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The Qualiport's very own media company Emap (LSE: EMA) is a medium-sized player in the sector and I don't think these deals have any great implication for it. Though Emap could be a potential buyer if the new merged company has to sell some assets.
But the Carlton/United merger set me thinking about management, and that really is a key issue for investors to address. Both these businesses are run, and were built up by, strong characters. Individually, they have built these companies into what they are; Michael Green at Carlton and Lord Hollick at United.
Apparently in the new company Hollick will be Chairman and Green the CEO. I would have thought that might create some difficulties. Nevertheless, the idea seems good, but it led me on to thinking about management in the Qualiport.
As I mentally listed the companies I realised that Bruce has actually assembled a very clever, and a rather unique, group of companies. Let's look at them and see why I think that.
In no particular order we start with Dell (NASDAQ: DELL) run by the eponymous Michael Dell. He started the company and devised its unique business model. This is very much his company.
Then there is Emap. Although an old company, its current form is very much the work of Kevin Hand who has built the company up in the last few decades.
Lloyds TSB (LSE: LLOY) is a similar story. A very old established bank that has been transformed first by Jeremy Morse then by Brian Pitman, who has had a resolute, and successful, focus on delivering shareholder value.
Moving on to Independent Insurance (LSE: IIG) we find that still being run by Michael Bright who set the company up in the first place.
Is any Chief Executive more identified more with his company that Sir Clive Thompson of Rentokil Initial (LSE: RTO)? Under his guidance the stock had delivered stunning returns to shareholders over decades before getting into strife in the last 12 months.
A similar model exists at Misys (LSE: MSY). This company was set up by Kevin Lomax in the seventies and is still going strong under his direction today.
PizzaExpress (LSE: PIZ) was established by entrepreneur Luke Johnson, but he has moved on to do other things. And the shares have not performed as well ever since he left.
The last member of the portfolio is Unilever (LSE: ULVR) and that is anything but an entrepreneurial company. Indeed, Unilever is the archetypal multi-national run by a large board. With its strong continental links it is even more of a consensual company than most UK companies. In this type a strong leadership does exist, but it can only be exercised with the consent of a board with strong views of its own. Unilever is not a company that is likely to rush of in an entirely new direction, and that of course is precisely its appeal. Nevertheless, it is true to say that returns to shareholders have been less than sparkling of late.
It seems pretty conclusive that Bruce has generally chosen companies run by strong individuals in a fairly entrepreneurial way. Whether that was deliberate or not, I cannot say -- perhaps he can enlighten us on Monday. But what is true is that these entrepreneurs have delivered great value to shareholders over time, probably better returns than the more bureaucratic companies.
The problem with these types of management structures is that they are fairly inflexible. When business conditions change the leader does not always recognise the new environment soon enough. Even a company like Marks & Spencer (LSE: MKS), which in many ways is the epitome of corporate governance, found it exceedingly difficult to defenestrate its individualistic Chief Executive. Can we imagine the board of Rentokil doing the same to Sir Clive Thompson? I think not.
Strong individuals can really build a business, but few are capable of remaining in charge successfully for decades. A rare exception perhaps is Jack Welch of GE (NYSE: GE) in the US. He took over the reins in 1982, just about at the start of the bull market. So he was lucky to start with. Even so, his record of wealth creation is almost unsurpassed. But he retires in about 18 months' time. Will the market still value the company at 44 years' worth of earnings when the next man is in place? (And Bruce thinks GEC (LSE: GEC) is expensive.)
At the end of the day all an investor is buying when he takes a position in a company is management. Everything else can be traded. Look at Mannesman. This classic German metal basher was famous for producing steel tubes. Now it is at the wrong end of a hostile bid for its telephone business. Investors who bought into it 10 years ago as an East German rebuilding story will have been very surprised, albeit pleasantly, by its metamorphosis. But it has been a huge change.
That brings us back to Carlton and United News. Will the two dynamic individuals who built these companies up get along in one tent? And will they be able to deal with today's fast-changing business world more effectively as a big conglomerate than they would as smaller, nimbler companies? If they can, maybe Bruce should sell Emap and buy Carlton United.
Tell us what you think on the Qualiport message board.
Company Change Bid DELL(US) 0.00 43.20 EMA -0.05 11.25 IIG -0.01 2.70 MSY -0.14 6.99 PIZ -0.10 7.70 RTO 0.00 2.41 ULVR +0.08 4.75 LLOY -0.19 8.42 Qualiport Stocks Last Rec'd Total # Company Buy Current Change 22/04/99 542 Misys 5.57 6.99 25.4% 29/09/99 356 Lloyds TSB 7.56 8.42 11.4% 17/04/98 301 Emap 10.20 11.25 10.3% 27/10/98 1133 Indep Ins 2.60 2.70 3.8% 04/11/98 245 Pizza Exp 7.93 7.70 (2.8%) 27/01/99 74 Dell (US) 44.63 43.20 (3.2%) 19/12/97 783 Rentokil 2.55 2.41 (5.5%) 17/07/98 266 Unilever 7.53 4.75 (36.9%) Last Rec'd Total # Company In At Value Change 22/04/99 542 Misys 3065.85 3788.58 722.74 29/09/99 356 Lloyds TSB 2723.20 2997.52 274.32 17/04/98 301 Emap 3139.85 3386.25 246.41 27/10/98 1133 Indep Ins 2990.63 3059.10 68.55 27/01/99 74 Dell (US) 2007.42 1937.45 (69.96) 04/11/98 245 Pizza Exp 1966.34 1886.50 (79.84) 19/12/97 783 Rentokil 2046.53 1887.03 (159.50) 17/07/98 266 Unilever 2052.00 1263.50 (788.50) Cash: £ 28.46 Current Total : £20,234.40 Total Invested: £20,184.62 Profit/(Loss) : £ 49.78 Value Per Share Day Month Year Qualiport -0.85% 12.70% -4.19% FTSE 100 0.03% 6.86% 13.64% FTSE All Share 0.11% 7.41% 16.67%