Washington DC
Mergers and acquisitions can be illusory. I was directly involved
with 50 or 60 completed acquisitions in my corporate years, some of them
blockbusters such as Raytheon's acquisition of the Hughes Aircraft Company. We labeled
some of these purchases “mergers," occasionally using the “mergers of
equals" sobriquet to conceal our intentions to debone the acquired firm.
If you ever find yourself in a firm being acquired under this
"equals" rubric, head for the hills unless, of course, you're a
sizable shareholder.
The Economist
(May 3) reports that global M&A activity in 2014 is off to its hottest
start since 2007, with some big brand names in play - Pfizer and
AstraZeneca, AT&T and DirecTV, Time
Warner and Comcast, GE and Alstom, and Omnicom and Publicis. How strange it was
to learn, however, that the much-ballyhooed $35 billion engagement between
these last two advertising and communications behemoths was abruptly scuttled.
Each party is blaming the other, off the record, of course, and both are citing
"cultural differences" as well as regulatory delays as two causes of
failure. Sure.
In writing about the
proposed deal, Forbes' columnist Avi
Dan is correct in stating that "there was nothing in it for the
clients" and that "scale is not as relevant as it once was" (Forbes.com, May 11). Regrettably, these
are not new phenomenon. Every time we acquired another firm in my banking days,
we positioned the deal as benefitting our customers. In truth, this was rarely
the case. Most deals were attempted then (and still) under customer-indifferent
market pressures to get bigger and bigger. Size is certainly an asset in some markets
at some times. Size matters most, however, when it enables agile, innovative smaller
firms to play Davey to stumbling, lumbering Goliaths focused inward. Of course,
deals are often undertaken to help a small number of shareholders get wealthier,
too, not that there’s necessarily anything wrong with that.
How is it that the
world's best branding and public relations minds at Omnicom and Publicis could
so mishandle their proposed "merger"? Publicis’ Maurice Levy and
Omnicom’s John Wren spent nine months and $100 million in fees to create
impossible expectations about an unworkable deal that would have been of little
benefit to their customers. Here’s where Forbes’
Avi Dan is wrong, however, in downplaying the role of clashing egos in the
demise of the deal. It’s beyond me how Levy and Wren let so much time pass
without deciding which of them would be the boss and for how long. These co-called
social issues were most definitely at play here. They almost always are. Their
own investor relations experts would have advised them to have these difficult,
ego-laden conversations before going public with the deal. Now, they are left
with nothing but embarrassment and legal fees.