The short time horizons of most public company investors have long dogged lean manufacturing turnaround efforts. Real lean takes time, measured in years and sometimes even decades. The typical investor wants to see a return in months. So is staying or going private the answer? Sometimes, but you also cut yourself off from a source of capital investment. It’s a tricky decision.
It’s not just manufacturing that is affected by this conundrum. A story in Wednesday’s Wall Street Journal described the takeover of Steve Wynn’s Mirage Resorts by Kirk Kerkorian’s MGM Grand. Huge and lavish casino and resort companies run by incredibly rich and flamboyant men. Perhaps it’s because I imagined a backdrop created by the Oceans series of movies with George Clooney, but this article was a fascinating tale of large corporate takeover.
The protagonists are…
Mr. Wynn, frustrated with critics of his lavish spending. A casino visionary who is slowly going blind, he is largely responsible for the modern, luxurious tourist mecca that Sin City has become since he built the Mirage casino in 1989. Often called the "King of Vegas," he had recently spent tens of millions of dollars buying Impressionist art for his latest creation at the time, Bellagio.
Mr. Kerkorian, the octogenarian investor who controlled MGM Grand Inc.
And of course there are the vultures.
Smelling a high-profile takeover battle, several Goldman Sachs Group Inc. bankers, including one named Dino Fusco, flew to Las Vegas that morning, proposing to represent Mirage.
The story is filled with intrigue and humor, such as this accounting of when the Mr. Wynn met with the Goldman Sachs guys.
"Let me get this straight," Mr. Wynn shouted, his face reddening. "Just so I understand. So I get a letter from Kirk Kerkorian. So far, he’s spent 33 cents. And you want to charge me $25 million to respond?"
Mr. Wynn’s ranting excited his precision-trained guard dogs. Perceiving a threat to their master, the German shepherds commenced to case the room for danger. One dog shoved his nose into Mr. Fusco’s crotch in an attack position. The dog stayed that way, staring at the investment banker, for the full length of Wynn’s tirade. "I was petrified," Fusco recalls. "I’m thinking, ‘This job isn’t worth this.’"
Who needs a fictional movie script when you have this? In the end the deal was amicable and friendly, and Mr. Kerkorian went to considerable length to create a good deal for Mr. Wynn. But why would Mr. Wynn want to sell? It took a while for the real reason to come out, and that’s the lesson:
Then he [Mr. Wynn] hinted at the truth: that he was already drawing up plans for his own comeback. "I’m very upbeat about what comes next," he said. "But I don’t think I’m going to be a public markets man." he added. "How can we ever cater to a 60-day time frame for investors when we’re building resorts for the ages?"
Good question. It can be done, but ittakes a unique organization, with even more unique investors, to focus on the long term. To build companies for the ages.