The Murdochs ride out

August 2, 2007

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The Murdochs are on rampage. One force led by father Rupert overpowers the Dow Jones ranch. Meanwhile another raiding party headed by son James makes a lightening raid, and claims ownership of the Amstrad territories. Can anyone stop the Murdoch gang?

Got a bit carried away there. First the surprise news that BSkyB, led by James Murdoch, has acquired Amstrad. Then a less surprising report. The long-running News Corps seige of the Dow Jones organization conducted by Rupert Murdoch has come to an end. The prized asset, The Wall Street Journal, has fallen to the mighty News Corp.

Both are relatively small deals, but each is of a high profile nature.

Before we get too tricksy in linking the two stories, let’s recap on recent events. The Wall Street journal tells it as it sees it, as a delicate dance between suitor and target. Suiter and Target? That’s not very romantic, but the story is well worth a read.

Behind the scenes, however, the media mogul had orchestrated a deal over two years. He quietly gathered intelligence on Dow Jones’s operations and consulted Wall Street figures to plot his moves. An emissary for him talked with family members who had been Dow Jones dissidents a decade ago

The story then rotated around the reluctance of the powerful Bancroft family to sell its shares. The sticking point was not so much a fair price, as the loss of what was reported as the values of independent news reporting esposed by family members.

Meanwhile, at BSkyB

Meanwhile, News Corporations’ subsidiary, BSkyB, announces that it has reached a deal to buy Amstrad. Coincidence, but another victory for the Murdoch family and News Corp. Like father, like son, The offer is a no-nonsense one, valuing Amstrad high enough above the traded value of its shares to deter other would-be bids. This is salient, as prospects for the Amstrad have not been rated highly by analysts.

The agreed figure is some £150 million. But the deal comes with a lot of trappings. Amstrad is the company that Sir Alan Sugar created and led to its current position. That alone would have secured him a niche as one of the UK’s most successful entrepreneurs, but then he starred in his own TV series, The Apprentice.

BSkyB is high-profile in the UK, through the impressive success of its satellite broadcasting, and particularly through its impact on Premier League football. Its deal is generally regarded as a major factor in the rocketing finances, and players mega-contracts. Add to that is a whiff of (Mills & Boon) drama starring a less-favoured offspring of James Murdoch striving to prove himself to patriarchal father Rupert and to the world.

Students of takeover battles can find details further details in earlier posts.

Financial analysts concede that the bid is advantageous for Sir Alan. In strictly financial terms the value to News Corp is less clear.

Some blue sky thinking

Those of us at a distance from the key players have to reply on efforts of imagination, trying to make sense of the available information. This is a nice training exercise for would-be strategic leaders. Can you push yourself beyond first impressions? Can you make sense of otherwise curious aspects of the story as it is presented to you?

Here are two puzzling aspects. Why did Rupert Murdoch make an offer for Dow Jones that is widely beyond what anyone else would have been prepared to pay? Why did James Murdoch likewise make an offer which again is one that is high enough to baffle commentators?

It is likely that there is an explanation that lies beyond the basic short-term numbers involved. The targets possess some value to News Corp that go beyond financial valuation of assets. For Dow Jones and its Wall Street Journal we could investigate whether the figure could be taken as reflecting that mysterious intangible ‘potential value of the brand’. I can’t see that work so well in the case of Amstrad (Sorry, Sir Alan).

In the first case, the intangible may be seen as the WIT price meaning ‘whatever it takes’. Rupert Murdoch wants the Wall Street Journal. A majority of its shares are held by individuals for whom the company is not valued in terms of a stock-market figure. Some ‘offer they can’t refuse’ has to be made. And eventually pragmatism wins over deeply held emotions. The WIT pricing simplifies the deal-making, by removing the possibility of some third party white knight appearing on the battle field.

In the second case, the seller, Sir Alan Sugar is founder of Amstrad. He has never presented himself as bound to it through a deep emotional commitment. Sugar the entrepreneur and market trader has the pragmatism of the entrepreneur. Faced with a deal in a company whose best days seem to be behind it, he acts decisively.

So what was James Murdoch up to? The ‘killer fact’ for me is the reliance that BSkyB has for Amstrad to supply its satellite boxes. With Amstrad stock otherwise rather unattractive, might it be attractive as a nice little move for, say, Richard Branson to make a bid of Amstrad. At very least that would send the price of Amstrad up. Until recently, that would also have been a real concern also because of BSbyB’s dispute with Virgin Mobile.

Is that what happened?

No more than speculation on my part. But it does show some of the considerations those strategic chess players have to be aware of in these corporate battles. And at least it does not reply on disentangling the spin put on the story given to ‘in the know’ financial journalists.


The Apprentice

June 27, 2007

350px-tovenaarsleerling_s_barth.pngMy curmudgeonly view of The Apprentice is largely focused on the view that it presents a distorted and undesirable role model for would-be business leaders. However, it can be argued that the series exposes dubious business practices, and that subsequent debate can be healthy.

Why should the owner of a large corporation risk public ridicule while seeking high-profile visibility for himself? In the news at the moment has been Sir Alan Sugar, and his BBC TV show The Apprentice. That other knight, Sir Richard Branson, has an even longer tradition of self-publicity, and would probably also be tempted into TV stardom given the opportunity.

One difference may be that Sir Richard’s publicity stunts have, mostly, been associated with his beloved Virgin Brand. By and large, the restlessly innovative brand and the image of RB seem pretty compatible.

So what about Sir Alan and his business interests? He has stated that he is doing the show because he enjoys it, and because he thinks it worthwhile to communicate the excitement of the world of business.

I note this without recalling the original source, but I can’t recall that he says he is taking part because it’s good for his business interests. On the other hand, it’s a pretty safe bet he doesn’t consider it to be harming his commerical net value.

What’s happened to Amstrad?

AS a matter of record, as Sir Alan’s public visibility has grown, so has the share value of Amstrad. Significantly. Over six times their quoted value in early 2002.

So Sir Alan’s show has helped Amstrad?

Well … it’s not as clear-cut as all that. A few years ago in 2002, the shares had plummeted to a price of 20p, suggesting that the company was a near basket-case.

At present, financial analysts see Amstrad’s main business is in the highly competitive one of selling set-top TV boxes. There is no evidence of great growth there. The vitality and entrepreneurial flair brought to the company in its early days by Alan Sugar seems have disappeared. My scanning of the financial press suggests that the company’s future prospects are not rated highly. [This is a personal view, and not, repeat not advice from a successful share-tipster.]

As part of a strategic response to corporate difficulties, the TV exposure hasn’t worked.

Is The Apprentice a good showcase for business?

Sir Alan says so. The BBC have commissioned another two series, and have increasingly talked-up the status even of those would-be apprentices ejected from the house (I meant, those fired from the programme). As each is evicted (sorry, ‘fired’) he or she has another brief period of celebrity.

By and large a consensus seems to be emerging beyond the vested interests of the BBC that The Apprentice throws as much light on Business as earlier and better-scripted series such as Steptoe and Son, Are You being Served, and Only Fools and Horses.

One article highlighted some undesirable elements if the show was intended to mirror business life.

“I think I would be very uncomfortable being Sir Alan Sugar’s solicitor now,” says Nicholas Lakeland at London law firm Silverman Sherliker. “I wouldn’t say his approach is consistent with what employment lawyers would advise.”

Although at interview you are only protected against discrimination after a year at an office, you can claim constructive dismissal, and where bullying is really bad, protection from harassment. If Sir Alan behaves in his company like he does on TV, warns Lakeland, he could find himself in hot water.

Bullying can prove very expensive for businesses. Last year Deutsche Bank had to shell out £800,000 to workplace bullying victim Helen Green. In 2003 Steven Horkulak was awarded nearly £1m in damages by the courts after months of abuse by his boss, president of brokerage firm Cantor Fitzgerald International. Employers be warned.

My case is, that the omnipotent boss as acted out by Sir Alan Sugar in The Apprentice, is a poor role model for much of today’s business. He illustrates many of the characteristics that have helped him achieve success for a self-made multi-millionaire. The vital ingredients of determination, resourcefulness, energy, single-mindedness are not so obvious as a kind of unthinking and gratuitous bullying. The style is by no means universal among successful business leaders. I have suggested elsewhere that such tyrannical behaviors are most often found concentrated certain industries including the media.

These objections have been raised elsewhere.

Steve Carter, head of recruitment firm Nigel Lynn, condemns the unrealistic “brutality” of the show’s recruitment process. “The idea that people should set about stabbing each other in the back to succeed is not good business,” he says.

To that I would add another misgiving. The episodes are followed by tired radio productions which remind me particularly forceably of the culture of Celebrity Big Brother.

The Case for the Defence

I have been inclined to rant a bit about a programme which I have trouble watching for more than a few minutes. So let me have a go at defending The Apprentice. It has revealed one example of muscular leadership. Wannabe leaders can discuss what they have seen. In pubs and workplaces this is already producing discussion. Maybe this in turn will allow people to figure out ways of coping when they come under fire from a bullying boss. Even better, some bosses may perhaps review their own leadership behaviors towards employees, and consider alternative patterns.


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