Barbarians at the Gate
Now I must admit, I do not know much about
arranged marriages. They are an institution of their own and I have neither the
will nor the inclination to learn about them. What I do know about is
investment banking and mergers & acquisitions. So let us talk about that.
An M&A transaction occurs when someone
has something to sell, and the other person has money to spare. When this
happens, intelligent investment bankers like myself go to these rich people
with money to spare. We tell these rich people that they, who have built such a
fortune and amassed so much wealth, that THEY do not know what to do with their
money. So now me, the guy who took an Ola-share to come meet them at their
office, waited outside for an hour, and is now prying for their attention, I
shall tell them what to do with their hard earned money. Because I know best.
So I tell them that there’s this “opportunity” in the market. It’s a good opportunity. A rare opportunity. An opportunity that does not last long in the market. Which is false. Because if such opportunities were to get exhausted, then from where would “intelligent advisors” such as myself get their next pay-cheque?
But I don’t tell my investor this. I tell
them that there’s this wonderful, beautiful, wheatish complexioned opportunity
in the market. Which this investor must
explore. In fact if I had the money, I would invest right now. Right now! I wouldn’t. No investment banker ever invests in what they are selling.
No drug dealer is ever an addict.
Usually the investor’s CEO would be too busy
to entertain the i-banker’s pitch. After all, he is responsible for the riches
coming in. And he’s busy with that. More experienced people directly approach
the Chairman. The Chairman really doesn’t have many functional
responsibilities, other than to nudge the CEO to make more money. And what
better way to make more money than to explore new opportunities? Many better ways actually. To start with,
stick to what you know. That almost never fails. But we never say that.
And so the meeting is set-up. The parties
get to know each other. They find common ground, like the common ground between
a car manufacturer and a watch manufacturer. It is my job to convince them that
the ground between them is common. And it is round. And the sky overhead is
blue for both. And every car obviously needs a watch. And what is a watch other
than an elaborate piece of mechanics running on a set of wheels? And with
arguments like these, we let the parties know that they are interested. But
they won’t say it to each other directly. Because no one wants to look
desperate. That’s when they turn to me. And I tell both of them that the other
party might be interested, but they
are looking at other companies to… merge with as well. So they better hurry. There’s almost never another party.
So to save face these two parties leave the due-diligence to me. After all, who better to make an investigation other than the person who gets paid if the investigation comes clean? And who is in a hurry to explore the next “great opportunity” with the next “rich investor”.
And so the companies come closer. They do
some small projects together. They go over each other’s balance sheets.
Sometimes the sessions would last late into the night, or several nights. Under
my careful observation of course. We want the companies to get fond of each
other, but not get tired of each other. We don’t want them to find the
dealbreakers about each other. Only find out enough which can be compromised
upon. Meanwhile we make a public spectacle about the merger. Make sure everyone
in the market knows about the deal coming soon and the share prices adjust
accordingly. Now there’s a social market pressure on the deal going through.
Someone will be disgraced if the deal breaks apart. And there’s only one thing
that Indians fear more than losing money.
So at this point I’m comfortable. Now it’s
only a matter of time before I get my commissions. Meanwhile, the companies
have started to become fussy about why the merger is taking so long. Now we can
talk about the important stuff. My time hath come.
Now we talk about the subtle terms and
conditions of the transaction. Terms that do not necessarily refer to the
price, but will talk a lot about who will be in charge. This is where the CEOs
step in and figure out a way how to co-exist in the new dynamic peacefully.
There will be some compromises made and one of them will need to shift their
office. But we all know that sooner or later they will both shift to a new
office. Entirely unrelated to the companies that are merging.
We work our ways through visits to each
other’s offices when no one’s absent and everyone wears their brightest colors.
We take special care not to upset the other side and hence, avoid talking about
anything meaningful. This is important. We don’t want the parties figuring out
that they are incompatible. That might be the only point about compatibility
that we are concerned about.
Now when the merger is nigh high, and the
process has been powered through, doubt finally starts to creep in. Are we
making the right decision? Are we getting a bad deal? Is the girl a virgin?
So the parties start contacting everyone they know and don’t know to find some
strand of feedback to find if they have been crossed. And they will find no
such information. Because no one but the best of friends wants to be the bearer
of bad news. And a true friend will not wait till the call to tell the truth.
So no new information in received and the companies rest in the knowledge that
despite all possible genuine effort, they have gotten the correct deal.
At this point, we meet the investment
bankers of the other side, who, just like us, are waiting mostly for their
pay-cheques and are equally desperate to get the deal done. The two sets of
investment bankers are left to negotiate the final terms of the deal. And the
negotiations are as real as a cricket match in the IPL. And similar avenues for
earnings are created, right from the cheerleaders to inside jobs. I think
Matthew McConaughey said it best when he said what he focused on. “Commissions
baby!”
As soon as the deal is done, there is
immense pressure from both managements to create immediate “synergy”. No one
really knows what it is or what to do with it once you have it, but creating it
seems to be essential. So that the two companies will have a problem to solve
together for which they will stay put. A problem they did not have to begin
with. Meanwhile, the investment bankers vanish. Until…
Until the synergies can no longer hold the companies together. Then the companies decide that it was a bad idea and go their own ways. Guess who knows the best way to separate a merged entity? That’s right – the investment banker. Unless there was a pre-nupital, the breaking process is going to be ugly. But the uglier it is the more we’ll get paid. So no points for guessing if it will get uglier or not. It’s like giving a pig the reigns to the carriage and hoping to avoid the mud. And guess what happens when these two battered companies are in search for new investment to get over their recently created bad times?
