By Alec Hogg
Had the privilege of an off-the-record chat with a very smart CEO yesterday. He’s embarking on an aggressive acquisition programme and was so passionate I got caught up, privately enthusing about his brilliant strategy. Then I recalled the mess Peter Matlare has had to deal with after Tiger Brand’s Nigerian acquisition, writing off two thirds of the R1.5bn investment. Supporting academic research that 80% of acquisitions fail.
I also revisited my Berkshire Hathaway annual reports for some wisdom from The Oracle. His comments in the 1992 edition ring as true now as they did then. Warren Buffett writes: “I’ve observed that many acquisition-hungry managers were apparently mesmerised by their childhood reading of the story about the frog-kissing princess. Remembering her success, they pay dearly for the right to kiss corporate toads, expecting wondrous transfigurations.”
Buffett continues: “Initially, disappointing results only deepen their desire to round up new toads. Ultimately, even the most optimistic manager must face reality. Standing knee-deep in unresponsive toads, he then announces an enormous “restructuring” charge. The CEO receives the education, but the stockholders pay the tuition.” I’ll try to remember this story next time a takeover-hungry CEO crosses my path.
Yesterday’s top stories
Billionaire comedian Bill Cosby’s $400m empire imperilled
Why educated people make stupid investment decisions
New law will criminalise South African landlords – warning
Tiger Brands’ Peter Matlare answers the hard questions about Dangote, results
Six great reasons to invest in SA Reits
