When we were working in mergers and acquisitions there was always nostalgic talk from the elders about the days of the hostile takeover. It wasn’t just that a lot of the people running the banks and private equity shops had come up through the ranks in the days of the hostile takeover. There was something else, something beyond a sentimental for yearning for the golden era of youth. It was as if the eighties—despite evidence of pink and yellow “power ties” and questionably girly haircuts on men—were somehow more manly than the present era.
Even the words “hostile takeover” speak of a martial spirit. As if taking a company from a decrepit management was like the Spartans facing down the Persians at Thermopylae and winning. The very language we spoke told us we were living in the shadow of our betters. Lots of the terms we were still expected to learn were leftovers from that era, although the devices that they named were rarely used. Who sends a “bearhug letter” letter anymore?
Well, we’ve got the pink and yellow ties. Even haircuts are becoming questionable once more. Men wear blazers, and Dana Vachon lunches without socks. Surely it’s time for the hostile takeover to come back.
Not persuaded? In the Wall Street Journal, Holman Jenkins has more substantive reasons for its return. The hostile takeovers were a far more effective way of keeping the managers of public corporations in check than the host of regulations, disclosure rules, compliance fetishes and calls for shibboleths such as “shareholder democracy” have ever been or are ever likely to be, Jenkins writes.
What's missing today is the universal solvent of a lively expectation that hostile takeovers can befall managements that hog too much value for themselves. Unfortunately, legal and regulatory changes have made these all but impossible. Yet hostile takeovers were a far more productive way of closing the circle of accountability than the corporate governance wrecking ball aimed at Hollinger has proved to be.
He takes the Conrad Black case as a prime example of the problematic manager who might have been simply taken out of action by a healthy hostile takeover regime. Unfortunately, the powers that helped put hostile takeovers out of business—corporate insiders, a compliant press, regulators and lawmakers captured by corporate donors—still reign, and have since been joined by a new industry of academics, compliance advisers, accountants and prosecutors who all have an interest in keeping the status quo in place. Only with more so.
But we can still dream of bringing back the era we lost. Only without the girls in shoulder pads.
Waste Case [Wall Street Journal]