I've been on a boardroom bender lately, happily digging up details about SEC rules, company policies, compensation practices, and whatever else I can get my hands on for all the companies I cover. But the dry SEC filings I deal with leave a bit to be desired regarding human interaction between directors and executives -- so I went looking for that information elsewhere.
That's how my roving eye landed on Rita Ricardo-Campbell's Resisting Hostile Takeovers: The Case of Gillette. Dust-jacket blurbs and quick-take reviews promised a glimpse into boardroom workings beyond the mere mechanics and regulations; the author spent 12 years on the razor designer's board, and the introductory chapter was promising:
A board member of a Fortune 500 corporation has, to my knowledge, never before attempted to analyze for the public in book form the day-to-day events, together with an objective economic analysis, of such a significant episode of American business history as a failed takeover attempt.
That was it. I had to read this book, if only to get a human perspective on how corporate boards actually work.
All action, all the time
That's not exactly what I got, though. Ricardo-Campbell explains in enormous detail the financial conditions around Ronald Perelman's repeated attempts to gain control over Gillette in the late 1980s and early 1990s and merge it with his flagship holding, Revlon (NYSE: REV ) . This book is a fine primer on how "poison pill" provisions, staggered board elections, and whitemail payments can stave off the most determined of would-be hostile acquirers, and you also get to see the downsides of these tactics.
For example, Gillette paid off one unsolicited tender offer in 1986 at above-market prices, under the condition that Perelman not come back and try again in the next 10 years. That tactic backfired in the court of public opinion, as shareholders felt slighted by this outsider getting a better deal than anyone else could. And Ron Perelman soon found loopholes in that agreement that allowed him to try, try again.
But there's a lot less boardroom action in this book than I had expected. This isn't a verbatim diary of board meetings and informal discussions over power lunches. It's the facts and nothing but the facts -- and probably had to be, as board deliberations constitute the height of business secrets. When the book was published, Ricardo-Campbell had left that board, but Gillette was still an independent and publicly traded company, more than half a decade away from the endgame when Procter & Gamble (NYSE: PG ) actually did acquire the company for $57 billion in 2005.
Bait and switch
So this turned out to be a very different tome from what I really wanted. It isn't exactly single-sitting material, either -- each of the 10 chapters could easily be published as a standalone pamphlet on a single aspect of the attempted takeover process. We get a brief history of the company in several places, and many concepts are introduced over and over again as if they were something entirely new each time.
That means two things. For one, the author most likely organized each section of the book around meeting notes and public documents about November 1986, or "poison pill" theory and practice, or proxy contests, and so forth. Little effort, if any, was made to integrate the whole work into a readable entity.
If that sounds bad, let me give you my second point. This is excellent reference material for anyone with a serious interest in takeovers. The independent nature of each chapter means less flipping back and forth to basic definitions in the middle of a research project. You can go in, get down and dirty with a single issue, and then put the book back on the shelf, with a good grasp on the topic at hand.
The target audience seems to be managers and directors of other public companies; the book apparently aims to be a reference work on how to fight these battles from both sides of the story. For an individual investor like you or me, the value of this work lies in understanding how the punches and counter-punches in unsolicited takeovers can affect the stocks we own.
Gillette is pictured as an ideal takeover target because of its massive and reliable cash flows on top of a strong balance sheet, with plenty of loosely related business units that could be sold off for a quick profit by an uncaring buyer. When Perelman started building his initial minority stake in the company, the sheer volume of his trading drove up share prices -- and every step in the decade-long tango had real effects on private investors and their holdings. Ricardo-Campbell is careful to note these market swings as they occur in her fractured narrative.
Foolish final thoughts
In short, don't do what I did. This isn't a book about director-on-director talks and interactions, though the final chapter touches on that aspect ever so briefly. There must be better ways to glean that kind of insight, and I'm still on the hunt for those.
But I could have used this book a few times in my investing career. The insight offered inside would have come in handy when Disney (NYSE: DIS ) started making overtures to my dear Pixar, which it then acquired on friendly terms. The same goes for Reebok, now a division of Adidas (OTC BB: ADDDY.PK). AMD (NYSE: AMD ) snagged ATI, seemingly out of the blue, and maybe Google (Nasdaq: GOOG ) intentionally overpaid for DoubleClick just to spite Microsoft (Nasdaq: MSFT ) . Buyouts happen, and you'll always do better the more you know about what's going on. This book is a fine weapon in your arsenal when the time comes to dig into a takeover attempt, or a mere rumor.
One final caveat: This is a pricey volume, at a cool $120 for its 250 pages and 10 chapters. Again, it seems aimed at corporate libraries, a low-volume market that practically demands higher prices. Then again, there's always your local library.
This one's in my personal collection now for future reference, and I'll be sure to consult my copy the next time one of my holdings is under attack -- or attacking someone else.
Further Foolish reading:
- Don't Swallow the Poison Pill
- A Smart, Sleazy Stock Striptease
- The Icahn Effect
- Foolish Book Review: "Revolt in the Boardroom"
Fool contributor Anders Bylund owns shares of AMD, Disney, and Google. He sold those Reebok shares before the merger closed, three years ago. He holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is always what you're looking for.