Former Microsoft CEO Steve Ballmer always wanted to own a sports team. Ultimately, he bought the LA Clippers for $US2 billion, out-bidding numerous other groups that wanted the NBA team, including Oprah and Oracle’s Larry Ellison.
Ballmer revealed the negotiating tricks he used to beat out everyone else in Business Insider’s podcast, “Success! How I Did It,” They can be applied to most major deals, whether you’re bidding on a house, or a sports team.
1. Do your research and learn the landscape.
One of the first things Ballmer did when he retired from Microsoft in 2014 was meet with the commissioners of the NBA and NFL. At first, no teams seemed to be on the market.
“It turned out the most difficult thing was actually figuring out how to get involved in the process,” Ballmer said. “I had looked at the Milwaukee Bucks; they didn’t want to sell to me. I had asked the commissioner who I should get to know. There was nothing that seemed like it was going to sell.”
But soon, the LA Clippers became an option after tapes of then-owner Donald Sterling making racist comments became public. Ballmer was ready to pounce.
2. Find a mutual connection to introduce you to the seller
Ballmer had never met the Sterlings, but it dawned on him that he knew Disney CEO Michael Eisner, and the Eisners had a Clippers box right next to the Sterlings. He asked for an introduction, and was quickly given Shelly Sterling’s contact information.
“[Eisner] called me on a Saturday morning, 7 o’clock,” Ballmer said. “He says, ‘Call Shelly Sterling right now at this number, she’ll be available.'”
3. Make the seller get to know you so the deal feels more personal
Ballmer spent a day with Shelly Sterling and came prepared with a bank statement to prove he could afford the team. At first, she had no idea who Ballmer was. By the end, she liked him better than any of the other bidders, The Wall Street Journal reported at the time of the Clippers sale.
Ballmer met with Shelly Sterling’s lawyer that same evening to make sure he was prepared to bid a proper amount.
4. Make your bid as hassle-free as possible, and don’t try to nickel and dime
Ballmer says the fact that he was a sole bidder for the team rather part of a group (like in Oprah’s case) proved to be an advantage. Given the “legal wrangling” the Sterlings had to endure regarding the scandal, Sterling’s lawyers thought Ballmer would be more likely to stick through the process as a stand-alone.
Additionally, Ballmer was upfront about how much he was willing to pay. He didn’t want to drastically overpay, but he didn’t want to nickel and dime the Sterlings either.
“I had told them, ‘This is what I’d like to pay, this is the maximum I’d pay and, oh by the way, you have to understand, I don’t want to look stupid in front of my wife for being a guy who dramatically overpays,'” Ballmer said. “But I laid it out there, I wasn’t trying to be some tough, get the last 3%, 5% out of the deal, I just wanted to own the team.”
Below, check out the full episode with Ballmer explaining how he is enjoying his retirement, or keep scrolling for a transcript detailing his realised goal of buying a sports team.
- Box founder and CEO Aaron Levie
- Robinhood founder and CEO Vlad Tenev
- ClassPass founder Payal Kadakia
- DropBox founder and CEO Drew Houston
Here’s the part of the interview where he describes how he was able to buy the LA Clippers:
Shontell: It sounds like the life that all of us hope to eventually have. One of those steps that I wanted to talk about more in depth is the Clippers. It was not easy for you to own the team and, like you said, you met with the commissioners and they were like, “Eh, there’s not much available.” Then all of a sudden, this Donald Sterling scandal happens where there was this tape of him coming out saying these racist things and he got eventually pushed out and there was this opportunity to buy the Clippers but you were not the only bidder. Oprah was interested and Larry Ellison, the founder of Oracle was interested. What did you do to eventually be able to own the team? What were your negotiating tricks? I hear you buttered up Mrs. Sterling quite well. How did that work?
Ballmer: Well, it turned out the most difficult thing was actually figuring out how to get involved in the process. I didn’t know Shelly Sterling, nobody was quite sure who was selling the business. I was talking to the commissioner, but things were very vague because, while they had banned Donald, Shelly and Donald hadn’t stepped up to agree to sell the business and then she eventually gets involved. There was no obvious banker to talk to, but I knew Michael Eisner from Disney for a number of years and a lightbulb went off.
The Eisners have had season tickets to Clipper games for years, right next to the Sterlings. So Michael Eisner made an introduction for me to Shelly Sterling. He called me on a Saturday morning, 7 o’clock. He says, “Call Shelly Sterling right now at this number, she’ll be available for your call.” She said, “Well, what’s your number?” Then she said, “Ah, it’s OK, why don’t you come see me?” So I went down, had a meeting with Shelly. I actually brought my brokerage statement, I never ended up showing her but a friend of mine had said, in some businesses, they want to see whether you can really afford the asset. I got through that without actually showing her the brokerage statement.
And then I met with her lawyer again later that evening and the process was really to try to ensure that I bid an appropriate amount of money. What I learned later, the fact that I was a sole bidder was of importance because her lawyers knew she was going to go through a set of legal wrangling with her husband over this, and they wanted a buyer who they could count on to stay with them through the process and they were worried about groups of buyers being tougher to do that with.
So I know there were at least three other bidders, two others who got bids in. There was a local Angeleno, there was a group that did include David Geffen and Oprah, and at least rumoured, there was a group from the Mideast. I knew what my walkaway price was. I had actually told her lawyer, I wasn’t a great negotiator. I had told them, “This is what I’d like to pay, this is the maximum I’d pay and, oh by the way, you have to understand, I don’t want to look stupid in front of my wife for being a guy who dramatically overpays.” But I, I laid it out there, I wasn’t trying to be some tough, get the last 3%, 5% out of the deal, I just wanted to own the team.
Shontell: Of course.
Ballmer: And that was my negotiating approach. And then I had to hold on for the ride as the Sterlings went through their legal wrangling about whether Donald was competent to participate in the management of their trust.
Shontell: I remember that. And also, at the time, it sounded like you structured it like a venture-capital deal where you had a valuation on the team, and what you were willing to pay. No one had bought a team for $US2 billion within the NBA before, but now it seems like you set the bar and other teams would be that valuable at this point.
Ballmer: Yeah, I think the thing people miss is in a business sense you’d say, it’s not sort of a fluid market. Assets are limited, figuring out what the price is in that kind of calcified market is hard to do, and particularly in LA. LA and New York are different places. No matter what else is going on, buying land is more expensive in LA, and buying basketball teams is more expensive in LA. The baseball team the Dodgers had sold for about $US2.1 billion, but they also had a lot of parking and they owned their stadium, so what was the right price for the basketball team? I knew exactly what the right price was: whatever the other bidders were willing to pay, plus some percentage.