593
n
The urge to conquer
For example if, over the years, you have painstakingly built up a
well-working organization in different parts of the world, active
in different businesses, this can be very difcult for others to
replicate. Competitors may be able to acquire all the pieces –
subsidiaries and businesses in different parts of the world – and
hence on paper look much the same, but in reality the organi-
zation will not work in the same way; they are loose pieces put
together. This makes it all but impossible for rivals to catch up,
even with a giant war chest and impressive acquisitions spree.
Consequently, even without a particularly valuable patent, brand
name, unique location, or value proposition in the market, you
can build up a sustainable competitive advantage – but you have
to be patient.
“I’ve won . . . I’ve won!”
A striking example of several of the concepts discussed so far in
this chapter concerns a company I rst started studying when it
was still on its way up (towards the sun . . .): Ahold, and its larger-
than-life CEO Cees van der Hoeven.
I rst spoke to a member of its top management team in 1994,
when I had started the research for my PhD thesis on interna-
tional growth and acquisitions. I remember that he agreed to talk
to me but only on a condential basis because, as he declared, I
was right that they did have an international presence but they
were keen to not advertise that, because they cherished their
image and reputation as an authentic, purely Dutch retailer. A
bare ve years later, when I nished my thesis work, they already
got two-thirds of their revenue from the US alone, and had
grown into a true multinational, being the third largest super-
market company in the world, trailing behind only Wal-Mart and
Carrefour. Their international growth – mainly through acquisi-
tions – had been truly massive and, to many, impressive.
It coincided with the reign of Cees van der Hoeven. Van der
Hoeven, who grew up as a manager in Shell, had previously been
the company’s CFO. Yet, his lifelong ambition had always been
Business Exposed60
to be a listed company’s CEO and, when he nally made it to
the top job, he famously shouted jubilantly in the company’s
corridors, “I’ve won . . . I’ve won!”
Ahold actually already had quite a signicant presence in the US
from the 1970s and 1980s, when they had acquired companies
like BI-Lo, Giant Food stores, First National, and Tops super-
markets, after having examined at least a dozen other take-over
candidates, conducting lengthy due diligence and a number of
visits by all members of Ahold’s management, including some
posing as secret shoppers.
In 1993, when Cees van der Hoeven took the top job, he wanted
to double Ahold’s revenues and prot in ve years, while growing
earnings per share of at least 10 percent per year. In the same year,
Ahold received the Investor Relations Award in the Netherlands,
while Ahold entered Eastern Europe, Portugal, and Singapore.
After several years of solid double-digit growth, winning the
Dutch Invester Relations Award back-to-back, Van der Hoeven
independently announced that the prot growth expectations
for the next ve years were to be increased to 15 percent. In
1996, in just a few months, Ahold consecutively entered ve new
markets: Thailand, Malaysia, Spain, China, and Brazil.
However, the acquisition targets appear to not have been
examined with the same scrutiny as in the past, and murmurs
started that they were also poorly integrated. In 1997, one of
the longest-serving top management-team members took early
retirement, and during his farewell speech spoke directly to Van
der Hoeven: “Cees, you shouldn’t try to become the biggest, but
the best; then you’ll automatically become the biggest.” However,
in 1997 Ahold commited to a prot increase of between 30 and
45 percent and again won the Dutch Investor Relations award. In
1998, Van der Hoeven announced that in the coming ve years,
Ahold will again double in size.
During the management team’s traditional Monday afternoon
lunch – a weekly event dubbed the “acquisition lunch” – the
team approved a signicant number of take-overs on four
different continents. One of them, the American company
613
n
The urge to conquer
Pathmark, Ahold had earlier dismissed as of insufcient quality,
because their explicit criteria had always been to only acquire
companies that were top players in terms of their protability.
When questioned, Van der Hoeven stated that an acquisition
target does not need to be a top player in terms of protability,
but rather in terms of “prot potential”.
Yet, after mounting problems in various subsidiaries, in 1999,
an internal audit concluded that between 30 to 40 percent of
the visited subsidiaries did not have adequate control. While
the board expressed their concerns, van der Hoeven won the
Dutch CEO of the Year award. In the subsequent year, 2000,
competitor Delhaize acquired Hannaford Brothers, which Ahold
had explicitly earmarked as an ideal acquisition target. Next,
Carrefour managed to acquire the Promodes chain. Analysts
began to express doubts about whether the company could
fulll van der Hoeven’s promise of 15 percent annual growth.
British chain Tesco was suggested as a potential target, but the
secret negotiations between Ahold and Tesco had already ended
unsuccessfully.
Van der Hoeven and his team responded in true Ahold style, and
acquired 50 percent of the large Scandinavian company ICA.
It also acquired American Internet-grocer Peapod and several
business-to-business rms, including US Foodservice (of which
Van der Hoeven declared “six months ago, US Foodservice was
not even on our list of candidates”), as well as the supermarket
chain Bruno’s, which had earlier led for Chapter 11 bankruptcy.
Ahold again won the Dutch Investor Relations Award and the
Dutch Reputation Award of 2001. The thirteen acquisitions in
2000 had added 3,600 shops to Ahold’s original 4,500, spreading
it over 24 countries, resulting in a strategy which they stated was
“multi-format, multi-local, multi-channel”.
Yet, while van der Hoeven continued to afrm that they needed
“strong targets” and “outrageous goals” and Ahold was named
US Retailer of the Year, in early 2002 serious conicts began to
arise in the Czech Republic, the Netherlands, and in Scandinavia,
while the tensions in Portugal continued to spiral out of control.
..................Content has been hidden....................
You can't read the all page of ebook, please click here login for view all page.