Chapter Content
Okay, so, like, you know how sometimes you hear about these massive corporate deals and mergers and acquisitions, right? Well, it's kind of crazy when you think about how that whole world, like, *really* took off.
I mean, before the 60s, mergers were mostly, like, companies in the same business joining forces, you know, like similar industries. But then, things got... complicated. People started using all sorts of reasons to justify these huge consolidations. And suddenly, M&A became this huge thing, with *way* more emphasis on the "A" part, the acquisitions.
There was this idea floating around, the "whole is worth more than the sum of the parts," which sounds good, right? Like, a synergy thing. And it all started with this group of, like, super smart guys from Harvard Business School, the "whiz kids," who helped the military during the war. One of them, Robert McNamara, even became president of Ford and then Defense Secretary. Pretty wild career path, huh?
But then, one of the *other* guys, Tex Thornton, he bought this small company, Litton, and just started buying up other companies. He went on this crazy acquisition spree! Litton became one of these "conglomerates," which were basically these huge companies that owned all sorts of unrelated businesses. There were other ones too, like LTV and Teledyne. The idea was that these superstar managers, they could run *any* business successfully, which, uh, didn't always work out so well, as we'll see.
And get this, there were even academics who were cheering this stuff on. This one guy, Henry Manne, came up with this "market for corporate control" idea, which basically said that takeovers were like a market where the *best* managers would end up running the companies. It sounded all nice and clean, but, you know, things got messy.
ITT, International Telephone and Telegraph, was like, the *king* of the conglomerates. This CEO, Harold Geneen, he bought everything – hotels, car rental companies, insurance companies! They even got involved in politics, which, uh, wasn't exactly their finest moment. Eventually, they had to break it all up because it was just too much. And that guy, Jimmy Ling, from LTV? He got kicked out of his *own* company! Litton went down the same path, and eventually got swallowed up by another company. So much for the "superstar manager" thing, right?
Originally M&A was kind of a friendly thing, but later it got a little meaner. This British guy, Charles Clore, he basically invented the "takeover." He realized that some companies were worth more for their assets, like real estate, than for their actual business. And he just went after them.
Then, this other dude, Sir Ivan Stedeford, he launched Europe's first *hostile* takeover. Basically, he went straight to the shareholders of this aluminum company, British Aluminum, and made them an offer they couldn't refuse, even though the management of British Aluminum *really* didn't want to sell. It was a pretty big deal at the time.
And then, like, even *big*, established companies like ICI started trying to take over other companies, which was just unheard of back then. Investment banks, too, got in on the action, helping companies launch these hostile bids. The whole game changed, and no CEO ever felt safe again.
Then, Britain got its own conglomerate boom. This guy, Jim Slater, started this company, Slater Walker Securities, that was famous for "asset stripping," which basically meant buying companies and selling off their assets for a quick profit. It wasn't always pretty.
But, even after the conglomerate craze died down, the dealmaking just kept going. All of a sudden, *everything* was up for sale. Venture capital and private equity became huge. These private equity firms, they'd buy established companies, often with borrowed money, and then try to make them more profitable.
The "management buyout" became popular, too, where the managers of a company would buy it themselves. Some people thought it was a good way to align everyone's interests, but others, not so much.
One of the biggest deals of the 80s was the takeover of RJR Nabisco. It was like a feeding frenzy on Wall Street. And this other crazy thing happened where Robert Campeau, a real estate developer, bought a bunch of famous department stores, and that deal totally blew up.
Private equity, at its best, can help small businesses grow, but, at its worst, it's just a way to extract money from companies. So, you know, it's a mixed bag.
Then, the dealmaking slowed down for a bit in the 90s, but it came roaring back with the "new economy" boom. The century ended with some *really* bad deals.
Even after the 2008 financial crisis, it continued! Can you believe it? This guy, who said that doing deals was his "art form," actually became president! He even talked about making Carl Icahn or Jack Welch Treasury Secretary.
It's all pretty wild, and it just goes to show you how crazy and unpredictable the world of corporate finance can be. A lot of these “wonderful deals” ended in destruction of some of the greatest businesses of the 20th century.