The Torygraph’s economics and business commentators (Ben Marlow being the other culprit) do seem to be good at missing the point:
We used to have a name for quoted companies that collected together lots of different businesses under a single corporate umbrella – they were called conglomerates. They rampaged their way through the 1970s and 1980s turning whole industries upside down. But they disappeared because they ended up destroying more value than they ever created. We certainly don’t need them to make a return in the 2020s.
It’s entirely true that the strategy ran out of steam. But that’s not the same as value destruction.
The conglomerates burned brightly for a couple of decades, and, in fairness, shook up some stagnant companies at a time when they needed a blast of fresh energy.
As with evolution itself, there’s no one strategy that works all the time. It is strategy for the surrounding environment that matters, if being the environment that selects for success.
So, asset stripping conglomerates. If the strategy succeeds in making money for shareholders then that means there are underused assets that require shaking up out of their stagnancy.
Cool.
If there are pots of money looking for such and not finding them then we don’t need to give a damn about that, do we?
That is, the activity itself, the existence or not of it, shows that it works or doesn’t. And if it does then we want it, if it doesn’t then who gives a shit? The test is the environment and success in it.
And with a number of large companies pissing the cash away on varied wokeisms, who is absolutely sure that there aren’t assets out there to be shaken up?
He seems to have confused “conglomerate” with “asset-stripper”. What is Guardian Media Group if not a conglomerate? or Unilever? or Virgin Group?
I guess the perceived problem is that conglomerates become to unwieldy. They lose focus because there are too many divisions to control.
I have seen the downside of these operations – if a branch is not performing, then it is simply lopped off. No attempt is made to sell it, because no one wants to inherit the stale culture, thus usually putting thousands out of work.
And with a number of large companies pissing the cash away on varied wokeisms, who is absolutely sure that there aren’t assets out there to be shaken up?
Some of the larger PE companies are rife with wokism and enforce it on their portfolio companies.
It’s not an easy thing to exploit though, because returns are so driven by the weight of capital. And that capital is fully signed up to woke, green and all the other nonsense which plagues our decadent civilisation. Institutional investors will cheerfully consign their investors to lower returns because they get paid anyway and their peers all do the same.
Wasn’t the reason for conglomerates that having a few people in charge of large number of businesses that those few people were better placed to work the high regulatory, Government and Union control environment of the time. Thatcher & Reagan breaking apart that regulatory environment meant that the upsides became minimal and the downsides (unwieldy, lack of focus etc) became more apparent. This is one reason that conglomerates are still the norm in China, for example.
I wouldn’t be surprised to see more conglomerates as Thatchernomics and Reaganomics gets further unwound.