Pru’s Asian misadventure: a cautionary tale

June 3, 2010

PRUDENTIAL/By Clara Ferreira-Marques

Prudential’s ill-fated Asian adventure has left the company and its management badly bruised. But it has offered at least two valuable lessons for ambitious executives tempted onto the acquisition path by post-crisis, “once-in-a-lifetime” deals.

Lesson one: It’s not 2007 any more, Toto.

Lesson two: Disregard shareholders at your peril.

On the first, bold mega-deals that once impressed the market now seem to mostly unsettle both investors and regulators.

Unease at the Financial Services Authority — and a need to tick every box — was responsible for the unprecedented and damaging last-minute delay to Pru’s offer details last month.

For that, Prudential can thank the financial crisis, but also Royal Bank of Scotland’s near-fatal role in the hubristic and record takeover of ABN Amro — despite shareholder misgivings and clear signs of an impending crisis.

Being the biggest ever insurance deal is no reassurance for the sector, it simply sends out alarm bells.

On the second, Prudential has proved companies can no longer assume investors will ultimately back management.

Pru’s top executives failed in their charm offensive, with Chairman Harvey McGrath’s confident comments last week on the “vast majority” of shareholders supporting the deal proving wide of the mark, and even Chief Executive Tidjane Thiam’s reputation for gallic charm failing to smooth ruffled feathers.

Both now find their jobs are on the line.

The company was also hampered by an unsettled investor relations department, the focus of many investor complaints.

At a time when IR executives were key to the company’s future, its former head of IR, former Lehman Brothers analyst Matt Lilley, was in fact serving as head of strategy. Pru is still seeking a replacement.

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