The M&A Litmus Test: Part 1

Published by

How effective is your board? M&A can be your litmus test. If you are making a buy/sell/merge decision, the experience will reveal your board’s capabilities in myriad areas, especially these:

  1. M&A “IQ”
  2. Fiduciary Duties
  3. Strategy
  4. Information Flow, and last, but not least
  5. Good Business Sense

 

 

 

 

Today is Day One of your M&A Litmus Test, so we’ll start by testing your board’s…

 

… M&A IQ.

 

Does your board know why M&A matters?  The wise board won’t leave mergers and acquisitions to external advisors—or wait until the last minute to bring them in. The decision to buy or sell a company of significant size is clearly a matter meriting board attention. On the sell side, time may not be on your side.

Directors serving on public company boards understand that any public company, by definition, is vulnerable to a hostile takeover (since any person with enough funding can buy their shares on the open market through a tender offer and gain control). In 2010, so far there have been nearly 20,000 announced deals worth more than $1 trillion. Some 7 percent of all announced deals worldwide—nearly 1,400 transactions—were unsolicited (hostile) bids.

Directors serving on private company boards need to understand that sometimes M&A is the company’s only exit strategy when the founder wants to retire and there is no next generation of family and/or employees to continue the legacy.

Next, you’ll be tested on fiduciary duties in the sale of a company.  See you in class!

Shout Out to Sources

Culture Shocks and Mergers Made in Heaven

Published by

As employees, executives and board members, we find change both challenging and exciting, which is, after all, only human. In a merger setting, this takes on even greater meaning as the building of new relationships out of old bonds takes time and requires trust. One known catalyst for smoothing the process is calm, confident, visible leadership. In this regard, the new-look NACD is fortunate.

NACD is acquiring Directorship, and people originally involved with each organization are getting to know each other.  Ken Daly, our CEO, and Jeff Cunningham, chairman, CEO and editorial director of Directorship, characterize our merger as bringing together two different organizations that share one common belief: to make good governance a feature of the boardroom landscape.

Directorship MagazineThe benefits of merging our two organizations are clear: We can now offer you a broader and deeper curriculum, a wider range of peer exchange opportunities, and a continued role for the award winning NACD Directorship magazine, a much-valued member benefit.
But any director or executive who has lived through M or A knows that it can take patience and understanding to forge a new entity and make sure rewards are reaped by customers, shareowners and employees.

Of course, I and my colleagues, old and new, will be supported in our new venture by our own board members. NACD Director Karen Hastie Williams is a member of the Continental Airlines board. She will take part in course NACD’s Director Professionalism® course in Laguna Beach, CA, on August 24 and 25, to talk about culture and leadership as the airline prepares to merge with United. NACD Director Rich Koppes, a member of the Valeant board, also will be there. Valeant is proposing to merge with Biovail later this year.

If you have any stories that illustrate ways in which the board and management can maximize the chances of a productive merger, please do share them—add a comment on this blog post.

As Daimler and Chrysler and Turner and Time Warner will tell you, the road ahead can be bumpy—and board members with skills and experience to help the new-look C-suite deliver successful integration will always be in high demand.

Karen Hastie Williams

Karen H. Williams

Rich Koppes

Rich Koppes

Beware the Whistleblowers

Published by
Judy Warner

Judy Warner

Today guest blogger Judy Warner, managing editor of NACD Directorship, shares her thoughts about the implications of the new whistleblower program and the board’s oversight role in corporate compliance.

Harry Markopolos writes emphatically about the need to compensate corporate whistleblowers in his book, No One Would Listen: A True Financial Thriller, released  this year by John Wiley & Sons.

The independent fraud investigator feared for his life for nearly a decade as he sought to expose Bernie Madoff’s $65 billion dollar Ponzi scheme to the government, the media—anyone who would listen. That all changed when Madoff confessed to his sons, and, in effect, turned himself in, exposing a financial fraud that resulted in his conviction and the loss of individual fortunes many times over. The Dodd-Frank Act creates a new whistleblower program, with new protections and potentially large cash rewards for individuals, like Markopolos, who provide information about securities law violations to the SEC.

Under the terms of the new law, the Commission will pay a whistleblower between 10 and 30 percent of any monetary sanctions in excess of $1 million dollars that the SEC recovers as a result of the whistleblower’s assistance.

A story by Marcia Coyle in The National Law Journal, published July 19, 2010, on www.law.com, reports that some corporate attorneys see the new program as a bounty and warns that even companies with robust compliance programs face increased risk. “You could have a perfect compliance program and still have no legal defense,” said FCPA specialist Richard Cassin of Cassin Law (www.cassinlaw.com) in Singapore. “We kind of depend on prosecutorial discretion. The Department of Justice (which shares enforcement authority with the SEC) will come down less hard, but still, when companies have employees who go rogue, companies are strictly liable. I don’t like it because I think it’s a disincentive to maintain a good, robust compliance program, and to self-report violations.”

Markopolos will speak specifically about the implications of the new whistleblower program and the board’s oversight role in corporate compliance at the NACD Directorship Forum on November 9 in New York City. To register, visit directorship.com/events.

Judy Warner is managing editor of NACD Directorship, the official magazine of NACD. A journalist for more than 30 years, Warner now manages the creation of all Directorship products, including its magazine, events, website, and newsletters. Warner joined the Directorship team in 2007 from ComAve, LLC, an independent marketing consulting firm she founded and ran for eight years. Warner was formerly the New England bureau chief and editor for Adweek magazine and a senior editor for Marketing Computers. She began her journalism career in the newsroom of The Boston Globe.