16 > Just Say Yes
Musk’s fresh financing brought with it fresh faces. Among those brought in to work with the mercurial billionaire was Michael Grimes. As one of Morgan Stanley’s hard-charging rainmakers, the firm’s head of global technology investment banking did whatever it took to impress, from knocking on the doors of prospective clients’ homes to snooping on his daughter’s internet usage to understand teens’ online habits. He had even moonlighted as an Uber driver to win the company’s trust ahead of its 2019 initial public offering, which Morgan Stanley led. However, Grimes, a sharp-faced man, had a mixed reputation, having overseen Facebook’s disastrous 2012 IPO in which the company’s valuation plummeted by billions of dollars due to volatile early trading. The fifty-five-year-old had seen it all in the Valley, but had yet to work closely with its richest figure. This was his chance.
At his bankers’ insistence, Musk also hired merger and acquisition lawyers from the firm Skadden, Arps, Slate, Meagher & Flom to support the transaction, instead of relying on Birchall and Spiro, his defense lawyer. Founded in 1948, Skadden was a relatively young firm competing with other blue-chip American names, many of which could trace their roots to the nineteenth century.
By the 1980s—a period defined by the excesses of Wall Street and swashbuckling corporate raiders—Skadden had made a name for itself as the go-to international law firm for hostile takeovers. While other white-shoe firms turned their noses up at the idea of taking over another business without its consent, Skadden saw proxy fights and boardroom wars as an opportunity. The firm had overseen historic deals representing billionaire Ronald Perelman’s $2.7 billion takeover of Revlon and media company Capital Cities’ $3.5 billion acquisition of ABC.
By the 2010s, however, Skadden had become almost allergic to the hostile takeover work on which it had built its name. Once happy to lay waste to a company board and ram through a deal for a private equity client, the practice was taking more of its cues from the establishment corporations they once battled with glee. It was steady business, and by 2021, Skadden was a top-five law firm by revenue, with annual bookings of more than $3 billion. Still, despite its successes, the firm had never truly cracked the big consumer tech companies of Silicon Valley.
Musk’s Twitter deal presented Skadden with an opportunity to buck that trend and do one of the most novel tech deals ever. Musk was a tricky client who was known for his questionable legal demands and churning through lawyers who didn’t anticipate his whims. The challenge of representing him in the once-in-a-lifetime deal fell to Mike Ringler, a new partner on the firm’s mergers and acquisitions team.
With a Georgetown law degree and a gleaming bullet pate, the deals lawyer had spent twenty-two years of his career at Wilson Sonsini, which represented Apple, LinkedIn, and, of course, Twitter. At Wilson Sonsini, he had worked closely with some of the lawyers now representing Twitter on the opposite side of the acquisition, and together they had closed industry-defining deals, among them Pixar’s $8 billion sale to Disney in 2006, YouTube’s $1.7 billion sale to Google that same year, and Hewlett Packard’s $25 billion acquisition of Compaq in 2002.
Wilson Sonsini’s lead partner on the deal, Marty Korman, one of the Valley’s biggest dealmakers, had worked alongside Ringler for nearly two decades, giving him unique insight into the man who sat opposite him at the negotiation table. A broad-shouldered lawyer with a buzz cut, Korman knew his one-time colleague had been dealt a bad hand: Ringler had no power and was doing the bidding of one very capricious man, who often didn’t listen to legal counsel.
Ringler at times did not even have direct access to Musk. In meetings between the two sides’ attorneys, Ringler sometimes disclosed he hadn’t had the opportunity to run certain terms by his client. Most of his interactions were with Birchall and Spiro, and Ringler made it known that his directive from Musk was to “get this deal done.” Musk anticipated resistance to his offer, and told his lawyers that moving quickly and aggressively would allow him to pluck Twitter out of the sky without a protracted fight.
>>> On the afternoon of Saturday, April 23, after more than a week of silence with Twitter’s side, Musk contacted Taylor again. “Would it be possible for you and me to talk this weekend?” he texted.
“That would be great,” Taylor responded. He suggested a call that evening with himself, Musk, and Sam Britton, a banker who led Goldman Sachs’s tech business from its San Francisco offices. Britton and Segal were close from their days at Goldman, and Britton had spent countless hours on video conferences with Taylor and the rest of the Twitter team over the past week, sussing out the strengths and weaknesses of the company’s business plan and Musk’s financing.
At 4:30 p.m. in San Francisco, Britton and Taylor dialed Musk’s cell. After his blowup at Agrawal, when he questioned the chief executive’s productivity, and his constant taunting tweets, Musk was more collegial. He told Taylor and Britton he was unwavering about the price he was willing to pay for Twitter.
Taylor had held out hope that there might be a way to squeeze a few more dollars out of the billionaire. Securing an even higher price would demonstrate his ability to tame the erratic billionaire and would satisfy the investors who recalled Twitter’s heyday in 2021, when its shares had floated comfortably above $70. Twitter had closed trading that week at $48.93—buoyed by investors expecting that the deal would close at or above Musk’s price. But just as Musk had told Taylor previously, he insisted he would pay $54.20 a share. If the board rejected him, he would go directly to Twitter’s shareholders with the offer.
Informed by his conversations with institutional investors, Taylor knew it was a nuclear option he couldn’t risk. A tender offer would wrest any control of the sale process away from the board, and Twitter’s chairman feared that if he sought a higher offer, Musk would blow the whole thing up. Taylor politely told Musk he would be back in touch shortly and ended the conversation.
With his phone pinging constantly as Twitter’s bankers and lawyers sent him updates, Taylor could barely get in a few hours’ sleep. But he went to bed that evening convinced that Twitter would have to be sold to Musk.
At 11:00 a.m. in San Francisco, Sunday, April 24, Taylor joined the rest of Twitter’s directors on a video call to make their final decision. Lane Fox dialed in from her home in London, where she’d spent most of the spring as she struggled with health issues. Rosenblatt and Pichette joined from the East Coast, while Taylor and Agrawal called in from the Bay Area.
Britton walked the board through Goldman’s recommendation. Based on everything Twitter’s management had said it might accomplish, the company’s past performance, and the state of the stock market, Musk was offering a fair price. JPMorgan rendered the same opinion.
Taylor calmly described his conversation with Musk the previous day. The chairman’s demeanor reminded some of the directors of a judge presiding over a courtroom, coolly directing his advisers, some of whom appeared sleepless and frazzled by the frantic pace.
Their tormentor was unwilling to budge on price, Taylor said, and an attempt to negotiate would likely end in disaster. Musk was clearly ready to charge ahead with a tender offer if he did not get his way, and he could even offer a lower price to Twitter’s shareholders than the $54.20 currently on the table. He could also bail on the entire transaction, leaving the shareholders high and dry.
The best thing to do, Taylor admitted, was to take Musk’s offer. It would lock the billionaire in at an acceptable price and give the board some control over how the transaction played out.
Other board members agreed. Twitter’s closest comparable public company, Snapchat, had seen its share prices fall about 20 percent that month, while six tech giants—Apple, Amazon, Google, Meta, Microsoft, and Netflix—collectively had lost more than $2 trillion in market value since the start of the year. It was a dicey moment for the wider American economy. Market analysts who thought Musk’s offer was a lowball effort just weeks earlier had started to change their tune as well.
Most of the board members felt resigned. Any emotions about the prospect of selling the company to someone who planned to upend it had fallen away, and all that was left was a grim determination to make Musk pay full price. They were focused on their lawyers’ advice to secure the best price for Twitter, come what may.
The conversation shifted to ensuring that Musk couldn’t weasel out of a deal. If the board did take Musk’s offer, how could its members be certain that the Tesla executive would follow through? He had already agreed to join their ranks, only to flit away mere days later. Any agreement with him would have to be airtight.
With the bankers’ recommendations in hand, the directors gave the go-ahead: Taylor and the transaction committee should meet with Musk and attempt to thrash out an acquisition agreement that would bind Musk to his price.
While the other directors dropped off the call, Taylor stayed on with Lane Fox, Pichette, Twitter’s management team, and the phalanx of bankers and lawyers to start hammering out what the deal should look like. The lawyers would have to draft something from scratch, and quickly began brainstorming shackles to ensure Musk didn’t wiggle away.
As they huddled that Sunday afternoon, Britton felt his phone buzz. The Goldman banker was stunned. In all his years of managing complex tech deals, he had never seen anything like the email that was sitting in his inbox. Musk’s team had drafted up a seller-friendly agreement on their own and were offering it to Twitter. The billionaire was completely bypassing the ritual dance that preceded massive transactions like this one, in which the seller outlined the deal, the buyer revised it, and the two sides negotiated back and forth, sometimes for months.
But Musk wanted none of it. Not only had he thrown together his own acquisition agreement, he was insisting that it be finalized and signed by the very next morning, so that it could be announced to the public before the stock market opened that Monday.
The draft agreement was accompanied by a letter from Musk himself. “$54.20 has been and will remain my best and final offer, period. This is binary—my offer will either be accepted or I will exit my position,” Musk threatened.
Just as the board had during its meeting that morning, Musk noted that the market had continued to decline, making his offer all the more lucrative.
“With your cooperation, we can negotiate changes that you require to be able to announce a transaction before the market opens tomorrow that the shareholders can then vote on. I would respect the outcome of that vote if the shareholders prefer the management plan to my $54.20, and exit my position entirely if that is the outcome of the vote,” Musk added.
Britton jumped in, interrupting the meeting to tell everyone about the bizarre missive he’d just received. The conversation quickly shifted from how to approach Musk with an agreement to how to revise the one the billionaire proffered.
>>> As the negotiations began, Gadde, Twitter’s head lawyer, found herself in comfortable territory. Before her time overseeing Twitter’s legal and policy matters, she had spent ten years as a corporate governance lawyer at Wilson Sonsini, where she had been privy to the ins and outs of boardroom proxy fights and tender offers. She had been part of the team of lawyers—along with Korman and Ringler—who had defended biotech giant Genentech against an unsolicited offer from the Swiss healthcare firm Roche and advised it to hold out for a larger offer in the depths of the 2008 financial crisis. The following year, Roche acquired Genentech for $46.8 billion, wringing out $3 billion more from the original offer.
Gadde knew that Twitter would have to lock Musk in a straitjacket of an agreement, giving him no way to extricate himself once he signed. She trusted Korman, her former mentor, and was confident in Twitter’s ability to get what it wanted, telling members of her legal department almost from the outset of negotiations that the deal was going to happen.
The speed at which Musk wanted to close the deal gave Twitter’s board an incredible advantage. Acquisitions of this size and complexity could typically take months or more than a year to close, as bankers and lawyers engaged in due diligence, negotiating, and paper pushing, but Musk wanted Twitter and he wanted it now.
So his side sped ahead. Still firm in his belief that he wouldn’t allow the Twitter board to muzzle him, Musk refused to sign nondisclosure agreements that would have allowed him and his advisers to review nonpublic information about Twitter’s inner operations and finances.
Twitter’s deal team was in a state of disbelief. No normal buyer would engage in such an expensive and elaborate transaction without first looking under the hood. Nondisclosures were common in any corporate takeover, and as one person who worked on the deal put it, signing one was as natural as “deciding to wear pants when you walk out into public.” But Twitter never sent anything to Musk before the deal was signed that it hadn’t already made public to its shareholders. He had prevented that from happening.
Had Musk signed an NDA, he and his bankers would have been able to see Twitter’s depressing financial projections. Or he could have asked for figures to do external analyses of Twitter’s user numbers or the amount of fake and spam accounts that he professed to worry about. Had he known the full picture, he might have lowered his offer or pulled it altogether. But his bankers proceeded with the deal sight unseen. At Musk’s insistence, Ringler continued to aggressively push for the deal to close.
Twitter’s lawyers believed Musk was trying to shove the deal forward at breakneck speed to force them to balk. It seemed like a tactic: Musk appeared to want the board to reject him, giving him a reason to launch the hostile tender offer.
So Korman and his counterpart at Simpson Thacher, Alan Klein, came up with a new strategy: “Just say yes.”
Wall Street had been accustomed to the “just say no” defense, a tactic among public company boards that arose in the 1980s to deal with corporate raiders. The idea was simple and stemmed from the idea that boards could discourage a hostile takeover by rejecting any offer immediately and simply refusing to negotiate with a bidder. Twitter’s lawyers flipped this approach on its head. Because they believed Musk’s side wanted them to stall or refuse, they advised the company’s board to agree to Musk’s terms—which locked in his inflated price. Give no indication Twitter wanted anything other than a quick and easy sale, they said.
Korman and Klein could hardly believe their luck. They knew they were dealing with a slippery character and angled for an agreement that placed all the legal risk on the buyer.
Musk’s draft did most of that work for them. By pushing his lawyers to get the deal done immediately, Musk undermined his own position. After his team sent the agreement on Sunday, he was eager to finalize everything by Monday morning.
On a video conference line that evening, Klein, Korman, Ringler, and bankers from both sides hammered out a deal through the night. Ringler insisted that the bankers at Goldman Sachs and JPMorgan had to stop shopping the company around to other buyers in the private equity world. He didn’t want Twitter’s board to back out at the last minute and recommend another acquirer to shareholders. Korman and Klein sensed they could get a few more concessions and marked up the agreement with changes.
Korman was adamant that Musk had to use his own name on the agreement. He demanded that Musk sign the document—not representatives of one of his companies—an unheard-of move in corporate deals that placed Musk legally on the hook. He and Klein also insisted that Musk be personally liable to come up with all the money, aside from the loans he had secured from his banks, to complete the transaction. In the eyes of the two board lawyers, it had to be the way. If they agreed to the transaction only for Musk to renege, the damage to the company’s reputation and stock price would be irreparable.
Each side agreed to a hefty breakup fee to hold them to their word: $1 billion. If Twitter’s board went out and found a new buyer, they would have to pay Musk the sum to walk away. Musk would have to fork over the amount only if the deal failed because of the collapse of his $13 billion in debt financing. But the billionaire had no other outs. Twitter’s lawyers included a “specific performance” clause in the contract that allowed the company to sue him to force the deal through. Musk couldn’t just change his mind and pay the breakup fee to escape.
With little fuss, Skadden agreed to all the amendments. By about 10:00 a.m. on Monday in San Francisco, a few hours past the Musk-imposed deadline of market open, the details of the merger agreement, a contract that laid out the union of Twitter with a holding company controlled by Musk, had been hammered out. Twitter’s board gathered on another video call to discuss final steps.
The meeting was a virtual funeral. The eleven directors knew they had done their duty—getting the best possible price for shareholders. Durban, who had cheered Agrawal on as he sketched his plan to keep Twitter independent, had a new fixation: making his one-time client pay.
Others, like Agrawal, had been with the company for more than a decade and seen it through high highs and low lows. He felt pride but also overwhelming angst. He had believed in the potential of Twitter and his ability to help the company achieve it, and the sale seemed like an admission of defeat. He had been chief executive for only 147 days, and it seemed as if half of that time he had been wooing or jousting with Musk. The rest of his tenure as Twitter’s leader would be spent transitioning the company to new ownership.
Lane Fox had also enjoyed a long tenure on Twitter’s board and held its mission sacred. She mused about the corner she and the directors had been painted into, as they were forced to put a price tag above all else. Was the share price really the only thing that mattered? What about the impact on Twitter’s employees, or the likely destruction of the platform?
The lawyers reminded everyone that their role was simple—they were there to represent the interests of the shareholders. The only thing to consider was whether the people who owned Twitter’s stock were getting a fair price and the best possible outcome.
Dorsey sat silent. His fellow board members pressed him—not for the first time—on his relationship with Musk. They wanted to know how much planning the two men had done behind the scenes. Dorsey had promised his colleagues several times that he had not agreed to help Musk with the transaction. Although most of the board members owned tiny fractions of Twitter’s stock, Dorsey held about a 2 percent stake and stood to make nearly $1 billion from the deal.
But Dorsey didn’t need to sell off his shares if he didn’t want to. Musk gave him the option to roll his shares into his new ownership, allowing him to remain involved with the company long after the rest of the directors were gone. Had Dorsey talked to Musk about sticking with Twitter? the board wanted to know. Dorsey swore he had no plans to roll his stake over to Musk.
No one was sure they could believe him. Dorsey, always a cipher, had become even harder to read after he had resigned as chief executive five months earlier. Even the Twitter executives in the meeting—Agrawal, Gadde, and Segal—who had spent years working alongside Dorsey, had fallen out of touch with him.
But Dorsey’s potential involvement in a new Twitter wouldn’t change the price that Musk paid. Several board members were livid with him and considered him a snake. After years of backing his leadership, they thought he had bad-mouthed them and gone behind their backs.
With that, the board voted unanimously to approve the terms of the sale and agreed they would recommend the same to shareholders, who had to vote to approve the deal.
As Twitter’s board voted, Musk was in Austin at the Tesla Gigafactory with Luhut Binsar Pandjaitan, an Indonesian minister who oversaw the country’s investments. They were supposed to discuss mining, as Indonesia sat on reserves of minerals that were crucial for electric car batteries. But the billionaire was distracted by the commotion of the deal.
“I think this is the craziest thing I’ve ever done,” Musk said to Pandjaitan. “I’m going to regret this for the rest of my life.”
Just before 11:45 a.m. in San Francisco, Twitter’s shares stopped trading on the New York Stock Exchange.
Five minutes later, the company published a press release.
Twitter, Inc. (NYSE: TWTR) today announced that it has entered into a definitive agreement to be acquired by an entity wholly owned by Elon Musk, for $54.20 per share in cash in a transaction valued at approximately $44 billion. Upon completion of the transaction, Twitter will become a privately held company.
The release also included statements from Taylor and Agrawal. The chairman chose to focus on “the best path forward for Twitter’s stockholders.” The chief executive said he was “deeply proud” of his employees and their work. Neither statement touched on what either man thought was in store for the future of the company. That was left to the new owner.
“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated,” said Musk. “I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans.”
Just after the press release went live, Dorsey reached out to Musk. “Thank you,” he texted Musk, including a heart emoji.
“I basically following your advice!” Musk responded, so excited that he didn’t check the message for typos before sending it.
“I know and I appreciate you,” Dorsey wrote. “This is the right and only path. I’ll continue to do whatever it takes to make it work.”
>>> By the time the deal was announced, Twitter employees were on tenterhooks. Most found out along with the rest of the public, reading the press release or news stories that were passed around on text threads or posted on Twitter. Outrage and frustration reigned on Slack.
“Oh man it would be awful if someone looked over all my Slack messages and discovered I think Elon Musk is a thin skinned, self aggrandizing, egotistical troll with a authoritarian management style and an understanding of the issues involved in social media roughly rivaling that of a well read 8 year old,” one person wrote in a Slack channel called #social-watercooler, where employees gathered to crack jokes and banter.
It was easy enough to find the dissenters, as they mouthed off in Slack, and reignited the criticism of Musk from when the company had first announced his joining the board weeks earlier. Still, there were plenty of employees who welcomed Musk, or at least didn’t immediately dismiss him.
That camp had become disillusioned with the lack of growth and innovation at Twitter or seen their ambitions and ideas sidelined by a checked-out Dorsey. And they saw Musk’s track record at Tesla and SpaceX as more than enough proof that he could lead a turnaround at Twitter. They found a place to commiserate in Slack channels like #I-Dissent, and their reactions ranged from cautiously optimistic to downright gleeful. Rolling the dice on Musk was better than slogging through the malaise that had plagued the company since Dorsey’s tenure.
“I remember the first oneteam in SF where Elon was a guest and everyone loved him,” one employee wrote on Blind, an anonymous chat app for workers. “Then the herd found out later that Elon disagrees with them on some issues and they became enraged, threw tantrums on Slack and denounced him from the human race.”
Dorsey chimed in that evening on Twitter. He chose to communicate his feelings about the sale of his company with music, sharing a not-so-subtle link to a Radiohead song titled “Everything in Its Right Place.”
Just to make sure no one missed his meaning, Dorsey fired off more tweets, extolling Musk and laying out his complicated views on the beast he created.
Jack
@jack
I love Twitter. Twitter is the closest thing we have to a global consciousness.
10:03 PM Apr 25, 2022
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5.9K
27K
Jack
@jack
The idea and service is all that matters to me, and I will do whatever it takes to protect both. Twitter as a company has always been my sole issue and my biggest regret. It has been owned by Wall Street and the ad model. Taking it back from Wall Street is the correct first step.
Jack
@jack
In principle, I don’t believe anyone should own or run Twitter. It wants to be a public good at a protocol level, not a company. Solving for the problem of it being a company however, Elon is the singular solution I trust. I trust his mission to extend the light of consciousness.
Twitter’s employees couldn’t help but think that Dorsey was looking for a scapegoat. He had known the stakes and expectations of running Twitter as a business when he rejoined the company as CEO in 2015, and while it was noble to think that Twitter could be a protocol instead of a corporation, he and the other cofounders had made the decision to head in the opposite direction years earlier. Employees also saw an incredible irony in calling Twitter a public good and then endorsing its sale to the world’s richest man. They mocked Dorsey’s phrases “singular solution” and “extending the light of consciousness” in group chats.
Some executives who had also become disillusioned with Dorsey by the end of his tenure began to speculate about their former boss. They wondered if Twitter’s creator had actually been speaking to Musk about buying the company earlier than previously known, and began to ask if his August 2021 visit to SpaceX’s Starbase in Texas was where Dorsey kick-started a takeover conversation. They never found solid evidence for their theories.
One person who was bothered by Dorsey’s message was Agrawal. Dorsey was the reason he was CEO, but Dorsey’s wooing of Musk had completely undermined his position. After the acquisition was announced, Agrawal didn’t follow Dorsey on a victory lap. Instead, he sent a curt email to his executive team, telling them to put the layoffs on hold. “Given our announcement today, we will not be moving forward with Prism,” Agrawal wrote. “While we will continue the work to build the best Twitter and operate efficiently, the Prism plan is no longer the right path forward. Please know that you are still under NDA and should continue to keep Prism strictly confidential. Thank you for all the work you did to get here, and for your leadership now as we move forward.” Although they didn’t know it, the deal spared Falck and Beykpour from the chopping block.
Executives didn’t get any other directives from their leader for the rest of the day, leaving them to fixate on the headlines just like their underlings. It was the first of many times that Agrawal’s communication during Musk’s disruptions would leave employees wanting more. But he didn’t know what else to say. The process had drained him. At an all-hands meeting with employees that day, his message wasn’t uplifting. “Once the deal closes, we don’t know what direction this company will go in,” he told Twitter’s employees.
Agrawal would later tell a confidant that Musk was unlike anyone he had ever had to deal with. There was just no way to assess Musk’s baseline behavior on any given day. Agrawal could normally get a measure of the abilities and limits of the people he worked with, using that as a gauge to predict how they would act, he told his friend.
“With Elon, he can always take it to another level,” he said. Musk could always do something crazier. Working with him was next to impossible.