Murphy Siding YoHo1975: Murphy Siding: But why can't we make the assumption, that they knew what they were doing? So again, why would you "assume" they knew what they were doing. The record will illustrate that they did or they didn't. Fair enough question, I suppose. My thought is this: These folks were running the railroads in question at the time. Who better than them, knew the ins and outs of traffic, maintenance costs, operations, etc. on their own lines? They had all the information. They were already running the railroads in question. ...
YoHo1975:
Murphy Siding: But why can't we make the assumption, that they knew what they were doing?
But why can't we make the assumption, that they knew what they were doing?
So again, why would you "assume" they knew what they were doing. The record will illustrate that they did or they didn't.
Fair enough question, I suppose. My thought is this: These folks were running the railroads in question at the time. Who better than them, knew the ins and outs of traffic, maintenance costs, operations, etc. on their own lines? They had all the information. They were already running the railroads in question. ...
Well, if the Penn Central wasn't an object lesson on this, perhaps there can be no lessons from history ...
Any given merger occurred, of course, because of the presumption that "they knew what they were doing." One of the good studies done by the old ICC showed that "mergers rarely achieved their goals," and this was, of course, troubling to the regulatory agency tasked with approving such mergers, when the records of implementation was quite poor.
And of course, that begged the question: was it the caliber of the officers implementing the mergers, or was it an intrinsic weakness in the concept of "merger" itself?
I tend to take the latter view: mergers don't fix problems, they obscure them.
Of course, that underscores my earlier point: there are tangible metrics by which to judge a merger: the pro forma projections created by the "folks running the railroads at the time." That is, the explicit reasons given for the merger.
And, for those paying attention to those, I think the opinions on the relative success or failure of a merger is at least informed by something other than something happening to a different company, under different economic circumstances, under a different regulatory scheme, forty years later.
Daimler Chrysler is a very good case study for anyone that gets too enamored of "mergers". The most profitable American car company at the time (!) combined with a company with a solid engineering tradition, combining some of the best and most experienced automotive industry brains in the business world and advised by the best merger experts money could buy.
Murphy Siding If fans of NP, or Milwaukee Road, or Anti-fans(?) of GN want to believe that "They did it wrong", I guess I'm OK with that. I just haven't seen anything that would convince me of that. So, back to my opinion- I just don't buy it.
I'm not sure how the "railfans" all of a sudden got drug into this.
It's not really a railfan issue and I sure wouldn't make my opinions based on what your select group "wants to believe." These are fact issues and while I don't see much use of them in discussion like this, they are still the key to any analysis. In the case of railroad mergers, there are well developed records of expectations that preclude just making up a personal judgment. An opinion without a reference to those well-developed records is well short of useful.
Generally, the record of "business mergers" is also quite well developed. There are books all over the place on the topic. Generally, they fail to meet their goals. A reasonable first opinion, then, on any given merger would be to take a skeptical attitude, simply because that reflects the informed and experienced judgment of history on the topic.
PNWRMNM The consensus of what got reported is that the CNW merger did NOT go smoothly. If ever there was a merger that should have gone smoothly the UP-CNW was it. The only thing UP really cared about was getting from Fremont/Omaha to Chicago. In retrospect it was an indication of what would come in the SP merger which basically was to ignore, run off, and fire the incumbent middle management. UP made its own unnecessary messes in both cases.
The consensus of what got reported is that the CNW merger did NOT go smoothly. If ever there was a merger that should have gone smoothly the UP-CNW was it. The only thing UP really cared about was getting from Fremont/Omaha to Chicago. In retrospect it was an indication of what would come in the SP merger which basically was to ignore, run off, and fire the incumbent middle management. UP made its own unnecessary messes in both cases.
It did not go smoothly.
If someone does a book on the subject some day, it would be interesting to read a developed history and context of why BN and its successors generally managed the organizational aspects of mergers quite well, and why Union Pacific generally didn't.
I've been through a few (non railroad) mergers and acquisitions and it ain't easy. One set of rules and theories clash with a different and opposite set. Then personalities clash, All communication and understanding is lost followed by employees and then customers. The "we've always done it this way so that's the way' we'll continute to do it no matter what you say" attitude is as defeating as, "now I'm in charge and you'll do it my way." Why a surprise that it happens when different railroads and railroad companies merge or acquire? EL, PC, UP-SP, BN-SF, SF-SP, ACL-SBD, oh, I could write the recipe for alphabet soup here and none of it would ever taste good!
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ICLand Murphy Siding: If fans of NP, or Milwaukee Road, or Anti-fans(?) of GN want to believe that "They did it wrong", I guess I'm OK with that. I just haven't seen anything that would convince me of that. So, back to my opinion- I just don't buy it. I'm not sure how the "railfans" all of a sudden got drug into this. It's not really a railfan issue and I sure wouldn't make my opinions based on what your select group "wants to believe." These are fact issues and while I don't see much use of them in discussion like this, they are still the key to any analysis. In the case of railroad mergers, there are well developed records of expectations that preclude just making up a personal judgment. An opinion without a reference to those well-developed records is well short of useful. Generally, the record of "business mergers" is also quite well developed. There are books all over the place on the topic. Generally, they fail to meet their goals. A reasonable first opinion, then, on any given merger would be to take a skeptical attitude, simply because that reflects the informed and experienced judgment of history on the topic.
Murphy Siding: If fans of NP, or Milwaukee Road, or Anti-fans(?) of GN want to believe that "They did it wrong", I guess I'm OK with that. I just haven't seen anything that would convince me of that. So, back to my opinion- I just don't buy it.
Thanks to Chris / CopCarSS for my avatar.
The one thing those with the ego's involved to pull off mergers and regime changes overlook about the overtaken property in the merger is that one size doesn't fit all....at least not without a lot of work being undertaken.
Railroad operations evolve out of the physical constraints of the physical plant, the traffic base and labor history of the areas involved. The operations that exist TODAY are the best efforts that that carrier could muster with the tools and finances that it has possessed up to today.
When the 'top dog' leadership does not take into account what transpired to get the 'bottom dog' partner in it's current position it generally dooms itself to short term failure.
After a merger/acquisition a management team implemented a operating plan of 'fewer bigger trains' as that plan had worked well on the property they were familiar with. What that plan overlooked was that the part of the property they were not familiar with did not have the terminals that could handle the larger trains, either receiving them or dispatching them, as a result trains were held from getting into terminals account the terminals were full of traffic that was waiting outbound movement because the plans train size minimums had yet to be met...in very short order the entire system collapsed. The wrong plan for the wrong property. The operation of major terminals on any carrier is all about juggling the space available in the terminal with the movement of traffic through the terminal. A 50 foot car, will ALWAYS occupy 50 feet of track space....a 5000 foot train, will occupy 5000 feet of track space in the terminal, no matter if the train is assembled or not...it can be 5000 feet in the receiving yard, 5000 feet in the departure yard or 5000 feet distributed through the bowl tracks during the switching process.....but it will ALWAYS occupy 5000 feet of track space.
When you try to operate 9000 foot trains in & out of terminals designed for 5000 foot trains you will pay the consequence in requiring more than one track to initially yard the train and more than one track to ultimately depart the train. The way many terminals are physically configured, switching cannot take place while trains are being yarded or dispatched account the inbound/outbound trains fouling the leads as they perform their multi track moves.
To be effective the operating plan MUST be tailored to the physical facilities that are being used to implement it. If the 'new' management doesn't feel that the facility is efficient enough....the facility must be changed so that it can handle the 'efficient model'. If you want to run 9000 foot trains....configure the receiving and departure yards to handle those size trains without fouling out the switching leads.
If you want to 'Run the Plan' you must have facilities that can facilitate running the plan.
ICLand It did not go smoothly. If someone does a book on the subject some day, it would be interesting to read a developed history and context of why BN and its successors generally managed the organizational aspects of mergers quite well, and why Union Pacific generally didn't.
Never too old to have a happy childhood!
Murphy Siding That sounds very interesting. In fact, it's so interesting, that I'd like to read more about that premise that the BN meger was a failure, and the railroad folks that lined it up didn't know what they were doing, and got it wrong. I'd really be looking for something more indepth than just messageboard forum chat between two railfans like you and me. Something written by an author with some railroad background and business experience would be best.. Could you recommend a book, or magazine article, or web article that would back up the idea that the BN folks got it wrong when they merged?
Well, there's more than a little "word putting in mouth" here. And I'm glad to join the ranks of railfans I guess, but if you ever catch me out watching trains for the h*** of it, good luck. I've never done it. I "think" I understand it -- maybe not the self-assured attitudes that railfans sometimes absorb, somehow -- but it just doesn't tilt my boat to stand there and do it.
As I have mentioned, a useful place to start with the BN merger, or any other merger, is with the organic documents. Then line up the actual economic and operating results with the prospectus. The UP/CNW merger documents are more revealing, and UP/SP is really a ride.
BN just happens to be interesting because 1) the organizational side of it went very, very well, but 2) the operating results side of things really flopped along. What makes it distinctive is that difference: with most "failed" mergers, the failure is easy to blame on the organizational calamity that ensues. It makes it an easy explanation. BN is distinctive in that regard and therefore an outstanding case study, because it was different from the "usual" and what "went wrong" can't be blamed on any organizational overall gone haywire.
No, these aren't in a book, a magazine article, or a web article.
They are in the applications to merge, the hearing examiner's reports, the exhibits to testimony, the recorded testimony, and are often summarized in the Opinions authorizing any particular merger and certainly in the annual reports.
These are far better sources than any book, magazine article or web article.
Why? Because the information is unfiltered by anyone's opinion, bias or, as often happens, the writer's lack of economic, financial, railroading or business background.
I would hesitate to suggest that I had an opinion, pro or con, that was uninformed by reference to that detailed factual record.
And that's just an exercise of caution insofar as credibility of offering opinions on complex economic topics because I don't see the point in having an opinion just because everyone can have one.
Only two of the four principal architects of the BN merger are still alive and they are pretty well up there in age. I know their views well on the matter.
BaltACD's lengthy post above echoes Railway Man's recent remark in another thread here that "All railroading is local".
- Paul North.
BaltACD The one thing those with the ego's involved to pull off mergers and regime changes overlook about the overtaken property in the merger is that one size doesn't fit all....at least not without a lot of work being undertaken.
And I think this is the realistic view that diverges significantly from what is, I guess, represented on this Thread as the railfan's view.
These organizations are not a perfect synthesis of highly educated, fully functional executives with plenary experience and infinite knowledge. There are competing ideas, different and often conflicting experiences, sometimes the ego wins over the experience, and sometimes "vision" sinks practical experience. The "turf wars" can be debilitating, older executives sometimes don't appreciate the new ideas about networking and node management, and sometimes it just gets back to what was referenced earlier about misunderstanding the role and purpose of IRR.
And of course that's the whole point of reviewing these actions, to see what went right and what went wrong. It is beyond my experience and education to presume, ipso facto, that "because they did it, it must have been right" which appears to be the prevailing rail fan opinion I am guessing from the comments posted.
Of course, even if there is a fully useful review of success and failure, then the problem is that the next generation of "merger gurus" have lost the institutional memory of the last round, and which is why the same problems seem to crop up over and over with merger efforts and I think you probably hit the nail on the head: there is an ego involved with creation of something bigger than what existed before. Oh, and bigger salaries too. And the golden parachute if it all falls apart. Well, oops, this is bringing out the cynic in me, and that serves little purpose, so, good day on an interesting point raised.
ICLand [snip] Only two of the four principal architects of the BN merger are still alive and they are pretty well up there in age. I know their views well on the matter.
In the mid-1990's, just before the BN+SF merger (as I recall), there was an article in Trains that consisted of interviews with 4 former presidents of BN about the 1970 merger and subsequent events - at least Lou Menk and Robert Downing, and 2 of these 3 - Norman Lorentzen, Gerald Grinstein, Richard Bressler - as best as I can recall. I skimmed through it over the weekend - I was looking for something else - but I did note that one of them remarked that the CB&Q line to Guernsey [sp ?] was not in near as good a condition as was expected. Nothing jumped out at me as any of them saying that the merger was a failure or disaster, or had unexpecetd challenges to overcome, etc. - but then, what would you expect them to say for attribution in an industry-wide publication ? Nevertheless, that article might be worth re-reading to see if there are some subtle clues that - at a simplistic, summary level - corroborate or refute what ICLand seems to be saying here.
But as he has noted, the best evidence would be to get and study the primary sources, and then do a detailed study, comparison, and narrative summarizing the trends and results. As he also said, that's at least a Master's and perhaps a Ph.D. level project. Perhaps when I retire in 15 or 20 years, if no one else has done it by then and if I have nothing better to do with my time . . . .
If Perkins of the C. B. & Q. had gotten control of the A. T. S. & F. as he wanted, would James Hill have wanted that combination? Would we be having this conversation?
Paul_D_North_Jr ICLand: [snip] Only two of the four principal architects of the BN merger are still alive and they are pretty well up there in age. I know their views well on the matter. In the mid-1990's, just before the BN+SF merger (as I recall), there was an article in Trains that consisted of interviews with 4 former presidents of BN about the 1970 merger and subsequent events - at least Lou Menk and Robert Downing, and 2 of these 3 - Norman Lorentzen, Gerald Grinstein, Richard Bressler - as best as I can recall.
ICLand: [snip] Only two of the four principal architects of the BN merger are still alive and they are pretty well up there in age. I know their views well on the matter.
In the mid-1990's, just before the BN+SF merger (as I recall), there was an article in Trains that consisted of interviews with 4 former presidents of BN about the 1970 merger and subsequent events - at least Lou Menk and Robert Downing, and 2 of these 3 - Norman Lorentzen, Gerald Grinstein, Richard Bressler - as best as I can recall.
John Budd, Lou Menk, Bob Downing and Worth Smith were the driving forces on the merger; Dowing and Smith on the merger committee itself. Downing was replaced by Smith in 1968 when the go-ahead was finally given by the ICC to merge and Smith chaired the committee through "M" Day in March, 1970. I think Jerry Grinstein was at Western Airlines or some such place during the pre-Frisco days at BN. Last I heard he was living at Sun City, Arizona. Bressler came on later. Lorentzen was an NP hand; a very good railroad man.
In any event, Downing and Smith are still alive.
I knew Menk, and he wasn't doing well. Indeed, for the railfan who thinks someone would have written a book about it all if it were true, the following:
"By 1977, Menk, in the midst of another merger, this time with the Frisco, began to shed full responsibilities of leadership. Aged 59 in that year, he persuaded to Board to appoint Norman Lorentzen, age 60, another career railroad man and trusted colleague, to the position of president and CEO while Menk remained as chairman. A man of exceptional physical and emotional energy and personal charisma, Menk had nevertheless become worn down by the death of his wife, and, no doubt, by the apparent failure of the strategy of the 70s to yield acceptable financial results."
-- Gordon Donaldson, "Corporate Restructuring: Managing the Change Process from Within," Harvard Press, 1994.
As Donaldson notes: "only the most die-hard and introverted railroader could ignore the facts" regarding the BN merger during the 1970s. P. 47. I would guess that Donaldson hadn't met some of the folks here!
Sadly, Robert Downing died recently - in or around August 2010, if I'm not mistaken.
Paul_D_North_Jr Sadly, Robert Downing died recently - in or around August 2010, if I'm not mistaken.
Oh my gosh. That's a real loss. I spoke with him last Christmas and he seemed to be doing pretty well.
ICLand Murphy Siding: That sounds very interesting. In fact, it's so interesting, that I'd like to read more about that premise that the BN meger was a failure, and the railroad folks that lined it up didn't know what they were doing, and got it wrong. I'd really be looking for something more indepth than just messageboard forum chat between two railfans like you and me. Something written by an author with some railroad background and business experience would be best.. Could you recommend a book, or magazine article, or web article that would back up the idea that the BN folks got it wrong when they merged? ..................BN just happens to be interesting because 1) the organizational side of it went very, very well, but 2) the operating results side of things really flopped along. What makes it distinctive is that difference: with most "failed" mergers, the failure is easy to blame on the organizational calamity that ensuses. It makes it an easy explanation. BN is distinctive in that regard and therefore an outstanding case study, because it was different from the "usual" and what "went wrong" can't be blamed on any organizational overall gone haywire........................ No, these aren't in a book, a magazine article, or a web article.
Murphy Siding: That sounds very interesting. In fact, it's so interesting, that I'd like to read more about that premise that the BN meger was a failure, and the railroad folks that lined it up didn't know what they were doing, and got it wrong. I'd really be looking for something more indepth than just messageboard forum chat between two railfans like you and me. Something written by an author with some railroad background and business experience would be best.. Could you recommend a book, or magazine article, or web article that would back up the idea that the BN folks got it wrong when they merged?
..................BN just happens to be interesting because 1) the organizational side of it went very, very well, but 2) the operating results side of things really flopped along. What makes it distinctive is that difference: with most "failed" mergers, the failure is easy to blame on the organizational calamity that ensuses. It makes it an easy explanation. BN is distinctive in that regard and therefore an outstanding case study, because it was different from the "usual" and what "went wrong" can't be blamed on any organizational overall gone haywire........................
Link to "In Memoriam" for Robert Downing -died August 2, 2010 - from Progressive Railroading's website, dated 08/06/2010:
http://www.progressiverailroading.com/news/article.asp?id=24033
I did three mergers-CNW+MSTL, SP+DRGW and UP+SP. The Economist summed it all up nicley in one cover photo: http://blog.titaniumdreads.com/wp-content/uploads/2007/08/economist_the_trouble_with_mergers.jpg
bobwilcox I did three mergers-CNW+MSTL, SP+DRGW and UP+SP. The Economist summed it all up nicely in one cover photo: http://blog.titaniumdreads.com/wp-content/uploads/2007/08/economist_the_trouble_with_mergers.jpg
I did three mergers-CNW+MSTL, SP+DRGW and UP+SP. The Economist summed it all up nicely in one cover photo: http://blog.titaniumdreads.com/wp-content/uploads/2007/08/economist_the_trouble_with_mergers.jpg
Well that was good for a belly laugh.
I think the perception regarding mergers in general is just about diametrically opposite between people who have experienced them, who have one set of opinions, and people who think that just because they are done, they must be "good."
Experience goes a long way.
Now, that image is going to stay with me all day.
Good one !
Considering the source is a 'blog', that cover is dated Sept. 10th -16th, 1994, it's in an upload of March 28, 2010, and another apparent date of "2007/08" in the URL, perhaps you'll forgive me if I'm a little suspicious that it was 'Photo-shopped' or similar. But even so, it's still pretty funny - and should have been an original - and better yet if it really was. It deserves broader circulation, too - like in every proxy statement soliciting votes for a merger . . . . . . and at least to the "Not Very Improved Humor" thread here.
Thanks for sharing that !
ICLand Murphy Siding: Could you recommend a book, or magazine article, or web article that would back up the idea that the BN folks got it wrong when they merged? As I have mentioned, a useful place to start with the BN merger, or any other merger, is with the organic documents. Then line up the actual economic and operating results with the prospectus. The UP/CNW merger documents are more revealing, and UP/SP is really a ride. BN just happens to be interesting because 1) the organizational side of it went very, very well, but 2) the operating results side of things really flopped along. What makes it distinctive is that difference: with most "failed" mergers, the failure is easy to blame on the organizational calamity that ensues. It makes it an easy explanation. BN is distinctive in that regard and therefore an outstanding case study, because it was different from the "usual" and what "went wrong" can't be blamed on any organizational overall gone haywire. No, these aren't in a book, a magazine article, or a web article. They are in the applications to merge, the hearing examiner's reports, the exhibits to testimony, the recorded testimony, and are often summarized in the Opinions authorizing any particular merger and certainly in the annual reports. These are far better sources than any book, magazine article or web article. Why? Because the information is unfiltered by anyone's opinion, bias or, as often happens, the writer's lack of economic, financial, railroading or business background.
Murphy Siding: Could you recommend a book, or magazine article, or web article that would back up the idea that the BN folks got it wrong when they merged?
Having been on the inside of a few mergers myself (BN+SF, CN+BNSF, CN-IC, CN-WC) I'm not sure I could say that even the applications to merge and supporting exhibits can in every case be trusted as a pure, unfiltered picture of why the applicants sought to merge and what they really expected in the way of results. Remember that the applicants are primarily concerned with gaining support for the idea from a variety of stakeholders (legislators, regulators, shippers, communities) and have an incentive to say what they think those stakeholders want to hear. Not that there were any major anti-public or anti-shipper objectives lurking behind the scenes in any of the aforementioned merger applications! I'm just sayin'...
CNSF Having been on the inside of a few mergers myself (BN+SF, CN+BNSF, CN-IC, CN-WC) I'm not sure I could say that even the applications to merge and supporting exhibits can in every case be trusted as a pure, unfiltered picture of why the applicants sought to merge and what they really expected in the way of results. Remember that the applicants are primarily concerned with gaining support for the idea from a variety of stakeholders (legislators, regulators, shippers, communities) and have an incentive to say what they think those stakeholders want to hear. Not that there were any major anti-public or anti-shipper objectives lurking behind the scenes in any of the aforementioned merger applications! I'm just sayin'...
Usually the best information came from competing railroads, which usually lined up to bury the proposed merger. It was a distinctly adversarial proceeding, which usually brought out the full story. Too, and as I have mentioned, these are SEC regulated transactions; make a "material misrepresentation" of fact that would have misrepresented the effect of a merger on the investing public, and bang, investigation, fines and possible jail time.
Saying "what a stakeholder" wants to hear can be a quick ticket to federal prison. To that extent, care had to be given to what was represented.
Deleted duplicate post.
The major perception that gets disseminated about mergers from those that experienced them comes from a very simple reality....did they survive the merger still being employed by the surviving entity? Those that didn't survive generally don't address the merger in glowing terms.
ICLand CNSF: Having been on the inside of a few mergers myself (BN+SF, CN+BNSF, CN-IC, CN-WC) I'm not sure I could say that even the applications to merge and supporting exhibits can in every case be trusted as a pure, unfiltered picture of why the applicants sought to merge and what they really expected in the way of results. Remember that the applicants are primarily concerned with gaining support for the idea from a variety of stakeholders (legislators, regulators, shippers, communities) and have an incentive to say what they think those stakeholders want to hear. Not that there were any major anti-public or anti-shipper objectives lurking behind the scenes in any of the aforementioned merger applications! I'm just sayin'... Usually the best information came from competing railroads, which usually lined up to bury the proposed merger. It was a distinctly adversarial proceeding, which usually brought out the full story. Too, and as I have mentioned, these are SEC regulated transactions; make a "material misrepresentation" of fact that would have misrepresented the effect of a merger on the investing public, and bang, investigation, fines and possible jail time. Saying "what a stakeholder" wants to hear can be a quick ticket to federal prison. To that extent, care had to be given to what was represented.
CNSF: Having been on the inside of a few mergers myself (BN+SF, CN+BNSF, CN-IC, CN-WC) I'm not sure I could say that even the applications to merge and supporting exhibits can in every case be trusted as a pure, unfiltered picture of why the applicants sought to merge and what they really expected in the way of results. Remember that the applicants are primarily concerned with gaining support for the idea from a variety of stakeholders (legislators, regulators, shippers, communities) and have an incentive to say what they think those stakeholders want to hear. Not that there were any major anti-public or anti-shipper objectives lurking behind the scenes in any of the aforementioned merger applications! I'm just sayin'...
Murphy Siding ICLand: Usually the best information came from competing railroads, which usually lined up to bury the proposed merger. It was a distinctly adversarial proceeding, which usually brought out the full story. Wouldn't competing roads have the very same inclination
ICLand: Usually the best information came from competing railroads, which usually lined up to bury the proposed merger. It was a distinctly adversarial proceeding, which usually brought out the full story.
Usually the best information came from competing railroads, which usually lined up to bury the proposed merger. It was a distinctly adversarial proceeding, which usually brought out the full story.
Wouldn't competing roads have the very same inclination
I could have phrased that better. "Competing roads" in the context of a given merger proceeding are those railroads that file formal objections based upon the alleged impact that the proposed merger will have on their railroad company. Generally, these objections are filed as follows 1) the formal objection, 2) exhibits which are generally in the form of traffic studies showing traffic diversions, 3) request for relief.
In the Union Pacific/Rock Island merger proceeding, for instance, 15 or so railroads filed objections in opposition to the proposed merger. In general, of course, what they object to is the creation of a new competitor that enjoys a size advantage, able to offer greater marketing benefits (single line haul, better equipment utilization, consolidation of markets, etc). So, their incentive is to provide as much negative information as they reasonably can attempting to 1) defeat the merger entirely, or 2) elicit traffic concessions from the Newco.
Since the competitor roads probably know just about as much about your business as you do, it's pretty hard to gild the lily in any kind of effort to bamboozle the Hearing Examiner or the ICC, because EVERYTHING is subject to cross-examination by those competitor railroads, as well as by the DOJ, SEC, state attorneys general, shippers, cities and town, public interest groups, and stray dogs.
ICLand Usually the best information came from competing railroads, which usually lined up to bury the proposed merger. It was a distinctly adversarial proceeding, which usually brought out the full story. Too, and as I have mentioned, these are SEC regulated transactions; make a "material misrepresentation" of fact that would have misrepresented the effect of a merger on the investing public, and bang, investigation, fines and possible jail time. Saying "what a stakeholder" wants to hear can be a quick ticket to federal prison. To that extent, care had to be given to what was represented.
Usually the best information came from competing railroads, which usually lined up to bury the proposed merger. It was a distinctly adversarial proceeding, which usually brought out the full story. Too, and as I have mentioned, these are SEC regulated transactions; make a "material misrepresentation" of fact that would have misrepresented the effect of a merger on the investing public, and bang, investigation, fines and possible jail time. Saying "what a stakeholder" wants to hear can be a quick ticket to federal prison. To that extent, care had to be given to what was represented.
Absolutely, great care has to be taken, by both sides, not to lie in making their cases. And yet... it remains, as you say, a distinctly adversarial process, and in such a climate, truth is often inflated, as you can see in any courtroom any day of the year.
All the mergers I was involved in were essentially end-to-end combinations designed to achieve economies of scale, extended reach and service offerings, etc. The objectives were pretty straightforward and clearly laid out without much in the way of hidden agendas. But still, if you study the details in the arguments justifying both sides' positions, you'll see it's entirely possible for management to somewhat overstate how good or bad they believe the near-term impacts will likely be, without going anywhere near a material misrepresentation of fact.
For example, look at the Conrail carve-up. Was it a material misrepresentation of fact to say that billions of dollars of new business could be diverted within a few years from the highways to new north-south intermodal services made possible by the proposed combinations? I would say no, it wasn't a misrepresentation of fact; if everything had gone incredibly smoothly with the operation it's conceivable that management might even have tried to go after some of that. But with hindsight we can see that not only did it not occur within a few years, but that at some level management probably knew from the outset it would likely take far longer to ever achieve than the application stated.
Take CN-WC for another example. Within a relatively short time, CN was running trains on its own rails between western Canada and Chicago, without a meltdown. That was simply a strategic necessity for CN, particularly after they bought IC. Therefore, the merger was successful. Case closed. It's picking nits to ask whether all the detailed benefits, financial targets, new services, etc. projected in the application were achieved as specifically as stated within the projected timelines.
For the record, my bias is based on my surviving all those mergers plus the failed attempt. CN-BNSF was rather hilarious. On one side, a case for all sorts of wonderful benefits was strenously made by a management team that, below the very top level, was... well let's just say less than enthused with the prospect. On the other, a case against the merger that basically said "if you let them merge, then we'll have to merge again, and do you really want a repeat of our last merger?"
On Merger skepticism, I'd argue that the world at large generally mimics Dilbert for it's opinion on Mergers. And as anyone who reads that comic knows, Dilbert is about poking fun of how, to put it bluntly, stupid the corporate world is.
And I mention that merely to point out that it is odd to hear people assume a merger is a good thing.
I'm no railroad man, I'm the fan, but in any other aspect of my life involving corporate intelligence and mergers, the popular sentiment is bumbling and mistakes. Why this isn't true in this thread is confusing to me.
Also, please don't conflate my posts with ICLand's. It felt as if people might be putting my words in his mouth and I wouldn't consider that fair as I'm less articulate on the subject and certainly less nuanced.
Interesting that GN dominated the merger team. That alone should make one question the neutrality of the group.
To reiterate something I said last week. When discussing BN, through the lens of modern BNSF, you can't also forget the Frisco Merger which affected the way they are now both positively and negatively....popular sentiment suggests more negatively.
Good point, YoHo1975. It's not just in the railroad world that mergers are routinely overhyped. There probably isn't an industry out there where someone hasn't claimed that putting two so-so companies together will somehow create a world-beater. In reality, most mergers (at least those in mature industries) are more defensive and reactionary than visionary. As one poster explained quite well early on in this thread, size matters, and no one wants to be left out and wind up becoming the next Studebaker.
No one expects Delta - Northwest or United - Continental to result in great airlines. Yet at the same time, I doubt that, thirty years from now, anyone with a basic understanding of the business will be arguing that they would have been better off remaining independent. Debating the fine points of how they realigned their combined routes and hub structures, or which computer system they kept, maybe.
In the case of the airlines, remaining independent likely means at least one if not both of them will fail. At least in the current airtravel environment. Certainly the railroads may feel the same way.
I'm not saying the railroads feel that way today, in fact I'm quite certain they don't. But back in 1970 I'm sure they did. The rail environment then was at least as bad as the air travel environment today, if not worse.
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