Archive for August, 2007
[Note: further information on surviving a merger can be found in my other blog: www.survivingmergers.com]
On 7 August, Management-Issues had an article based on the final chapter of our book (Intelligent M&A: Navigating the Mergers and Acquisitions Minefield). That chapter, entitled ‘How to Survive a Merger’ provides a number of strategies and tips on how to increase your chances of being retained in a company that has just merged, acquired, or been acquired.
The Management-Issues article was also entitled ‘How to survive a merger’; it concluded with a reminder about a particularly critical point, as advised by one of their thought leaders, Patricia Soldati. She’s put together a list of the top 10 smart ways to get ahead of ‘the corporate curve ball’, as she called it. The one noted in the article (and the first of her list of ten) was: ‘Don’t think it can’t happen to you.’ Said another way, that’s why everyone’s at risk, even the high performers.
During a merger or acquisition integration, all too often the decisions about who to retain and who to make redundant are made on political grounds or with an appalling lack of due diligence and ‘intelligence gathering’ on the part of those responsible for the hire/fire decisions. Even the top performers should be concerned that they may not be part of the post-merger organisation. Or perhaps especially, as they are high profile, likely to be highly paid (at least relative to many others in the organisation), and all too often difficult to manage.
P.S. Please do check out the blog noted above (Management-Issues); when you get there, type ‘mergers’ into their search engine and you will find a number of very useful articles on M&A topics, especially in the career and talent development areas.Read Full Post | Make a Comment ( 1 so far )
Christmas may be over four months away, but if ABN AMRO is acquired by Barclays or the RBS consortium, it looks as if the current members of the ABN AMRO board will be able to place better Christmas presents under the tree this year.
As reported in The Times on 2 August 2007 (see the full article online here at TimesOnLine), if the Barclay’s bid goes through, the ABN AMRO supervisory board chairman, would see his pay increase from €113,000 (£76,000) a year to as much as £750,000 if he become chairman of the enlarged group. This is the level of compensation of Marcus Agius, Barclays’ present chairman. The Scottish bank doesn’t pay it’s chairman as well, by-the-way, as Sir Tom McKillop, the chairman of RBS since April 2006, receives a basic salary of £471,000. [Note on the foreign exchange: to translate the pounds into dollars, just double the pound amount.]
It’s not just the Chairman of the Board who benefits. ABN AMRO’s finance director would get £600,000 a year should he become chief administrative officer at the new company (up from about £444,000 at ABN AMRO) and would be eligible for a maximum bonus of £1.5 million next year (and a minimum of £600,000, not including other benefits such as a company car). According to the regulatory filings sourced by The Times for their story, the six ABN AMRO supervisory board members expected to join Barclays’ board if the bank wins control of ABN AMRO would see their pay jump from between €40,000 and €70,000 a year to between £76,000 and £200,000.
Although this appears to be a conflict of interest that would lead those directors to prefer the Barclays bid, The Times also made the following point about the RBS bid:
‘Sources … pointed out that RBS’s higher cash offer would give ABN’s board members a more immediate financial boost, based on their share options in the Dutch bank, than the salaries on the table at Barclays.’
In my earlier blog posting in June on Surviving a Merger, we questioned whether the ABN AMRO directors would be adding post-merger compensation agreements to their employment contracts. In this case, they probably didn’t need to re-write their contracts, but rather knew that the deal — no matter which bidding bank won — would result in large increases in their personal wealth. As we noted in that blog, ‘not a bad deal if you can get it.’
This is just one more example of the personal planning that goes into surviving an acquisition and the application of good intelligence: in this case, doing the due diligence to determine how the acquirer’s board was compensated and then negotiating to keep the terms of the acquirer, not the target (despite one stated goal of the deal being to reduce expenses).
Such compensation increases need not be limited to board members. Intelligence can be gathered about positions at just about every level in the two merging companies before any deal is consummated. Such information is essential to have BEFORE making a decision whether to stay or take a redundancy package.Read Full Post | Make a Comment ( None so far )
The Financial Times published a long (almost 700 word) review of the book, Intelligent M&A: Navigating the Mergers and Acquisitions Minefield, on 1 August 2007. The review was entitled ‘Giving diligence its due’, and noted in summary that ‘the authors have strong points to make on any activity [M&A] in which thoroughness and common sense are sometimes lacking.’
The full review can be seen on FT.com at http://www.ft.com/cms/s/352c1298-403f-11dc-9d0c-0000779fd2ac,_i_rssPage=f38b85e4-51de-11da-9ca0-0000779e2340.html.Read Full Post | Make a Comment ( 1 so far )
I expect that not many of the readers of this weblog were up at 5:30am on 30 July watching World Business Report on the BBC (or it’s rebroadcasts in the UK later that morning and globally on BBC World). So you did miss my discussion on the ABN AMRO takeover battle.
Later that morning, ABN AMRO’s board was to decide whether it would continue to recommend the Barclay’s offer over the RBS (Royal Bank of Scotland) consortium’s offer. The RBS team (which included Banco Santander of Spain and Fortis of Belgium) still had the higher offer, despite Barclay’s attempts over the prior days to sweeten their offer.
But back to Harry Potter. I did say on the air that it was likely that the ABN board would hedge their bets and provide no recommendation — that is, letting the shareholders decide without guidance from them. Here’s where the Harry Potter reference occurs: ‘No longer can the ABN AMRO board consider the RBS consortium as the Death Eaters from the Harry Potter books, and Barclays as The Order of the Phoenix good guys. They must consider both to be equally satisfactory acquirers.’
The BBC presenter, Sally Bundock, didn’t miss a beat when she responded with the question, ‘Well, I guess that means that it isn’t going to be a Fight to the Death.’
Hopefully, the interchange did wake some people up who were otherwise not paying attention to the business news.
But on a totally serious note, this decision by the ABN board was not without precident. Just remember the Manchester United board who had done everything they could to stop Malcolm Glazer from purchasing the team, but since his offer had been so attractive, they couldn’t in all fairness tell shareholders that they should reject the offer. So the Manchester United board reluctantly stood on the fence in 2005, just as the ABN board did on Monday.Read Full Post | Make a Comment ( 1 so far )