The deference differential and why it undermines transatlantic M&A

The boss of an American company paid a barely noticed compliment to the British media a few years ago, declaring it the world's most impertinent.

Deference does not come naturally to the British press, writes Michael Prescott
Deference does not come naturally to the British press, writes Michael Prescott

Kraft chief executive Irene Rosenfeld was bruised pushing through her acquisition of Cadbury.

She went public after winning through, expressing near-shock at how influential the British media seemed to be upon investor sentiment – and adding that in no other market would reporters pose the kind of tough questions she’d had to contend with over the acquisition price.

Journos asking about the correct offer price for acquisition of a historic, household name brand? Perish the thought.

Rosenfeld’s seniment suggest the old joke about Britain and America being divided by a common language doesn’t go far enough. There are important cultural differences, too.

These cultural contrasts ought to be better understood by proponents of transatlantic M&A.

Indeed, they help to account for the failure of Kraft’s more recent acquisition attempt, the bid for Unilever.

The key contrast is to do with deference – dead in the UK, alive and kicking in the USA.

In America, they have "tycoons". Treated as celebrities, they write best-selling books and even become President.

In the UK, we have "fat cats". It is a rare day when any of their achievements are lauded. Business reporters seize annual reports to stir controversy over their pay.

This "deference differential" can be seen everywhere.

To step briefly into the political context: the White House press corps traditionally stand for the President.

UK lobby correspondents hurl questions such as (after an Iraq-war related suicide) – "Do you have blood on your hands, Mr Blair?"

Imperfectly understood, this "deference differential" causes aggravation for US corporates.

Kraft found its eventually successful acquisition of Cadbury more tumultuous than it need have been.

CEO Rosenfeld faced up to this. It is remarkable that any lessons she learned appear forgotten at Kraft itself.

Indeed, there was little apparent "pitch rolling" (it’s interesting that the term comes from cricket, the least American of all sports) ahead of news about the bid for Unilever.

Falling from a clear blue sky, the acquisition met with overwhelming UK media hostility.

Much of the copy could have been written by Unilever itself.

One of the bid’s architects, "sage of Omaha" Warren Buffet, has since revealed that the deal failed because Kraft never intended and did not want to mount a hostile bid.

The whole thing was down to a misunderstanding. Unilever’s polite European silence when first sounded out by Kraft was misinterpreted in straight-talking America as a "yes, maybe."

In the words of the Led Zeppelin song: "Communication breakdown/it’s always the same/communication breakdown/drives me insane."

Not that there is any need for such frustration.

In M&A, preparation is all. That means due consideration of cultural differences and, if entering the UK, acknowledgement of just how the climate of opinion comes to be formed.

Michael Prescott is managing director of corporate and political strategy at Hanover

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