Chapter Content
Okay, so, like, let's talk about... well, not exactly pretty pictures, you know? More like, the stuff behind the scenes of big deals, the kind that maybe aren't as shiny as they seem. You know, there's that quote, right? About daring to be great, and how it takes, like, toil and sacrifice and courage? It's easy to get caught up in the *idea* of greatness, but the reality is, um, usually a lot messier.
Take Trump Tower, for example. Not exactly a masterpiece, architecturally speaking, but it's a, like, physical reminder of this whole "dealmaker as artist" thing. But, honestly, some of these deals... They don't really seem to *create* much value, you know? It's more like, just doing it for the sake of doing it.
And you see this, right? The success of Trump's autobiography, it's ghostwritten, but it kinda shows how much people admire, or think they admire, dealmaking skills. More than like, managing actual *things*. It's all about the drama, the moves and countermoves, the big climax. Like, everyone read *Barbarians at the Gate*, right? Reads like a thriller! Nobody is calling Sloan's *My Years at General Motors* a thriller, that's for sure.
This whole dealmaking thing, it, like, personalizes the CEO role. Suddenly everyone is a hero, like the founders of the company. And because these CEOs have all this power, everyone, like, flatters them, tells them what they want to hear. That's where the M&A business is driven from, right? Egos. Managerial egos, and the fees that it generates for bankers, lawyers, consultants... Mergers have always been around, but, like, finance people now use "corporate activity" to *mean* mergers and acquisitions. It's crazy!
The trick, for these investment bankers, is to build up a network. Get a contact list, so they're the first ones called. If you can even *start* a deal, not just help it along, you're worth even *more*. The thing is, the finance sector, they get rewarded for making the deal *happen*, not for whether it actually works! The advice they give is about *how* to do the deal, not whether it's a good idea. "Bid-em-up Bruce", right? His real clients were the CEOs and executives, who wanted to build their empires, even if it was a disaster for the actual company.
I mean, think about those massive mergers from way back. AOL and Time Warner? Vodafone and Mannesmann? Disasters! Should be, like, required viewing for any CEO thinking about a big acquisition, those photos, right? The high-fives, the grins. One CEO called the Time Warner deal "the biggest mistake in corporate history"! They, like, blew a fortune on something that turned out to be worthless. The "advisers" walked away with millions, of course.
You'd think people would learn, right? But no. Consultants are out there saying that, because of the pandemic, CEOs found new time to, like, dial into meetings and think about deals. So they do them. It's seen as a key skill now.
For years, I used the Royal Bank of Scotland's acquisition of NatWest as an example of a *good* merger. But it ended up being a disaster because of, like, hubris. Bad lending, poor risk control... Then they bought ABN AMRO, another disaster. The winner's curse, right? Sometimes, the prize for winning is bankruptcy.
I even remember sitting there while the CEO was going on about how great the ABN AMRO deal was going to be. It was obvious that the banking sector was in trouble. Bear Stearns collapsed, Lehman Brothers followed, then RBS basically said it was going to run out of cash. The government had to step in!
And the advisor for that deal? Got a huge bonus, even though he admitted later that if they knew what they know *now*, they wouldn't have advised it! Apparently, he got the contract even though his advice was terrible.
It really makes you wonder about all this. Before things got crazy, management wasn't always pressured to be great. But the M&A process seems to benefit the executives, more than anyone else. The failures, like AOL Time Warner, they're just extreme examples. The studies usually say that M&A *destroys* value, overall. It's not just about overpaying. It's about whether the combined company is better than it was before.
You can't really measure the value. It's not that easy to measure what's happening in the stock market. It's better to see how things are doing, long term. But you need a counterfactual. What would've happened if the deal didn't happen? Even with *good* deals, like Disney and Pixar, or Google and Android, you don't know what would've happened. But managers, like, it's probably better to just build a great company, instead of buying one.
So, what does it all *mean*, you know?
Think about iconic stores, like Selfridges and Harrods. Selfridges changed hands multiple times. And Harrods... the guy who owned it also was the father of Dodi, who... well, you know. And now, Qatar owns it.
These "trophy assets", they're popular. Should we like, indulge that, or see it as, "the unacceptable face of capitalism"?
Think about Oreo cookies. They've been around forever, right? The ownership changed multiple times. Different tobacco companies and whatnot. But the cookie is basically the same!
As that *Barbarians at the Gate* book said, "What did it have to do with doing business?" It's a good way to end this, because it's all about deals. The deals that happen, not the things they make.