1 Introduction
There is a way to get the empire: get the people, and the empire is got. There is a way to get to the people: get their hearts, and the people are got. There is a way to get their hearts: it is simply to collect for them what they like and not to lay upon them what they dislike.
Mengzi1
When states are acquired in a country differing in language, customs, or laws, there are difficulties, and good fortune and great energy are needed to hold them.
Nicolo Machiavelli2
Identifying an empire
Definitions of âempireâ
Empires have been in existence since the beginning of recorded human history and have often played a pivotal and central role in the development of human civilization. As the American socialist priest and journalist Irwin St. John Tucker (1905â1969) put it in the first few sentences of his book A History of Imperialism:
Empires are as old as history itself. When the misty curtain first parts for us upon that stage whereon the drama of life is played, emperors occupy the center of the scene. They have held the leading role ever since.3
âEmpireâ is a word that calls forth many images and emotions. For some, the word may evoke images of the magnificent stone temples and buildings built by the plebeians of the Roman Empire. For others, the painting The Secret of Englandâs Greatness by the English painter of historical themes, Thomas Jones Barker (1815â1882), which depicts a benevolent-looking Queen Victoria presenting a bible to a submissive African chieftain in the audience chamber of Windsor Castle, may come to mind. For this author, aside from several images recalled from school lessons and reading history books, the word âempireâ brings to mind the British composer Edward Elgarâs stirring and solemn song Land of Hope and Glory with its lyrics by Arthur C. Benson: âBy Freedom gained, by Truth maintained, Thine Empire shall be strongâŚ. Wider still and wider shall thy bounds be set; God, who made thee mighty, make thee mightier yet,â4 the music of which is often heard at university graduation ceremonies in the US (perhaps in playing this music some universities subconsciously desire to bring forth empire builders into this world?). The historian Niall Ferguson of Harvard University, in his book Empire, recalls listening in admiration to the adventurous tales of his pioneering relatives who set out to all the far corners of the British Empire, which implanted in his adolescent mind a heroic image of the empire on which the sun never sets.5 To Ferguson and his family, the British Empire represented bright sunlight, and its legacy and importance were never questioned.6
To those who were on the side of the dominated, however, the word âempireâ may evoke sentiments of anger and outrage associated with memories and events such as the Amritsar Massacre in British India, when British Indian Army soldiers under the command of General R.E.H. Dyer gunned down several hundred unarmed Indians at a gathering without warning. Or it may call forth the massacre perpetrated by British colonial authorities when they indiscriminately opened fire on Irish football spectators in Croke Park on a day during the Irish War of Independence that would be remembered as âBloody Sunday.â Filipinos may recall their American conquerors torturing captured Filipino ârebelsâ and destroying villages and killing their inhabitants when their islands were invaded. For some Indonesians, the indiscriminate point-blank shooting in the heads of 470 men suspected of being colonial rebels in the Indonesian village of Lawagede at the hands of the Dutch colonial masters may come to mind. To Koreans who lived under the yoke of Japanese imperialism and to their descendants as well, âempireâ may prompt memories of the March 1 Movement of 1919 during which the Japanese massacred several thousand Koreans in an effort to keep their contumacious subjects in their place. For the descendants of the Herero of South-West Africa (present-day Namibia), the massacre in 1904 of over 50,000 of their people at the hands of the Germans, who engaged in indiscriminate shooting and the burning alive of men, women, and children as retribution for rebelling against their imperial rule, may come to mind. For those on the receiving end, all too often life in an empire was not a rosy experience and meant massacres, suppression of individual liberty, slavery, and economic exploitation.
While there are various images, perceptions, emotions, and memories associated with âempire,â the word itself is derived from the Latin imperium, meaning a domain that is ruled by an emperor. The political, economic, and cultural policies of control historically undertaken by such empire builders as the British, Dutch, Spanish, and Romans over their conquered subjects and territories have in effect made the concept of âempireâ suggest a group of people or territories under the political, economic, and social domination of a hegemonic nation or people. There seems, however, to be no ready agreement or understanding regarding its definition. Certain political commentators, for example, have used the word âempireâ as a label to describe the behavior and intent of the United States.7 American historian Paul Schroeder of the University of Illinois has defined âempireâ as the political control exercised by one independent, organized political unit over another.8 Historian Stephen Howe of the University of Bristol presents a definition of âempireâ as consisting of a center and a periphery: a large, multiethnic or multidivisional political unit, usually created by conquest, that is divided between a dominant center and subordinate peripheries which are sometimes distantly located from the center.9 Meanwhile, the International Relations scholar Michael Doyle defines âempireâ as a relationship of political control imposed by a political society over the effective sovereignty of another political society.10
Alongside the term âempire,â there is the concept of âimperialism.â While pointing out that âimperialismâ originally referred to the policies of Napoleon III of France in the 1860s, Howe specifically identifies imperialism as meaning the actions and attitudes which create or uphold empires.11 Thomas McCarthy of Northwestern University, on the other hand, does not make a distinction between âempireâ and âimperialism.â Although he observes that some authors characterize the former as the âcolonialismâ of the settler and commercial colonies prior to the last quarter of the nineteenth century and the latter as the struggle among competing national powers during the decades immediately preceding World War I, McCarthy broadly uses both words to refer to the domination and exploitation of peripheries by a âcenterâ that is driven by governments, colonists, or private trading companies.12 In contrast to McCarthy, Michael Hardt of Duke University and Antonio Negri of the University of Padua in their book Empire describe âempireâ as something altogether different from âimperialism.â While to them imperialism was an expansion of the sovereignty of European nation-states beyond their original territories, empire is a regime that is characterized by a lack of fixed territorial boundaries which not only manages a territory and a population, but also aims to condition human nature and create a situation of perpetual peace through violent means. As they put it, although the practice of âempireâ has often been bloody, ironically its concept has always been dedicated to the creation of a universal peace.13
While there are of course many other interpretations and definitions of âempire,â for the purposes of building a hypothesis for this book I will at this point propose a definition which is essentially a synthesis of the various definitions mentioned above; that is, an âempireâ is a hierarchical relationship of control and domination by a single authority or a center over another group of people based in a periphery that is distinct from the center. In the next section I will look at the extent to which this definition of empire is applicable to an act which takes place on a stage other than that of world history and international relations: businesses that undertake mergers and acquisitions (M&A).
Businesses as âempiresâ
In the context of world history, control within an empire emanates from a sovereign state, but Doyle and McCarthy have pointed out that a non-state body such as a corporation or a religious order can also establish control over peoples and nations.14 Howe supports this observation by stating that while the focus on empire and empire builders by historians has been in the context of the nation-state, there have been times in history when non-state organizations have taken the initiative in empire-building, a major, successful example being the English East India Company (EIC: the English trading enterprise established by royal charter in the seventeenth century) during the eighteenth century and the early nineteenth.15 Indeed, during its encroachment upon the Indian subcontinent, the EIC in effect became a government, maintaining its own armed forces, imposing taxes, and enforcing laws. Accordingly, I will argue that the word âempireâ can also be used in the business world to describe certain companies that have the characteristics of an empire from world history: the existence of a center (in the form of corporate headquarters), a periphery (in the form of subsidiaries or business divisions), and a hierarchical relationship of control and domination by the people of the center over another group of people in the periphery. The term âempireâ to portray such a company has in fact been in use for some time. A director of the EIC described his company, which led British efforts at controlling the Indian subcontinent in the eighteenth century, as âan empire within an empire.â16 Even Hollywood has used âempireâ to describe a company. In the opening few minutes of Orson Wellesâs classic movie Citizen Kane, the narrator describes the business conglomerate lorded over by the fictional American newspaper tycoon Charles Foster Kane as an âempire upon an empire.â17
Aside from applying the term âempireâ to certain types of companies, I also argue that in the world of business, the act of two or more independent enterprises merging with each other or of one independent company taking over another (sometimes forcibly), i.e., the act of mergers and acquisitions (M&A), is basically equivalent to an act of imperialism or empire-building where one independent country takes over another by force or other means, or where several independent countries or political entities come together to form a new union. Both in M&A and in imperialism, the outcome is the creation of a dominant center consisting of a âparentâ company in the former and a âmotherâ country in the latter, and a periphery consisting of subsidiary companies or divisions in the case of businesses and colonies in the case of empires.
âSuccessfulâ and âunsuccessfulâ global empires
Both in world history and in business, there have been cases of what I consider âsuccessfulâ and âunsuccessfulâ empires. While âsuccessâ is a subjective term open to many ways of interpretation and measurement, I argue that the definition of a âsuccessful empireâ of world history is as follows and contains several critical success factors. A successful empire in world history is one which has lasted for more than a century. Within a successful empire, its people, both at its center and at its periphery, have seen their level of prosperity rise during its duration and have experienced a non-discriminatory distribution of additionally created wealth. A successful empire has also been able to build up the loyalty of its conquered subjects at the periphery so as to support the continuation of the empire.
Conversely, I argue that the meaning of an âunsuccessfulâ empire is as follows. An unsuccessful empire is an empire that fails to garner loyalty from its conquered/peripheral subjects and instead creates resistance from them against imperial rule. This in turn may result in a heavy-handed response from the imperial master in controlling its subjects, leading possibly to cases of brutal suppression and discrimination. Inability to contain resistance may lead to the implosion and collapse of the empire. In an unsuccessful empire, there may be growth in prosperity as a result of empire-building, but the conquered/peripheral subjects may not be full participants in the sharing of wealth.
âSuccessfulâ business empires
Having identified the primary characteristics of âsuccessfulâ global empires, I argue that they can equally be used to define âsuccessfulâ business empires that have been created from M&A deals. To better fit the definition to the business world, however, I have changed the wording of some of the elements of a âsuccessfulâ business empire, as follows. A successful business empire created from an M&A deal is one that lasts for a long period (at least for 10 years). Further, (1) the business empire is able to achieve its corporate objectives through its merger with or acquisition of another company; (2) the shareholder value, revenues, and profitability of the business empire has not declined as a result of acquiring or merging with another company; (3) the business empire has enabled the acquired business enterprise to contribute to the increase of the empireâs revenues and profits; (4) the business empire has been successful in building up the loyalty of its acquired employees and has been able to avoid loss of morale and instability of management and organization; and, (5) if the business empire has divested or dissolved its merger with a âconqueredâ company, it was not as a result of detrimental losses or other major problems arising per se from the merger or acquisition.
A hypothesis for this book
The high rate of M&A failures
According to Robert Holthausen of the Wharton School, numerous studies of the long-term results of business mergers show that the rate of failure has been extremely high: 50 to 80 percent.18 Michael Porter of the Harvard Business School concluded, based on an analysis of acquisitions made by 33 âFortune 500â firms (the top 500 companies as surveyed by Fortune magazine), that over half of these had been unsuccessful with the end result being divestiture.19 The American Management Association examined 54 big mergers undertaken in the 1980s and found that approximately one half of the mergers led to declines in productivity and/or profits.20 Management professor Martin Sikora points out that according to accepted data most M&A deals donât succeed.21 The negative data on M&A does not seem to apply to the US only. According to an analysis by the consultancy the Hay Group of more than 200 major European M&A deals undertaken between 2004 and 2007, just 9 percent of the business leaders felt that they were âcompletely successfulâ in meeting their stated objectives for a merger or acquisition.22 While the reasons for M&A failure are diverse, the high rate of failure suggests that many business leaders have neglected to heed the oft-cited words of the Spanish philosopher George Santayana stating that those who cannot remember the past are condemned to repeat it. In this regard, the core similarity between the acts of M&A and empire-building as I have argued suggests that business leaders involved in M&A may have also something to learn from the success and failures of empire builders in history.
Despite the lackluster performance of M&A, however, its use as a business tactic remains popular among business leaders. The global M&A activity market topped US$4.3 trillion and over 40,000 deals in 2007, up from US$1.2 trillion in 2002.23 In addition, globalization has increased the market for cross-border M&A, with cross-border transactions reaching US$2.1 trillion in 2007, up from US$256 billion in 1996.24 In the so-called emerging markets, M&A activity has substantially increased, with annual increases in the number of cases at 300 percent in China and 68 percent in India.25 Chinese...