Corporate Battles & Business Tycoons

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Before getting into today’s Sunday Reads, I wanted to make sure I shared the registration link for an exciting investing discussion I’ll be hosting with my good friends Morgan Housel and Drew Dickson on July 22nd. We’ll be discussing a wide range of relevant topics like the importance of behavioral finance to investing, the current state of Tech / Growth stocks, and why European stocks are potentially worth a second look. Not one to miss, and its free to register!

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Elon Musk Tells Twitter… “Sike!”

You may have heard this week that Elon Musk told Twitter’s board… “sike! I will not be buying Twitter for $44 billion.” In the words of Jason Bateman in Dodgeball, “It’s a bold strategy Cotton, let’s see if it pays off for em.”

In their letter to Twitter, Musk’s lawyers at Skadden Arps wrote:

“As further described below, Mr. Musk is terminating the Merger Agreement because Twitter is in material breach of multiple provisions of that Agreement, appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement, and is likely to suffer a Company Material Adverse Effect (as that term is defined in the Merger Agreement).”

In response to Musk’s actions, the Chairman of Twitter’s board posted that the company “plans to pursue legal action to enforce the merger agreement”, and that they are “confident we will prevail in the Delaware Court of Chancery.”

Ladies and gentlemen, we have a corporate battle! That said, today’s post will focus on some historical examples of corporate warfare and heated business rivalries between some of America’s best known companies and business leaders.

Bar Fights, Lawsuits & the Flu Pandemic: The War Between Henry Ford and the Dodge Brothers

Why This is Relevant:

One of America’s greatest business battles and rivalries that also happens to feature one of the most prominent automobile CEOs of all time: Henry Ford. Oh, and this story takes place during a global pandemic… sound familiar? This battle also had very serious and long-lasting implications for the way America conducts business:

“The lawsuit brought by the [Dodge] brothers against Ford became the legal basis for the idea that companies exist primarily to generate profits for shareholders, setting the stage for the aggressive rise of the American corporation.”

Summary:

With any new revolutionary technology, comes intense competition. When one thinks of the greatest business battles in history, the early Ford vs. Dodge years have to be up there. After the introduction of the automobile, competition was fierce. This article dives into the bar fights, lawsuits, and accusations of poisoning that plagued this bitter rivalry. This excerpt should give you a sense of how aggressive the situation became:

“The brothers came up from working class roots, the sons of a machinist and seamstress, but by the time the brothers attended Edsel Ford’s wedding they were incredibly wealthy men with the second most successful car company in America in their own name—and a 10 percent stake in the Ford Motor Company. On that chilly joyous day in Detroit, John and Horace celebrated the wedding of the heir-apparent with Henry Ford and his family.

The very next day, they sued him.”

Visualizing History:

Henry Ford

Robert Brooker: Unsung Warrior in One of the Greatest Battles in Business

Why This is Relevant:

A fascinating story of corporate warfare and rivalry involving the Amazon of the 20th century, Sears Roebuck, and its bitter competitor Montgomery Ward.

Summary:

“The story of Tom Brooker is really three stories: that of Montgomery Ward, the original American “Amazon,” the creator of the general merchandise mail order catalog; the story of Sears, Roebuck, the Johnny-come-lately which took the lead; and the story of Tom Brooker – the man and the manager. One who took on “an impossible task.” The three stories are inextricably linked. The 90-year battle between Sears and Ward’s is one of the great business contests in American history, alongside Coke vs. Pepsi, General Motors vs. Ford, UPS vs. FedEx, and Crest vs. Colgate. Tom Brooker’s story cannot be understood without understanding the battlefield on which he fought.”

Visualizing History:

A Century of Corporate Takeovers: What Have We Learned and Where Do We Stand?

Why This is Relevant:

Although the Elon Musk / Twitter deal (or not deal) is not a corporate takeover, this paper does offer a fascinating history of “merger waves” since the late 1800s. The authors reveal what drives increased M&A activity, their successes, and more.

Summary:

“We address the following questions: Why do we observe recurring surges and downfalls in M&A activity? Why do managers herd in their takeover decisions? Is takeover activity fueled by capital market developments? Does a transfer of control generate shareholder gains and do such gains differ across takeover waves? What caused the formation of conglomerate firms in the wave of the 1960s and their de-conglomeration in the 1980s and 1990s? And, why do we observe time- and country-clustering of hostile takeover activity? We find that the patterns of takeover activity and their profitability vary significantly across takeover waves. Despite such diversity, all waves still have some common factors: they are preceded by technological or industrial shocks, and occur in a positive economic and political environment, amidst rapid credit expansion and stock market booms. Takeovers towards the end of each wave are usually driven by non-rational, frequently self-interested managerial decision-making.”