News that RBS plans to divest its RBS Citizens Financial group is an opportunity to discuss two interesting uses of the IPO. First, RBS has been unsuccessful in attracting a merger or buyout (M&A)_offer, and so instead they may sell to IPO investors. M&A offers come from sophisticated buyers (e.g., competitors) while IPOs attract investors from across the spectrum. Should investors be interested a deal that does not attract sophisticated buyers? Bear in mind that my commentary has nothing to do with RBS Citizens specifically, but rather this general category of IPOs. A second key use of the IPO is also at play. RBS is using the (threat of) IPO filing to better their negotiating position and to attract an M&A bid. Filing creates a real option — the option to exercise the IPO in lieu of a satisfactory M&A bid. This is known as “dual-tracking”, and research (e.g., Lian & Wang, 2007) shows that firms using the IPO option increase the acquisition premium by some 58%. When used and timed properly, dual tracking can be a very successful tactic.
I have been fortunate to work with hundreds of companies and also to study managers in the workplace from an academic perspective. After a discussion with an organizational behavior professor colleague of mine, I want to start a dialogue about some counterproductive “types” of managers — do you recognize these? We need to write a paper on this.
a. The “One-upper”. These people “one-up” everything you say. In a misguided attempt to empathize, they have done everything you have, but worse (or better!). You know, “I have four projects, I am swamped”, yields a, “Yeah, I have six and I know what you mean.”
b. The “Yeah, but”. How about the manager who always responds, “Yeah, but…”. It is not necessarily negative, but rather contradictory. “We should price this at $X”, is followed with, “Yeah, but if we do…”.
c. The “MMI” – Me, Myself, and I. Every sentence is brought back to a point about oneself. While “I” is the most common word in the spoken language, how much business dialogue is about oneself?
d. The “Debbie downer”. The name taken from SNL, some managers focus on the worst, the flaws, the risks, the negatives. True, it is a great idea to ensure the holes are plugged. Balancing criticism with praise for the positive will surely motivate better.
To be fair, most all of the people I have ever worked with do not fit these stereotypes and instead were/are quite positive, nice, and decent people. However, it is fun to stand back and analyze those others.
After seven years at Microsoft (NASD: MSFT) my wife left last week for HP (NYSE: HPQ) and so I will finally discuss my thoughts! I am on record with hundreds of students in my classrooms predicting that Microsoft would buy Nokia and then “should” buy Sony (NYSE: SNE). That was two years ago. Isn’t Sony too big? Sony’s market cap in Jan 2014 is ~US$19B while Microsoft is ~US$300B. That is a very doable size. The Sony brand and the Sony consumer electronics design capability could help Microsoft engage the consumer and compete with Google and Apple. However, Microsoft waited…a long time…they bought (part of) Nokia after a several year precipitous decline in handset market share. Following the same playbook, Sony’s handset share has fallen and now we see Microsoft and Sony working on a Windows Phone deal. A major obstacle to an acquisition is that Playstation and Xbox own too much of the gaming console market. Why not spin off the Playstation group and buy the rest of Sony?…or again wait around long enough and we will see Steam, Nintendo, and perhaps the TV makers steal enough gaming market share that regulators will allow PS and Xbox to combine. Microsoft needs to make some bold moves in the consumer space, else leave it for good and focus on the business side.