Well, yes, obviously Mr. Kamm

Will that help or hinder economic prospects? There’s a convincing argument that a market in corporate control generates efficiency gains. A management that fails to deploy a company’s assets effectively to generate returns for shareholders ought to feel the discipline of a potential takeover. Yet a general principle doesn’t necessarily apply in every case. My guess is that a wave of corporate consolidation after this crisis is likely to reduce competitive pressures in the economy. This will not serve the interests of consumers.

Being able to screw the customers is to deploy corporate assets with greater efficiency. Not that it’s the sort of efficiency we want of course but the idea should be obvious and not need explaining.

23 thoughts on “Well, yes, obviously Mr. Kamm”

  1. A management that fails to deploy a company’s assets effectively to generate returns for shareholders ought to feel the discipline of a potential takeover.

    Indeed. The mere threat of US megacorp taking over the NHS or Chinese SOE taking over the prisons would concentrate minds wonderfully.

  2. If every crisis consolidated firms more, then we’d be down to only a handful.

    The reverse is more true. Lumbering behemoths don’t like crises. Agile small firms prosper instead.

  3. ‘… US megacorp taking over the NHS…’

    No US corp would be that stupid! The NHS is a charity, it does not create revenue stream, therefore no profit, from its output, it is purely a cost centre with no clear trail of costs: increasing output only increases costs with no increase in revenue.

    Its assets aside, it would be impossible to value the NHS as a business enterprise for the purposes of acquisition or IPO. Buying the NHS would be like buying a food bank.

    In addition managing its staff with 70 years of entrenched inefficient, restrictive, protectionist behaviour would be a nightmare.

  4. All true, John B
    But the current MO is blackmail, and I bet the yanks could do that better.
    And they have the example of the BBC’s hypothecated tax to follow. Who could possibly refuse?

  5. Dennis, He Who Wants You To Show Your Work

    There will probably be a wave of corporate restructuring and, in particular, an increase in domestic corporate merger and acquisition activity.

    Really?

    Kamm takes it as a given that M&A activity will increase due the effects of the pandemic, but provides nothing in the way of fact to back up his assertion. M&A is complex and expensive; whether a merger or acquisition is initiated, and then completed, hinges on a lot of different factors. Given that the economic fallout of the pandemic, is far from clear, especially at the company level, Kamm seems to be more on the side of pure guesswork rather than informed speculation.

  6. ‘In addition managing its staff with 70 years of entrenched inefficient, restrictive, protectionist behaviour would be a nightmare.’

    How do you get due diligence out of them? You know everything they say is a lie.

    ‘A management that fails to deploy a company’s assets effectively to generate returns for shareholders ought to feel the discipline of a potential takeover.’

    An odd concept. Failing management should expect to be fired. Takeover is a non sequitur.

  7. “No US corp would be that stupid!”

    Wrong. The NHS has a fixed top line and it is up to the NHS to cut its costs as far as it can. In normal circumstances it doesn’t bother, but the current situation shows that it can cut back services if required. All it needs is a little bit of strong management.

  8. “There’s a convincing argument that a market in corporate control generates efficiency gains.”

    This is the sort of thing that people say, perhaps should be the case, is parroted by the media, but I’m really never sure about. How many are actually worth it?

  9. @John77: The fixed top line is £120 billion a year. The government would happily give away the NHS and pay the current annual cost to begin with if that figure could be driven down, or at least rise at a rate lower than the rate of inflation (particularly the mythical NHS rate of inflation that the NHS talks about).

  10. The Meissen Bison

    Gamecock: My company (CSC) got £3.1bn out of NHS. THANKS!

    You’re welcome – did you have to provide anything in return? Would they have noticed if you hadn’t? [Clue: ‘it’s only taxpayers’ money’]

  11. Alex
    “top line” is revenue. The £120 billion paid by the government is the bottom line.
    That is accounting jargon but is universally accepted jargon (well, almost universally excluding you)

  12. Different division, TMB. I never knew anyone who was involved.

    From what I’ve read on the internet, project management was awful on both sides. Scope creep, etc.

  13. In a non profit organisation like the NHS, is there a difference between the top and bottom lines?

  14. The Meissen Bison

    Gamecock: I never knew anyone who was involved.

    That’s the old Nüremburg defence which didn’t wash then and it doesn’t wash now.

    Your only way out now is to buy the NHS in monthly instalments whereby we pay you £3.1Bn and you send in chlorinated nurses.

  15. @Gamecock, @TMB

    CSC £3.1bn – probably 1/4 of Blair & Browns NHS IT system which was abandoned after >£12bn wasted

    How the hell can software and some test hardware costs be allowed to escalate to >£12bn?

  16. @john77

    Unfortunately, it’s you who is a little bit confused in this situation.

    From the point of view of the sainted NHS, their top line, equivalent to turnover, is what we hand over to them as taxpayers each year.

    They don’t think of it as top line, as they aren’t a commercial enterprise. Maybe if they were things would be different.

  17. “How the hell can software and some test hardware costs be allowed to escalate to >£12bn?”

    Project staff for NHS were naive and inexperienced, and full of hubris. They didn’t want to hear CSC et al’s advice.

    “It is immoral to allow a sucker to keep his money.”

    CSC et al went along for the money. They knew it a mess. They told NHS it was a mess. NHS pushed forward. The principal problem was NHS hubris.

  18. Oliver Kamm has been educated beyond his innate level of intelligence.

    That horizon was passed at age ~11.

  19. @ samuelbuca
    You clearly do not understand (i) the meaning of words and (ii) how the NHS operates.
    IFF HMG handed a fixed amount of £12bn to NHS to spend each year *and NHS budgetted so that it spent that amount* that would be the top line. But it doesn’t. Each NHS Trust has a notional budget but spends money almost randomly and ends up with a surplus or deficit – more often than not a deficit – which, in the former case, it then has available to spend next year or, in the latter case, is bailed out (not always immediately but nevertheless always) by the taxpayer. And, of course, the cost of the unfunded NHS Pension scheme is massively understated – by around 20% of nominal salaries – and that cost is not included in your £12bn.

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