Big deals increasingly are cast as mergers of equals where the chief executives involved keep their jobs and corporate America's drastic makeover gets a friendlier face. In traditional acquisitions the common view is that one company wins and another loses. A merger of equals, however, conveys the message that everybody wins. In the pending merger of Seagram Co. Ltd., Montreal, and Paris-based Vivendi SA, for example, Seagram CEO Edgar Bronfman will be the second-ranking executive, working closely with Vivendi Chairman and CEO Jean-Marie Messier. "We think of it as a partnership, but Messier will be the ultimate leader," says Bronfman. In a transaction timed simultaneously, Vivendi will acquire the remaining shares of Canal+ SA, Paris. The company formed from these parts will be a $55 billion global media and communications giant known as Vivendi Universal, headquartered in Paris. Despite the peaceful aura, this type of relationship must be well understood to be effective. In any merger of equals one partner inevitably winds up being more equal than the other. The co-CEO arrangement at DaimlerChrysler AG, Stuttgart, Germany, failed. Robert Eaton, the former Chrysler chief, vowed to deliver a merger of equals, but Chrysler Corp. is now the subsidiary of a German holding company and Eaton has resigned as co-CEO. New York-based Citigroup Inc.'s cochairman and co-chief executive John Reed stepped down just two years after the giant financial services company was created with the merger of Citigroup and Travelers Group Inc. And in the recent Monsanto Co. and Pharmacia & Upjohn Inc. "merger of equals," Fred Hassan, CEO of Pharmacia & Upjohn, will run Pharmacia Corp., the combined company, from his headquarters in Peapack, N.J. Monsanto's CEO Robert Shapiro will be chairman for 18 months but will not have an executive role. As megamergers across industries leave fewer players, proposed mergers of equals are likely to continue. The following are a few conditions for success in such alliances:
- For co-CEOs to be effective, there must be a clear understanding of a distribution of duties and responsibilities. That may mean that one CEO leaves soon after integration is completed. A successful combination of talent at the top of a merged organization is far more likely when there is clear delineation and communication of where the buck stops. When that message is clear, the organization knows that there will be fewer power struggles and less likelihood of one of the co-CEOs departing unexpectedly. Everyone can get on with the business of the business instead of politically aligning themselves with the putative winning parties.
- In making decisions, co-CEOs must learn to compromise at the right time, not all the time. Sometimes compromise is exactly what is needed. Other times, however, the decision ultimately made is one that pleases no one and runs the risk of not leading to effective action. For instance, decisions made relative to integration will require less compromise and more dominance. One set of business processes likely will predominate, or information systems that cannot be integrated may be outsourced. Trying to be fair and equitable may result in a camel with four humps and one leg-a hybrid animal that cannot move.
- For a co-CEO arrangement to succeed, it must be understood for precisely what it is. Is it an actual sharing of power or a face-saving arrangement? An example of the former is the Vivendi/Seagram deal, whereas the DaimlerChrysler deal is an example of the latter. A clear understanding of the meaning behind the announcement will rally the troops within the joined entities and diminish the confusion that can cause low morale and cynicism in the workforce affected by the combination.
