Seasoned advice from the merger arena.

• Author: Segnar, Sam F.

How to make sure your acquisition turns out to be what you thought you bought.

This classic piece of advice on deal-making appeared in our Winter 1985 issue. At the time of publication, Sam Segnar was chairman and CEO of InterNorth Inc., a $5 billion in revenues energy company headquartered in Omaha, Neb. The management had done several dozen small and medium-sized transactions since the early 1960s, but two transactions raised its profile from, as Segnar observed, "a relatively unknown Midwestern utility to a serious player in the acquisition arena": its bid in 1980 for Crouse-Hinds Co., an electrical equipment supplier that was ultimately acquired by Cooper Industries Inc.; and its acquisition in 1983 of Belco Petroleum Corp. Another big deal was imminent. In 1985, InterNorth acquired Houston Natural Gas Co. in a $2 billion-plus transaction, and the merged company took on a new name - Enron Corp. Segnar served as chairman and CEO of Enron until the end of 1985. He subsequently headed a chemical company and a Texas bank. "I've retired three times," he likes to say. Today, at 69, he is serving as a director of a number of companies, including Gulf States Utilities, Mapco Inc., Seagull Energy Corp., and Textron Inc.

- James Kristie

I have been on the receiving end of a great amount of merger and acquisition advice over the years - from investment bankers, consultants, corporate staff. Most of it has been very good; some of it, in retrospect, hasn't been worth anything. Since there is still a full measure of questionable advice floating around that needs further examination, I am prepared to offer some advice of my own.

Do not use third parties to start a negotiation process. Every case is a special case, but I believe it is absolutely inadvisable in most cases to try to open negotiations through a third party. The CEO should personally call the top officer and make every effort to set up a meeting on a personal basis to discuss first and foremost the business philosophies, ethics, and standards of their respective companies. If there is no fit, then there is not much point in talking about anything else.

When two corporate cultures are considering coming together, there has to be some sharing of values, because without common values those businesses will never merge with any success. When there is some commonality of principle and purpose, it's rather surprising how many barriers drop - and you can begin talking about your plans, and theirs.

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