December 2010 | Your Company’s Achilles’ Heel

December 2010

What is your company’s Achilles’ heel – and can you protect it?

Shakespeare could not have written a play with more twists and turns than the real-life 2010 hostile takeover bid for Potash, one of the world’s largest suppliers of potash, a key fertilizer ingredient. Two companies — Australia’s BHP Billiton and Sinochem, China’s state-owned chemicals giant — wanted to expand their influence in the global fertilizer market, and Potash was a very attractive acquisition target.

BHP fired the first shot, making a hostile offer for Potash in August 2010. But Potash quickly sued BHP alleging that it tried to weaken Potash by driving down its share price prior to making the offer. BHP allegedly pledged to “run its new mine flat out, flooding the market with potash” according to a court filing. BHP’s announcements were “designed to raise the specter that BHP was the 800-pound gorilla about to become a major competitor” to Potash Corp.

Potash’s stock price dropped, regulators got involved and the hostile bid stalled. Soon Sinochem, sensing an opportunity, entered the stage and exposed BHP’s Achilles’ heel by opening antitrust investigations against it. In November 2010, BHP was blocked in its bid for Potash by the Canadian government. Click here to read BHP’s press release after the offer was blocked.

While this war is not yet over, sifting through the ashes of the latest battle some claim Sinochem’s action was largely motivated by a desire to be what the Wall Street Journal termed a “spoiler for consolidation in a strategic industry.” Sometimes, even when it seems the big strategic moves are gone, there are small moves a company can make to improve its position. Quickly rearranging the the chess-pieces so that a competitor is blocked from expanding is one of them.

As you think about your business, how are you reducing the time between identifying your competitors’ weaknesses and taking quick action? And, equally important, how are you protecting your own company’s Achilles’ heel?