We need to know their names

Big-money deal makers ran the show at Steinhoff

One of the shocking things I was told very early in my financial journalism career was that people don’t make money running businesses. “They make money buying and selling businesses,” said my wealthy businessselling friend, threatening most of the illusions I had acquired at university.

Whatever my initial scepticism, over the next few decades I learnt how true it was. While CEOS inevitably pocket inappropriately generous packages for overseeing the running of companies, it is the guys who buy and sell companies that make the really big bucks.

They make so much money that deal makers have become somewhat detached from the real world. Putting a deal together has become so important that few care whether the deal should actually be put together.

Consider the Steinhoff mess. So far no real jobs have been threatened. The definition of “real jobs” in this context is those at the retail outlets of the dizzying array of chains cobbled together to make up Steinhoff circa December 4 2017. It may be that when the dust settles some real jobs will be lost as retail chains are sold to competitors with overlapping operations.

The crisis at Steinhoff, rather like the one at Resilient and other 21stcentury capitalist crises, has not been brought on by poor management but by the army of financial and other advisers who appear to have shadowed every move made by this company since it shook off its small-town origins. From humble beginnings as a German-based furniture manufacturer, the group assumed ambitions to become a global furniture retailer.

At some stage during that 54-year process, making and/or selling furniture became unimportant, or at least not-that-important. What did become important were the opportunities for fee-generating advice for an army of investment bankers, now playing a more significant role in Steinhoff’s life.

By the late 1990s it seemed deal makers were running the show. As the years passed it became increasingly difficult to understand how or where Steinhoff made its money. But it was getting bigger, so few bothered to look too closely. With all those topnotch bankers and corporate advisers around, what could go wrong?

In the years ahead, as various investigations establish precisely what happened, we may learn when Steinhoff unhooked itself from the real world of furniture retailing. We may find out how many of the companies in the Steinhoff galaxy were actually involved in furniture retailing and how many were created with the intention of distorting the underlying reality.

We may even discover what corporate finance and advisory fees were paid out in the past 15 or so years. In the interests of fairness, we should be told who the advisers were and what fees they were paid for all that buying and selling activity. And the names of these advisers should be given the same prominence we’ve given those of the auditors and directors.

With this information we may be able to calculate how much value their advice destroyed and who aided that destruction.

With all those top-notch bankers and corporate advisers around, what could go wrong?