On Mittal's bid

M&A

An American merger expert expresses his opinion on Mittal Steel's bid for Arcelor.

Professor Robert F Bruner is the dean of the Darden School of Business, University of Virginia. He is also a leading M&A analyst from American academia, and a rather harsh one at that, having authored Deals From Hell, a book on why only a few M&A deals ever come good. Here, he expresses his opinion on the bid that has shaken the global steel industry.

On the deal's value:
"This deal is driven by excess capacity in the global steel industry and by technological innovation. Mittal is an instrument of change for the industry, removing excess capacity and rationalising the availability of capacity. Also, Mittal is a proven operator that enhances the efficiency of the assets it acquires""mainly through the transfer of technology and know-how. So far, Mittal's acquisitions have helped this industry adjust to the need for change. Customers and ultimately individual consumers are the beneficiaries of Mittal's actions."

On possible hurdles Mittal may face:
"Antitrust authorities may take a narrower"" meaning, more regional "" view of the benefits of this deal. The large question is whether the Competition Commission of the EU will focus simply on the issues of competiton and efficiency, or take a broader view of the geopolitical implications of the takeover of Arcelor. European governments are famous for preserving European control of corporations and jobs, at the expense of economic efficiency. I would not be surprised to see another European firm enter the bidding as a 'white knight' at the behest of Europeans worried about keeping control of a regional champion in the steel industry."

On Mittal's integration challenges:
"The scale of the proposed takeover dwarfs Mittal's previous deals. Big acquisitions are significantly harder to integrate successfully than smaller deals. As my study of "deals from hell" showed, complexity is one of the important precursors of failure. We should hope and expect that Lakshmi Mittal very carefully plans the post-merger integration. So far the stock market has given this deal an enormous vote of confidence""but this, too, warrants caution since my study showed that overconfidence is another precursor of failure."