New CEO = Portfolio Review = M&A
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Hi everyone,
There are many examples where newly appointed CEO’s have engaged in portfolio reviews (which ultimately has led to M&A deals) within the first 2 years of appointment.
My sense is that this is related to the CEO trying to “make his/her mark” as leader of the new company (narrative is always related to exiting lower value businesses and entering more profitable businesses with growth potential).Are you supportive of this approach? How often do you think the pressure to “get a deal done” results in portfolio repositioning/deals that do not benefit shareholders long-term?
Craig
I think this is a question of a CEO being stronger than her/his Board. And running out of steam improving/managing the core business. A sure sign of operational leadership failure is reaching for M&A all of a sudden. If M&A were a real part of the strategy (of say serial acquirers), then M&A would be business as usual. Another sure tell tale sign is a major reorganization after around the same time. Or the CEO has a huge success fee in their contract (I know of a case where a 20m payday lead to a multi-billion write down a few years after a poor acquisition.
I agree with your view Craig that the new appointed CEO is trying to make his/her mark and sort of an achievement that can be put into his/her CVs, and as ultimately they do not suffer any personal financial losses yet with a good bonus with the M&A deal done, they have more incentive to do such action.
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