Perhaps Airtours should bow out graciously. They’ve been told enough is enough, that First Choice is not for them.
But, I suppose David Crossland is on a crusade. It’s a pity, because no-one thinks the worse of him for being stopped by the European Commission, except for those who have lost money on the deal. But those sort of people have plenty of money anyway and no-one cares if they are a few million short. Do these mega takeovers help anyone, except for those who don’t need the money anyway? There was an excellent article by John Humphrys in The Sunday Times on December 5 analysing the findings of the recent KPMG report on takeovers.
The KPMG survey looked at the biggest 700 cross-border takeover deals involving 107 companies between 1996 and 1998. It found that fewer than half the companies bothered to analyse whether the mergers and takeovers had been beneficial, after the event had happened. That did not stop most of the companies from claiming they had. But KPMG’s own assessment was that only 17% had added any shareholder value, and that 53% of deals had actually destroyed it.
“Coming from a firm with such an international reputation, that finding is dynamite,” states Humphrys.
He goes on to say: “If we are to believe what chief executives and chairmen tell us when takeover battles are launched, pretty well everybody stands to gain. Everybody, except the workforce.”
He then says how bidding companies vie with each other as to how many jobs they will be able to dispense with and invariably promise that those who hold on to their jobs will be even more secure. Until the next round of rationalising that is. Does the customer benefit? Humphrys rightly says: “It’s a bit of a cheek for company directors, who spend most of their waking hours preaching the value of competition, to start arguing that we would actually be better served by three shops instead of four. Both claims cannot be true.”
Are the local communities in which the companies are based the beneficiaries? He says: “Again, unlikely, given that most communities don’t like to see their factories being closed in the name of efficiency, or their local bank branch disappearing for the same reason.” He quotes from Terrence Deal’s and Allan Kennedy’s book New Corporate Structures regarding shareholder value and the paranoia over share price and takeovers.
They say that the passion to create big companies by merging smaller ones has “É.decimated traditional corporate structures replacing joy, commitment and loyalty with fear, alienation and self-interestÉ Loyalty to companies has flown out of the window”. So, who benefits?
“Well, first the big boss who ends up on the top of the even bigger pile, his ego as inflated as his share options. And then, the massed ranks of lawyers, accountants, consultants and corporate financiers in the big investment banks. The banks earn up to 6% of the value of a deal.”
So, there you are, all of you who have seen your job security and satisfaction destroyed by what has been happening in our industry. I wonder if those few who have gained can cross their hearts and say what they have done is for the good.