M&A

Andrew Hill Dogs bark and Xstrata’s Davis moves on

April 17, 2013 3:39 am by Andrew Hill

Mick Davis’s departure from Glencore-Xstrata without serving a six-month transition period at the merged company is a classic dog-bites-man story. It looked inevitable even when my colleague Helen Thomas and I met him in January for an interview, but the Xstrata chief executive and cricket fan played a straight bat to questions about whether he would sit patiently in his office after what he plainly described as a takeover by Glencore. Read more

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Posted in Mining |

Andrew Hill Now Autonomy puts HP on the rack

November 20, 2012 3:48 pm by Andrew Hill

“Real business value”, “industry-shifting technology”, “unsurpassed innovation” or “accounting improprieties, misrepresentations and disclosure failures”? Or both?

Hewlett-Packard’s accolades for Autonomy’s technology are drawn from an HP “fact sheet” which is helpfully included in the “related links” HP provides from Tuesday’s withering online statement about an $8.8bn impairment charge. Most of the charge relates, HP says, to alleged improprieties at the UK software company the US group bought last year.

The announcement brings back into the open the sort of concerns that dogged Autonomy as Mike Lynch, its co-founder, built up the business – and that he always dismissed as untrue. Read more

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Posted in Business, Technology |

Andrew Hill Glenstrata is polling the wrong people about pay

October 1, 2012 11:07 am by Andrew Hill

Xstrata’s novel decision to allow its investors to uncouple their vote on whether to approve retention payments from their vote on whether to back a merger offer from Glencore is fascinating.

But it seems to me that Glencore and Xstrata are polling the wrong people. If it is true, as Xstrata chairman Sir John Bond and the non-executive directors say, that “without the ability to retain key Xstrata managers to run the combined group’s mining operations… the value proposition of the combined entity is at risk”, shareholders are still short of a piece of vital information. Read more

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Posted in Mining |

Andrew Hill EADS-BAE – the devil in dual listing, in pictures

September 14, 2012 10:50 am by Andrew Hill

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:

 

 Read more

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Posted in Aerospace |

Andrew Hill Overconfident innovators: handle with care

March 5, 2012 2:28 pm by Andrew Hill

The latest study from the American Finance Association’s Journal of Finance reaches a counterintuitive conclusion: perhaps over-confident CEOs are better innovators. Here’s what it says:

CEO overconfidence is associated with riskier projects, greater investment in innovation, and greater total quantity of innovation as measured by patent applications and patent citations even after controlling for the amount of R&D expenditure. In other words, the R&D investments of overconfident CEOs are more productive in generating innovation [my emphasis].

David Hirshleifer, Angie Low and Siew Hong Teoh rightly point out that this may go against the grain for most business commentators (myself included), who “often point to examples of headstrong, overconfident CEOs who made disastrous decisions”. Read more

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Posted in Management |

Andrew Hill M&A: guilty until proven innocent

June 14, 2011 6:33 pm by Andrew Hill

My favourite bon mot from Richard Rumelt, the UCLA strategy expert whose interview fuelled my column this week, was his comment that in any boardroom discussion of strategic options, acquisitions should be “guilty until proven innocent”.

Prof Rumelt’s new book Good Strategy/Bad Strategy makes clear he is no fan of M&A. “The problem with engineering growth by acquisition,” he writes, “is that when you buy a company, especially a public company, you usually pay too much.” Read more

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Posted in Banks, Business, Management, Telecoms |