Author: Krysten Crawford

This article is part of a series called Classified, in which we spotlight some of the more powerful lessons faculty are teaching in Haas classrooms.

Peter Goodson entered Cheit 110 on a recent drizzly Wednesday morning, ready to teach students the good, the bad, and the ugly of how mergers and acquisitions really get done. More importantly, he offered lessons in creating value, instead of destroying it, as many deals do.

“Any fool with money can buy a business,” says Goodson, a mergers & acquisitions veteran and Berkeley-Haas finance lecturer for over a decade. “This course is more about enhancing strategy and executing operational improvements to create value than teaching lessons in how to squander your own capital.”

The two topics that day included “Takeover Tussle,” which involved a hypothetical hostile bid by Oracle for Salesforce, and a case on buyer due diligence, which forced students to dig behind the scenes, questioning former disgruntled employees to find the truth about a seller.

The takeover scene is a meeting of Oracle directors, with some students taking on the role of company advisers presenting their case to the board. The rest of the class acted as directors. The first student to address the fictitious board didn’t get very far into his presentation before Goodson jumped in with a critique.

“Never go into a board meeting where you don’t intelligently compliment your audience in some way at the opening,” he said. “Realize that you have already met each director and have the total vote count in your pocket. Don’t read the (PowerPoint) slides. Synthesize what is important to the decision at hand. You must kindle an interchange with the audience that forces you to think on your feet.”

One presenter after another was challenged. “You’re role-playing as the board of directors— you don’t raise your hand. It’s demeaning,” Goodson insisted when the opportunity came to ask audience questions. Get to your point faster, he urged another student. “Insightful economy of words matters in leadership.”

Goodson’s bona fides run deep. He founded the M&A group at Kidder, Peabody at age 26 and later negotiated the investment bank’s $600 million sale to General Electric. Goodson’s perspective is shaped from his experience as lead advisor to hundreds of big M&A deals, but also as an owner/acquirer of many companies.  He was an early-stage partner at the influential private equity firm Clayton, Dubilier & Rice, which acquired more than 65 companies valued at a combined $100 billion over 40 years. The firm is most noted for value creation, with famous CEO partners including GE’s Jack Welch.

Goodson, now retired, teaches an elective M&A value creation course for Full-Time MBA’s and Evening & Weekend MBAs and a summer block turnaround leadership course for EWMBA and EMBA students aimed to show aspiring management consultants, investment bankers, top executive candidates, and CEOs the art of “change agency.”

He also co-teaches a course in private equity centered on investing, ownership, and value creation.

An insider’s approach

Few students show up to Goodson’s classes short on caffeine. Nor do they arrive expecting to dissect spreadsheets or textbook theories.

They come instead to get a glimpse of the real world—no matter how uncomfortable the view or how challenging the required deliverable may be. “Peter’s not one for a lot of unnecessary fluff,” says Aleksey Lakhchakov, MBA 16, and the class graduate school instructor. “He tells it like it is.”

This approach is just one reason why Goodson is so highly valued by Berkeley-Haas and its students, who have awarded him the Cheit Outstanding Teaching award multiple times. “There’s this idea that most business classes are management by spreadsheets,” says Travis Dziubla, MBA 16. “Peter’s class is a refreshing example of managing by working with people.”

William Rindfuss, executive director of strategic programs in the Haas Finance Group, calls Goodson “institutionally important” to the school. “Peter is a walking M&A history.”

Berkeley-Haas Dean Rich Lyons has introduced Goodson as “the master of tough love and real-world decision-making.” “What students soon realize is that he has a passion for their improvement. Somehow he seems to reach each student, every term, providing inspiration and an invaluable tool kit for their career advancement.”

Asking the right questions

Goodson’s tone, at times sharp, will quickly turn supportive. Highly animated, he gleefully fist-bumps students and peppers his lesson with anecdotes from his own experiences.

His lectures include references to “The Big Short” and other Hollywood movies that eviscerate Wall Street—and he pleads with students to challenge him. “He loves that level of engagement,” says Jen Fischer, MBA 16, who openly questioned a strategy Goodson suggested during the “Takeover Tussle” class.

Fischer (pictured) and another classmate, Zara Khan, MBA 16, decided at the start of the course that they would work together to challenge Goodson whenever they felt the urge. He worships push-back and often says “don’t come to class unless you have a solution or a decision viewpoint. We all read the case and don’t agree with me out of pity if I am wrong.”

Says Khan: “You don’t take Goodson’s class if you want to find answers. You take it if you want to learn how to identify and ask the right questions.”

The Oracle/Salesforce “Takeover Tussle” exercise was a case in point: on the topic of gathering information on what any other potential bidders might do and whether top Salesforce performers were likely to bolt after a takeover, Goodson was unequivocal: covert intelligence- gathering is a must, even if it means pushing the boundaries of what’s acceptable by hanging out at coffee shops near Salesforce or the headquarters of other potential bidders.

And so it went for three hours. Goodson made clear his disdain for today’s acquisition prices (“We live in a bubble.”), key players (“Sellers lie. Their advisers lie.”), and the buzzwords used to justify deals (“What does ‘synergy’ mean, anyway?”). Then he urged students to find value anomalies using judgment, leadership, operating improvement understanding, and creative negotiating skills to seek out deals where “you see potential others cannot envision.”

“Doing deals is easy, but it is a fool’s game,” he said. “Your job is to get to the truth.  Discover, if you can, how to strategically and operationally make a business you acquire substantially better and more valuable before you blow a fortune buying it.  Otherwise you are the definition of the ‘winner’s curse.'”

In our ongoing series of “Classified” articles we spotlight some of the powerful lessons being taught in classrooms around Haas. 

The soulful sounds of Amy Winehouse’s “Rehab” reverberated through Cheit 125 as second-year MBA students filed in on a recent Monday for Prof. John Morgan’s Game Theory class.

For nine weeks now, the 65 students enrolled in the elective course have been participating in a game modeled after the CBS reality show “Survivor.” Of the 14 original teams, only six were still in the running.

Just as on TV, Morgan’s contest features a series of teams competing weekly to win a game—minus the sleep and food deprivation and exotic locales. In Morgan’s version, each game mirrors a real-world business challenge, including basketball free agency, radio spectrum auctions, online retailing, and legislative lobbying.

The team with the highest score each week gets immunity, while losing teams duke it out in “tribal council” to see which one would get voted out of the competition in a secret ballot.

Morgan, who has taught Game Theory, or the science of strategy, at Haas for 11 years, has long relied on team competitions within his class. But it wasn’t until last year that, at the suggestion of his then-11-year-old son, he combined the games into a semester-long contest modeled after “Survivor.”

His goal, he says, is to teach students to be “outward thinkers.” By that, he means to show them that they need to be able to relate to others to succeed in business. “You don’t really learn how to empathize by having some professor tell you about the need to empathize. It’s like a reading a self-help book. It doesn’t work. You actually have to do it.”

Fragile vs resilient

On this day, Morgan’s game was about to take a dramatic turn. The theme of this late October class was “Redemption Island.” As the name suggests, one team that had previously been given the boot would be given a second chance.

That team—called WITS Going Down! (WITS stands for “Walk in Their Shoes,” an acronym Morgan uses to promote the use of outward thinking)—had excelled at the weekly challenges, but stumbled badly when it came to the behind-the-scenes maneuvering, where personality often trumps performance.

The team recovered quickly, and spent the intervening weeks when it was officially out of the competition building the kind of alliances that led to its redemption.

WITS Going Down seemed to have figured out that, to win, its strategy didn’t need to be perfect. “Perfect-but-fragile strategies,” says Morgan, “are less good than mediocre-but-resilient strategies.”

Getting to the final round

Here’s how “Survivor: Game Theory” has worked during the course: 14 teams started the semester split evenly into two camps, named after Nobel Prize winners in economics: House Harsanyi (the Haas School’s own Nobelist) and House Vickrey.

After each competition, all members of the house with the best-performing team were guaranteed to make it to the next round. The teams in the losing house then convened in an end-of-the-week “Tribal Council,” run by Morgan’s assistant Sibo Lu, to talk through which one of their own to vote off.

Through a process of elimination, three teams will make it to the final round in December. At that point, all 14 teams will get to decide which of the three wins the entire game. Each member of the winning team gets $100 (out of Morgan’s pocket) with the team captain collecting $150.

The incentives are an important aspect of the game: “People play differently when money is on the line,” says Morgan. But because he wants the incentives to mirror closely the business world, he won’t grade students on their performance in the game.

At first, the votes were straightforward. The first team to be eliminated, for example, didn’t show up to Tribal Council. Soon, however, the balloting became much less predictable. And that’s when WITS Going Down! ran into big trouble.

Emanuele Rusina, MBA 16 and a member of WITS Going Down!, says the teams in his house had all agreed to vote off members who had acted ruthlessly in trying to win weekly competitions. Yet, when votes were tallied, the “nice” teams in his house were being picked off. “It was clear early on that someone was playing a different kind of game,” says Rusina.

Learning from mistakes

To get back into the competition, WITS Going Down! embraced the kind of behind-the-scenes lobbying that it had originally avoided. The result: a second shot and an alliance that Rusina says — at least as of press time — will determine the team’s votes going forward.

Rusina, for one, is taking Morgan’s message to heart. “The game has been a great reality check for me, for my team, and for a lot of people who pride themselves on defining principles,” he says. “It’s teaching us how to learn from our mistakes, get back on track, and to keep friends close but your enemies just as close.”

Travis Dziubla, MBA 16, was surprised by his takeaway. He signed up for Game Theory in the hopes of learning more about mathematical approaches to complex business situations. He didn’t expect to get a heavy dose of life lessons, too. “We have this tendency as humans to attribute the worst possible intentions to any outcome,” says Dziubla, whose team, Russians v. Germans, was eliminated. But when dealing with human beings, “there can be lots of misinterpretation or different interpretations of the rules of a game.”

Hannah Davidoff, MBA 16, agrees: “If you think about it, ‘Survivor: Game Theory’ recreates the game of life.”