play it smart today you won't look at tomorrow
tell Dad meet me the runner Carrie I guess you have a [ __ ] medal the session is an HBO TV
series that focuses on the problematic family relationships of the Roy family patriarch Logan
Roy and his four children Kendall shiv Roman and Connor the family is incredibly wealthy thanks to
their company waystar royco a conservative media conglomerate with operations and News television
theme parks and cruises it's never overtly mentioned by the showrunners but this is very
similar to the real-life Murdoch family who also own a media Empire and have their fair share of
family drama at the very least the show took a dash of inspiration from these controversial
public figures you do like the feeling of power you have as a newspaper proprietor and being
able to sort of formulate policies for a large number of newspapers in every state of Australia
well there's only one hundred times a bit of course not yes the driving force of family
tension in the show is a series of big corporate events around the ownership of the company with
the children vying for control over the business when their elderly father a man with declining
Health passes on you don't need to understand the details of the business deals to enjoy the show
but it would definitely help and the producer style of show doesn't leave much room for
explanation so without an MBA or a background in corporate law it is easy to get a little bit lost
there are four big business deals and ideas that you need to understand to fully grasp the complex
Machiavellian backstabbing and family Intrigue that takes place I will also do my best to avoid
any big spoilers pertaining to the plot and try to focus as much as possible on just the business
side of things the first thing to understand is why the Roy children are so desperate to take over
the business in the first place and how that would actually work it's quickly established that the
family owns their share of voystar royco through a family holding company which is interned owned
by a Family Trust a very popular asset management structure for wealthy high-profile business people
we see real life examples of this exact holding structure all the time because it protects the
family's Assets in the event that either way star gets sued or they themselves personally
get sued something that is highly likely given how the family members conduct themselves in the
show if you have watched my videos for a long time you might remember me talking about the
holding companies and trusts that were uncovered in the Panama papers the showrunners did the exact
same thing here so they obviously cared a lot about accuracy there are two parties that you
need to understand when talking about trust the trustee and the beneficiary the beneficiary or
beneficiaries is the parties that benefit from the payments made by the trust trust fund babies are
called that because they are the beneficiaries of family trusts the other party to understand
is the trustee the trustee is the manager of the trust and they get to make decisions on what the
trust does if a trust wants to buy or sell an asset for example that decision is made by the
trustee not the beneficiary a trustee can also be a beneficiary but that's not always the case a
trustee can also be a representative like a family lawyer or it can be a a separate company known as
a corporate trustee as is the case with the Roy Family Trust the Roy Family Trust which owns the
Roy Family holding company which in turn owns a majority stake in waystar royco is managed by a
corporate trustee that the family members all have voting shares in the known members of the trustee
company are Logan's ex-wife Caroline Collingwood who also gave voting power to her three children
shiv Kendall and Roman as part of her divorce settlement that took place before the show
started the final two people with voting power are Conor Roy the eldest son born to a mother who
is never mentioned in the show and Logan Roy himself Logan has double voting power in the
Family holding company presumably because he is a control freak and he was responsible for building
the company that made the trust worth anything in the first place everybody else has one vote
if the family wants to make any big changes they can all vote on it using this corporate structure
the Family Trust simply does what the corporate trustee tells it to do and the corporate trustee
is just a show company owned by these family members who can tell the company what to do
through a shareholder vote early in the show a big plot point is that Logan Roy wants to add his new
wife to the Family Trust is a beneficiary and changes will to have Marcia inherit his double
voting power in the trustee company upon his death are we okay yeah it's just some paperwork what
ahead of the announcement putting Masha on the trust [ __ ] I uh I just felt like checking in
oh yeah fine this causes quite a stir amongst the children who all want to protect their control in
the Family Trust because it gives them control over the holding company and waste our royco
itself and my seat also to go to her on my desk what wait that gives her a double voting weight
ah the children will all be wealthy no matter what because the trust defines a stake that
they each own in the company which is worth between 500 million dollars and two billion
dollars depending on the company's valuation throughout the series this does not include any
other asset that the Family holding company could own or any assets that the family members have
acquired individually all of them have beautiful homes and passion assets so the Roy children are
rich and they don't need the company but they all want it because it gives them a lot of power
even though it really shouldn't Paul so important that children are supported and encouraged and uh
everything I've done I've done for my children so it's time to learn how money Works to find out
how the business dealings in secession actually work this week's lesson was sponsored by exter
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they're running an anniversary sale and you can get up to a 25 discount from extra by you
using the code money or by using my link in the description box below in the very first episode
of the show Kendall Roy played by Jeremy Strong is working for the company on a deal to acquire a new
tech focused Media company with a stronger focus on younger more liberal audiences called valter
This is an obvious nod to James Murdock owning a 10 stake in Vice media but it also introduces one
of the most important business activities in the show which are mergers and Acquisitions which is
the second thing to understand about the business deals in secession the vulture deal was a simple
acquisition a bigger company buys a smaller company for cash or stock and then uses a new
company that they own to make them more money the previous investors in the company are all bought
out and they do not own any part of the business at all anymore so they want to make sure that
they get the best possible price this is called an exit because this is how Founders along with early
investors exit their companies and turn their hard work into cash if you are following along the
corporate structure would now look like this the other type of m a deal is a merger this happens
when two similarly sized companies come together there are a lot of reasons that businesses would
do this or horizontal mergers where a company merges with another company that is a supplier
or customer to theirs in 1996 Time Warner a cable company merged with Turner Corporation a media
producer this is a vertical merger because Time Warner was Turner's customer before they merged
to become one Corporation Time Warner could then offer their customers their own programming to
make them more Revenue a horizontal merger is when two companies that were once competitors
merged together a big plot point in season 2 is a potential merger between waystar royco's
biggest competitor in the media space horizontal mergers are more difficult for businesses this big
especially in highly sense sensitive Industries like media because the SEC and FTC will challenge
the merger if it would give the new company a monopoly over an industry if Wister became the
only company in America broadcasting TV news it would give them an unconscionable amount of power
over what stories got covered and what stories got buried mergers can be a tricky operation
especially for publicly listed companies because it will involve delisting one of the companies and
compensating the shareholders of The Old Company in some way normally this would be done by giving
them stock in the new company but sometimes it can just be done by paying them in cash mergers also
have other considerations like who will manage the company which CEO will be let go who will be
on the board of directors and what will the merge company even be called companies that have had big
mergers in the past are easy to spot because they will have two individual company names
merged together Daimler Chrysler Exxon Mobil and for the astute viewers waystar royco it's
never mentioned explicitly in the show but the name and logo make it clear that the company has
had a large merger in the past the third thing to understand about the show is how the family could
lose the company way store royco is is a publicly listed company with other shareholders outside of
the characters in the TV show presumably Pension funds investment firms and regular people with
a Robin Hood account the Family holding company owns a majority stake in the company which gives
them a lot of power and shareholder votes the family can vote through their trustee company
this won't appear on shareholder issues whatever way they vote the trustee will tell the trust to
tell the holding company to cast the vote one way or another and since they own most of the shares
they will always win any vote this is challenged a few times because the executives at the company
including the family members who totally got their jobs based on Merit still have a fiduciary
duty to their shareholders and they are legally required to act in their best interest the family
could also lose their shares without spoiling too much one of the family members used the shares in
the holding company as collateral to make some big purchases the thing is it's secured against
waystar stock and when the stock hits 130 they can pursue repayment in full the deal with the
loan was that if the value of those shares fell below a certain value they could be taken by the
bank giving the loan and sold on the market to make sure that the bank gets repaid their money
this is a margin call and if it was big enough it could potentially reduce the family's ownership to
where they no longer have a majority control it would also crash the Stock's price so all of the
other investors might be angry enough to vote out the Aging CEO and all of his nepo babies that got
given senior roles at Daddy's company the other way that the family could lose control of the
company is by being bought out there is always a bigger fish in businesses and at the end of
the season a coalition of wealthy business rivals private Equity Bros and a family Insider teamed up
for a bear hug it's great value for shareholders yeah there it is I'm not gonna get into feelings
this is a [ __ ] bear hug that's right a bear hug is when a group of investors try to buy an entire
Company by offering to buy investors shares for a premium over what they are trading for
Elon Musk famously bought Twitter for 45.20 a share which was a funny number because 420 but
it was also a 40 premium over what the Twitter stock was trading for at the time of his Twitter
announcement most investors trying to perform a bear hug don't announce their plans on Twitter
they do it by approaching the company's board of directors with their offer the board can reject
the offer but if the deal is good enough they have to follow through it because they have the
duty to their shareholders to at least put it to a vote if a bear hug is successful shareholders
can be forced to trade their shares for the cash price offered most shareholders will be happy to
make the easy gains and will just reinvest their money into other companies but others might not
want to sell their shares even at a premium over what they're worth because they believe
that they could be worth more in the future the bear hug and secession is first offered
when waystar stock is trading at a significantly lower price from the beginning of the show some
shareholders would have taken a loss if they had bought in towards the top and even the premium
offered by the bear Huggers would not be enough to put them in the black so they might vote no
on a deal so they don't have to lock in a loss on a position that could turn around
in the case of the Roy family they don't want to sell because those shares let them control
a very influential company and they have enough money anyway and since they own a lot of shares
their say is very important the fourth thing you need to understand about the business deals of
secession is how the company was eventually stolen away from under the children's noses
even with all the protections offered by their voting power in the Family Trust but I mean um
do you know the long and the short of it is I saw their plan and my dad's plan was better
remember all the family members have boating shares in the company that controls the trust
that controls the holding company that controls way star Logan Roy eventually decides that he is
getting old and he wants to sell the company to a fictional equivalent of Netflix for a massive
amount of money he would not be able to get his children on board because if that deal
went through they would lose their positions and just become rich nobodies well you know that's
[ __ ] Logan gets around this by making a deal with his ex-wife who gave their children their
voting rights through their divorce settlement Logan trades a multi-million dollar townhouse
in London for her voting shares that meant that the only other shareholder in the trustee was
Conor but it didn't matter what he said because Logan now had six votes to as one that's a super
majority which means whatever he decides is what will happen and his ultimate decision
was to sell the company to make a lot of money in spite his entitled children and what's more
I will win
secession is a great show that I definitely recommend even though all of the characters
are absolutely terrible people all right [ __ ] it keep driving just
press it my place yeah uh yes so where are we going this is crazy this is like
this is like OJ I mean except if OJ never killed anyone who said I never killed anyone
art imitates life and a lot of the Shady corporate structuring and family power at the expense of
the shareholders is very similar to a real-life corporate fraud that is allegedly unfolding right
now go and watch my video on how the adani fraud actually works to find out how this family used
the same tricks as the show to make themselves the third richest people in the world a special
thanks again to extra for making it possible for everybody to keep on learning how money
works I'm getting on in years here at peace Stream Industries and it is time I choose my succession
but I feel great and I probably got 30 years left in me but it's time for me to step away and
give it to one of you none of you are getting this company but I need it to be one of you