The following is an article that I wrote in 2001 about so-called "mergers-of-equals." It's nice to see that after six years some things never change.
By Robert Duncan
A "merger of equals" is a lot like meatloaf.
Both are the product of weakness, defensive efforts that try to make something new out of leftovers that may not normally excite investors or gourmets.
In the case of meatloaf, it's about making ends meet, stretching a meal to feed more mouths and disguising the fact. For most corporate mergers, it's a move to strengthen market position, tease out synergies and protect against hostile approaches.
Meatloaf in and of itself isn't bad, but it shouldn't be passed off as filet mignon. Unfortunately, merged companies sometimes get caught in the hype and really think they've invented a fresh culinary delight.
Take the recipe that formed Spanish giant Banco Santander Central Hispano SA (STD) in 1999.
It called for Banco Santander and Banco Central Hispano to seamlessly merge quite diverse corporate images and cultures. Two years later, it was increasingly clear that the Santander team's more aggressive style - led by co-chairman Emilio Botin - was being held back by co-chairman Jose Maria Amusategui, who represented the old, staid order at Banco Central Hispano.
The real problem was that both parties believed they were equal. And that they would remain equal. And this is the fatal flaw of a "merger of equals."
BSCH is a classic case of the bread wanting to be meat, or vice versa. Did Amusategui really believe Botin would so easily give up power to an empire that can be traced back to 1857, when his grandfather founded Banco Santander?
While Botin publicly touted the operation as a merger-of-equals, that wasn't the sentiment behind closed doors: insiders repeatedly said the Botin family was taking control of the bank.
On Aug 16, after months of endlessly denying the existence of management clashes, the heat apparently became too much - and Amusategui's leaving the kitchen.
For anybody who cooks this shouldn't have been a surprise. "Too many cooks spoil the broth," and that's an adage Botin also seems to ascribe to - and one Amusategui forgot.
Now sole top-chef Botin has his work cut out for him. He needs to not only convince investors that the merger has been completed, he also needs to convey a clear vision regarding the bank and its investments and expansion plans, both in Europe and Latin America.
Investors and analysts alike are pleased the bank finally has Botin as lone leader. At least it's good news for the company's shares, which have been weighed down of late by the leadership factor.
But leadership isn't the only problem facing Botin. Considering the current fragility in Argentina and the economic slowdown in the U.S. and E.U., it will be quite a trick if Botin's souffle doesn't deflate.
Insiders say the first thing he'll do is unify the group's branding and management structure, likely shedding hundreds of jobs and setting the stage to realize the EUR601 million in merger synergies he's been promising since 1999.
There's also talk Botin will change the bank's name slightly, to Santander Central Hispano - dropping the Banco and giving Santander slightly more prominent billing.
In other words, Botin has to redefine BSCH.
That may be, however, like trying to classify meatloaf. What is it ... meat or bread?
Given his reputation, it's likely Botin will remember investors won't be fooled by too many spices or fancy glazes. Because at the end of the day a bank's a bank, and meatloaf, is, well, meatloaf.
This article was originally published August 2001 as a Skeptic Column for Dow Jones Newswires and republished at Robert Duncan's home blog.
Robert Duncan is a journalist and ombudsman for foreign press in Spain. He is an Executive Board Member and Vice-President for the Organización de Periodismo y Comunicación Ibero-Americana, and Vice-President of the energy and telecommunications association, APSCE. He is News Editor for Spero News, and Editor-In-Chief of EnerPub. More of his writings can be found here, as well as at the Santificarnos website.
He has also been published in World Catholic News, National Catholic Register, Renew America, Lifesite.net, as well as Capital Hill Coffee House, Common Conservative, The Conservative Voice, Enter Stage Right, News By Us, Conservative Crusader, World Net Daily, Mens News Daily and others. Robert was the bureau chief for an international news agency in Madrid for many years, and was published regularly in Dow Jones Newswires, with articles appearing in The Wall Street Journal.
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