JimPinto.com - Connections for Growth & Success™
No. 207: 10 April 2006

Keeping an eye on technology futures.
Business commentary - no hidden agendas.
New attitudes, no platitudes.

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What happens to companies when they are acquired

In the last issue of eNews, we discussed how companies reach growth plateaus and barriers beyond which they cannot expand.

So, what happens to those that get stuck below the barriers? Most of them get acquired, usually by larger companies.

There are many mid-sized, mini-conglomerates, company consolidators; some are still around (Ametek, Bowthorpe/Spirent, Dwyer), while others have fizzled (Peek, Unitech). Their typical formula: Buy companies in the $5-20M range, leave them relatively independent as long as they generate profit and cash-flow. When that doesn't work, merge them with other similar companies and/or products with synergies in marketing, sales-channels or manufacturing.

Then there are the top-tier companies which buy smaller companies and Divisions of other large companies for consolidation. Irrespective of size, the algorithm is the same: consolidate engineering and manufacturing, maintain multiple sales channels, increase profits by reducing facilities and headcount.

When companies are acquired, there is always a BIG culture change. Layers upon layers of management leave little freedom for lower levels. Local managers are locked into the strait-jacket of tight budgets that are handed down by remote bean-counters. Long-term projects are dumped in favor of short-term fixes that boost the incentives of top managers - the only ones who get immediate gain.

The mind-sets between large organizations and small, independent companies are simply not compatible. The Financial and management frameworks of large corporations totally destroy most acquired companies. The entrepreneurs/owners are no longer there to exercise the vision and judgment which makes a company grow in its special niche. They are replaced by relatively low-level lackeys who are judged only by the bottom line.

Click Why Alliances, Mergers and Acquisitions Fail

Click Industrial Distribution - Why acquisitions fail

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Invensys resolves UK pension issues
Siemens buyout near?

During the past couple of weeks Invensys shares have increased steadily, with rumors of a buyout offer from Siemens. Someone seems to be betting big money that something is going on. Was the whole company being sold off? Or just a piece? Or was it some other good news? The Invensys weblog was buzzing with anticipation.

Perhaps the good news was that Invensys has come up with a way to cover the company's shortfall on its 107,000 members UK pension plan without cutting their benefits. The worldwide pension deficit of 609M is likely to rise by around 170M. So, the deficit hasn't gone away - it has only been resolved in the UK. The pension deficit was an obstacle to acquisition; but now, perhaps Invensys has become a more attractive takeover target?

CEO Ulf Henriksson has done well to settle this UK pension problem. In addition, he announced that Invensys is also paying down a further 105M of debt.

Meantime, Invensys shares had jumped to about 24p and some 200 million shares changed hands on talk that big gorilla Siemens might now be interested.

With stock soaring in the 400p range before the 1999 merger between Siebe and BTR, this talk about Siemens jumping in at a mere fraction is barely a consolation. But, speculators who jumped in at the rock bottom of 12-13p, and more recently as the stock was rising, may see this as a jumping off point. Many observers point to speculation by hedge funds who have come into the game.

The JimPinto.com Invensys weblog brought this comment:
    "YOU cannot be serious! Surely this is a case of wishful thinking. Invensys jumps on revived rumors of a bid approach from Siemens? This probably came from hedge funds across the Pond. Say no more."
Hey, but who knows? If Ulf can engineer this sale to Siemens, or the other buyers (Emerson, Schneider, GE) who are waiting in the wings, he could be the savior who solved the problems that had Haythornthwaite helpless.

Click UK Guardian: Invensys plans to clear 325m pension shortfall

Click Provide your own Invensys comments & feedback

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The recurring Immigration debate

Today (Sunday 9 April 06) my wife and I joined a protest march in San Diego; 50,000 people rallying and walking together for immigrant rights, and to protest proposed legislation against illegal immigrants. This was a new and moving experience for me - seeing peaceful democracy at work.

A recent study reported that 35 million American residents were foreign-born, the highest number in the nation's history. This has always been a nation of immigrants. 100 years ago, the Irish and the Italians were immigrants, but now many of them have convenient immigrant amnesia.

Americans revere the country's immigrant past while rejecting its immigrant present. Will Rogers, or maybe Yogi Berra, said: "America is a land of immigrants that doesn't like immigrants."

The immigration debate is usually framed as if there is a clear demarcation between legal residents and illegal aliens. The reality is far, far more convoluted; mixed-status families are very common.

Most families (siblings, spouses and kids) include Americans by birth, naturalized citizens, permanent residents and undocumented immigrants. A recent study estimates that 64% of the children of illegals are US-born. Factor in those who hold temporary work visas, and the confusion multiplies even more. Many people who were born in America, or immigrants who entered legally, still identify with the undocumented and feel intimately connected with them.

Some 11-12 million "illegal aliens" (about 4% of the US population) are living and working in the US. Many own businesses, pay taxes, lead productive lives, working in in the agricultural sector, and the construction and service industries.

My wife and I recently remodeled our home in San Diego, about 35 miles North of Tijuana, Mexico. The general contractor and many of the sub-contractors were well-known American companies; but 95% of their employees (legal or not) were from Mexico. These were skilled artisans and craftsman who did excellent work. My wife is a perfectionist, and she was well satisfied. One wonders what we would have done if cross-border workers were stopped. It's not that the Mexican labor was cheaper; skilled people are simply not available here.

Many Americans find themselves reviling illegal immigration and yet benefiting from its work culture, the jobs that need doing that nobody else wants to do.

Anna Quindlen of Newsweek suggested that it might be useful for America's immigrants to stage a one-day strike. If those with green cards, those in the process of getting one and those who are illegal didn't show up for work on a single designated day, Americans would get a terrifying taste of how the nation runs without them: vegetables rotting on the vine, hotel sheets going unchanged, working parents with no child care, restaurants with no busboys.

You know what? This may indeed happen. A 1-day countrywide strike is being organized to occur on May 1, 2006. Except, the strikers won't just be laborers and janitors - they'll include doctors, lawyers, engineers, business people and professionals in all walks of life. It'll be interesting to see how America is affected.

Hey, you may wish to rent the movie with this theme, "A day without a Mexican" It's satirical, but significant.

I saw a cartoon the other day; a yuppie housewife pushing her supermarket shopping cart right past a sign that read, "Apples, picked by Americans - $2.00 each".

Click Newsweek (April 10, 2006) - Illegals Under Fire

Click In Focus: The Immigration Debate

Click Movie - A Day without a Mexican - Trailer & Clips

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The new science of Mental Chronomics

Recently, I met David Goodman, an eminent neuroscientist and futurist with remarkable theories and ideas I must tell you about.

David Goodman quickly gets down to the basics of brain science. The cortex is divided into prefrontal lobes and the rest of the cerebral hemispheres. The prefrontal lobes are responsible for impulse inhibition, emotional maturity, planning ability, and complex analysis.

Goodman predicted in 1978 that by the year 2000 America would be filled with chronic drug users. They would on average be about 20 pounds overweight, would suffer from memory loss, be self-centered, short-tempered and emotionally crude.

And true enough, recent studies have shown that 60% of America is overweight. Many people whose emotional growth was stunted with toxic drugs, are now old or middle-aged, and many are emotionally insensitive to the needs of others. Many actually use multiple drugs, causing untold complications.

David Goodman insists that this has occurred because of gradual yet noticeable brain frontal lobe deterioration. His message is clear: prefrontal lobes that function less than optimally can make drug users obese. Heavy drug use prematurely ages the brain. Users of polydrugs can show early symptoms of senility.

The public has heard nothing about this because America has become a haven for the pharmaceutical lobby. Incessant TV and media advertising stresses the cure and hurries through the side effects. They never comment on the detrimental effects of drugs on the chemistry of the human brain. Many people actually believe that taking multiple drugs can help, when it often causes severe complications.

David Goodman is passionate about "Mental Chronomics" as a real alternative to drugs. Since laying out the scope for this new science in 1973, he has written and researched this abundantly during more than 30 years (see weblinks below).

The science originates in what are called "clock" genes. Their function is to naturally raise and lower levels of chemicals like serotonin and dopamine. Programs controlled by clock genes originate in embedded genetic instructions based on evolution of vertebrates during millions of years in a cyclic environment.

We are all familiar with biological rhythms, among them the circadian cycles of sleeping and waking which last about 24 hours; the female fertility and gestation cycles; and annual rhythms of animal and bird migration. Yet these barely scratch the surface. There are many more mental rhythms that are remarkably complex and therefore not easily identified until now. Two cycles reported from Goodman's research are those lasting 30 hours and 260 days.

The pharmaceutical industry downplays all biological rhythms, calling them ailments. Jet lag is a nuisance which can be treated with drugs. Women's natural rhythms require drugs. People in colder climates suffer SAD and require more drugs. Cyclic ups and downs found in everyone are now called "bipolar disorder" which needs to be treated with drugs. Juvenile activity cycles are diagnosed as ADHD and require more drugs. The list of cyclic ailments go on and on.

The benefits of Mental Chronomics are numerous, according to David Goodman who has charted his own moods and dreams daily and nightly without interruption since 1977. Knowledge of mental cycles has helped him, and hundreds of others, to make better plans for their personal and family futures.

The emotional cycle begins, say, with a period of feeling intuitive, a good time to make investments. The phase of feeling empathic is the best time for courting. The phase of feeling vulnerable suggests reading books in a secure corner. The irritable phase predisposes complaints about unfairness . In men, a cycle lasts about a month, though longer or shorter cycles may be observed.

Goodman, the neuroscientist and futurist taught at UC Irvine for four years. He specializes in teaching about very negative and very positive futures. His science represents a very positive future for the brain and the mind.

When practiced by families, Mental Chronomics helps them to understand how the brain works. It discourages children from experimenting with drugs. It introduces a world of greater equality when Dad admits that he, like Mom, experiences a monthly emotional cycle.

Mental drugs cost America $83 billion annually, and cause damage to prefrontal lobes. Mental Chronomics is easily understood, and can be studied in depth on the Internet.

What's your choice for America's future?

Click Send Email directly to David Goodman

Click The new world view emerging from mental science - 2005 to 2035

Click Here come the intelligent and feeling machines

Click Scientists Explore the Importance of Dreams

Click NC Times - Independent thinker charts nocturnal journeys

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Jim Moore [jom@nni.com], son of the founder of instrumentation company Moore Products, was one of many people who pointed out my Moore error in the recent eNews:
    "A minor typo with a major implication - your reference to Moore Products should have been Moore Industries. Of course Moore Products followed the path of you first examples, but at the $170M level. But the reasons were the same as those companies transitioning to oblivion at the <$100M level.

    "In the case of Moore Products Co I think it was a case of not 'when to hold and when to fold' but 'what to hold and what to fold'. With 20-20 hindsight, we should have sold off the systems business to the highest bidder in the early 90's and kept the instrument business. So should Moore Products get honorable mention in this article, or is it in a class by itself?

    "Jim, I enjoy your e-mails and do actually peruse them. It is about my only remaining link to my professional past in the ISA world. I am now pursuing open space preservation and 'greener' things."

Jim Pinto Note:
The Moore error has been corrected in the web version of eNews, with the following addendum:
    Companies like Moore Industries (founder Len Moore is still there at 72) and Opto-22 (the son of the founder is President) are still trying bravely to get to $100M. Another Moore (Moore Products) continued to run with the founder's sons, and eventually sold (to Siemens) at the $170M level, for all the same reasons.

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Patent agent George H. Morgan [patagent@evansville.net] sent this regarding the Patent Troll issue:

    "Many people like to ignore the reality that intellectual property really is property, the same as real estate, in many ways.

    "Often the independent inventor cannot develop his creation, so licenses it, or sells it to someone who can. It is how he gets paid for his efforts.

    "If he owned a patch of raw land, he could leave it undeveloped, and no one would object, except maybe the city that wanted to take it by eminent domain (illegally) for commercial development purposes. But, he would still get some compensation for it. Or, he could sell it to a developer who could make something of it.

    "Intellectual property works the same way. When big companies get caught with their hand in someone else's pocket, they scream 'Patent Trolls'. The reason companies buy patents is because their legal experts believes the patents are good and represent valuable property.

    "The true test of a patent's validity is how it stands up in court. The definitive court is the Circuit Court of Patent Appeals that has the final say, before the Supreme Court gets it.

    "People screaming 'Patent Trolls' are trying to fog up the issue of property rights. They claim the patents are not valid & shouldn't have been issued. Well, all they have to do is show the prior art that invalidates it.

    "For the independent inventor, it is a major 'make or break' issue. The major corporations have tried for many years to weaken patent protection for independent inventors, which is why they rally to fight such attempts."

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Eoin Riain [readout@iol.ie] liked my reminiscing about my visit to Bangalore (eNews 26 January 2006):

    "Your news about India coincided with a visit of our Taoiseach (Head of Government) to India...

    "India have many links with Ireland, not only in the fact that their flags have the same 3 colors, but also the that the leaders of India's struggle for independence looked to Ireland's own struggle against a stubborn occupier prior to and after independence.

    "I seem to remember that Pundit Nehru's sister was ambassador to Ireland for some time. And as I child I was very aware of India as a new nation. The writer Rabindranath Tagore (1913 Nobel Laureate in Literature) has acknowledged being influenced by Irish literature."

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