Open To Offers

If there is one thing the events of the last year or so should have taught us yet again, it is that in the ownership of retail businesses we need to keep our egos in our pockets and remain always open to real offers. This holds true for private companies but in particular for listed retailers.

No matter how well management and Boards believe their businesses are being run or how clever they believe their strategies to be, emotion should not play a part in evaluating the best interests of shareholders.

And it is clearly in the best interests of shareholders for the businesses that they have ownership in to be in demand.

That doesn’t mean you open the doors up to every Kohlberg, Kravis or Roberts just because they knock, but it does mean remaining flexible and getting into dialogue which – if nothing else – reinforces the value of the business, encourages debate about the best strategy for the business and puts pressure back on the internal team to lift their game in execution.

Businesses that are not open to conversations of these kinds are often so inclined because they are insecure, under-performing or just plain insular. None of these behaviour patterns is positive and – in my experience – the opposite holds true.

It is usually the strongest companies that are the ones open to debate and sharpen their view of how they could improve their performance or how they could offer best value to shareholders. They know that strategic insight can come from many quarters and they welcome it. They also know that – at the end of the day – you can’t bank a whole lot of talk. Execution is where you win and cold hard cash is the final arbiter of winners and losers.

The market has a way of passing fair judgement on performance, even if management of some companies don’t like the judgement or choose to play to the gallery about it. Buying and selling retail businesses is like poker. But once a party has made a bid, the best thing to do is call them and get them to put up or shut up.

Exchanging barbs in the press and stalking one another in the public arena is a tactic aimed at lining the pockets of advisers not shareholders. It betrays egos not rational decision makers and it fails the ultimate beneficiaries of the potential outcome. It can also lead to Boards painting themselves into a corner where they are forced into only one possible outcome – not a great bargaining position.

If someone comes knocking, talk to them. Draw them to the table and get them to bid. Open the bid up. Seek the best offer possible and evaluate your real performance and likely success of your business strategy against the cash being put on the table now. And do it fast. In retail, as in poker, timing and how you play the game are more important than the cards you hold. And at the end of the day retail businesses represent commerce in its purest form. Buy, move, sell.