As Association Staff Feels The Strain, Would Wall Street M&A Group Provide Quick Solution To Merger?
Jim Prevor’s Perishable Pundit, July 30, 2012
A former chairman of United and experienced helmsman of several produce companies recently weighed in on the United/PMA merger:
Al is very right about the danger of a drawn-out process on staff morale and retention. Although, at the end, PMA was probably a little too aggressive in the way it gave an ultimatum to United, the process had gone on for a ridiculously long time.
There are consequences to this. People look to get more secure jobs as Al points out, and new hires are hard to attract with things in such flux.
Al’s idea about bringing in an investment banker is surely the way to go if you want the transaction to happen. Instead, in order to facilitate the negotiations between PMA and United, the boards brought in Jerry Jacobs, an attorney at Pillsbury Winthrop Shaw Pitman LLP. Mr. Jacobs heads up the firm’s Nonprofit Organizations Practice and is widely recognized as a leading expert in this area of law.
Part of the problem is that you have to know how to use lawyers. At one point in the negotiations, PMA actually agreed to a co-CEO arrangement for a year, as long as it was agreed that Bryan would then become CEO. This wasn’t much of a sacrifice as the nature of the transaction, which involved setting up a new association and closing down the existing two associations after transferring assets, would have probably taken six months to effectuate anyway.
It is not clear that United would have accepted this but, in any case, the issue became moot when the lawyer declared that there was no way to bind some future board to appoint anyone as CEO.
This is true, but the answer you get depends on the question you ask. You never ask a lawyer if something is legal or not; you tell a lawyer what you wish to accomplish and let him develop a legal strategy that will get you there.
So, no, a future board can’t be bound legally. But a contract can be entered into giving a person a million dollars in severance if he is not appointed CEO — which, as a practical matter, means he will be appointed CEO.
The other issue, though, is that in this case, not everyone wanted to do the transaction, and those who were skeptical lost faith in Mr. Jacobs. Some felt he was looking forward to his firm making a lot of money on legal work setting up the new association and dissolving the old ones.
Others felt he wanted a notch on his belt. Several people mentioned that we should note the first matter listed on his web site as an accomplishment: Merged two major national trade associations in the financial services industry, each with competing programs and complex structures, into one large association.
Rightly or wrongly, these board members felt he wanted the merger to happen and so he lost the ability to serve as impartial broker when disputes arouse.
Would an investment banker have done better? Maybe. Though they, of course, bias toward completing the deal as well.
If you know you want a merger, the investment bankers would have a lot of credibility on evaluating cash flows etc., but the disputes here aren’t business disputes; they are disputes over what is important.
Should a new association prioritize government relations or global networking? Should growers dominate governance or buyers? These strike us as not really business issues at all, so we question whether any business expert could get us to a solution.
Or, more precisely, the M&A guys could get us to the optimal business outcome, but whether it is the association the industry wants is an open question.
Many thanks to Al Vangelos for helping us wrestle with this important question.