Ian King and Dick Olver, respectively chief executive and chairman of BAE Systems, are in for a rough ride now the planned deal with EADS has collapsed. When merger plans fall through, the people in the top jobs are always vulnerable. But recent experience suggests Mr King’s future is more secure than Mr Olver’s.
Take a look at a handful of recent abortive transactions – G4S’s takeover of ISS in the support services sector, the tie-up between miners BHP Billiton and Rio Tinto (or, if you prefer, the uncompleted deal between Rio Tinto and Chinalco), the proposed merger of Prudential, the UK insurer, and AIA. The chief executives of all the companies involved are still in position, even though some (Nick Buckles of G4S, I’m talking about you) have suffered further setbacks since their favourite tie-ups unravelled. Read more
The takeover of BAE Systems by EADS to create the biggest European civil and defence aerospace company was always a hard sell to its political and financial shareholders. It is starting to look out of reach.
The latest opponent is Invesco Perpetual, which owns more than 13 per cent of BAE and thinks, to paraphrase, that the company is a deal-junkie that ought to run its business better rather than seeking salvation through M&A. Read more
“National interests in the sphere of strategic-level business have all but disappeared,” claims a senior executive of EADS in a new book. But the opinion of Lutz Bertling, chief executive of the group’s Eurocopter subsidiary, is now being tested in battle, as national governments wrangle over what a merger between EADS and BAE Systems would look like.
To be fair, the German executive’s chapter – “Commercial Top Strategic Leadership: A Helicopter View” – was written before the EADS-BAE talks became public. But the question of how Mr Bertling’s personal views might apply to the aerospace and defence merger was raised at Thursday’s launch of In Business and Battle, a “cross-cultural, cross-sectoral and international” anthology of insights into strategic military and civilian leadership. The discussion at London’s Royal College of Defence Studies – where Mr Bertling first presented his ideas – was non-attributable. But as one of the distinguished guests said: “Consolidation is right, but whether this is the particular merger that should be backed is still open to some debate.” Read more
It is natural to regards any merger proposed by BAE Systems, the UK’s biggest defence company, with suspicion. Had it a better record of predicting its industry’s future and doing deals at the right price, it would be in less of a pickle. Read more
For BAE Systems and EADS, the European aerospace and defence companies whose courtship was revealed last week, it’s simple. Business logic will help level the political hurdles and bridge the legal pitfalls that lie in the path of their proposed union. Read more
Shareholders in BAE Systems and EADS should know what they’re getting into. The FT’s Alison Smith laid out the governance pitfalls on Friday, and Steven Davidoff has pointed out for the New York Times’ Dealbook that setting up a dual-listed structure requires an “unbelievably complex set of agreements in which [the companies] agree to equalise their shares, run their operations collectively and share equally in profits, losses, dividends and any liquidation”.
But a picture is worth a thousand words, so here are three illustrations of the full horror of some dual-listed structures. Expect EADS-BAE, with the added political and defence ingredients, to be 100 times more complex. Nice work for investment bankers, corporate lawyers and company secretaries; hard work for everyone else.
1. This classic describes the consequences of Reuters’ 2008 merger with Thomson Corporation (from the 545-page prospectus that one investor likened to War and Peace). Easy to see why the Anglo-Canadian DLC ended up abandoning its London listing in 2009:
Anyone who reads Sir Howard Davies’s acerbic regular diary column in Management Today magazine will know that the former head of the CBI and London School of Economics is extremely well-qualified to lead an independent inquiry into UK airport capacity. He seems to spend much of his time travelling by air between international destinations – dropping in the occasional barb about the airports he passes through.
In July, he pointed out that “you need a sense of humour to fly from Venice airport. Congested? It makes Heathrow Terminal 1 look like a county cricket ground on a wet afternoon”. Last December, he recounted a bad Paris-Munich TGV experience, but added he was “instinctively pro-train, except when it is owned by Richard Branson”. Read more
The euphoria at Nasa over the successful landing of Curiosity on Mars is infectious. The public seems to have joined the scientists’ celebrations with a fervour similar to that shown by the British for their Olympic team’s successes. As one wag posted on Twitter: “Gold medal for Nasa in the 563 billion metres.”
Be careful, though, in extrapolating from either the Mars mission or the Olympic triumphs the easy conclusion that “aiming high” gets results. As I’ve written, the achievement of even quite small steps can have measurably positive effects on a team’s performance and morale. Similarly, missing the big goal might prove a crushing blow – I watch some of those heart-rending interviews with athletes that fell short of their and their countries’ expectations at the Olympics and wonder how they will start to recover. Read more