Friday, 28 May 2010

Prudential - wins Bloop Award Stars!

Well I never! Not in all my days!
Who might have imagined that, within 18 days of winning our illustrious award, the unbelievably highly paid Mr Thiam, together with his team of the finest intellects in The City, would have managed to pull off not one but two more howlers.

On the 25th May, it was reported that AIA’s chief executive, Mark Wilson, had told friends and industry executives that he intended to quit if the deal completed. Press reports said Mr Wilson would leave because the combination of AIA and the Pru’s Asian business was “unworkable”. Two senior executives, AIA’s finance director, Steve Roder, and its legal head, Peter Cashin, have already quit the company. So Mr Thiam plans to spend billions of other peoples' money, and to put at risk the funds for which he already holds the stewardship responsibility (how close is that to his attention, we wonder?), to acquire a business from which the leadership and local operational management knowledge will be absent. So here is someone else, as well as the FSA, that Mr Thiam has failed to persuade to come on side. This is definitely worth our first ever award of a Bloop Star.

But, hardly have we put the newspaper down, when we learn that a significant number of the shareholders have expressed serious reservations about the financial feasibility of the proposed acquisition - and there is now doubt as to whether Mr Thiam will be able to get the 75% shareholder support he must win to go ahead. The usual excuses are being trotted out by the financial analyst experts (who had clustered around, hands out for their millions of commissions, to help Mr Thiam concoct the offer) - the markets have changed, the economy, blah, blah - ignoring the fundamental lack of resilience within the proposed deal. Now, say the experts, the price to AIA must be reduced, so the US Government must lean on the AIA management to accept a lower price, and then the deal will be OK again. Now we have yet another group, as well as the FSA and the AIA management, that Mr Thiam has failed to persuade to come on side. This is definitely worth our first ever award of a Bloop Star SQUARED.

It appears that this whole deal is so flimsy and fragile that the smallest unexpected external variation is enough to put it at risk. And if the construction process is so lacking in basic robustness, what confidence can anyone have in the resulting structure? Dodgy builder equals shoddy house. The comparisons with the RBS grab for ABN Amro catastrophe, and (has anyone spotted this even more scary similarity?) the Lloyds TSB/HBOS wrap up, are compelling. Any Comparative Competitive Strength advantage (see our related blogs here too) for this venture is not visible - precisely the opposite seems probable. This is an origami house built of tissue paper - what will happen when the first shower falls?

So the Business Bloop Star and Star SQUARED awards go to Tidjane Thiam and the lesson to the rest of us is:

POOR PROCESS ALWAYS PRODUCES POOR RESULTS

For more on process thinking go to :http://www.changeworld.co.uk/gettingresults.html

Business Bloop of the Month Award is brought to you by Steve Goodman & Tony Ericson. It is one of our "Excellence Quartet" of blogs promoting the cause of Excellence as the key to prosperity. We publish regular articles using a recent business/financial topic to highlight different perspectives and conclusions from those obtained using conventional thinking and techniques. You can read the other three blogs at“Exceeding Expectations", "You're having a laugh ... Seriously?, "Capitalism or ... Common Sense .






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