Watching the Golden State Warriors under the previous ownership of Chris Cohan was one of the more painful experiences that fans of any professional sport have had to endure. From bad contracts, to weird personnel moves, and all the way out to the coaching staff, the old front office made head-scratching moves their modus operandi.
So when Cohan announced that he was selling, it was cause for celebration. After fan favorite Larry Ellison mysteriously lost the bidding war, most fans didn’t really care. After all, one uber-rich ownership group was as good as any other at that point, right?
“Just get us away from Cohan please!”
Ethan Strauss put together a remarkable investigation for The Athletic that dove deep into the nuts and bolts behind Joe Lacob’s moves to win the Warriors. And it’s a story that bears repeating, not just for what it tells us about how we got here; but also for what it can tell us about where the franchise is going.
Setting the stage for a coup
As re-told by Strauss, the initial sale news was met with a fair amount of confusion. After all, Larry Ellison, a man of tremendous wealth with pre-existing ties to the franchise was seemingly the front runner since the opportunity was announced. No one really knew what happened at first, only that a new investor group emerged with a larger bid.
Fans could be forgiven for some confusion. That day’s edition of the San Francisco Chronicle included a story entitled, “Ellison reportedly close to buying Warriors.” Ellison was indeed close to buying the Warriors. Or at least he thought he was close. “Someone else,” it turned out, was, out of desperation, playing by an entirely different set of rules.
You really should read the entire Strauss article if you can. According to his telling, Lacob and Guber were going through the established process, which was a sort of blind bidding war. Unfortunately, they knew that if they continued to walk down this path, Ellison would always respond with a higher offer. With deeper pockets, and an established “in,” Ellison represented a group that really could pay whatever it took. So Lacob knew that his best avenue was to leverage his personal relationships to try and elbow into the conversation. But it never went there (at first) because Cohan’s selling process removed any semblance of preference for one group over another.
Suddenly, Cohan was in the auction business. “Larry (Baer) went dark,” Guber says with a grimace. Baer had to remove himself from any proceedings because there were now multiple bidders and he couldn’t show favoritism. In fact, there would be 12 prospective buyers for the Warriors, a “frothy auction” as Galatioto calls it.
A “frothy auction” is exactly the sort of phrase the seller wants to hear, but it’s not too hard to imagine the discomfort it caused among the bidders. Still, as the costs rose, there were just these two groups remaining - with both Lacob and Ellison representing groups willing to pay the $400 million (and rising) current bid.
Lacob goes way outside the box to close the deal
With a dead heat in the bidding war, these two groups had reached a critical point for Lacob and Guber. According to Strauss’ reporting, $400 million was what Lacob’s group had initially set as their “walk away” point. The back and forth bidding war had gone well past any previous value for a team sale in the NBA, and all sides were beginning to show signs of wearing down. At some point, the cost is too much and would force one of the groups out of the running and — given the finances for each respective group — it was going to be Lacob’s group folding.
Not wanting that to happen (because, again, Lacob and Guber knew Ellison could keep responding to their marginal increases) Lacob’s group came up with what is described as an “exploding offer.” In other words, they wanted to jump ahead of the marginal bidding war and just offer Cohan a direct deal that was significantly larger than the current bid price.
So $450 million was the offer, and the terms were simply “take it now or we walk away forever.” But you can’t just do a deal like this over the phone, or by sending an email. According to the reporting, this is where Guber’s Hollywood expertise came into play — he strongly advocated for a face-to-face meeting. It wasn’t going to be easy, but eventually they strong arm their way into a meeting somehow.
So Lacob flies out and wins Cohan over, telling him that they are dropping out of the bidding at $400 million, but would be willing to just do the deal at whatever price Cohan needed. No more waiting, no more watching the price slowly increase. And, more importantly, no more auction.
David Stern hinted at this move, back in 2010, saying of Lacob and Guber’s coup, “It wasn’t quite cloak and dagger, but it was to a degree.” There’s an open question as to whether this move was ethical. Lacob and Guber were circumventing the standard auction process, in favor of cutting clandestine deals. Guber rejects the premise of questioning the morality. “There are no rules, but you break them at your peril,” Guber says. “Anything that gives you a competitive advantage that isn’t illegal, maybe sometimes in certain circumstances immoral, I think is fair game.”
Immoral or not, they won; the line between pushy jerk and successful business person remains razor thin. Lacob and Guber’s group paid $450 million, including a non-refundable $20 million. To cement the deal, they also made the unusual request to finalize the deal quickly, demanding a final contract within 72 hours instead of the usual months required for a deal of this scale. Lacob, as the Dallas Mavericks learned with their initial pursuit of Deandre Jordan, was worried about something weird happening. Cohan backing out, or Ellison getting wind of the deal and responding with a higher offer.
And that’s how it all went down.
Moving forward, this story just offers additional insight into how the current ownership group operates: aim high, and fight hard to get there.
So far, so good!