Archive for July, 2007
I had the great pleasure of being invited by the founder of EA Consulting, Steve Robson, to speak at a wonderful summer’s event in the London docklands on Thursday evening, July 19. There were two speakers, and clearly the most popular would be Sean Fitzpartick, who captained the New Zealand All-Blacks rugby team during a legendary period of the 1990’s.
I did speak first, talking naturally about M&A. I was introduced by a former colleague at Deutsche Bank, Roger Bates, who’s now a director at EA Consulting. He kindly noted my new book on M&A (on which this blog is based).
Although I had only a half hour to speak, I gave some highlights of many of the topics that I have been recently researching, some covered in that book: 1) the recent success of deals in this merger wave (since 2004 more deals have been successful in the short-term, which is a distinct change from earlier merger waves), 2) how serial acquirers tend to do worse than more focussed acquirers, 3) the need for attention to the post-merger cultural integration issues at every stage in the deal, 4) the role of business intelligence (including the importance of gathering information and even the weak signals from the environment) and 5) the importance of communication especially after the deal’s been announced. It was all very timely, being a day when Macy’s, Sainsbury’s, Jaguar, Nestle, Pepsi and many other companies were in the news with merger deals of their own, either as target or bidder. Examples during the talk came from Morgan Stanley / Dean Witter, HP / Compaq, Verisign / Jamba, Texas Pacific / Gate Gourmet, Oracle, Santander / Abbey National and the hottest deal of the day, ABN AMRO with either Barclays or RBS.
Sean’s talk was about how he came to be captain of one of the world’s leading rugby teams in a country where that sport was clearly THE national sport and where he quoted the New Zealand prime minister telling him (and I paraphrase here): ‘Sean, when you win, I would prefer to be in your position than mine, but when the All-Blacks lose, I couldn’t imagine a worse job.’
Sean didn’t try to draw any parallels with the world of mergers and acquisitions. Yet the juxtaposition of his talk and mine probably led a number of people in the large audience to tie the two together. He spoke of the need for teamwork, pride and identifying new ways of doing something (in his case, rugby, of course). He descibed leadership from the perspective of a captain who led his team to the finals of the 1995 World Cup. He described good sportsmanship and gave examples where there was none. He showed how excellence can inspire. He could have been talking about a CEO leading a company.
There were two other very relevant points he made about international rugby, but that could have been said about M&A deals: 1) that there’s ever only one winner (and in any merger or acquisition, eventually one side ‘wins’) and 2) there are no equals (that is, there is no such thing as a ‘merger of equals’).
Needless to say, although he spoke longer than promised, no one left the room.Read Full Post | Make a Comment ( None so far )
Another book review of Intelligent M&A: Navigating the Mergers & Acquisitions Minefield appeared in the British national press on 24 July 2007, in the Daily Express and their on-line newswire, Daily Star:
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PROFESSOR Scott Moeller, of Cass Business School, London, has written a guide to takeovers, called Intelligent M&A: Navigating the Mergers and Acquisitions Minefield.
Warning that most managers of target companies leave within three years, his top tips include: becoming part of merger planning; not assuming your boss will take care of you; and, most drastic of all, not going on holiday.
A brief review of Intelligent M&A: Navigating the Mergers and Acquisitions Minefield appeared in the print and on-line versions of The Times on Saturday, 21 July 2007. You can see the on-line version of the book review here. An excerpt is as follows:
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Guide to surviving in the wild M&A jungle
Given the seemingly boundless deal-making appetite of private equity firms, the release of a new book by professors from the Cass and Bournemouth Business Schools is timely. Intelligent M&A: Navigating the Mergers and Acquisitions Minefield by Scott Moeller and Chris Brady contains a handy cut-out-and-keep guide to surviving the M&A jungle. The old methods, it seems, are still the best – don’t go on holiday, update your CV, contact the headhunters and get the gossip from your PA.
It was difficult to miss the headlines last week about fee income for M&A deals. The Financial Times reported that the advisory fees paid to investment bankers was $10.7 billion for the first six months of the year. This is 20% higher than last year’s first six months. Not surprising, either, given the deal volumes also running. For comparison, note that the low point in this millenium was in 2003 when the first half of the year yielded ‘only’ $3.0 billion in M&A fees.
There’s been talk of pressure on the amount that dealmakers can bill for deals, especially as the deals get larger. This appears to be true, as the value of deals has increased by 50% this year (first half 2007 vs first half 2006: $2.8 trillion vs $1.4 trillion). But this is as much as case of their being more mega-deals, where the fee level is smaller as a percentage of the deal. Note that the total fees earned by investment banks in the first half of the year is just under 0.4% of the announced deals.
The value for money comes in what is provided by the investment banks in this advisory work. We’ve been addressing ‘business intelligence’ in this weblog, and would suggest that this could be something that companies seek more from their advisors, often from consultants other than the investment banks:
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Despite their expense,studies conducted at Cass Business School have shown that the inclusion of a financial advisor is good for buyers because the advisors increase shareholder wealth by finding bidders or targets with greater value, providing advice on premiums, identifying liability concerns (including demonstrating to shareholders that they did the most they could to achieve the best deal for the shareholders), providing local knowledge in the increasingly complex cross-border deals and because of their competence demonstrate a higher probability of deal successful completion.
Each of the advisors can play an important intelligence role, although often each advisor’s actual role is limited to their traditional functions. Accountants check and produce the numbers, but if asked, can provide important information about the industry and other companies in the market. Investment banks may drive the overall process and be responsible for the valuation, pricing, and negotiation, but are also important reservoirs of information about the market, and competitors. They have Chinese walls that operate to keep information from one deal being used on another, but the general experience of the senior investment bankers themselves is often enough to provide a client with information that otherwise could not be obtained.
Both large, global consultants and small boutique advisors are renowned for their ability to seek out non-public information about client and customers. There is a demonstrated willingness of employees, suppliers, and clients to provide information for no other reason than having been asked. Often it is difficult for a company to ask this information directly, because they would need to identify who is asking. Consultants, on the other hand, do not need to disclose their clients unless asked – and frequently are just not asked! Why people are so willing to divulge confidential information to experts is not always clear, but what is clear is that many will do so for no other reason than that someone has asked them.
Some specialist consultants focus specificially on due diligence work and intelligence gathering. One or several steps up from the detectives made popular by Hollywood, these consultants can be masters at finding information that is otherwise difficult to obtain. Although there are those that operate on the wrong side of generally acceptable ethical and moral principals (granting that these may differ by culture, country, and individual), there is also much that can be done for targets or bidders by these investigative firms on the totally right side of the law. Selection of such consultants is therefore a key factor in successfully obtaining the information required.