The link between Sports and M&A

Posted on Thursday, 26 July 2007. Filed under: Commentary, Mergers |

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. 

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Book Review: Daily Express, 24 July 2007

Posted on Tuesday, 24 July 2007. Filed under: Books on Intelligent M&A, Commentary |

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:

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.

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Book Review: The Times, Saturday, 21 July 2007

Posted on Saturday, 21 July 2007. Filed under: Books on Intelligent M&A, Commentary, Mergers |

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:

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.

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What is success in an M&A Deal?

Posted on Wednesday, 20 June 2007. Filed under: Commentary, Mergers |

There is a fair amount of discussion about when a deal can be judged to be a success or a failure, and even how to determine success. 

Our own research has shown that the first six months following a deal’s closing is an excellent predictor of longer term success – the latter being defined as a period from three to five years following the deal closing.  Much after that, and the effect of the deal will have dissipated or be too mixed with other changes at the company, in the industry, or in the economy as a whole.

But what is success?  We like to consider shareholder performance as the ultimate criteria, but we acknowledge that there can be many different measures and stock performance is a very Anglo-American concept ignoring such factors such as local economy impact, workers and their families, suppliers and related companies (upstream and downstream), etc.  However, it is simple to measure (try isolating and measuring worker or supplier impact across deals, countries, and time!) and easily understood.  Thus, it has its appeal.

We discuss this further in our forthcoming book where we look as well at comparisons between experienced and inexperienced acquirers.  The experienced acquirers don’t fare well, by-the-way:

Prior experience may not be a predictor of success, although some studies have shown that acquirers do better when making an acquisition that is similar to deals they have done previously.  Here again the need for specific intelligence is central.  Many studies have shown that relatively inexperienced acquirers might inappropriately apply generalised acquisition experience to dissimilar acquisitions.  The more sophisticated acquirers would appropriately differentiate between their acquisitions.  For example, VeriSign appears to have failed with its 2004 purchase of Jamba AG despite having made 17 other acquisitions in the prior six years, many in related internet businesses.  Intelligence cannot, therefore, be taken for granted.

One challenge in trying to determine success of an acquisition lies in how to define ‘success.’  Is it shareholder value?  If so, over what period?  Or should one look at sales growth?  The ability to retain key customers?  Employee retention? Cost savings? And how would the company or companies have performed if they had not merged?  Perhaps as some have suggested, success should be defined by the publicised goals of the merging companies themselves and then measured against achieving those stated objectives. 

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Posted on Monday, 28 May 2007. Filed under: |

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M&A Frenzy and the need for Scenario Planning

Posted on Monday, 28 May 2007. Filed under: Business Intelligence, Commentary, Mergers, Scenario Planning |

This past week has seen many articles about the continue growth of the M&A market (see, for example, the Financial Times for a discussion of European M&A, or other articles on the Asian market).   It is difficult to walk down the street in the City of London or Canary Wharf and not overhear people talking about M&A deals.  The higher equity prices in the market generally are attributed to the continuing number of deals being announced.  The trend is global.  It makes front page news — and in fact, some days the front page of the Financial Times has all three or four of its major stories being M&A deals (this happened on Wednesday of this week with the only exception being a picture of the charred ruins of the clipper ship Cutty Sark)

It make me, and many of those I speak with, wonder about the hype.  Yet the M&A market continues to defy anyone’s predictions of when it will end.  I thought in 2005 that it might be the peak, but 2006 certainly exceeded my expectations.  My foundation is in history (I actually have two degrees from university in history and only one in business).  History DOES repeat itself.  At some point the market will begin to decline.  But just as the trough between the 5th merger wave (late 1990’s) and the current one (started in 2003) was higher than the peak of the 4th merger wave (late 1980’s — and for anyone else who lived through that merger wave, we thought it was going to be a record level of deals for a VERY long time to come), so the downturn that will happen sometime may still be at higher levels than we think.  M&A is here to stay.  One cannot be global as a company and not do deals (although there are some notable exceptions, the few number of such exceptions does prove the rule).

And I hear that Goldman Sachs is predicting a 30 year bull market.  I do think that different perspectives and forecasts are critical in planning what to do at this point in the M&A market.

Where can military and business intelligence techniques fit into this?  In our book, we discuss the need for scenario planning — a key military intelligence tool.  One section of our book, we discuss scenario planning as follows:

The first thing to realize is that the process of scenario planning is the consequence of a culture obsessed by the future – its risks and opportunities.  At Samsung, for example, scenario planning is enshrined in what is referred to as their VIP House (Value Innovation Programme).  The house is where the Samsung product managers, researchers, engineers, and assorted others ‘live’ while solving problems and/or planning projects.  The reason that this house is considered so important is because Samsung believes that 70-80% of ‘quality, cost, and delivery time is determined in the initial stages of product development.’ Samsung’s CEO and Vice Chairman, Jong-Young Yun, is clear about one thing, ‘the race for survival in this world is not to the strongest but to the most adaptive.’  Like the tsunami tribes and animals, he views the business world as an environment of existential threat and potential disaster.  The VIP house provides his disaster avoidance radar.

Another company famed for its extensive usage of scenario planning is Shell.  Using their own jargon, Shell’s scenarios team are tasked to ‘help charter routes across three interrelated levels; the Jet Stream level of long-term trends, uncertainties, and forces; the Weather Systems that reflect specific features of key regions; and the Turbulence of market level factors.’  To get a feel for the Jet Stream level, go to www.shell.com/scenarios.  Whether a scenario planning function is structured as a Samsung hot house or a highly centralised Shell-like group, the point is to monitor simultaneously the past, present, and future.  In all instances in addition to the expected, it is essential to attempt to imagine the unimaginable.  From those imaginings, scenarios must be built such that when a ‘new’ scenario presents itself, it is recognisable.

I wonder what Samsung and Shell are thinking now about future deals…

 

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