A French soap opera is about to unfold

The world's richest woman just died. If you didn't know this, please stop focusing on the tweets and turn your attention to more weighty matters of the world.

Liliane Bettencourt passed away four days ago at the age of 94. She was the heiress to the founder of L'Oréal, the world's largest cosmetic company; the only child of Eugène Schueller who founded L'Oréal in 1907. She herself worked in the company from the age of 15 and rose to become its deputy Chairperson.

The future of L'Oréal is now in play. And therein lies a story that could give a beating to any soap opera on television.

In 1974, fearing that France would nationalise the company, Bettencourt did a deal with Nestle wherein she offloaded about half her holding in exchange for shares in Nestle. Since then Nestle and Bettencourt have had one of the longest tangos in business history. Nestle, a food company, with no presence at all in cosmetics, had a 30% stake in the world's largest cosmetics company (now down to 23%). But in an agreement with Bettencourt, Nestle remained a sleeping partner and promised not to acquire any more shares or to bid for Bettencourt's own shares as long as she was alive. Presumably Nestle had thought that she would not live so long. But they kept their word and until now have not interfered at all in the business just pocketing the dividends and biding their time. So much so that very few outside the business world probably even know that Nestle is a major shareholder in L'Oréal.

In the meantime Bettencourt's life over the last decade has been another soap opera all by itself. Sometime in 2007, at the  ripe age of 84, she took a fancy to her photographer and started to bestow gifts to him worth over €1 billion. Her daughter filed a complaint with the police that her photographer was taking advantage of her weakened psychological stake to amass a personal fortune. She and her daughter had an extremely public spat with each accusing the other of having gone mad. The courts finally made Bettencourt's grandson as her overseer and the fortune was vested with her daughter and her two grandsons. But everything was in a state of limbo as long as she was alive.

Cue the events in Nestle. Nestle , for long, has waited patiently to consummate what was really a delayed acquisition. Both the last two Chairmen of Nestle sit on the L'Oréal Board. They were probably waiting for the death of Bettencourt to acquire L'Oréal . But alas they now have an activist shareholder in Dan Loeb who has a fair stake in Nestle and is pushing it to do the opposite - sell the stake in L'Oréal and return the money to shareholders. So there is no saying what Nestle will ultimately do - acquire L'Oréal or divest !

There are other big fish circling. Given how cheap debt is , there are enough and more funds of various stripes, including probably the notorious 3G Capital and their close friend Warren Buffet, who are getting all excited. Also interested would be two giants in the cosmetics field - Unilever and Procter & Gamble, who have long eyed Nestle's stake with envy and made noises about what a Foods company is doing with a stake in a Cosmetics company.

Complicating this will be nationalism, for after all L'Oréal is (very) French. Would Macron be willing to let a French institution fall into the hands of the ugly Americans ? If he interfered, the tweeter in chief would surely have something to say !!

And what will Françoise Bettencourt Meyers, Liliane's daughter and the two grandchildren to whom the 30% stake in L'Oréal passes, do ?  Would they act in concert. Or would they go their own ways ? Would they buy ? Or sell ?

Every investment banker is drooling and shivering with anticipation. It is fair to assume that no first class seats are available on all flights to and from Paris, London, New York and Lausanne !

Watch this space. The knives will be out on 18th March when the six months period after Bettencourt's death ends and  all agreements expire.    Bettencourt's life was colourful to say the least - marrying a Nazi sympathiser, losing money with Bernie Madoff,  a strange affair with her photographer, being declared mentally incompetent, accused of giving cash stuffed envelopes to Nicolas Sarkozy,  having numerous Swiss bank accounts ...... But even by those standards, what will follow in the fight for L'Oréal will be, to put it mildly, interesting.

Read More

Screw around with Kraft

What do you call something who is passed from hand to hand ? Used goods ? Probably something worse ? Well, that is what we have to call Kraft these days.

With a touch of slight (?) exaggeration, you could say that the land of mom and apple pie, could be stretched to include Kraft too ! Read on to see the list of brands this company owned at one time or the other, and even the Professor - he of the class war against processed foods - would have had one of those some time or the other. Its a quintessentially American company. And yet the way it has been sold and bought and sold and bought again makes somewhat depressing reading.

As is usual with many of the well known companies, there is always a visionary entrepreneur in the beginning. There was a James L Kraft. He was born in Canada, but emigrated to the Chicago in 1903 and started selling cheese from a horse drawn cart. In 1916 they developed a new process for pasteurising cheese, enabling it to be shipped long distances and patented it. Then came World War I, the need to provision the army and Kraft took off. In 1928 came Philadelphia cheese. In 1930 it merged with National Dairy, then the leading ice cream company in the US and became a full fledged Dairy Products company. 1926 saw Breyers, a famous ice cream brand;  1935, Sealtest, another iconic ice cream brand.  It grew and grew and became a globally recognised company and one of the giants of the food industry.

Then came 1980 and the barbarians. Wall Street types seem to have a peculiar fascination for Kraft and it become the favourite darling of deals. In 1980 a merger was engineered with Duracell and Tupperware. Immediately thereafter it sold all the non food businesses including Tupperware, but retained Duracell. In 1988 it sold Duracell to private equity firm KKR. In that mad winter of 1988, when dizzying deals were done, Kraft itself was acquired by Philip Morris (the largest tobacco company in the world) . Philip Morris merged Kraft with its General Foods business (of Maxwell House, Jell O, Kool Aid and Tang fame ) and created Kraft General Foods.  In 1990 they bought Jacob Suchard a big European coffee company and also the owner of Toblerone. In 1993 came Shredded Wheat. In 2000, Philip Morris acquired Nabisco and merged it with Kraft. Into the fold came Oreo, Chips Ahoy, Ritz, etc. In 2001 Philip Morris IPOed Kraft and it became an independent company again. In 2009, Kraft acquired Cadbury. In 2011 it split itself into two companies - the North American Kraft and the global Mondelez. And then last week, Warren Buffett and 3G bought out Kraft and will now run it together with Heinz which they already own.

Whew. That is a dizzying pace of changing of hands. How can a business survive this level of buying, adding, stripping and selling all the time. I wonder what the suppliers, consumers and employees make of all this. Businesses need some stability. Wall Street types doing financial engineering, don't do much for the long term health of the business.

There is one saving grace. Warren Buffett is not a wheeler dealer. He holds for the long term. Maybe Kraft will get some stability now.

Read More

When you pay to sell a business

Mergers & Acquisitions are often the glamorous side of business. CEOs love  them - you go through the excitement of doing a deal, get on to the papers and TV, become famous etc etc. Most of the haggling on the deal is on the price - how much the buyer is willing to pay the seller. But how about a M&A transaction where the seller has to pay the buyer in order for the buyer to buy the business !! Fanciful ? Well, that's exactly what has happened with the sale of Fresh & Easy by Tesco to Ron Burkle.

Tesco is an UK based grocery retail giant; it is the third largest retailer in the world. From the UK, where it is a household name, it has expanded in Europe and Asia. But in the US, the largest retail market in the world, Tesco was non existent. In 2006, it decided to foray in to the US with the branding  of Fresh & Easy - in small store grocery format, primarily in the Western states. It never took off and Tesco faced mounting losses despite opening some 200 stores. Its investment and trading losses cumulatively mounted to some £ 1.8 bn. Something had to give.

Tesco tried to sell, but there was no buyer. Finally it found a buyer willing to take it on, but only if Tesco lent him £ 150 m in loans. This is unusual - we have heard of companies being sold for $1, but for something to be sold at negative value is rather unique. The reason why Tesco was willing to do this was simply that the cost of closing the stores and making all the employees redundant would have been far greater than what they were able to finally strike in the deal.

Why is Ron Burkle doing this deal. Evidently he believes he can make a success of this business. You have to be somewhat sceptical about this - If Tesco, a great company, could not succeed, could he ? But then in the retailing world, the US is for Americans and Europe is for Europeans. Even Walmart has not succeeded in creating a great business in Europe despite acquisitions. And no European retailer has really succeeded in the US.  Not sure why this is so, for you would expect retailing to be a pretty similar business anywhere, but that's the way it is.

It must have been extremely humiliating for Tesco to do this deal. Quite apart from paying somebody to take away a business, it represents a failure of their strategy to enter the US. They are admitting defeat and walking away, perhaps not to enter back for a long time, if at all. Its actually a more far reaching retreat for Tesco - they recently announced that they were in negotiations to put their Chinese business in a joint venture with a Chinese company. Retailing is a pretty brutal business.

I'm sure Tesco's boss Philip Clarke is not going to be on TV or on the newspapers for this one.

Read More

Barbarians at the Gate II

Barbarians at the Gate is the name of the scintillating book that detailed the leveraged buyout of RJR Nabisco in the mid 1980s. It was made into a movie as well and for a long time it was the biggest M&A transaction in the world. I strongly recommend the book, if you have an interest in business. ( or if you like thrillers !)

 

Take 2 seems to be happening in the goings on with Dell. The resemblance to what happened with RJR Nabisco is uncanny.

 

The Dell story started with Michael Dell, the founder teaming up with Silver Lake, a private equity firm,  and announcing a bid to take Dell private at $13.65 a share (a 25% premium over the closing price of $ 10.88 prior to this announcement). When rumours of this started to surface in January, people thought it was not a doable deal. Dell after all is a struggling PC maker in an industry which is declining with the onslaught of tablets. In any case its a fiercely competitive and somewhat commoditized industry. Whoever wants to pay top dollars for that.

 

As soon as the announcement was made, there were many murmurs that this was not a good deal for the shareholders - never mind that the stock was languishing at 35% below the bid price until rumours started to float. Carl Icahn, a famous Wall Street tycoon wanted to get in on the act. So did Blackstone, perhaps the world's largest private equity fund. Blackstone offered on Friday to buy the whole company for not less than $ 14.25 a share. Carl Icahn offered to buy 58% of the company for $15 a share.

 

Every investment bank in town is on one side of the deal or the other. So are many lawyers. Whatever happens, they will all pocket handsome fees. Money, greed, egos and insane optimism will now decide the direction of the deal. None have said what they will do with the company to realize value from what they are paying for it. Some form of stripping it and selling off pieces while keeping the rest would be inevitable. But still, how can the ugly duckling magically transform into a swan. What of Michael Dell himself. If either Blackstone or Icahn win, he will most likely be out.

 

Exactly the same thing happened with RJR Nabisco then. The book beautifully portrays the actors, their egos and their insanity. KKR "won" then, but then time proved how much of a dud deal it was as they had wildly overpaid. Now RJR Nabisco as a company does not exists. Various bits and pieces are in various places although the tobacco company RJ Reynolds still exists making Salem, Camel and Winston cigarettes. 

If you like thrillers, follow the Dell saga. And if you work for Dell, maybe its time to polish that CV.

Read More

Chicken Tikka Masala in Old Blighty

Chicken Tikka Masala is reputed to have taken over as the national dish of Britain. Perhaps the best example of reverse colonisation, although it must be said that overthrowing "British food" is not as great an achievement; such being the epicurean significance of the cuisine in Her Majesty's land. Actually its a Bangladeshi takeover, given that 99% of the curry houses in Britain are run by Bangladeshis. But we shall lightly pass over Bangladesh propagating "Balti"cusine" and such other monstrosities.

Stay with the chicken. British affinity to consuming this hapless avian is the only logic I can find (after much scratching of the head in vain) to explain the take over of Blackburn Rovers , a Premier League football team, by Venky's - an obscure chicken farming company from India.

Firstly the facts. Blackburn Rovers is a struggling middling football side in England. Its been bought out by Sri Venkateswara Hatcheries for £ 53 m , an Indian family firm, run by Anuradha Desai and her brothers. The takeover was completed yesterday and the team's home grounds are henceforth to be known as Venky's Ewood Park !

Foreigners taking over English clubs is not something new. It is mostly rich tycoons doing it for vanity - witness Roman Abramovic and Chelsea. They lose pots of money, but they don't care, for it barely makes a dent in their fortune. Owning a football club is like digging a hole and pouring money into it endlessly. Its the biggest dud when it comes to a business investment. Even Manchester United the most famous and richest of them all is financially in ruins. Nobody makes money except the players - its the only field where you can make outrageous salaries (think of a salary of £35000, ie Rs 25 lakhs per day) whether you perform or not.

Anuradha Desai does not fall in that boat. She is no playboy. She isn't a household name, even in India. She is known for prudently growing the company that her more illustrious father built. If she had a passion for football, it has thus far been well hidden. Beyond the usual blah blah that is made after any acquisition - we will grow together, we see a bright future, and such other rubbish, she displayed her ignorance of football by saying she is not going to pour money in to buy players. The economically challenged rabid English fan wants his favourite club to be owned by a zillionarie who'll write a blank cheque to buy every player on earth. He doesn't want to see prudent business principles.

There is zero brand value for this investment - can't imagine Venky's Chicken Tikka Masala in the menu. Sitting in the owner's box and watching Blackburn lose on a miserable cold and windy winter's day cannot be her idea of happiness. Back home in India, seeing handsome hulks sporting the Venky's logo on their football shirts is not going to make Rajalakshmi eat chicken.

Of all the bewildering acquisitions that happen in the business world, this must surely take the cake.

Read More

Two cheers for Labour's Cadbury law

The Labour party in the UK has announced a “Cadbury Law” as part of its election manifesto. This was motivated by the aftermath of the Kraft takeover of Cadbury. It has many good and some bad features and can potentially be a model for takeover law in many countries.

The broad proposals are as follows

- M&A transactions have to be approved by a two thirds majority and not just a simple majority.
- People (read hedge funds) who buy shares in the target after a bid is announced would be barred from voting
- A “national interest test” is being considered to prevent foreign takeovers in vital industries” – defence, utility, infrastructure being thought of as “vital”

In the red corner in fervent defense of these proposals are the Labour party, obviously, the Confederation of British Industry and Unite – the powerful Trade Union.

In the blue corner, opposed vehemently to this are the Conservative Party, obviously, and the Association of British Insurers. Silent, but presumably in this camp are all the hedge funds, speculators and assorted punters. Silent and sitting neutral are Britain’s Takeover panel (the body that oversees takeovers) and presumably the Liberal party.

I am vigorously in support of the first two proposals and strongly against the third. Hence the two, rather than three cheers.

Firstly I completely support the requirement for two third’s majority. That is a principle that is fundamental in many political democracies. Game changing issues require two third’s majority; simple issues can be passed with a simple majority. Something as fundamental as a takeover, that could potentially extinguish a company should not be taken lightly. It requires a broader support that a simple majority. The argument that such a provision will make takeovers difficult in the UK and that it would protect failing management is humbug. If the case is strong, it will achieve two third’s majority. If its weak, it doesn’t deserve to pass. No consistently failing management can achieve a blocking 34% support.

I defy any rational person to challenge the second proposal. This blogger has railed in the past against the practice of hedge funds buying up huge stakes in targets, clamouring for an increase in the bid and then forcing the target to accept the bid so that they can cash out profits – all under the threat of law suits if they did otherwise. These speculators deserve no sympathy and certainly not voting rights.

Unfortunately Labour has sullied its hand with the spurious “national interest” proposal. This is daft. There is no national interest in roads or power or for that matter BA. This proposal is just a throwback to the days of the public sector, where without competition, Britain’s dinosaurs were just awful. And we have the old problem of defining what is a British fund or a British bidder. This proposal deserves to be trashed into the dustbin.

Notice that an election manifesto contains such well thought out issues, which you may agree or disagree with, but indicates the level of maturity of Britain’s politics. Contrast this with India’s homegrown variety of elephant statues, free colour TV, loan write offs, free power, sacks of cash ….. Or with China’s complete absence of debate on any policy ….

Read More

No love lost for hedge funds

Its difficult to reconcile to the way the Kraft Cadbury deal finally ended (the deal got done today). Not the outcome – M&A transactions like this happen all the time. But the way it happened makes me reflect if unbridled capitalism is really a good thing.

My ire is on the hedge funds – they are no different to a herd of vultures which circle over an animal that’s about to die. When there’s a whiff of a M&A transaction, the hedge funds pile in to buy the shares of the target, hoping to make a killing . This is what happened in the Alcon transaction about which I posted here. Somebody tell me how what happened in the Cadbury case is reasonable by any yardstick.

Here’s what happened. When the first whiff of a possible takeover of Cadbury was in the air, the hedge funds bought heavily into Cadbury shares. They then drummed up noise that Kraft’s bid was inadequate and it had to raise the price. They kept making this noise and were prepared to play brinksmanship. Till virtually yesterday, they kept repeating the mantra – Kraft had to bid more.

Kraft caved in. They raised their offer to an effective 850p per share, from the original 745p where they started. Once this happened, the herd turned on Cadbury’s board to accept the offer. Never mind that one of Cadbury’s largest shareholders Standard Life said that they wouldn’t support a bid lower than 900p. Never mind that many independent valuations supported a price above this figure. Never mind that Cadbury released excellent results even with this protracted takeover process was on. The noise making ability of the hedge funds is pretty large . The Board was right to be worried about lawsuits – the scoundrel’s last refuge. Cadbury’s investment bankers advised the Board to accept – they would; wouldn’t they – they don’t make any fees if the deal doesn’t happen. So ultimately the Board of Cadbury caved in.

So the hedge funds win. They are only concerned about a windfall now. Who wants to wait for the long term for value creation. Who cares about the 180 year history of a company. Who cares for the management which has created all this value. So 850 is a great price because they bought it at 750. Forget about long term potential.

I simply cannot accept that a short term raider has the same equal shareholder rights as a long term investor. As managers, we are supposed to be working for our shareholders. But I certainly don’t want to work for vultures. Governments have to intervene – if you haven’t held the shares for more than a year, you have no right to influence a M&A transaction – you have no voting rights, you have no right to sue. The fate of companies built over 180 years cannot be decided by the shark who wants to make a killing now. Its just not on.

The financial services industry has learnt nothing from the past year. Their behaviour is exactly the same. Forget about bonuses and pay which have hogged the headlines. Hedge funds have got back to behaving exactly as before. No wonder the public mood is so much against this lot. They stand next only to Osama bin Laden in public contempt. They deserve this contempt, and more.

Read More

Romance is in the air

This seems to be the season for whispering sweet nothings. K and C are engaged in a very public courtship as I blogged here – its progressing at such a snail’s pace that its probably more exciting to watch grass grow. K has threatened to abduct and carry away C, and C is saying “bah” as women are wont to do !

But there’s another rumour doing the rounds. Yesterday curious things happened with Colgate Palmolive’s share price. The speculation is that Reckitt Benckiser (makers of Dettol) and Colgate Palmolive (makers of, well, Colgate) are looking coyly at each other. It appears that Reckitt is sending strong signal that he/she is ready to marry. What is not clear is who the target of its affection is. Is it Colgate, or is it SSL (makers of Scholl and Durex) ?

If its Colgate, then its not clear who is the bride and who is the groom. For they are both roughly equal. It's supposed to be a marriage of equals. But then women’s lib has not yet reached the corporate world where the tradition of the man abducting the woman and running away with her is the usual norm. So who will pop the question and who’ll say Yes, is not clear.

It is also rumoured that Colgate does not really want to marry. But then its perhaps scared of that stodgy, old man (wheeze, wheeze) who’s much bigger, has a bigger fortune and is capable forcibly lifting her up and running away with her. So why not this strapping Reckitt, who at least is of the same age and has similar taste in music – both like P.Diddy rather than Harry Belafonte which the old man likes. You get the drift …

Why is romance in the air ? Consumer goods companies are struggling for growth. They are being ripped apart by retailers who sell their own brands for a lot less than these companies (after all somebody has to pay for all the ads they air). Then come the discounters who are refusing to stock their products at all. Consumers reeling from the recession are penny pinching. All told, general misery. So the hope is that by marrying they can share the costs (like having only one house, like sharing the same bed, …. because businessmen have to invent important sounding words, these are called synergies). And the stodgy companies who stayed in Europe and North America have belatedly realised that they are in the Old World and that the New World is in China, Brazil, India, Indonesia and the like. Since they are scared of venturing into such strange lands on their own, why not marry somebody who’s already there.

So will Reckitt or Colgate pop the question to each other ? Who can fathom the minds of people who are all dewy eyed (Sri, are you listening ?!). The papers will make interesting reading.

Read More

Mush and business

Will they , or won’t they ? Get married that is. The very public match making process between K and C is as riveting as any soap on TV.

Readers of this blog would know that I’ve taken a fancy to mush in my old age. Especially since A Journey called Life and The Thoughtful Train have suggested that I better wear black than pink. This is another mushy post to prove that “macho men” can also mush !

K and C had gone out on a date about three weeks ago. K tried to hold C’s hand, but C pulled it back ; you see C is a “decent” girl and doesn’t hold hands on the first date. K , being an American, then wrote a long flowery love letter and then published it for the world to read. K said he was prepared to marry C and if C agreed and would pay C’s parents $16 bn as dowry. C was angered by the public announcement after just the first date. C promptly said NO and that she was prepared to die a spinster and would not marry K, especially with such a piddly dowry.

Despite C’s brave words that she wanted to remain alone, she knows that sooner or later she has to marry. And she’s very scared that if she left it too late, she’ll grow old and nobody will want to marry her. She especially has an eye for H or N. But both have problems. N is already married and C is not sure N will divorce his current wife to marry C (this is called in business parlance as anti trust problems). H is very pretty and rather feminine ; C knows that if they get married C can bully H. But the problem is that H doesn’t have much money to pay as dowry. And H’s parents are rather old fashioned.

K is playing a waiting game. He feels C has no other option but to marry him. C is scared that her parents will cut a deal with K and take the money. But there is a slight problem. K has not shown the money. He only says he will pay if C agrees. And K is keeping quiet, letting all the gossip do all the work for him.

C is furious. This is preventing her from doing her normal stuff – like going to the movies, eyeing other men, etc. Everywhere she goes, people are staring. She’s therefore gone to the village elders (called the British Takeover Panel) and asked them to instruct C to show the money or piss off. This the elders did yesterday – they told K that he has to show the money before Nov 9th.

Now C’s parents know that if K shows the announced $16bn, everybody will laugh at him. And K will lose so much face that no other girl will marry him. So they are hoping that he will bring much more dowry.

C is on the horns of a dilemma. She knows K will bring more money. And if she has to marry him in the end, she doesn’t want to get him really mad. So a week ago, she gave a sly wink and said that sometimes K can be cute (called in business parlance as "I can see the strategic fit"). C’s parents threw a fit. They gave C a bollocking for daring to appear like an indecent girl.

Now everybody is waiting for K to formally propose marriage. Will he go down on bended knees and pop the question. Or will he hire an aircraft and unfurl a banner in the sky announcing his undying love. And, more importantly, is he prepared to bring that posh house he has as dowry ?

Don’t miss the next episode, coming in two weeks time.

Read More

A soap opera begins

On 17th October 1988, late in the day, Monday, Philip Morris announced an unsolicited bid to acquire Kraft. It set off a soap opera , the likes of which have not been seen since.

October 1988 was an unbelievable month in business history. Two weeks earlier, on October 3, Grand Metropolitan (now Diageo) launched a hostile bid for Pillsbury. But then on October 20th, the atom bomb fell. The management of RJR Nabisco announced a bid to take the company private. That set off a bidding war with KKR, a private equity firm, who ultimately acquired RJR Nabisco for a staggering $25 bn. For 10 years that was the largest acquisition in the world by far.

Between October and December of 2008, for the first time, the front pages in newspapers around the world were filled with business news. With three large hostile bids going on simultaneously, daily gossip, who did what, who was seen with who, became staple news. News helicopters hovered above company headquarters taking pictures. The soap opera was in full swing. The food industry was dominating news – all three companies in play were either food companies or had substantial food businesses.

I was reminded of this when I read yesterday of Kraft’s unsolicited bid for Cadbury. Sense of déjà vu. The brash corporate raider from Chicago against a good British company ( pip pip, toodleoo, Right Ho !). It will be another soap opera. Won’t be like October 1988, but nonetheless will be a riveting story to follow.

But back to October 1988. The battle for RJR Nabsico was immortalised in a book – Barbarians at the Gate. It’s a fascinating read – strongly recommend to anybody who has an interest in business. Its written like a thriller, and all of it is true. You can buy it in the US here and in India here. It was even made into a movie.

Fast forward to the present day. The Kraft Cadbury dogfight will be great to watch. For my long time colleagues, this will be particularly interesting, for one of the characters involved is somebody whom we know well ….

Read More

Global businesses; National laws

Businesses are going global. But the laws they have to follow are national. No two countries can agree on any law. The result is a massive blocker to globalisation. Today, I focus on one aspect of the law that affects businesses - anti trust.

My immediate trigger for this post was the hold up by the Chinese competition authorities of Mitsubishi Rayon's takeover of Lucite. This is an interesting case. Neither of these two companies is Chinese. Mitsubishi Rayon is Japanese, Lucite is based in the UK. But both these companies have operations worldwide. So to get approvals for the takeover, they have to go to the competition authorities in each country they operate. They got approval from every authority, bar one. China . Now the deal is in trouble.

In the good old days, there were only two competition authorities that you needed to worry about, in any global deal. The US and the EU. Anywhere else, it didn't matter. The authorities in other countries rarely blocked global deals and even if they did, the operations in those countries were likely to be minor and could be dealt with. But China's competition authority, Mofcom, is now important as well. Last month it blocked Coca Cola's acquisition of Huiyuan, a Chinese juices company . A year ago they interfered in InBev's acquisition of Anheuser-Busch.

Its China flexing its muscles today. No doubt it would be India, Brazil and Russia tomorrow. And the others, the day after. Increasing no global business would exist without major operations in these countries. So no deal can go through without every single authority approving it. Fat chance of that happening.

Global M&A will undergo fundamental changes. Investment Banks, Strategists, Financiers and the like will have a lesser role than Lawyers.

This is a problem business will face increasingly in the future. Business is going global, much faster than the socio political environment it operates in. That is not sustainable, for it will inevitably provoke a conflict. Tomorrow, I will post on the worst example of the impact national laws have on global business - tax.

Read More