Comment

Last week two blistering reports came out on the subject of supposed wrong doing, incompetence and poor leadership in banks. First was Anthony Salz’s report on Barclays culture prompted by the bank’s attempt to rig Libor and yesterday’s Parliamentary Commission on Banking Standards  pinpointing three senior executives once at the top of HBOS with indications that these people might never be able to work in financial services again. In addition, RBS investors launched a class action lawsuit against the bank and former directors including the ex CEO Fred Goodwin. They are looking for £4bn in compensation. Not surprisingly all these projects were managed by those outside the organisations which does not say much for the degree of internal self discipline and self analysis which their existing culture engenders.

I try to follow the various recent deals within the US airline sector, and amongst the predictable post-close challenges around union negotiations, booking systems integration etc, this note really caught my eye: Diana Moss, VP of the American Antitrust Institute (AAI) recently testified in the US Airways–American Airlines merger review, voicing her concerns about the deal. Alongside the predictable concerns related to market share and the potential to exert anti-competitive behaviour, out came this zinger: “An increasingly important factor in the efficiencies debate is post-merger integration".

I just finished reading The Perfect Prey, which I mentioned in my previous blog. The next book on my reading list is already chosen and it's not about Mergers & Acquisitions or another business topic. This time it is a novel in which the main character is faced with a highly impacting change in his personal life. I find myself inspired by (amongst others) business books, novels and classic literature. The topics and influences of each genre are very much interchangeable and can be applied to everything you do, regardless of situation, place and time.

While I'm writing this, I am waiting at the airport for my flight back to Brussels. Yesterday, we held a BTD team meeting in London which was very inspiring and laid the foundation for the extension of our services towards 2014. It was also the moment to welcome a few new team members and officially kick-off our expansion with establishing the Continental Europe office.

[caption id="attachment_285" align="alignleft" width="58"]Coordination groups M&A Co-ordination - all important![/caption] In large businesses, getting an acquisition from opportunity to signature is one of those few key activities that demands seamless collaboration between Corporate and Business Unit entities. In many cases one group pays for the deal, while the other lives with the results. While this may seem a logical split of roles, it can result in a number of misaligned priorities and other systemic flaws in the pre-close process: Business Units not fully understanding the deal rationale, making it hard for them to truly get behind the delivery of the benefits; Corporate Strategy or M&A groups building synergy models and assumptions insufficiently underpinned by operational realities; lack of accountability between Corporate and BUs over execution, leading to finger-pointing if things go wrong.

[caption id="attachment_245" align="alignleft" width="150"]Indian M&A Mumbai[/caption] The headline news [here] that India’s M&A activity in 2012 hit $36.3 billion, although large in overall size, camouflages the large fall in capital inflows into the country compared to a year ago, which was almost five times that amount. Outbound deals also continue to be relatively small.

[caption id="attachment_257" align="alignleft" width="150"]Good v bad acquisitions Honeywell - serial acquirer?[/caption] An interesting piece caught my eye: it's about Honeywell's approach to acquisition (read it here). They are evaluating about 100 potential acquisition targets and one of their criteria is how easy they will be to integrate. Businesses that undergo multiple acquisitions are often called ‘serial acquirers’, which has both good and bad connotations.   Good, in that if done properly it can be a strategic deployment of capital in order to obtain capability, market reach and process performance that all enhance value and shareholder confidence. Definitely not to be sneezed at.  Getting it wrong, on the other hand, can lead to a destruction of all this and the CEO’s career to boot.

[caption id="attachment_249" align="alignleft" width="150"]Dell M&A Dell - big M&A spenders - but good?[/caption] How does a business model change after an acquisition?  I was wondering about this in the light of a recent article on Dell’s buying spree (here) in which the success of its acquisition strategy was called into question.  For Dell, the strategic rationale for its M&A strategy has been to move it away from hardware to enterprise solutions.  So this means that Dell’s business model has to change – the way Dell generates revenue and the component parts of the company that support that.

Unpredictability in M&AIn a recent editorial by Acquisitions Daily, this item caught our eye: Write-offs to hit big mining deals.  Following the US$14bn loss on acquisitions that cost Rio Tinto boss Tom Albanese his job last week, further write downs on investments at the other largest mining companies in the weeks ahead seem sure to curb strategic M&A activity in the sector in the near-to-medium term. As the prices of base metals continue to fall while costs continue to rise, Rio’s leading rivals will be forced to follow its example over the next two months – with nickel and aluminium assets particularly vulnerable.
 

[caption id="attachment_215" align="alignleft" width="150"]Culture; M&A; Integration To see or not to see...[/caption] I saw this case study about cultural fit in an M&A by Mary Teresa Bitti – the company in question is Vancouver-based The Little Box Company. It’s great to read a case study where cultural considerations are a key part of an acquisition strategy. All too often it’s in the bloody aftermath of why it didn’t work, or return the value expected, that ‘cultural incompatibility’ is cited as a main factor.