Ed Giera, General Motors
Denis Hamboyan, Bank Boston
Betsy Hatfield, Bank Boston
David Herter, Fleet Boston
Tod Hibbard, Fleet Boston
Christopher Howe, Kleinwort Benson
Thomas Jasper, Salomon Brothers
Scott Johnson, Ober Kaler
Andrew Kalotay, Salomon Brothers
Eric Linnes, Kleinwort Benson
Hugh McColl, Bank of America
Mary McDaniel, SNL Securities
Jean McTighe, BankBoston
Angelo Messina, United Technologies
David Meyer, J.P. Morgan
Dennis Morgan, Yahoo!
Lin Morison, BankBoston
John Muleta, PSINet
John Newcomb, BankBoston
Ralph Norwood, Polaroid
Tim Opler, Lehman Brothers
Michael Pearson, McKinsey
Nancy Preis, Kleinwort Benson
Christopher Reilly, S.G. Warburg
Gerry Rooney, NationsBank
Emilio Rottoli, Glaxo
Jonathan Rouner, CSFB
Craig Ruff, AIMR
Barry Sabloff, First Chicago
Katrina Sherrerd, AIMR
Kirsten Spector, BankBoston
Martin Steinmeyer, MediMedia
Stephanie Summers, Lehman Brothers
Sven-Ivan Sundqvist, Dagens Nyheter
Peter Thorpe, Citicorp
Katherine Updike, Excelsior
Carlos Valle, Merrill Lynch
Manoj Verma, Yahoo!
David Wake Walker, Kleinwort Benson
Elizabeth Wells, SNL Securities
Ulrich Wiechmann, UWINC
Scott Williams, McKinsey
Bill Wright, Morgan Stanley
Harry You, Salomon Brothers
Marc Zenner, Salomon Smith Barney
I am very grateful to the staff of the Darden School for its support in this project. Excellent editorial assistance at Darden was provided by Stephen Smith (Darden’s unflappable editor) and Sherry Alston. Betty Sprouse gave stalwart secretarial support. Outstanding library research support was given by Karen Marsh and Frank Wilmot. The patience, care, and dedication of these people are richly appreciated.
I must also acknowledge the great support and encouragement given by my editors (and now friends) at John Wiley & Sons: Bill Falloon, senior editor, finance and investments; Melissa Scuereb, editorial assistant; Robin Factor, managing production editor; and Todd Tedesco, senior production editor. I also thank the staff at Cape Cod Compositors, who worked with the Wiley team, for their fine attention to detail. Pamela Van Giessen, executive editor, Joan O’Neil, publisher, finance and investment, and Will Pesce, president, were decisive in my commitment to embark on this project. For the vision and enthusiasm of the Wiley organization, I am very thankful.
Lewis O’Brien, permissions consultant, makes the author’s life immeasurably easier. He checked the manuscript, offered editorial advice, and ferreted out some elusive permissions to quote the material of other authors.
Of all the contributors, my wife, Barbara McTigue Bruner, and two sons, Jonathan and Alexander, have endured the greatest sacrifices for this volume. It is significantly a product of their faith, hope, and charity.
All these acknowledgments notwithstanding, responsibility for the final product is mine. I welcome suggestions for its enhancement. Please let me know of your experience with this book either through Wiley or at the coordinates given below.
Robert F. Bruner
Distinguished Professor of Business Administration and
Executive Director of the Batten Institute
Darden Graduate School of Business
University of Virginia
Post Office Box 6550
Charlottesville, Virginia 22906
United States of America
E-mail: [email protected]
Web site: http://faculty.darden.edu/brunerb/
NOTES
1 1. Quoted from Albert Bigelow Paine’s authorized biography, Mark Twain, 1912, page 559.
2 2. How to Resist Hostile Takeovers, edited by Joseph O’Donoghue and Donald Grunewald (International University Press, 1991).
3 3. Darren Berry, Anne Campbell, David Eichler, Dennis Hall, Jerry Halpin, Peter Hennessy, Brian Kannry, Doug Leslie, Andrew Meiman, Reed Menefee, Casey Opitz, Katarina Paddack, Thien Pham, Chad Rynbrandt, Michael Schill, John Sherwood, Jane Sommers-Kelly, Carla Stiassni, Sanjay Vakharia, Larry Weatherford, and Steve Wilus.
CHAPTER 1 Introduction and Executive Summary
AN URGENT PROBLEM: HOW CAN MY TEAM DO BETTER THAN THE AVERAGES?
M&A (mergers and acquisitions)1 is no easy path to riches or career advancement. On average, it looks like buyers earn just the going rate of return on their acquisitions. However, around the average is a wide variance. We learn about the stupendously bad deals from the media: They make lurid reading and sell copy. Unfortunately, we know less about the real winners, probably because successful buyers do not want to alert the competition. Nevertheless, we know enough to say that it is possible to succeed through M&A.
Most firms have no better alternative. M&A is one of the most important means by which companies respond to changing conditions. It is an instrument of macroeconomic renewal. And even if you did opt out of M&A, the odds are that your competitors would use it to reach for strategic or financial advantage, with consequences that might be disastrous for your firm in the long run. Simply opting out of M&A is not feasible.
Some writers portray M&A as the kind of losing proposition that compulsive gamblers face in Las Vegas: You can’t win; you can’t break even; and you can’t get out of the game. This is unduly pessimistic. Though M&A is a very competitive business activity, it is possible to succeed. But competitive forces limit true success to a fortunate few.
So here’s the problem: How do you succeed at an activity in which you must participate and in which the odds of great success are slim? The problem manifests itself in four ways:
1 Getting a handle on the subject. Good practice begins with a good grasp of what is happening. “How