Interlocking Directorates and Mergers
We love to see the application of new intelligence techniques in assessing mergers, acquisitions and divestitures. Check this out…
A most interesting comment was posted on this blog on 19 November in response to our own thoughts regarding the possible break-up of Merrill Lynch, Citibank and Northern Rock (see More about breaking up Merrill Lynch, Citi and Northern Rock and the comment added at the bottom of our blog on that day). That comment is from a website entitled News Visual which uses knowledge maps to look at the links between companies.
This technique is not uncommon in places such as business schools and consultancies, and that website shows how it can be particularly useful in a merger or acquisition situation. Links between the two companies may not be direct but the News Visual website shows where these exist. Most of the information appears to come from public regulatory filings in the US, so non-US deals appear to be less covered; nevertheless, it is all very useful.
A few examples from their website:
- On 9 November, for example, they showed the links between BHP Billiton and Rio Tinto as that deal came to light (see their blog entry: Can Common Connections Between BHP Billiton and Rio Tinto Boost a Second Offer?)
- There was even the complex RBS / Santander / Fortis takeover of ABN Amro that we commented on here often (but see the News Visual blog entry of 9 August: RBS-Led Consortium Engages ABN with Common Connections). Some very intriguing connections between these companies during these deals.
- Even more interesting was New Visual‘s prediction back in April that ‘only one common connection exists between the Board of Directors of Barclays and ABN AMRO. This signifies a weak relationship between the two firms and may jeopardize the merger talks between them.’ How prescient this was. See How well were ABN Amro and Barclays Connected Before the Merger?
The comment about the News Visual website that was left on our own blog also merits some attention. We’ve written several times that a number of firms might face dismantling as they fall from grace. As noted before, we (and now many others) have suggested this is possible for Northern Rock, Merrill Lynch and Citibank. But a close look at the strong connections of the new master of Merrill Lynch (John Thain) has casued News Visual to come to a different conclusion: given all the people John Thain knows, he can draw on those connections (both personal and corporate) to help him succeed where others, presumably Stan O’Neal, failed — with the implication being that Thain’s predecessor was less well connected (see the blog entry: Past Experience and Connections Valuable as John Thain Steps Up to CEO Role at Merrill Lynch). They have concluded as well that Chairman Robert Rubin’s connections at Citibank can help to save that bank, too (see the blog entry: Former Ties Offer the Advantage as Rubin Takes on the Challenge as Citigroup’s Chairman).
All very useful if you want to look whether a deal — or inverse deal (otherwise known as a break-up or divestment) — is likely. Not that these knowledge maps should be used in isolation, but they do provide useful information … and as we’ve often written (including in our book, Intelligent Mergers), information is power.
Thank you, News Visual for producing these, and we do intend to look at them in the future as well.
Intelligent Mergers 
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