informed Anbang that it would need both a higher bid and proof of financing to displace Marriott.
Anbang responded by raising its offer to $78 per share and providing a letter of credit from China Construction Bank covering the full amount. Still, Starwood had concerns. What strategic value did Starwood hold for Anbang? And what would happen if Chinese regulators blocked the deal after Starwood walked away from Marriott?
To mitigate this risk, Starwood secured an extraordinary concession: Anbang guaranteed that the deal would close at the agreed price even if Chinese regulatory approval failed. With that assurance in hand, Starwood announced on March 21 that it was accepting Anbang’s $13 billion bid and terminating its agreement with Marriott.
Clarity, at Last
Marriott was not finished. The company returned with a $13.6 billion offer that relied more heavily on cash than its earlier stock-and-cash proposal. Starwood accepted.
As negotiations intensified, Anbang countered once more with an all-cash offer of $81 per share. Starwood pushed Anbang to increase the bid to $82.75 per share—roughly $14 billion—and demanded renewed proof of financing and regulatory approval.
Unable to compete further on price, Marriott argued that it offered stronger long-term strategic value than Anbang. Starwood waited three days for Anbang to meet its latest demands.
Then, abruptly, Anbang’s strategy changed. Its lawyers informed Starwood that the company was withdrawing from the process. Marriott emerged as the winner—at a price roughly $1.2 billion higher than its initial bid, largely due to Anbang’s involvement.
“It’s great to have clarity,” Marriott CEO Arne Sorenson told the Journal. “We had very little insight into what the competing bidder was prepared to pay.”
Following regulatory approvals, Marriott and Starwood completed their merger on September 23, 2016, forming the world’s largest hotel company, with more than 5,700 properties worldwide.
The Downside of Unpredictable Behavior
Throughout the process, Starwood attempted—largely unsuccessfully—to understand Anbang’s underlying interests and motivations. Although Starwood ultimately benefited financially from the bidding war, its limited insight into Anbang’s strategy could easily have pulled the company into a high-risk transaction. Meanwhile, Marriott paid significantly more for Starwood because it was forced to compete with a bidder whose decision-making process was difficult to predict.
Many negotiators pride themselves on secrecy and surprise. During the 2016 presidential campaign, Donald Trump told New York Times that unpredictability was essential in dealing with China, saying, “I don’t want to say what I would do because . . . we need unpredictability.”
The Starwood deal highlights the downside of this approach—not only in M&A negotiation strategy but in negotiation more broadly. While secrecy may seem like a way to gain leverage, it often ends up confusing counterparts rather than pressuring them. Worse, it can leave significant value on the table. When negotiators conceal their interests and motivations, they miss opportunities to uncover mutually beneficial tradeoffs.
Of course, discretion still matters. It’s wise to protect your bottom line and safeguard sensitive financial information. But being open about your underlying interests and strategic goals can foster trust, encourage reciprocity, and increase the odds of a durable, value-creating agreement.
Have you experienced a counterpart’s unpredictable M&A negotiation strategy?
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