Does it matter who owns the business you work for? Many column inches have recently been devoted to the private equity take-over of British companies. Although the accusations have been strenuously denied by those inside the private equity business, the thrust has been that such takeovers are in some way bad.
We're hearing that they're bad for employers (through reduced security and less generous conditions), for customers and suppliers (through tougher terms of business) and the country as a whole (through loss of accountability as a result of going private). Whatever the reality, the prospect of your employer being taken over in such a deal is likely to be a worry.
Similarly, concern has been expressed over several years as a series of high profile British companies have been acquired by foreign corporations. As a former employee of ICI, I am particularly interested in the possibility of it being taken over by Akzo Nobel. I was there when Lord Hanson took a significant equity stake in the 1980’s with a view, we all assumed, to mounting a full scale bid. The clamour, both within ICI and in the country at large, was as loud as today’s against private equity – the concerns were similar.
Is there really anything to worry about? To the majority of employees does it matter whether the owners are a group of high net-worth individuals or a collection of pension funds? Does it matter whether the head office and most of the shareholders are in London, Amsterdam, New York or, looking not too far ahead, Beijing?
Ultimately it comes down to one thing – trust. Those of us who had grown up with ICI (my father was there for 25 years before me so I knew something of what to expect before I joined) expected to be well looked after. Some would argue that the management style was soft although those who came across the Chairmen of that era: Harvey Jones, Henderson and Hampel would argue strongly otherwise.
However few would disagree that even when it was tough it was fair. Employees at all levels were treated with respect and were rewarded for the efforts they put in. Families were involved wherever possible and those who left, either to move elsewhere or to retire, were kept in touch and welcomed back to visit.
The threat of ownership changing hands brought fear. Not necessarily loss of jobs or reduced benefits but a general fear of the unknown. Also concern that those extra things that were done to look after staff might disappear. They were the things that often made the difference. They made us feel proud of the company and caused us to support it at every turn even when things weren’t going well.
Having since worked for Tetra Pak, a private, Swedish owned company I am sure these fears have nothing to do with foreign ownership or with public quoted companies. They have everything to do with it being different. New ownership threatens change. Change is perceived as bad. Big change is very bad. So the arrival of a new type of owner (private equity) or one from overseas bring the threat of ‘they wont understand us’. The fear that things will change for change’s sake. That the things that have made the company successful will be taken away.
But there is the rub ‘the things that have made it successful’. If the business was that successful, there may not have been need for change in ownership. The existing owners would be happy to leave senior management in charge to continue the good work. Many have subsequently concluded that ICI needed the shake up that Hanson gave it. No doubt it would be denied by those involved but fact that the de-merger of Zeneca followed not long after cannot have been a coincidence.
Even if a change in ownership does occur, is the fear of change justified?
New owners want to run successful businesses. To do so they require well trained, well motivated, loyal employees. They also need genuine partnerships with both customers and suppliers. They may see ‘waste’ in some of the practices that the former owners sanctioned and that are held so dear but if they are taken away and business performance suffers they will soon pick up the signs.
We operate in an increasingly global business world where the opportunities for those with access to finance can mount bids for all business assets in UK. I suspect few people would wish for protectionist policies to prevent such take-overs so they will continue – and hopefully UK based businesses will similarly acquire those overseas. The fears may never completely go away but perhaps they will reduce as the perceived ogres are shown to be not quite as frightful as was anticipated.