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 extra is known
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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
