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The Directors Chair

Bill Achtmeyer

Artisan of the deal

In The Directors Chair with David W. Anderson: A conversation with Boston-based

Bill Achtmeyer serves up an advanced class in M&A strategy and execution
Photography by Damian Strohmeyer

After decades of M&A advisory experience, first with Bain & Co., then as
founder, chair and managing partner of the Parthenon Group, plus a distinguished
director career, Bill Achtmeyer has an acute, boards-eye view of M&A. Here,
in conversation with governance and leadership adviser David W. Anderson,
Achtmeyer draws on experiences and situations in his own career to address
questions like: Why do so many deals fail? What rides on the CEO? Where
do boards get it right? And wrong? There are many takeaways, but Achtmeyer,
who sold Parthenon to Ernst & Young in 2014 but stayed at the helm, commanding
an even bigger strategic advisory practice within EY, consistently asserts the
value of process and planning. If you as a director feel like a deal is being rushed,
he says, take a pass.

Bill Achtmeyer
Primary roles
Founder and Senior Managing Director, Parthenon; Global Leader, Parthenon-EY Strategy Services,
Transaction Advisory Services, EY
Additional roles
Chair of the Board of Trustees, Boston Symphony Orchestra; Overseer, Museum of Fine Arts Boston; Chair, Massachusetts
High Technology Council; Chair, Tenacity; Vice-Chair and Board of Trustees, Belmont Hill School
Prior professional role
Founder, Chair and Managing Partner, The Parthenon Group; Director, Bain & Co., Founder and Leader of the
Mergers & Acquisitions/Integration Practice
Former chair
Chair of the Board of Overseers, Tuck School of Business at Dartmouth College; Massachusetts
Society for the Prevention of Cruelty Against Children
Former president
Lawrence Academy Board of Trustees; Nashoba Brooks School
Former director
Briggs & Stratton Corp.; Citizens Energy Corp.
Education
MBA, Tuck School of Business, Dartmouth College; BA (Public and International Affairs),
Woodrow Wilson School, Princeton University
Honours
kMyra H. Kraft Award for Non-Profit Leadership, 2015

kEmbracing the Legacy Award, Robert F. Kennedy Childrens Action Corps, 2014

kOverseers Medal Recipient, Tuck School of Business, Dartmouth College, 2012

Current age
60

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Bill Achtmeyer

David Anderson Corporate acquisitions are among the most momentous processes organizations endureoften for little benefit. Youve participated in acquisitions as a director and owner
and have advised on them for decades. Is there a common mistake being made?
Bill Achtmeyer Too often the acquisition process is led by opportunism rather than thinking comprehensively about whats best for the
company. Patience and discipline are lacking. Thats why acquisitions
often fail to create value, as the academic research shows. I like to see
a merger opportunity pursued in many ways, but fundamentally the
CEOs have to build trust by getting to know each other.
David Anderson What should directors ask their CEO when an

acquisition proposal shows up?

Bill Achtmeyer First of all, if you are a board member faced with

an out-of-the-blue acquisition that youve not discussed in

prior board meetings, then its a very risky proposition. It may
have some elements on paper that look interesting but theres
no fundamental understanding of the company. Thats a real issue. Boards looking to grow their companies through acquisition
should require management to have a process. I would ask the
CEO to bring clear updates to the board on three questions: One,
where are the target companies in their cycle? Two, how are you
developing relationships with each? And three, what would an
attractive offer look like?
David Anderson Are there characteristics of companies that do
acquisitions well?
Bill Achtmeyer Companies that Ive seen enjoy success in being
acquisitive either have it as part of their raison dtreGE comes
to mindor are particularly diligent when they do make an acquisition. Ive worked with Corning and Thomson (now Thomson
Reuters) and both had solid acquisition programs at the corporate or business unit level. They were deliberate, putting in time
up front, thinking about their acquisitions and then taking time to
assimilate them carefully. My experience on the Briggs & Stratton
board was similar, in that management took time to identity top
acquisition candidates and walk us through the current status of
each company and how they looked relative to what would make
sense economically and strategically. Such a process is not hard
to understand, but it is very disciplined. The great acquisitors
have a list of top picks and concentrate on understanding them
and wooing them and studying their market conditions. This way
they know that if any one would be successfully landed, it would
fit on many dimensions. The more you approach it this way, the
better the outcome will be.
David Anderson What does a CEOs interaction with the board
look like when done well?
Bill Achtmeyer Ill use Agilent Technologies, a spin-off of HewlettPackard, as an example. Bill Sullivan, Agilents CEO, kept three or
four companies on the radar screen for his board and identified
Varian Inc. as the top candidate for acquisition. Bill kept his board
apprised of Varians business performance and his relationshipbuilding activities with Garry Rogerson, Varians CEO. When it
was clear Varian didnt want to sell, Bill discussed a range of options with his board including joint ventures and strategic alli-

ances. Bill made sure he invested in the education of the board,

so that an acquisition would be a natural event not met with surprise, but anticipation. Over time, Agilent performed very well
relative to Varian and the opportunity arose where both felt it was
better to put the companies together. Bill and Garry had talked a
lot about their philosophies and Bill discussed this with his board
along with an updated vision for a merged company. The board
studied Bills detailed plan for the first 100 days, which aimed to
capture as much of the synergy and integration benefits as possible. But they also took a longer point of view, thinking ahead
two years to pull the organizations together carefully. Bill and
the board made sure there was thoughtful planning for how R&D
expenditure could be more effectively used and what best practices from either company would continue. The deal went well
because the process was deliberate and thoughtful and won the
full support of the board by keeping them familiar with the business rationale and relationships. At the stage of actually pulling
the trigger, the directors had sufficient knowledge to be comfortable. While this was not a blockbuster deal that garnered a lot of
press, it was a savvy deal for both companies.
David Anderson We may also learn from failure. What M&A
value destruction comes to mind that offers lessons?
Bill Achtmeyer I think of Ford in the period they were buying
Jaguar, Land Rover and Aston Martin. We know Ford at the time
was a business making no money in its different lines other than
trucks. They paid astronomical prices for these luxury brands
and then spent a fortune to upgrade each of them. In the financial
crisis, Ford had to divest them all to have a prayer to do its turnaround. The business case was flawed. HP buying Compaq was
similarly flawed and may be the worst of the big deals. Compaq
had acquired Digital and other hardware companies, so putting
HP and Compaq together was actually putting three or four companies together, in an environment suffering a 10% cost disadvantage to Dell. The deal was sold on the basis of cost synergy,
yet any business school student would fail if they argued this. In
the face of no revenue or organizational opportunity that would
create value over the long termyou know cost savings will run
outwhat then are you going to do? It defies logic if youre a company trying to buy things for the longer term. Sorting out business
models, revenue opportunities and issues of culture are complicated. The lesson is it takes human beings a while working together to generate a compelling rationale, legitimate plans and
personal commitments. Slapping together a complicated plan in a
condensed time frame doesnt allow for disciplined vetting by the
various parties and leads to disappointment. As a board member,
its better to pass if you feel a deal is being rushed.
David Anderson Youve indicated a level of irrationality can mo-

tivate M&A deals. Does the disposition or personality of the

CEO affect M&A activity?
Bill Achtmeyer Dun & Bradstreet is a great case study. It went
through a huge acquisition stage, then a huge divestiture stage. So
much had to do with the attitude and comfort zone of the CEOs
and their willingness to take risk. In its highly acquisitive phase,
Dun & Bradstreet bought a series of information companies that
took it from $1 billion to $15 billion in value. If I was doing a psy-

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Bill Achtmeyer

chological analysis, the CEO was a very engaging and magnetic

figure. He could envelop anyone in the new merger vision he
was pursuing. But the next CEO the board chose was more inwardly focused and didnt want to engage in what he viewed as
the wheeling and dealing of M&A. He was oriented to operations and comfortable talking about customer likes and dislikes.
This didnt take root in the culture, so the board brought in a new
CEO, this one with a strong technology background and different
sense of risk. He saw technology changes with negative implications for the business, so he divested everythingA.C. Nielsen,
IMS, Moodys and many others. While neither approach is right
or wrongshareholders got a good financial deal over timeits
an example of a company that went from one extreme to the other. A lot can change with the CEO, depending on where the CEO
is most comfortable. You have to have the zeal and interest for
things to work. Boards have to understand where they can influence value creation and preservationits in the business model,
the leadership and the people.
David Anderson Have you seen boards show sophistication fac-

toring in this interplay of business interests and CEO leadership dynamics?

Bill Achtmeyer In my Briggs & Stratton experience, the board and
CEO, Todd Teske, came to the opinion that the company needed to gear up for acquisitions. I dont think Todd was naturally
inclined to do deals, but he saw the same business necessity the
board sawthat producing lawn motors for lawn mowers had
reached a level of market share that was constraining growth.
Being a highly capable CEO, he figured out a way to take advantage of the companys core capabilities to deliver growth through
strategic acquisitions. Todd and the board were drawn to acquisitions by the business case; a collective board-and-CEO view developed on what the future held and on a process to make the
right acquisitions and support the organization throughout. Not
all boards and CEOs are as flexible in their thinking and capable
in their leadership, but there are good examples to follow.
David Anderson What specific advice do you have for boards of

acquiring companies?
Bill Achtmeyer Boards generally do their best work asking ques-

tions that provide management a platform on which to defend and

sharpen its logic, absent negativity, confrontation and defensiveness. Boards that exercise skepticism in a constructive way find
out where the potential risks lie and the level of those riskswhich
may not otherwise be presented or discussed as warranted. By acting in this way, a board can force management to get more specific
as to why the deal makes sense, the plans and back-up plans, the
mitigating circumstances and managements capacity to work with
their counterparts in the company to be acquired. Only then can a
board understand if the acquisition is well planned and fits along
the relevant dimensions. A boards most important role is up front,
making sure the conditions are right by employing the Socratic
method, to get management to go down a level below that which
it is inclined to present to make its case. After the deal, the board
should have a look back session to evaluate what actually happened against what was supposed to happen and thus enforce discipline and learning.

David Anderson What should boards of target companies do?

Bill Achtmeyer That depends on the ethos of the company. If fo-

cused singularly on shareholder return as a metric for success and

the culture understands that, then its a relatively straightforward
analysis of the financial deal; is the offer better than what can be
done independently? Most companies today have aspirations for
their customers and employees and want their brand to have a
better future. Here is where boards can distinguish themselves.
The price may look attractive, but what elements will come into
play that will allow a customer or employee to think this deal provides a better future? If that cant be explained, then you better be
careful about selling for that price. Boards should ask: How is this
better for the career development of our people? And, how will
the customer benefit relative to what they receive today? If these
can be defended and the price is attractive given the condition of
the business, then likely youve got a good deal.
David Anderson Youve contributed your talent and treasure to

philanthropic causes serving children and the arts. Aside from

the profit motive, what distinguishes for-profit from not-forprofit leadership dynamics?
Bill Achtmeyer The need to have broad consensus behind major decisions is much more accentuated in not-for-profits. This makes the
power of the CEO and board discernibly different; theres more work
to be done to bring something to fruition. Leading change is harder
because people are mission-driven and emotionally connected to the
hallowed territory of their cause. For-profit CEOs take liberties and
know that most constituencies will come along. Not-for-profit CEOs
have to take not only the board along but also many more stakeholders.
You cant get there by edict because not everyone sees it as you do. You
have to accept this to be successful.
David Anderson Has your service on charitable boards taught

you skills that translate to the corporate world?

Bill Achtmeyer Yes, charitable boards provide a great arena to

learn about meaningful stakeholder engagement. In the corporate

world, I often see a knee-jerk reaction to stakeholder activism; a
rush to mount a defence with lawyers or bankers. Ive learned
from charitable boards its better to engage people to understand their expectations and why they believe there is a gap between what were doing and what they think we should be doing.
Activists are smart and articulate. You have to do your homework.
John Donahoe, eBays CEO, mounted a strong defence against
Carl Icahn over the PayPal divestiture. John wouldnt have done
it without Icahns activism. Icahns thesis was correct, even if his
tactics were unnerving. This will happen more often as stakeholders scrutinize performance, as theres a huge appetite for activism
to get companies to do better. Discipline and patience will serve
anyone well in the multi-stakeholder corporate world today.
David W. Anderson, MBA, PhD, ICD.D is president of The
Anderson Governance Group in Toronto, an independent
advisory firm dedicated to assisting boards and management teams enhance leadership performance. He advises
directors, executives, investors and regulators based
on his international research and practice. E-mail:
david.anderson@taggra.com. Web: www.taggra.com

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