Taking the personal out of corporate takeovers

When General Electric bid for Honeywell in 2000, it was Jack Welch’s last “swing for the fences”. The GE chief executive handwrote the $43 billion offer faxed to his Honeywell counterpart.

He delayed his retirement to see through the takeover. He went alone in June 2001 to the last meeting in Brussels with Mario Monti, then European competition commissioner.

So when the commission blocked the bid, it was Welch’s reputation that suffered.

GE and the commission should finally exorcise the ghost of that decision, which shocked the US corporate and political establishment. Brussels is expected to approve, with conditions, the US group’s takeover of energy assets from Alstom of France.

Many of the ingredients that spiced up the Honeywell case have changed, but when it comes to dealing with the EU regulator, a few important ones — including the risks posed by politics and towering personalities such as Welch — can still complicate the handling of big deals.

Since the Honeywell setback, GE has moved its European headquarters to Brussels. Thanks to the number of small deals it submits for commission approval, it has become expert at the merger process. Where Welch tried to build a personal relationship with Monti, who declined his invitation to “call me Jack” while talks were under way, Jeffrey Immelt, his less aggressive successor, has adopted a more formal, team-based approach.

Margrethe Vestager, the youngest commissioner to hold the competition brief, differs from her predecessors, too. But a more important shift is that adverse court rulings after the Honeywell decision prompted the commission to refine and restrain its powers.

Investigations are now subject to greater checks and balances, such as internal “devil’s advocate” panels. Alec Burnside, who heads the Brussels office of Cadwalader Wickersham & Taft, a law firm, says “the drama has largely gone out of antitrust cases”. That may be bad for reporters in search of a good set-to, but it is good for companies seeking certainty.

Since 2001, when US president George W Bush publicly expressed his concerns about objections to GE’s bid, US-Brussels relations in this area have improved. But politics still simmers behind other cases, such as the ones Vestager is investigating about Google’s dominance and Amazon and Apple’s tax breaks.

These days, battles involving multinationals are never clear-cut by territory (and rarely were in the past — US rivals were among those that objected to the GE deal in 2001). But if Vestager rules against these US-based giants, it is hard to imagine the transatlantic political temperature will remain tepid.

Even the GE-Alstom transaction, though smaller and less potentially significant than GE-Honeywell, has had a political edge. After GE’s approach to Alstom leaked, and Germany’s Siemens emerged as a potential alternative suitor, Immelt went to Paris to charm the French establishment, including President Francois Hollande, into becoming allies rather than antagonists. But he never staked everything on his personal ability as a deal-closer, the role Welch assigned himself in 2001.

Going it alone in Brussels is imprudent. Yet, says Burnside, “it does still happen — and it comes to grief sometimes”. If GE has moved from imperial leadership of its bid strategy to an approach based more on the joint input of executives and advisers, others still believe in the pure power of a senior executive to convince regulators and legislators.

For instance, Ryanair’s mouthy chief executive Michael O’Leary reportedly cooked up the airline’s first bid for Aer Lingus in 2006 with just two other executive directors, though they knew they would face a regulatory backlash. When Brussels blocked the deal, he denounced the decision as “bizarre, illogical, manifestly inaccurate and untenable”. The commission then vetoed another attempt in 2013.

For GE’s Immelt, approval of the Alstom acquisition could lay another ghost: that of his still ubiquitous predecessor. Immelt is at last turning what was a US-centric empire, fuelled by its finance arm GE Capital and identified with its hard-headed boss, into a more focused industrial company, with most of its operations outside its home country.

Assuming the GE-Alstom deal is approved, he may finally be able to echo Monti at the end of that last meeting in 2001: “Goodbye, Jack.”

Financial Times